Pest Analysis

2654 Words Nov 27th, 2015 11 Pages
1.0 QUESTION 1

“PEST analysis is used by businesses around the world to devise a strategic approach to their activities”. Discuss this statement describing in detail the components of the said analysis.

1.1 INTRODUCTION

Apart from a company’s internal resources there are several other factors that have a profound impact the performance of a company. The internal resources usually refers to the employees of the firm, contractors, sub-contractors, suppliers and so on whereas the external environment refers to the market, clients, stakeholders, etc.

1.2 PEST ANALYSIS

According to Kotler (1998), PEST analysis is a useful strategic tool for understanding market growth on decline, business position and direction for operations.
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Furthermore, to the nature of the political situation prevailing in the country where the company is doing business or where it intends to do business.
The political factors which influence the external environment include consumer protection law, employment law, government tax regulations, competition regulations and environmental regulations. Therefore, any business need to operate around these factors.
The political factor is the key component of the business environment that dictates greatly on the success of any business. If businesses do not take into consideration the political aspects and political environment of the country they are operating, this can present political risks and negative impact on the business.

Changes in government policies may affect the economic performance of a business either positively or negatively. For example: Reduction on import duty of raw materials for a ceramic industry will be positive to the local ceramic manufacturer as imported tiles are more expensive. However, it will have a negative feedback to importers. Hence, many businesses may have to change or abandon strategies because of government actions.

Businesses should consider the following political

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