PEST Analysis & Porter’s
Five Forces Model
PEST ANALYSIS
The general environment of an organizations consists of the external conditions
that set the context for managerial decision making. Four major environmental
forces:
Political
Economic
Socio-cultural
Technological
Political Conditions

Proposed laws, regulations and government policies all influence the ways
businesses enter & operate in various markets.
Political Conditions effect:

Corporate tax rates

Sales tax

Minimum wage & labour laws

Environmental waste

Food & drug safety controls
Economic Conditions
Economic conditions influence consumer spending, resource supplies and
investment capital.
Economic Conditions effect:

Unemployment rate & job outlook

Financial markets (consumer investments in stocks)

Inflation effect on consumer spending

Exchange rate - supplier purchasing

Exchange rate - consumer purchasing
Socio-Cultural Conditions

The norms, customs and social values on ethics, human rights, gender roles &
lifestyle
Socio-Cultural Conditions Effect:

Desire for ‘green’ products

Ethical production

Pressure to be socially responsible

Healthy-living preferences
Technological Conditions
Technological conditions are driving consumer buying decisions, social interactions
and are giving businesses an unprecedented amount of consumer data.
Technological Conditions effect:

Web access decreasing worker productivity

Mobile workforces

Informed purchasing decisions (ie. product reviews, company profiles)

Consumer buying habits

Marketing strategies

Consumer Behaviour research & data collection
Porter’s Five Forces Model
Five major forces guide managers in making strategic choices to strengthen their
company within an industry.
1.
Industry Competition – the way companies within the same industry compete with
one another
2.
New Entrants – threat of new competitors entering the market
3.
Substitute Products or Services – competitors offering substitute products (often
at a lower prices)
4.
Bargaining Power of Suppliers – the ability of resource suppliers to influence the
price that a company has to pay for their products/services
5.
Bargaining Power of Customers – the ability of customers to influence the price
that they will pay for the firm’s products or services.
Coca-Cola & Porter’s Five Forces Model
In the competitive industry, does Coca-Cola
face threats from new entrants in the
beverage industry?
Coca-Cola & Porter’s Five Forces Model
In the competitive industry, does Coca-Cola
face threats from companies offering
substitute products?
http://www.huffingtonpost.com/thrillist/blind-tastetest-ranking_b_4255165.html
Coca-Cola & Porter’s Five Forces Model
In the competitive industry, do customers
have bargaining power in the purchase
price of Coca-Cola?
The individual buyer no pressure on Coca-Cola
Large retailers, like Wal-Mart, have bargaining power
because of the large order quantity, but the bargaining
power is lessened because of the end consumer brand
loyalty.
Coca-Cola & Porter’s Five Forces Model
In the competitive industry, do suppliers
have bargaining power?
The main ingredients for soft drinks include:
carbonated water
phosphoric acid
sweetener
caffeine
The suppliers are not concentrated or differentiated.
Coca-Cola is likely a large, or the largest customer of any
of these suppliers.
Coca-Cola & Porter’s Five Forces Model
Does Coca-Cola have a large rivalry with
any other beverage company?