Topic 1 Business Organisation
and Environment
External Environment
Learning Objectives
• Be able to prepare a PEST analysis for a given
situation
• Use PEST analysis to examine to examine the
impact of the external environment on a firm
• Evaluate the impact on a firm’s objectives and
strategy of a change in any of the PEST
factors
• Analyse the impact that external opportunities
and threats may have on business objectives
and strategy
• Explain how external opportunities and threats
can impact on business decision-making
How do these factors impact your life?
PEST Analysis
• Political, economic, social and technological
• Analytical framework for external
environment factors affecting business
objectives and strategies
• Sometimes can be refereed to as STEEPLE
which includes ethical, environmental and
legal
• Or PESTLE which includes environmental and
legal
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Political factors
Economic factors
Social factors
Technological factors
Opportunities and threats for each
Conduct a brief PEST
for McDonalds in
Mexico
• Health and safety guidelines –
increased obesity
• Pressure groups about wastage
packaging
• Recycling issues
• Wars and conflicts in the country
where McDonalds operates
• America – they have become a symbol
of capitalism and a target for terrorists
• Health fears so customers opting for
places like Subway now
• McDonalds now put nutritional
information onto their packaging so
customers can make informed
decisions
• Food safety– suppliers have safety
management systems in place
• Growing internationally, they need to
keep the prices low for consumers
• Franchising opportunities
• Taken advantage of technology to
streamline their processes and improve
efficiency
• Touch orders to place order via handsets
• Speed Pass – cashless payment system
• Explain why each factor on the PEST
analysis is where it is, and why it is in
that part
• Write a short piece explaining how the
firm should exploit/avoid some of the
issues you have identified and how
they may achieve this
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Advantages of PEST
Simple and only costs time to do.
Provides an understanding of the wider business environment.
Encourages the development of strategic thinking.
May raise awareness of threats to a project.
Can help an organisation to anticipate future difficulties and take action to avoid or minimise their
effect.
Can help an organisation to spot opportunities and exploit them.
Disadvantages of PEST
Usually a simple list and not critically presented.
The rapid pace of change in society makes it increasingly difficult to anticipate developments that
may affect an organisation in the future.
Collecting large amounts of information may make it difficult to see the wood through the trees
and lead to "paralysis by analysis."
The analysis may be based on assumptions that prove to be unfounded.
PEST analysis only covers the external environment and the results need to be considered with
other factors, such as the organisation itself, competitors and the industry in which it is working.