AOS3 Flashcards
(The external environment) Meaning of P.E.S.T.L.E
P - Political
E - Economical
S - Social
T - Technological
L - Legal
E - Environmental
The external environment
Factors surround a business that can impact operation, which the business has minimal control over.
External Environment is divided into:
- Operating environment
- Macro environment
(The external environment) The operating environment
The primary external factors impacting a business that it has some control over.
(The external environment) Operating factors
- Customer needs and expectations
- Competitors behaviours
- Suppliers and the supply chain
- Special interest groups
(The external environment) The macro environment
Social, legal, technological, global and economic conditions that a business operates in and has no control over.
(The external environment) Macro factors:
- Legal and government regulations
- Societal attitudes and behaviours
- Economic conditions
- Technological considerations
- Global considerations
- Corporate social responsibility considerations
(The external macro environment, key legal and government regulations) Legal and government regulations
Laws and rules that are set out by both parliaments, governments and courts.
(The external macro environment) Business specific rules and regulations: listed
- Employment laws and regulations
- Environmental legislation
- Industry regulations
- Council regulations
- Taxation requirements
( Business specific rules and regulations) Employment regulations
Rules governing the relationship between employers and employees.
(Business specific rules and regulations) Environmental legislation
Set of laws that aim to preserve the environment.
( Business specific rules and legislations) Industry regulations
Rules that are specific to business within a certain industry.
(Business specific rules and legislations) Council regulations
Local government rules made to govern businesses operating in a specific geographic area.
(Business specific rules and legislations) Taxation requirements
Laws and rules related to tax that apply to all businesses
Societal attitudes
The attitudes and behaviour of the society that surrounds us impacts how we act, what we consume, how we communicate and also, how we interact with businesses.
(Societal attitudes) Societal values and beliefs
The principles, standards and assumptions upheld by individuals or a group of people, which influence how they make decisions.
(Societal attitudes) Societal trends
A general development in the way a group of people in society are behaving.
Economic conditions
The conditions that exist in the relation to the productive performance and financial stability of a nation or other geographic area.
(Economic conditions) Interest rates
The price paid for money that’s been borrowed expressed as a percentage.
(Economic conditions) Employment levels
Is measured as the percentage of the labour force who are working in paid employment.
(Economic conditions) Tax rates
The percentage of income or spending that’s required to be paid to the government by individuals or businesses.
(Economic conditions) Consumer confidence
A measure of consumers feelings and expectations about current and future economic conditions.
Technological considerations
With technology becoming more prominent in society, businesses have been forced to alter the way in which they operate.
(Technological considerations) Technological developments
The invention and innovation of tools that solve problems and enhance processes.
(Technological considerations) Technological developments impact on planning
*Production lines
* Eftpos
*Online presence
(Technological considerations) Advantages of tech development
*Increase consistency of product
*Production lines remove unsafe repetitive tasks for employees
*Can run 24/7, no need for breaks, holidays etc.
*Can reduce labour costs
(Technological considerations) Disadvantages of tech development
*Can develop poor reputation for increasing unemployment rates
*Employees may be replaced by tech
*Technological breakdown can stop production
*High set up costs and maintenance
(Technological considerations) Business responsiveness to technological developments
Businesses must monitor and understand the latest tech developments and adapt to them accordingly.
(Global considerations) Globalisation
The process by which governments, businesses and people across the globe are becoming more interconnected, allowing for increased trade.
(Global considerations) Global considerations
- Overseas competitors
- Overseas markets
- Offshoring of labour
- Exchange rates
- Online sales
(Global considerations) Overseas competitors
Businesses that are located in other countries that operate in the same industry and offer a similar good or service.
(Global considerations) Overseas markets
Any markets that are outside of a businesses own country.
(Global considerations) Offshoring a labour
Business moving its services or processes to another country.
(Global considerations) Exchange rates
The relative price at which currency of one country is exchanged for the currency of another country.
(Global considerations) Online sales
Buying and selling goods and services using the internet.
Corporate social responsibility (CSR)
The ethical conduct of a business beyond legal obligations, considering social, economic and environmental impacts.
Corporate social responsibility (CSR) divided into two groups
- Environmental considerations
- Social considerations
(Corporate social responsibility (CSR)) Environmental considerations
Businesses should be placing emphasis on environmental sustainability through their business activities.
(Corporate social responsibility (CSR)) Environmental consideration during planning
*Choice of resources
*Choice of energy source
*Waste management processes
*Method of packaging
(Corporate social responsibility (CSR)) Social considerations
Businesses must additionally consider their impacts on society.
(Corporate social responsibility (CSR)) Social consideration during planning
*Choice of suppliers
*Optimising
*Employee work-life balance
*Charity/philanthropic efforts
Corporate social responsibility (CSR) Advantages
*Positive business reputation = more customers
*May attract more highly skilled employees = making business employer of choice
*Employee loyalty
*Customers may be willing to pay more for more ethically sourced products
Corporate social responsibility (CSR) Disadvantages
*Too much focus on CSR may result in loss of productivity elsewhere
*May be overwhelming for employees to keep up with CSR processes
*Time consuming
*Expensive
(Customer needs and expectations) Customer needs
The essential requirements that customers intend to fulfil with the purchase of a good or service.
(Customer needs and expectations) Customer expectations
The values or benefits that customers seek when purchasing a good or service from a business.
(Customer needs and expectations) Possible needs and expectations listed
*Customer convenience
*High-quality good or service
*Social responsibility
*Responsive customer service
(Customer needs and expectations) Customer convenience explanation
Customers expect a product or service that saves them time and effort.
(Customer needs and expectations) Customer convenience how it impacts business planning
Owner should consider convenient options: Click and collect, same day delivery, multiple payment options.
(Customer needs and expectations) High quality good or service explanation
Owners should ensure their products are high of standards and reflect needs and expectations of customers.
(Customer needs and expectations) High quality good or service how it impacts business planning
Supplier choices. Business could put in place product standards and expectations.
(Customer needs and expectations) Social responsibility explanation
Customers are becoming increasingly informed and considerate about the ethical decisions of businesses.
(Customer needs and expectations) Social responsibility how it impacts business planning
Owner should consider CSR in all business processes.
(Customer needs and expectations) Responsive customer service explanation
Customers expected quick responses to their queries. Businesses should ensure customers are able to interact.
(Customer needs and expectations) Responsive customer service how it impacts business planning
Business may optimise technology. Offer multiple communication channels FAQ page.
(Competitors behaviour) Competitors
Businesses that operate in the same industry and offer a similar good or service.
(Competitors behaviour, how competitors behaviour affects planning) Competitors selling similar goods or services at lower prices
*Consideration of manufacturing and operating costs, determine if lower production costs are possible.
*Business may need to seek other ways to be competitive (Eg, convenience).
(Competitors behaviour, how competitors behaviour affects planning) Competitors selling a highly unique good or service
Business may seek to manufacturer product more unique or advanced.
(Competitors behaviour, how competitors behaviour affects planning) Entering an industry where businesses have large market share
*Business must investigate its own strengths and weaknesses and identify whether they can take advantage of competitor weaknesses.
*Seek to be innovative.
(Competitors behaviour, how competitors behaviour affects planning) Threat of new competitors entering the market
Business must anticipate new competitors and plan to respond to them.
Suppliers and the supply chain
Choices of appropriate suppliers must be considered during the planning stages of the business.
(Suppliers and the supply chain) Suppliers
Individuals or businesses that provide the resources required to produce goods or services.
(Suppliers and the supply chain) Supply chain
The network of individuals or businesses that are involved in producing and distributing a good or service to customers.
Supply chain considerations (Listed)
*Sourcing considerations
*Retrieving considerations
(Supply chain considerations) Sourcing considerations: time
*Local suppliers: Resources will be received faster, helps build competitive advantage.
*Overseas suppliers: Less predictability and can take longer.
(Supply chain considerations) Sourcing considerations: Shipping costs
*Local suppliers: Business should consider total cost of shipping in order to accurately forecast costs.
*Overseas suppliers: Can result in higher shipping costs.
(Supply chain considerations) Sourcing considerations: Social responsibility
*Local suppliers: Business can support local economy, good for reputation and retention.
*Overseas suppliers: Can harm reputation and customer loyalty.
(Supply chain considerations) Sourcing considerations: Access to resources
*Local suppliers: May not have needed resources.
*Overseas suppliers: May enable businesses to comply with customs regulations.
(Supply chain considerations) Sourcing considerations: Legal regulations
*Local suppliers: Business doesn’t have to worry about customs.
*Overseas suppliers: May require business to comply with customs regulations.
(Supply chain considerations) Retrieving considerations: Road transport
*Local market: Business owner could pick up goods directly from supplier, no delivery costs, traffic can affect, limited capacity on trucks.
*Overseas market: Isn’t available for Aus businesses wanting to retrieve overseas supplies.
(Supply chain considerations) Retrieving considerations: Air transport
*Local market: Can be costly, method of retrieving resources over short distance.
*Overseas market: Beneficial for businesses that require items to be delivered quickly over long distance, can be expensive due to tax and fuel.
(Supply chain considerations) Retrieving considerations: Rail transport
*Local market: Can be slower than other methods, cost effective.
*Overseas market: Not available in Aus.
(Supply chain considerations) Retrieving considerations: Sea transport
*Local market: Cannot be used between states (including TAS).
*Overseas market: Slow, easily disruptive (weather), cost effective, environmentally friendly.
