External Factors - UB Flashcards
What does PESTEC stand for?
External factors are also known as PESTEC factors. PESTEC stands for:
• P - political
• E - economic
• S - social
• T - technological
• E - environmental
• C - competitive
Political factors involve the decisions and laws that governments make. These include:
- tax
- laws
- political stability
Political ; description + eg.
This is any action taken by the government eg government laws to ban smoking which forced many pubs to introduce outside smoking areas
Economic; description + eg.
This is the current state of the economy that will influence business eg, if the economy is in a recession, the rate of unemployment, the interest rate, the exchange rate
Socio- cultural: description and eg.
- The cultural trends and buying habits of the market,
such as soap powder companies reduced the size of their bottles as the average family size was shrinking and so too the size of homes or kitchens - Population trends such as demographics eg if the
population is growing through an increase in birth rate the govt will plan for a rise in demand schools in 5 years.
Technological: description + eg.
This is the latest developments with technology eg the use of CAD in designing training shoes means it is easy to have a design office in one country and a manufacturing plant in another country, eg China
Environmental: description + eg.
This involves action and laws that promote the upkeep of the environment eg the need to recycle waste has led to introduction of bins with separate
compartments
Competitive: description + eg.
This is the actions of competitors that force a firm to react eg Tesco launching the successful self-service tills has forced many other supermarkets to follow
What are the ‘levers’ of economy include:
- economic growth
- interest rates
- unemployment
- inflation
- exchange rates
Social factors are the things that affect the habits and spending of customers. These include:
- demographics
- lifestyles
- tastes and trends
Technological factors refers to the ways new practices and equipment can affect businesses. These include:
- ICT
- research and development
- automation
- e-commerce
Environmental factors cover two main aspects:
The physical conditions that a business has to deal with, such as:
- climate change
- weather
The green credentials of global business, including:
- recycling
- pollution
Competitive factors cover how businesses who offer similar products or services affect each other. This includes:
- imitators
- price wars
- product differentiation
