Module 3 Part 3: PESTLE and Porter’s Five Forces

Question 1

What is PESTLE?

Answer 1

• P: Political; tax policies, changes in trade restrictions and tariff, other government policies
• E: Economic; interest rates, inflation rates, gross domestic product, unemployment rate, growth or decline of the economy
• S: Social; population size, age, ethnic mix, cultural trends such as attitudes towards obesity, etc.
• T: Technological; improvements in products or services provided by science
• L: Legal; how the courts and law influence and impact business activities
• E: Environmental; awareness of climate change or seasonal or terrain variations. Physical conditions in which organizations operate

Question 2

What are Porter’s Five Forces?

Answer 2

• New Entrants: easier to enter the market, the more a company’s position can be threatened, higher level of competition
• Substitutes: products or services that can replace a company’s own products or services at low cost or effort can threaten a company’s power
• Rivalry: the larger the number of competitors and the number of products and services they offer dictate a company’s power
• Suppliers: how easily a supplier can drive up the prices of goods and services; fewer suppliers and larger dependence on them means more power on supplier
• Consumers: deals with the ability consumers have to drive prices down; stronger bargaining position, smaller and powerful client bade, lesser profits