PEST Flashcards
What are the four PEST factors?
Political, economic, social, technological
What are the different factors of the political factor?
- Laws and regulations
- Taxes
- Trade agreements
- Political system
- Political stability
Explain how laws and regulations connect to business and give an example
Laws that everyone or everyone in the industry must abide by (made by governments). Eg. minimum wage, environmental regulations, pollution control
Explain how taxes connect to business and give an example
Can be good or bad. Eg. Carbon tax, an increase in income taxes (bad, because will have less money to spend on goods), and corporate taxes (bad, because businesses will have to spend more money on taxes and less on growing their business
Explain how trade agreements connect to business and give an example
Eg. NAFTA: if duties are imposed on goods from Canada to US it could make Canadian businesses more expensive and less competitive (opposite also applies if duties are imposed on goods from US to Canada)
Explain how the political system connects to business and give an example
Affects how free businesses make their decisions, and as the restraints you are facing as a business and the opportunities that are possible for you to pursue. Eg. the difference between communism and democracy
Explain how political stability connects to business
For the most part in north America, there are not dramatic changes being made in the government. However, you must ask what kind of opportunities/support will you have from a legal perspective (at the government level). Keep in mind that overseas there may be big shifts in government and the kinds of changes will be made
Explain why governments gets involved in business
- Protection of consumers
- Support/protection and regulation of domestic businesses: when jobs are supported/protected, it creates jobs, which leads to income, spending, vacations, etc.
- Governments want to create opportunities with other businesses in other countries
What are the different factors of the economic factor?
- Inflation/deflation
- Interest rates
- Employment rates
- Exchange rates
- Balance of trade
- Productivity
Explain how inflation/deflation connects to business and give an example
When inflation moves dramatically and unpredictably it becomes a problem. Eg. When the first MacDonald’s opened in Russia, people were so excited to try it and there were so many people that prices were changing while you were standing in line
Explain how interest rates connect to business
When interest rates go up it is more expensive to borrow money. Less people will buy your stuff because their own mortgages and loan will go up in price and they won’t have as much money to spend
Explain how employment rates connect to business
High rates of unemployment result in less consumer spending overall, while low unemployment rates can make it hard to find the employees that you need for your company
Explain how exchange rates connect to business
It will be more expensive to import goods from a country with a higher dollar, but it will be cheaper to import goods from a country with a lower dollar. The same applies to exporting
Explain how balance of trade connects to business
If you are exporting more than you are importing, there is a trade surplus, and if you are importing more than you are exporting, there is a trade deficit
Explain how productivity connects to business
Low productivity means waiting for your goods to be produced or sold instead of maximizing on revenue
What is the significance of economical factors in business?
Affects economic stability, employment, economic growth (measures aggregate output, and GDP)
What are the different factors of the social factor?
- Customs
- Values
- Attitudes
- Demographic characteristics
Explain how customs connect to business and give an example
The customs that exist within a country impact the sales of different goods. Eg. Thanksgiving, Christmas, Halloween, and Valentine’s Day affect rose, chocolate, and pumpkins sales
Explain how values connect to business and give an example
What a society does or doesn’t appreciate can influence how a business runs and affects employee commitment. For example Japan is very community oriented while North America is individualist. How does that affect how to motivate your workers?
Explain how attitudes connect to business and give an example
People’s attitudes about work matter a long in the workspace. For example, employers offered unlimited vacation time, as long as your work gets done. Europe loved it, the thought it was a great idea, they were happy and the company was happy. North Americans freaked about and overthought it: “what does it mean if I take too much or too little vacation time?”
Explain how demographic characteristics connect to business
What people like to do in their own time could affect the types of products that will sell
What is the significance of social factors in business?
Affects customer preferences and worker attitudes and behaviour, standards of business conduct, and corporate social responsibility
What are the different factors of the technological factor?
- Internet
2. Information technology
Explain how the internet connects to business and give an example
The internet affects what you can search, how you can search, and how much data you can collect to help your business. Eg. China’s internet is government controlled in terms of what sites you can access
Explain how information technology connects to business and give an example
Technology moves very quickly and is snowballing, and often requires learning new skills. Information technology is not limited to computers and technology (eg. pencils vs. mechanical pencils).
What is the significance of technological factors in business?
Because technology is changing so quickly, it demands constant scanning and learning. Technology also creates significant change and challenge
How is outsourcing changing and what does that mean for business?
Outsourcing is the strategy of paying suppliers and distributors to perform certain business processes or to provide needed materials or services. Today, businesses outsource numerous activities (like payroll, employee training, and research and development, and sometimes the production of products). Outsourcing different parts of your company can allow businesses to pay less for the production of their products, and can allow the management to focus more strongly on the core aspects of their company.
How is social media and viral marketing changing and what does that mean for business?
This is the strategy of using the internet and word-of-mouth marketing to spread product information. Today, social media and viral marketing has advanced significantly and marketing happens faster than ever before through sites like Twitter. This means that businesses have more and faster access to customers than ever before in history, however competitors have the same access to customers. It is much harder to keep customers loyal to you when so many other competitors are also easily accessible
How is business process management changing and what does that mean for business?
This is an approach by which firms move away from department-orientated organization and toward process-oriented team structures that cut across old departmental boundaries. Companies choose their goals, then organize their processes around their goals, then organize their resources around their processes. This means that decision making is faster, more customer-oriented, materials and operations are coordinated, and products get to customers more rapidly. Businesses are therefore able to better meet their customer needs and are able to adapt very quickly to a changing environment
