The External Environment

Question 1

Models for External Environment

Answer 1

PESTEL
Five Forces
Porter’s Diamond

Question 2

PESTEL

Answer 2

Political
Economic
Social
Technical
Environmental
Legal

Question 3

PESTEL –> Political

Answer 3

E.g., government decisions & policies such as changes in competition policy or consumer policy

Question 4

PESTEL –> Economic

Answer 4

E.g., impact of the economic climate (recessing or growth); inflation, interest rates, tax rates or foreign exchange rates

Question 5

PESTEL –> Social

Answer 5

E.g., demographics; changes in tastes or cultures (demographic changes can affect workforces as well as consumers)

Question 6

PESTEL –> Technical

Answer 6

E.g., changes in technology that affect ways of working or the types of products & services demanded

Question 7

PESTEL –> Environmental

Answer 7

E.g., ‘green’ issues, pollution, climate change, environmental regulation, consumer attitudes to products

Question 8

PESTEL –> Legal

Answer 8

E.g., laws & and regulations, including any changes to them (employment law, health & safety, data protection)

Question 9

Porter’s Five Forces

Answer 9

Threat of new entrants
Threat of substitutes
Bargaining power of customers
Bargaining power of suppliers
Competitive rivalry

Question 10

Porter’s Diamond

Answer 10

(Used for location)
Firm strategy, structure & rivalry
Demand conditions
Factor conditions
Related & supporting industries