3. introduction
• PESTLE is an analytical tool which considers external
factors and helps you to think about their impacts
Why to use PESTLE
• The overriding question:
– Is this an attractive industry?
– (Eventually: Is this a game we want to play?)
• If so:
– What do we need to do to take advantage of, or
position ourselves against, as we move ahead with
our strategic thinking and planning?
4.
5. PESTEL Framework
• Political
– Government pressures
– Differences in countries,
states, and regions
– Influences from political
pressures(//sun of soil)
• Economic
– Growth, Interest rates
– Employment levels
– Currency exchange
• Sociocultural
– Norms, culture, values
– Lifestyle changes
• Technological
– Innovation
– Research & development
• Environmental
– Global warming
– Sustainability
– Pollution
• Legal
– Court system
– Legislation
– Hiring laws
3–5
6. EXAMPLE:
• Political
– The Singur Controversy
– acquired a land But this acquisition required the displacement of farmers.
– “Save Farmland” movement by opposition leader Mamata Bannerjee.
– later established in Sanand, Gujarat.
• Economical –
– promising with GDP growth rate around 7%
– high interest rates and low freight availability impacted its financial
infrastructure in first quarter of 2013.
– price pressure from competitors.
• Social –
– Generates local population generating employment. Due to which Tata
enjoys full public support.
– supports around 600 NGOs.
– high standards of education to students.
– institutes opened and managed by Tata are Indian Institute of Science, Tata
Memorial Centre, Tata Institute Social Sciences, etc.
7. EXAMPLE:
• Legal-
– Cases against car explosion.
– Government norms for production.
• Technological –
– In order to adapt with the latest technology TML owns Tata
Technologies Limited.
– helps in the upgradation of designs and technology.
– Tata faced a technological hurdle when two units of its revolutionary
Nano cars caught fire in the year 2009.
• Environmental –
– Tata to manufacture greener cars with low fuel consumption and lowest
emission gases possible.
– invested huge sums of money in its R&D section to produce eco-cars.
– As an eco-friendly company, TML has also invested in various “Green
Earth, Clean Earth” campaigns.
– It has also worked towards the stopping of deforestation many years in
a row.
8. • It is possible to use the PESTLE analysis on projects
as well for organizations
• It is not always needed, especially if the projects are
small
• If PESTLE analysis is used for a project, then the
focus should be on solving the “focal problem” and
analyze how the external environment is affecting the
process of solving the “focal problem”
– e.g. the guidelines from the European Commission do not
include PESTLE in their logical framework approach
PESTLE analysis and projects
9. Advantages
• Provides a simple and easy-to-use framework for your
analysis.
• Involves cross-functional skills and expertise.
• Helps to reduce the impact and effects of potential
threats to your organization.
• Aids and encourages the development of strategic
thinking within your organization.
• Provides a mechanism that enables your organization to
identify and exploit new opportunities.
• Enables you to assess implications of entering new
markets both nationally and globally.
10. Disadvantages
• Users can oversimplify the information that is used for
making decisions.
• The process has to be conducted regularly to be
effective and often organizations do not make this
investment.
• Organizations often restrict who is involved due to time
and cost considerations. This limits effectiveness.
• Users’ access to quality external information is often
restricted because of the cost and time needed to collate
it.
• Assumptions often form the basis for most of the data
used, making any decision made based on such data
subjective.
11.
12. An Overview Of Liberalization,
Privatization and Globalization
• Liberalization refers to relaxation of government restrictions in
areas of economic policies. Thus, when government liberalizes
trade it means it has removed the tariff, subsidies and other
restrictions on the flow of goods and service between countries.
• The term “Privatization” refers to “The transfer of ownership of
property or businesses from a government to a privately owned
entity.” Privatization in India generally is in the form of
disinvestment of equity. In general, here privatization has not led
to 100% transfer of control from public sector to private sector
unit.
• globalization is the increasing economic interdependence of
national economies across the world through a rapid increase
in cross-border movement of goods, service, technology and
capital. It is a process which draws countries out of their
insulation and makes them join rest of the world in its march
towards a new world economic order.
13. Reasons for implementing LPG
• Excess of consumption and expenditure over resulting in
heavy government borrowings.
• Growing inefficiency in the use of resources.
• Over protection to industry.
• Mismanagement of firms and the economy.
• Mounting losses of public sector enterprises.
• Low foreign exchange reserves.
• Burden of national debt.
• Inflation.
• Technological impairment.
14. Liberalization
Reasons of liberalization:
•country to near bankruptcy.
•The Rupee devalued and economic reforms were forced upon India.
• India central bank had refused new credit and foreign exchange reserves had
reduced to the point that India could barely finance three weeks’ worth of
imports.
Reforms taken during Liberalization
•Abolition of industrial licensing and registration
•Liberalizing the MRTP act
•Freedom for expansion and production
• Increase in the investment limit of the small industries
• Freedom to import capital goods
• Freedom to import technology
•Free determination of interest rates
15. Liberalization
advantages
•Increase in rate of economic growth
•Increase in competitiveness of
industrial sector
•Reduction in poverty and inequality
•on prices
•Increase in Efficiency
•Better Stock Market Performance
Disadvantages
•Pressure by IMF and World
•depending on Foreign Debt.
•Dependence on Foreign technology.
•Promotion of Consumerism..
•Problem of Unemployment.
16. globalization
• According to IMF: - “The growing economic interdependence of countries
worldwide through increasing volume and variety of cross border transaction
in goods and services and of international capital cash flows, and through
the more rapid and widespread diffusion of technology.”
FEATURES
• Opening and planning to expand business throughout the world.
• Erasing the difference between domestic and foreign market
• Buying and selling goods and services from / to any countries in the world.
• Locating the production and other physical facilities on a considerations of
the global business dynamics, irrespective of national considerations
• Global sourcing of factors of production i.e. raw material, components
,machinery, technology, finance etc.
17. globalization
Advantages
•improves the efficiency of resource,
reduce the capital output and
increase labour productivity, update
technology that gives a boost to the
average growth rate of the economy.
•Increase in Trade in Goods and
Services
•Increase in industrialization
•Commodities at lower price with high
quality
•Increase in jobs and incomes
Disadvantages
•Globalization is helping the
developed economies more than the
developing economies.
•Multinational companies and
Chinese goods will flood the market at
cheaper rates and there will be no
takers for local products.
•Entry of MNC supermarket and
hypermarket chains would cause
severe displacement of small and
unorganised shopkeepers and
traders.
•Loss of domestic industries in
income
18. Privatization
• Privatization means replacing government monopolies with the competitive pressures of the
marketplace to encourage efficiency, quality and innovation in the delivery of goods and services .
METHODS
• FRANCHISING-Franchising is a business model in which many different owners share a single
brand name. A parent company allows entrepreneurs to use the company's strategies and
trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The
parent company also provides the franchisee with support, including advertising and training, as
part of the franchising agreement.eg-McDonald's (MCD) operates the world's largest fast food
chain, and earns 37% of its revenue from franchisingacross its approximate 31,400 restaurant
locations.
• LEASING- Written or implied contract by which an owner (the lessor) of a specific asset (such as a
parcel of land, building, equipment, or machinery) grants a second party (the lessee) the right to its
exclusive possession and use for a specific period and under specified conditions, in return for
specified periodic rental or lease payments.eg- lic housing finance
• CONTRACTING- agreement between companies. Eg.
• DISINVESTMENT- Disinvestment involves the sale of equity and bond capital invested by the
government in PSUs through securitization. Securitization is a structured financial process which
involves pooling and repackaging of cash flow producing assets into securities that are then sold to
investors. The government and not the PSU’s receive money from disinvestment. The disinvested
shares are traded in the stock markets. In India there have been several cases of disinvestment,
for example , Maruti Udyog, SAIL, Indian Airlines, Indian Oil, BALCO etc. .
19. Privatization
Advantages
•modernize and diversify business.
•making public sector units more
competitive.
•improving the quality of decision-making
•help in reviving sick units which have
become a liability on the public sector.
•better results in terms of revenues and
efficiency and productivity.
Disadvantages
•Privatization encourages monopoly,
power in the hands of big business houses
and thus greater disparities in income and
wealth.
•The limited resources of the private
individuals cannot meet some of the vital
tasks which alter the very character of the
economy.
•There is lack of transparency in private
sector
•Privatization results in high employee
turnover
