PESTN Analysis

This article is linked to the previous article on 4C Model of Situation Analysis .

PESTN analysis is used to analyse in analysing the cusrrent state/position in the organization in relation to its external environment. As the beginning of the strategic maangement process an organization needs to analyse the environment and identify its strengths, weaknesses, opportunities and threats. In identifying opportunities and threats the PESTN analysis can be used as it gives a detailed analysis of the external/macro environment in which it operates.

PESTN analysis identifies the political, economical, socio-cultural, technological and natural environmental factors that affects the organization. These PESTN factors result in opportunities or threats to the organization and strategic management process should be able identify them and makeuse of it/ combat them.

PESTN analysis is considered as a fairly simple and widely used in environmental/position analysis. The factors of PESTN Analysis can be described as follows:

Political Factors

Political analysis includes the influence of governemnt, law and regulations of of the country. Political factors are vital in determining the strategic position of the orgnization as political factors determine the regulatory environment in which the business has to operate. Typical factors included in the polical analysis includes

• The stability of the governement
• Diplomatic relationships of the governement.
• Governement policy/attitude towards the industry in which the business operates.
• Other governement policies
• Laws affecting busienss such as Labour laws, consumer protection laws and so on.
• Level of curruption and freedom of press.

Economic Factors

The economic factors relate to the macro economic factors of the economy in which the busienss operates. Company needs to understand economic situation of the country in setting the strategy for the organization. Typical factors included in the economic analysis includes

• Economic growth rate and GDP level of the economy
• Purchasing power of consumers
• Interest rate levels
• Exchange rates and fluctuations
• Trade agreements by the government with other countries
• Taxes such as import taxes, VAT and corporation taxes
• Inflation level/ Cost of living

Socio- Cultural Factors

Socio cultural factors includes the culture, life stlye, beliefs and values of the people of the country in which the busienss operates. Comapany should build its strategy to fit in with the cutural environment of the country. The typical factors in the socio-cultural analaysis includes

• Religions, races and caste systems
• Languages and accent of people
• Life style of people
• Beliefs, attitudes and values of people
• Business ettiqutte

Technological Factors

Technological factors is one of the important dimensions as the modern business is connected with technology and it changes rapidly. Company should be update with the technogy to beat their competitors and gain competitive advantage. Concerns in technological environment includes

• The changes in the technology used in the industry
• Infrastructure such as electricity, telephones and broadband internet
• Level of reserch and development in the industry
• Level of automation

Natural Envioronment

Natural environment inclues the impact of the geopraphical situation of the country. Since there is more concern towards environment protection natural environment plays a vital role in situation analysis. Factors under the natual environment includes

• The natural resources owned by the country such as oil, water, trees and so on.
• Climate situations (seasons and weather patterns)
• Natural disasters such as floods and volcanos.

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