Reference no: EM133244884

Organizations understand that internal functions have a major impact on the success of their services and products. The processes within are always controllable and can be handled usually with ease over a carefully planned timeline. Aside from the internal factors, they must be conscious of the external factors impacting the success of their businesses. These factors will be outside of the organizations control and the PEST method helps identify and quantify these. PEST is the acronym for political, economic, social, and technological.
The political environment impacts through government regulations and legal matters. The main factors that the government impact are tax guidelines, trade and safety regulations, and employment laws (Pestle Analysis n.d.). Understanding how each of these influence your business will help you maneuver and create methods around them if possible. The type of questions that organizations should ask themselves when conducting business in other countries is: (1) Is the government involved in any trading agreements, (2) Does the government have any policies that regulate or tax the organization, and (3) What is the governments policy on the economy (Visual Paradigm n.d.).
The impact that the economic factor has on organizations are interest rates, inflation, and gross domestic product (Post 2018). When interest rates are higher, citizens are less likely to spend on consumer products/services because their income is being used for paying off loans. If the GPD is strong, then companies are paying higher salaries and the employees are able to pay more on consumer products. Organizations are no stranger to inflation and its impact. When prices increase drastically, consumer spending decreases just as fast. This can cause organizations to lose money.
Social factors can somewhat pay in this also. Depending on the country, the culture could vary. American citizens can be seen as less frugal when it comes to consumer products. We are known to always have the "latest and greatest". Other countries would rather not use credit for consumer products/services. The type of questions that organizations should ask themselves when conducting business in other countries is: (1) How much time do consumers have for leisure and (2) What are attitudes to foreign products and services (Visual Paradigm n.d.)
Technological factors are driving factors in today's businesses. The implementation of technology has created intense competition amongst organizations over every industry. Understanding how the chosen technology, or any technology available for use, will impact operations is important. There is an abundance of technological implementations that organizations can benefit from if they what they were looking for. Its best to be observant of all the advancements taking place within other organizations and the government so that your organization can benefit and get on even playing grounds.
This tool has proven to be effective in helping organizations understand the external factors impacting them. This model can be used to understand market growth and decline as well as the potential of direction of a business. It helps the organization develop effective business strategies, allocate resources, and roadmap the direction of the company. Understanding all the factors within this analysis will help identify opportunities and threats when marketing the organization.