BS 2024 Unit2 MacronvironmentAnalysis

Business Strategy
Unit 2
Macroenvironment Analysis
Class of 2025
Semester 3
June 2024 – Sept 2024
1
The strategic position is concerned with the impact on strategy of the macro-
environment, the industry environment, the organisations strategic capability
(resources and competencies), the organisation’s stakeholders and the
organisations culture.
External
Opportunities & Threats PESTEL Framework
Porter’s 5 Forces Framework
SWOT Analysis Porter’s Value Chain Analysis

Strategic Gap Analysis
The
Organisation Resources & Capabilities
Analysis (VRIO)
Internal
Strengths & Weaknesses
2
Macroenvironment Analysis
(PESTEL)
3
PESTEL Analysis
Political • PESTEL Analysis is a framework for assessing the key feature(s)
of the external environment facing a business.
• The macro-environment can be analysed in terms of the PESTEL
Economic factors – political, economic, social, technological, ecological and
legal.
Social • A PESTEL analysis helps identify key drivers of change, which

PE need to addressed in strategy. Alternative scenarios can be
ST constructed around key drivers.
EL Technological • PESTEL helps to provide a list of potentially important issues
influencing strategy. It is important to assess the impact of each
factor.
Ecological • These key drivers can be an opportunity or a threat
• Alternative scenarios can be constructed around key drivers of
Legal change
4
Key drivers for change
• Key drivers for change are environmental factors that are likely to have a high impact
on industries and sectors, and impact on the success or failure of strategies within
them.
• Typically key drivers vary by industry or market.

– For example, retailers are concerned with social changes and customer behaviour
which have driven a move to ‘out-of-town’ shopping.
– Personal disposable income also drives demand for retailers
5
Political factors include
• The role of the state e.g. as an owner, customer or supplier of businesses.
– Political stability in the country
– Political ideologies of the government
• Government policies.
• Taxation changes.
• Foreign trade regulations.
• Political risk in foreign markets.
• Changes in trade blocks (e.g. BREXIT).
• Exposure to civil society organisations
(e.g. lobbyists, campaign groups, social media).
6
Economic factors include
• Business cycles.
– Current phase of the Trade Cycle (Expansion,
Depression, etc)
• Economic situation
– GDP growth rates
• Key rates
– Interest rates.
– Unemployment rates.
– Inflation rates
• Personal disposable income.
• Exchange rates.
• Differential growth rates around the world
7
Social factors include
• Changing cultures and demographics
– (e.g. ageing population in Western societies).
• Income distribution.
• Lifestyle changes.
• Consumerism
– Consumer Buying Patterns
• Changes in culture and fashion.
– Religious and Cultural factors
– Lifestyle trends in place at the time
• Social networks within an organisational field
(e.g. with regulators, campaign groups, trade unions).
8
Technological factors include
1. New discoveries and technology developments.

– New production technology
– Manufacturing technology (increase in output, lowering of
production cost, etc.)
– New innovations
– Intellectual Property, Patents, etc.
– Maturity of technology
2. Examples include developments on the internet, nano-

technology or the rise of new composite materials.
9
Ecological factors
1. This refers to ‘green’ or environmental issues, such as pollution, waste
and climate change.
– Environmental Issues
– Energy/Power Consumption
– Insurance Policies
– Safe Waste Disposal
– Dealing with hazardous material
2. Examples are environmental protection regulations, energy problems,

global warming, waste disposal and recycling.
10
Legal factors include
• Labour, environmental and consumer regulations.
• Taxation and reporting requirements.
• Rules on ownership.
• Competition regulations.
• Regulation of corporate governance
• Business Laws
• Environment Laws and guides
• Health and safety guidelines
• International Trade Agreements and Treaties
• Regional/Local Laws and Circulars
11
Using the PESTEL framework
• Apply selectively – identify specific factors which impact on the industry,

market and organisation in question.
• Identify factors which are important currently but also consider which will
become more important in the next few years.
• Use data to support the points and analyse trends using up-to-date
information.
• Identify opportunities and threats – the main point of the exercise.
12
PESTEL opportunities and threats for the oil industry
13
In-Live Class Activity
& Discussion
The Indian Automobile Industry
14
PESTEL Analysis Template
Factor Description O/T Impact on Business Low to High
P
15
PESTEL Analysis Template
Key Driver O/T Impact on Business Low to High
P Develop India as a global manufacturing centre O Explore new opportunities
GST on EV reduced from 12% to 5% O
S Rise in middle class income and young population O Business Growth
T Accelerated transition from BS IV to BS VI T Need to quickly move BS VI
EV vehicles becoming affordable and acceptable
L Major regulatory interventions
16
Finish
17

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Business Strategy

Porter’s 5 Forces Framework

SWOT Analysis Porter’s Value Chain Analysis

Social • A PESTEL analysis helps identify key drivers of change, which

• Typically key drivers vary by industry or market.

1. New discoveries and technology developments.

2. Examples include developments on the internet, nano-

2. Examples are environmental protection regulations, energy problems,

• Apply selectively – identify specific factors which impact on the industry,

The Indian Automobile Industry

GST on EV reduced from 12% to 5% O

S Rise in middle class income and young population O Business Growth

T Accelerated transition from BS IV to BS VI T Need to quickly move BS VI

EV vehicles becoming affordable and acceptable

L Major regulatory interventions

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