Session04: PEST(EL) Analysis

1. Manning School of Business Session04:PEST(EL) Analysis Dr. Mark H. Mortensen 66.490.211 and 212 Tues &Thurs 2:00 to 3:15 3:30 to 4:45

2. Today Purchased text book & read Chapter 3 Purchased case studies • Attendance • Group workshop on #2 – your company • Discussion on PEST(EL) analysis of external environment • Group work – do a PEST(EL) analysis of your company

3. Group Workshop: Your Company • Take 20 minutes: • Pull together your group information about the company that your group has been assigned to. • Fill out the information on the profile sheet • Present the sheet (via overhead projector) to the class (3-4 minutes).

4. Today • Attendance • Group workshop on #2 – your company • Discussion on PEST(EL) analyses of the external environment • Group work – do a PEST(EL) analysis of your company

5. Strategic Management Process: Environmental Scanning Assumptions Constraints Truisms TOOLS PEST(EL) analysis Porter 5-Forces model Company positioning chart Product positioning charts BCG product matrix GE product matrix Core competency analysis Value chain analysis Bowman’s Strategy Clock

6. Environmental Scanning Assumptions Constraints Truisms • Outside-In analysis • Society • Industry • Internal company • Not what you wish it was, but what it actually is.

7. PEST(EL) Analysis of the External Environment • PEST Analysis is a simple but important and widely-used tool by business leaders worldwide to build their vision of the future. • Ensure that what you are doing is aligned positively with the forces of change that are affecting our world. By taking advantage of change, you are much more likely to be successful than if your activities oppose it. • Helps avoid taking action that is condemned to failure for reasons beyond your control. • Particularly useful when starting to operate in a new country or region. Using it helps you break free of unconscious assumptions, and helps you quickly adapt to the realities of the new environment.

8. PEST(EL) Analysis Political • Form of government • Tax laws • Stability of government • Government attitude toward foreign companies • Strength of opposition groups • Trade regulations • Protectionist sentiment • Foreign policies • Terrorist activity • Legal System

9. PEST(EL) Analysis Economic • Economic development • Per capita income • Climate • GDP trends • Monetary and fiscal policies • Unemployment levels • Currency convertibility • Wage levels • Nature of competition • Membership in regional economic organizations, e.g. EU, NAFTA, ASEAN • Membership in World Trade Organization • Outsourcing capability

10. PEST(EL) Analysis Example: GDP Country Ranking

11. PEST(EL) Analysis Example: Population and Growth 87 India 1.3% 125 US 0.9% 152 China 0.5% 199 Japan -0.1%

12. PEST(EL) Analysis Example: Other Economic Indicators http://www.indexmundi.com/g/r.aspx?v=67

13. PEST(EL) Analysis Sociocultural • Customs, norms, values • Language • Demographics • Life expectancies • Social institutions • Status symbols • Lifestyle • Religious beliefs • Attitudes toward foreigners • Literacy level • Human rights • Environmentalism

14. The “Graying of America” • Baby boomers and retirees over 65 represent the fastest growing demographic segment of the population. We have talked about 10,000 Americans turning 50 every day for years and combined with a decline in the birth rate, 40% of the overall U.S. population is over 50. • In 1900, just 3.5 million Americans were 65 years of age. By 1998, that number grew to 35 million and projections are that by 2025 that number will be 70 million. • And it has been further projected that by the year 2030, there could be more Americans over 80 than there are under the age of eight!

15. PEST(EL) Analysis Sociocultural examples 8 Current Transformational Trends • Expanding seniors market • Impact of the Generation Y boomlet • Increasing environmental awareness • Growing health consciousness • Declining mass market • Changing pace and location of life • Changing household composition • Increasing diversity of workforce & market

16. PEST(EL) Analysis Technological • Regulations on technology transfer • Energy availability & cost • Natural resource availability • Transportation network • Skill level of workforce • Patent-trademark protection • Internet availability • Telecommunications infrastructure

17. PEST(EL) Analysis Environmental • Carbon emission regulations • Green movement Legal • Privacy regulations • Industry regulations

18. PEST(EL) Form • Brainstorm the relevant factors that apply to the market, using the form. • Identify the information that applies to these factors. • Draw conclusions from this information.

19. Today • Attendance • Group workshop on #2 – your company • Discussion on PEST(EL) analysis of external environment • Group work – do a PEST(EL) analysis of your company

20. Assignment #3: Written report on Starbucks and Dunkin’ Donuts Due by: Thursday • Each person visit both a Starbucks and a Dunkin’ Donuts retail store and write a report. • Describe and contrast the atmospheres, types of menu items, service quality, and prices • Describe and contrast the patrons and how they react to the above • Talk to at least one person in the store about why they come there and relate their opinions • Describe your own experiences at each of them, from this and other visits. • Visit the Starbucks and Dunkin’ Donuts web sites: • Try to determine their target markets, mission statements, and anything else you can glean about their strategies – write a paragraph or two on each • Contrast the two web sites • Contrast the apparent strategies of the two • Discuss how the information on the web sites does or does not match the reality in each case. • A few informal pages should suffice – if it wants to be longer, OK.

21. Strategic Management – Spring 2013