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PEST factors:

Political factors:

Environmental directive and fortification

Taxation (customer, corporate)

International trade directive

Consumer fortification

Employment Law

Government institute/ approach

Competition directive

Economic Factors:

Economic growth (overall; by industry division)

Monetary strategy (interest rates)

Government expenses (overall level; precise expenses priorities)

Policy towards unemployment (smallest amount wage, joblessness benefits, grants)

Taxation (impact on client throwaway income, incentives to devote in capital tools,

business tax rates)

Exchange tariffs (Effects education on demand by abroad clients; effect on cost of trade in

Inflation (outcome on costs and selling prices)

Stage of the business sequence (outcome on short-term business act)

Economic mood customer assurance

Social factors:

Income allocation (change in allocation of disposable income)

Demographics (age structure of the population; family size, gender, composition;

changing nature of occupations)

Labour/ Social mobility

Lifestyle changes (e.g. single households, home working)

Attitude towards job and vacation


Fashions and fads

Health and welfare

Living conditions (pollution, housing, amenities)

Technological factors:

Government expenses on research

Government and industry spotlight on technological effort

New discoveries and expansion

Speed of technology convey

Rates of technological obsolescence

Energy utilization and costs

Changes in substance science

Impact of changes in information technology


Factors and organizational response:

Environmental factors:
Environmental regulation and protections: environmental regulation and protection become very
important issues for last couple of decades. All business, from shop and offices to businesses in
sectors like chemicals and agriculture, has lawful obligations that they have to fulfil. Risk
assessment need to be done. Local authorities will monitor small businesses but for big ones
Environmental agency will take part this thing. First of all, organizations must manage their
waste in a proper way; they have to follow the environmental standards. Factories must store and
dispose waste appropriately. A disposal unit will responsible for disposing and wasting goods
and materials. They need to take extra care on hazardous materials and chemicals otherwise
those will pollute local environment. Pollution and contamination must be in control. Emission
rate will reduce and extra care should be taken to noise, dust and smells. Every big company
must have water treatment plant otherwise surface water or ground water will be contaminated.
A regulatory committee will monitor every environmental regulations and protection at regular

Taxation (Corporate, customer): there are five kinds of business taxes

1. Corporate finance tax
2. Excise tax
3. Employment (withholding) tax
4. Gross-receipts tax
5. Value added tax
Some business organizations have to pay more taxes like insurance, petroleum extraction, and
mining companies. All the business taxes have an impact on people taxes because if they
government impose new tax, companies will increase the price of products and services and
people have to pay extra money. All the consumers have to pay value added tax (VAT) for the
products and services. All the end users have to pay this tax. If government increase the VAT,
sometimes it hampers business as people leave the services or products

International trade regulation: Normally international trade regulation is done by two bilateral
treaties between two countries. Most of the countries have high tariffs and restrictions on
international trade. Now most of the rich countries beliefs on free trade agreement as they are
economically dominant. Companies doing business crossing international border face a lot of
risks which have a great impact on domestic transactions. As like

Buyer insolvency

Credit risk



Regulatory risk

War and other out of control incidents

Political risk

All the companies should follow the rules and regulation of international trading regulations.
Consumer protection: it is designed to ensure fair trade competition and provide actual
information in the marketplace. Consumer protection law is a private law which relates
individual clients and the businesses that sells services and goods. Consumer protection cover a
lot of topics like privacy, product liability, fraud, unfair business practices, misrepresentation and
other business/consumer interaction. This law deals with product safety, credit repair, service
and sales contracts, debt repair, bill collector regulation, utility turnoffs, pricing, consolidation
and personal loans.
Employment law: Employees have the entitlement and right how they are dismissed and
disciplined, how their complaints are handled, their absence, wages, sickness, work breaks and
bonus, holidays, maternity, paternity, parental leave, flexible working hours and redundancy. All
the employees have right against gander discrimination, race, disabilities, age, belief and
religion. All the employers need to know how to deal with promotion, recruiting, dismissals,
disciplinary action, staff management and so on. Every workers and employers must respect the
employment laws.
Government organization/attitudes: Sometimes government control local market and
international market through good collaboration with international and local businessman.
Sometimes government negative attitude can destroy a company or its operation completely. If
businessman has good relation with political parties sometimes they are benefited.

Competition regulation: It has main three elements:

Prohibiting practices or agreements that restrict competition or free trading between
Banning offensive behaviour by a firm controlling the market or anti-competitive
exercises that lean to guide to such a leading place. Predatory pricing, price gouging, tying,
refusal to deal and many others are controlled by the law.

Supervising the acquisition and mergers of large corporation as some large joint ventures.

Economic Factors:
Some economic factors affect the working of business organization through internally,
operationally and externally. Those factors are describing below:
Economic Growth and Development: Economic growth means the amount of money or
finance that the country is earning and development means the amount of money is being
devoted in long term up-gradation. Development is the most influencing economic factors which
is responsible to build dynamic society.
Demand and supply: Demand and supply are two main factors of business. Demand is the
purchasing power of customer and supply means the ability to provide for the demand or clients.
Those two things are inter-connected.
Monetary policy: banking facilities monetary and economic policy has a great impact on
customer and business. If the interest rate is too high customer are unwilling to borrow money
from bank, which has negative impact on business.
Government spending: If government has a good affiliation with businessman customers will
be benefited as government can lessen the tax for importing goods. If government give
incentives to small businesses then customer can buy product in a fair price and government
need to monitor the market at regular basis otherwise some businessman stock the product to
increase the price in market.
Policy towards unemployment: Government must fix the scale of employees income
otherwise there will be discrimination. Government must give some benefits to unemployment
people by providing allowance, special training and recruiting. Everyone must work together to
minimize unemployment rate.
Taxation: if taxation increases for customer or business organization demand will decrease.
Different interest rate must be determined for different businesses from the government.
Government earn a good amount of revenue from customer and businesses taxes.

Exchange rate: Exchange rate has a direct impact on importing goods. If the exchange rate
suddenly goes high, importing goods will decrease in a big amount which causes a price
increasing in local markets. All times banks must have liquid money to provide to businessman
to run their business smoothly.
Inflation: If inflation rate is high, customers purchasing power will go down which cause great
demand reduction. Government must control inflation rate otherwise it can hamper the economy
in diverse ways. First world countries have low inflation rate, on the other hand third world
countries has high inflation rate.
Stage of business cycle: Business cycles are the variable costs of products and commodities in
an economy. Stability, rise, fall and continuity are some of the major cycles that affect the price
of all products such as credit, raw material, final goods, etc. Business cycle affects the general
price level very eloquently.

Social Factors:
Income Distribution: income distribution has a great impact on business. Income must be
relevant with skills and experiences focus on chronological distribution. If income is not
distributed properly, purchasing power will be reduced and business will face great loss. Mass
people will be enrolled in incoming activities.
Demographics: Demographics have a great impact on business environment. Buying and selling
are varied with age of the population, family size, gender and consumption. Changing occupation
also has some influence, if the salary goes high purchasing power increase and if salary goes
down purchasing power decrease.
Labour/ social mobility: Social mobility has a great impact on business environment. Social
mobility relates to the economic condition of people. If people economic condition going lower
class to middle class or middle class to higher class, businesses get profits. On the other hand, for
downstream of economy businesses will face loss.
Lifestyle change: Now a days people become modern and they are changing their demands
with time and economic condition. If people become rich their demand will be high and they will
use quality goods. On contrary, if people become poor their demand will be low and they will
use inferior products.
Attitudes to work and leisure: If people are too much busy in work and have less time to relax,
sometime have an effect on business. There must be balance between work and leisure. Working
societies have better buying power than less working society.

Education: Educated people always try to understand the market place. They will judge the
market condition before buying. Most of the rich countries are well educated that means if you
become educated, education will show you how to change your economic condition, life style,
attitudes which have a great impact on business environment.
Fashion and fads: fashion and fads will change with time, so all business organizations are very
careful about this factors. When fashion changes people demands for certain product will
change. Young generation change their fashion frequently rather than old generation.
Health and welfare: Health and wealth are inter-related. Sound body and mind have the willing
power to change life and go for extra miles. Healthy people can do more work and earn more
money, the ultimate result of increment of purchasing capabilities.

Technological Factors:
Government spending on research: Technologically sound countries have great efficiency in
work and activities. So government must allocate more money on research activities to improve
the efficiency and effectiveness.
Technological effort: Government and business will give more emphasis on technology.
Business organization will adapt with technology otherwise their efficiency will decrease.
Technologically solvent countries or business organizations have more purchasing capability
then other countries and organization.
New discoveries and development: Everyday technology is improving. If any company launch
a new technology or a new product with new technology, people are attracted by those and
companies do a huge profit. New idea has a great power in business environment.
Speed of technology transfer: when a new technology come to market people are rushing to
accept new technology. Business organization will change their operation and marketing with
technology otherwise they will fall apart from the competition.
Rate of technological obsolescence: if the rate of technological obsolescence is high people
have great economic condition and buying capability.
Energy use and cost: Energy use and cost have great impact on business. If the cost of energy
goes high businesses have to pay extra money which will cause increase in price and customer
have to pay more money than usual.
Impact of change in information technology: information technology has a great effect on
business. Previously most of the communication was done by direct contact but now visual
communication like phone conversation, email, fax are intensifying the contact which cause
rapid business.