2.

1 Macro Environment: PEST

Chapter 1 learnings show that organization do not exist in vacuum.

The planning, organizing, leading, and controlling functions are completer in dynamic environments-
external and internal. The external environment, which includes the government, economic conditions,
social, and other factors that generally affect all organizations, is also called the macro environment
(Bateman and Snell, 2008). The macro environment may be defined by the acronym PEST, which lists the
Political, Economic, sociological, and Technical variables in the said environment, as follows:

Political, Government, and Legal

 Changes in tax laws

 Environmental protection laws
 Fiscal and monetary policies
 Government regulations or deregulations
 Import-export regulations
 Local and national elections
 Oil, currency, and labor markets
 Political conditions in foreign countries
 Size of government budgets
 Special tariffs

Economics

 Shift to service economy

 Demand shift for different product and service categories
 Income differences by region and consumer group
 Level of disposable income
 Availability of credit
 Prosperity of people to spend
 Interest, inflation, and tax rates
 Monetary and fiscal policies
 GDP/GDRP trend
 Consumption patterns
 Price fluctuations
 Worker productivity levels
 Unemployment trends
 Export of labor and capital
 Economic conditions in foreign countries

Social, Sociological, Cultural, Demographic, and Environmental

 Air and water pollution control

 Attitudes toward product quality and customer service
 Average level of education
 Changes in tastes and preferences
 Energy conservation and waste management
 Life expectancy rates
 Lifestyles and buying habits
 Number of high school and college graduates
 Number of women workers
 Per capita income and average disposable income
 Social programs
 Social responsibility
Technological and Technical

 Internet
 Provides decision and support systems
 Spurs productivity and living standards
 Alters product life cycles and distribution systems
 Technological advancements and developments
 New and improved products
 Shortage of technical skills

A variation on the PEST acronym is PESTEL, which stands for Political, Economic, Social or
Sociological, Technical, Environment, and Legal factors in the environment.

Environment or ecological factors include:

 Weather
 Climate change;
 Laws regulating environment pollution;
 Waste management
 Attitudes toward ‘green’ or ecological products; and
 Attitudes toward and support for renewable energy.

Globalization and technological advancements have raised the concern for the aforementioned
factors in the natural environment. Simultaneously, other issues affecting businesses and industries
consist of the following:

Legal factors include:

 Anti-trust law;
 Discrimination law;
 Copyrights, parents, intellectual property law;
 Data protection;
 Health and safety law;
 Consumer protection and e-commerce; and
 Employment law

Chapter 1 learnings also showed alternative perspectives for the macro environment, such as the
World Economic Forum (WEFORUM) and City Development Strategy (CDS) approaches. The twelve
pillars used in the Global Competitive Report of WEFORUM provide comparative evaluation with other
countries and locations. It is helpful, especially for starting environment, and health and primary
education in their attempts to profile their chosen locations. Data from the local government units and
their respective websites, if available, serve as guide for the macro environment sketch.

As organization progress in their respective industries, data for the WEFORUM efficiency
enhancer list-higher education and training, goods market efficiency, labor market efficiency, financial
market development, technology readiness, and market size-are usually available from industry
suppliers, i.e., the banking sector, machinery, equipment and human resource suppliers, and the
customer population.
 Information for the business sophistication and innovation elements is gleaned from private
sector alliances.

It is useful to note that most progressive cities in the Philippines and other countries have their
own websites that provide valuable data for their sites, the macro environment data they offer support
the information from national government departments and bureaus.

In the Philippines, the statistics essential to the CDS frameworks may be taken from selected
departments of the national government, such as the following:

1. Department of Trade and Industry (DTI), and its bureaus and agencies, for product and
service standards, consumer protection guidelines, incentive programs, export-import
statistics, and other trade data;
2. Department of Labor and Employment (DOLE), and its bureaus and agencies, for manpower
availability, skills development, wage and benefits, and employee-employer rights;
3. Department of Interior and Local Government (DILG), and its bureaus and agencies, for
regional, provincial, and local government development plans;
4. Department of Public and Work and Highways (DPWH), and its bureaus and agencies, for
infrastructure developments;
5. Department of Education (DepEd), and its bureaus and agencies, for basic education, skills
training, and development; and
6. Department of Health (DOH), and its bureaus and agencies for employee health certificate,
product registrations, and licenses to operate.

The Commission on Higher Education (CHED) and the Technical Skills and Development
Authority (TESDA), and their bureaus and programs, provide higher education and technical-
vocational skills training and development.

The annual reports of these agencies show fundamental data in the aforementioned list.
Finally, the State of the Nation Address (SONA) from the Office of the President summarizes past
accomplishments and future plans for the country. Macro environment indices-growth rates of
the gross national product, inflation rates, interest rates, and other economic indicators- are
reported and reviewed.

These data are essential for the macro environment report used by enterprises.