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PESTEL Framework

By- Prof. Abha Rishi

The PESTEL/ PESTLE framework Categorises environmental influences into six main types: political, economic, socialcultural, technological, environmental and legal

PESTEL FRAMEWORK
THE FRAMEWORK PRIMARILY INVOLVES THE FOLLOWING TWO AREAS 1. THE ENVIRONMENTAL FACTORS AFFECTING THE ORGANIZATION 2. THE IMPORTANT FACTORS RELEVANT IN THE PRESENT CONTEXT AND IN THE YEARS TO COME.

The PESTEL framework


Political ( e.g. government stability, taxation policy, foreign trade regulation, social welfare policy) Economic (e.g. business cycle, interest rate, unemployment) Social (e.g. population demographics, income distribution, lifestyle changes) Technological (e.g. government spending on research, new discoveries, speed of technology transfer) Environmental ( environmental protection laws, energy consumption) Legal ( employment law, health and safety, product safety)

POLITICAL
Government Stability Political Values And Beliefs Shaping Policies Regulations Towards Trade And Global Business Taxation Policies Priorities In Social Sector

What characteristics measure economic development


Quantitative Indicators are numerical indications of development. Qualitative Indicators include descriptions of living conditions and people's quality of life. They are useful in analyzing features that are not easily converted to numbers such as freedom and security. Composite Indicators combine several quantitative indicators into one figure and generally provide a more balanced view of a country. Usually they include one economic, one health and one educational indicator.

Quantitative Indicators
GNP, GDP, GINI Index,etc. Purchasing power parity (PPP) in which the actual comparative purchasing power of the money in the country is calculated. Economic indicators include
unemployment rates, energy consumption and percentage of GNP in primary industries

Social (demographic) indicators include the


birth rate, death rate fertility rate.

Health indicators include nutrition (calories per day, calories from protein)
percentage with malnutrition, infant mortality population per doctor.

Qualitative Indicators( Sociocultural)


Happiness Index Health Index Fidelity Index Aggression Index Empathy Index Racism Index Authority Index Grooming Index

Composite Indicators
The HDI (Human Development Index) is now the most widely used composite indicator. A number is calculated between 0 and 1 taking into account the most important measures: GNP per capita, the adult literacy rate, the school enrollment rate and life expectancy. A HDI between 1 and 0.8 is considered high, 0.8 and 0.6 is considered medium and 0.6 to 0.4 is considered low. The PQLI (Physical Quality of Life Index) which was a precursor to the HDI which used infant mortality rate instead of GNP per capita and rated countries from 0 to 100. It was calculated by assigning each country a score of 0 to 100 for each indicator compared with other countries in the world. The average of these four numbers makes the PQLI of a country.

Composite Indicators
The HPI (Human Poverty Index) is used to calculate the
percentage of people in a country who live in relative poverty. In order to better differentiate the number of people in abnormally poor living conditions the HPI-1 is used in developing countries, and the HPI-2 is used in developed countries. The HPI-1 is calculated based on the percentage of people not expected to survive to 40, the adult illiteracy rate, the percentage of people without access to safe water, health services and the percentage of children under 5 who are underweight. The HPI-2 is calculated based on the percentage of people who do not survive to 60, the adult functional illiteracy rate and the percentage of people living below 50% of median personal disposable income.

The GDI (Gender-related Development Index) measures gender equality in a country in terms of life expectancy, literacy rates, school attendance and income.

ECONOMIC FACTORS
GNP/GDP TRENDS BoP INTEREST RATES/ SAVINGS RATES MONEY SUPPLY INFLATION RATES UNEMPLOYMENT DISPOSABLE INCOME BUSINESS CYCLES TRADE DEFICIT/SURPLUS

Economic Indicators
1. Ease of doing business index 2. Cost of living Index 3. Consumer- price index 4. Consumption index 5. (Sectorial) Growth Index 6. Producer price Index 7. International Manufacturing Cost Comparisons Index

SOCIO-CULTURAL FACTORS
POPULATION DEMOGRAPHICS
ETHNIC COMPOSITION AGING OF POPULATION REGIONAL CHANGES IN POPLULATION GROWTH/DECLINE

SOCIAL MOBILITY LIFESTYLE CHANGES ATTITUDE TO WORK AND LEISURE EDUCATION-SPREAD OR EROSION OF STANDARDS HEALTH AND FITNESS AWARENESS MULTIPLE INCOME FAMILIES

TECHNOLOGICAL
BIOTECHNOLOGY PROCESS INNOVATION DIGITAL REVOLUTION GOVERNMENT SPENDING ON RESEARCH GOVT AND INDUSTRY FOCUS ON TECHNOLOGICAL EFFORTS NEW DISCOVERIES/DEVELOPMENT SPEED OF TECHNOLOGY TRANSFER RATES OF OBSOLESCENCE

Environmental
Recycling Waste management Air pollution Water pollution Ozone depletion- carbon credits (Kyoto protocol) Endangered species- biodiversity, sui generis ( WTO-TRIPS)

LEGAL
MONOPOLIES LEGISLATION/ ANTITRUST REGULATION EMPLOYMENT LAW HEALTH AND SAFETY PRODUCT SAFETY FOOD LAWS ENVIRONMENTAL LAWS

PESTEL-AN INDIAN FRAMEWORK

PESTLE - Key Economic Variables-1


Shift to a service economy in India Availability of credit Level of disposable income Propensity of people to spend Interest rates Inflation rates

PESTLE Key Economic Variables-2

Government budget deficits Gross domestic product trend Consumption patterns Unemployment trends Worker productivity levels Value of the Rupee in world markets Stock market trends Foreign countries economic conditions

PESTLE - Key Economic Variables-3


Import/export factors Demand shifts for different categories of goods and services Income differences by region and consumer groups Price fluctuations Exportation of labor and capital from India Monetary policies

PESTLE Key Economic Variables-4


Fiscal policies Tax rates European Economic Community (ECC) policies Organization of Petroleum Exporting Countries (OPEC) Policies Coalitions of Lesser Developed Countries (LDC) policies

PESTLE Key Social, Cultural, Demographic, Environmental Variables 1


Number of marriages Number of divorces Number of births Number of deaths Immigration and emigration rates Life expectancy rates

PESTLE Key Social, Cultural, Demographic, Environmental Variables 2

Per capita income Location of manufacturing, retailing and service businesses Attitudes toward business Life-styles Traffic congestion Inner-city environments

PESTLE Key Social, Cultural, Demographic, Environmental Variables 3


Average disposable income Trust in government Attitudes toward government Attitudes toward work Buying habits Ethical concerns Attitudes towards saving

IDENTIFY FEW KEY ACTIVE POLITICAL FORCES AND HOW THEY ARE SHAPING THE OVERALL ENVIRONMENT IN THE COUNTRY ?

SUPPOSE THE FOREX RESERVES REDUCE TO HALF OF THE PRESENT LEVEL BECAUSE OF FEW DEVELOPMENTS IN THE OUTSIDE WORLD . DISCUSS THE ECONOMIC EFFECTS IT MAY LEAD TO ::

THERE HAS BEEN A THRUST ON WOMEN LITERACY. DISCUSS THE INFLUENCES YOU SEE IN THE SOCIAL ENVIRONMENT AND THEIR IMPACT ON BUSINESS.

ENUMERATE FEW OF THE TECHNOLOGICAL ADVANCES IN THE AGRICULTURE AND DISCUSS ITS ROLE IN TAPPING BETTER OPPORTUNITIES IN THE OVERSEAS MARKETS

LIST OUT THREE MAJOR INDUSTRIES WHICH IN YOUR VIEWS POSE DANGER TO ENVIRONMENTAL CONDITIONS.MENTIONING YOUR REASONS SUGGEST HOW THESE INDUSTRIES MAY CORRECT THE SITUATIONS.

DISCUSS THE LEGISLATION ON PATENTS IN INDIA AND COMMENT ON ITS IMPACT ON THE BUSINESS.

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