MAYURI VADHER

introduction

• PESTLE is an analytical tool which considers external factors and helps you to think about their impacts 

Why to use PESTLE

• The overriding question:

– Is this an attractive industry?

– (Eventually: Is this a game we want to play?)

• If so:

– What do we need to do to take advantage of, or position ourselves against, as we move ahead with our strategic thinking and planning?

PESTEL Framework

• Political– Government pressures

– Differences in countries, states, and regions

– Influences from political pressures(//sun of soil)

• Economic– Growth, Interest rates

– Employment levels

– Currency exchange

• Sociocultural– Norms, culture, values

– Lifestyle changes

• Technological– Innovation

– Research & development

• Environmental– Global warming

– Sustainability

– Pollution

• Legal– Court system

– Legislation

– Hiring laws

3–5

EXAMPLE:• Political

– The Singur Controversy – acquired a land But this acquisition required the displacement of farmers. – “Save Farmland” movement by opposition leader Mamata Bannerjee. – later established in Sanand, Gujarat.

• Economical –– promising with GDP growth rate around 7%– high interest rates and low freight availability impacted its financial infrastructure in first

quarter of 2013. – price pressure from competitors.

• Social –– Generates local population generating employment. Due to which Tata enjoys full public

support. – supports around 600 NGOs. – high standards of education to students.– institutes opened and managed by Tata are Indian Institute of Science, Tata Memorial

Centre, Tata Institute Social Sciences, etc.

EXAMPLE:• Legal-

– Cases against car explosion.– Government norms for production.

• Technological –– In order to adapt with the latest technology TML owns Tata Technologies

Limited. – helps in the upgradation of designs and technology. – Tata faced a technological hurdle when two units of its revolutionary Nano cars

caught fire in the year 2009. • Environmental –

– Tata to manufacture greener cars with low fuel consumption and lowest emission gases possible.

– invested huge sums of money in its R&D section to produce eco-cars.– As an eco-friendly company, TML has also invested in various “Green Earth,

Clean Earth” campaigns. – It has also worked towards the stopping of deforestation many years in a row.

• It is possible to use the PESTLE analysis on projects as well for organizations

• It is not always needed, especially if the projects are small

• If PESTLE analysis is used for a project, then the focus should be on solving the “focal problem” and analyze how the external environment is affecting the process of solving the “focal problem”

– e.g. the guidelines from the European Commission do not include PESTLE in their logical framework approach

PESTLE analysis and projects

Advantages

• Provides a simple and easy-to-use framework for your analysis.

• Involves cross-functional skills and expertise.• Helps to reduce the impact and effects of potential threats to

your organization.• Aids and encourages the development of strategic thinking

within your organization.• Provides a mechanism that enables your organization to

identify and exploit new opportunities.• Enables you to assess implications of entering new markets

both nationally and globally.

 

Disadvantages

• Users can oversimplify the information that is used for making decisions.

• The process has to be conducted regularly to be effective and often organizations do not make this investment.

• Organizations often restrict who is involved due to time and cost considerations. This limits effectiveness.

• Users’ access to quality external information is often restricted because of the cost and time needed to collate it.

• Assumptions often form the basis for most of the data used, making any decision made based on such data subjective.

An Overview Of Liberalization, Privatization and Globalization

• Liberalization refers to relaxation of government restrictions in areas of economic policies. Thus, when government liberalizes trade it means it has removed the tariff, subsidies and other restrictions on the flow of goods and service between countries.

• The term “Privatization” refers to “The transfer of ownership of property or businesses from a government to a privately owned entity.” Privatization in India generally is in the form of disinvestment of equity. In general, here privatization has not led to 100% transfer of control from public sector to private sector unit.

• globalization is the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology and capital. It is a process which draws countries out of their insulation and makes them join rest of the world in its march towards a new world economic order.

Reasons for implementing LPG

• Excess of consumption and expenditure over resulting in heavy government borrowings.

• Growing inefficiency in the use of resources.• Over protection to industry.• Mismanagement of firms and the economy.• Mounting losses of public sector enterprises.• Low foreign exchange reserves.• Burden of national debt.• Inflation.• Technological impairment.

LiberalizationReasons of liberalization:

•country to near bankruptcy.

•The Rupee devalued and economic reforms were forced upon India.

• India central bank had refused new credit and foreign exchange reserves had reduced to the point that India could barely finance three weeks’ worth of imports.

Reforms taken during Liberalization

•Abolition of industrial licensing and registration

•Liberalizing the MRTP act

•Freedom for expansion and production

• Increase in the investment limit of the small industries

• Freedom to import capital goods

• Freedom to import technology

•Free determination of interest rates

Liberalizationadvantages

•Increase in rate of economic growth

•Increase in competitiveness of industrial sector

•Reduction in poverty and inequality

•on prices

•Increase in Efficiency

•Better Stock Market Performance

Disadvantages

•Pressure by IMF and World

•depending on Foreign Debt.

•Dependence on Foreign technology.

•Promotion of Consumerism..

•Problem of Unemployment.

globalization

• According to IMF: - “The growing economic interdependence of countries worldwide through increasing volume and variety of cross border transaction in goods and services and of international capital cash flows, and through the more rapid and widespread diffusion of technology.”

FEATURES

• Opening and planning to expand business throughout the world.

• Erasing the difference between domestic and foreign market

• Buying and selling goods and services from / to any countries in the world.

• Locating the production and other physical facilities on a considerations of the global business dynamics, irrespective of national considerations

• Global sourcing of factors of production i.e. raw material, components ,machinery, technology, finance etc.

globalizationAdvantages

•improves the efficiency of resource, reduce the capital output and increase labour productivity, update technology that gives a boost to the average growth rate of the economy.

•Increase in Trade in Goods and Services

•Increase in industrialization

•Commodities at lower price with high quality

•Increase in jobs and incomes

Disadvantages

•Globalization is helping the developed economies more than the developing economies.

•Multinational companies and Chinese goods will flood the market at cheaper rates and there will be no takers for local products.

•Entry of MNC supermarket and hypermarket chains would cause severe displacement of small and unorganised shopkeepers and traders.

•Loss of domestic industries in income

Privatization• Privatization means replacing government monopolies with the competitive pressures of the

marketplace to encourage efficiency, quality and innovation in the delivery of goods and services .

METHODS • FRANCHISING-Franchising is a business model in which many different owners share a single

brand name. A parent company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement.eg-McDonald's (MCD) operates the world's largest fast food chain, and earns 37% of its revenue from franchising across its approximate 31,400 restaurant locations.

• LEASING- Written or implied contract by which an owner (the lessor) of a specific asset (such as a parcel of land, building, equipment, or machinery) grants a second party (the lessee) the right to its exclusive possession and use for a specific period and under specified conditions, in return for specified periodic rental or lease payments.eg- lic housing finance

• CONTRACTING- agreement between companies. Eg.• DISINVESTMENT- Disinvestment involves the sale of equity and bond capital invested by the

government in PSUs through securitization. Securitization is a structured financial process which involves pooling and repackaging of cash flow producing assets into securities that are then sold to investors. The government and not the PSU’s receive money from disinvestment. The disinvested shares are traded in the stock markets. In India there have been several cases of disinvestment, for example , Maruti Udyog, SAIL, Indian Airlines, Indian Oil, BALCO etc. .  

PrivatizationAdvantages•modernize and diversify business.•making public sector units more competitive. •improving the quality of decision-making•help in reviving sick units which have become a liability on the public sector.•better results in terms of revenues and efficiency and productivity.

Disadvantages•Privatization encourages monopoly, power in the hands of big business houses and thus greater disparities in income and wealth.

•The limited resources of the private individuals cannot meet some of the vital tasks which alter the very character of the economy.

•There is lack of transparency in private sector •Privatization results in high employee turnover