PESTLE – External Environment

PESTLE – External Environment

Courses Info

PESTLE – External Environment

The PESTLE acronym is used to identify the macro (external) factors facing a business.

P = Political

E = Economic

S = Social

T = Technological

L = Legal

E = Environment

Political factors

This factor is influenced by the government’s political actions. Government intervention through taxes, regulations and policies will impact businesses.

Economic factors 

The main economic factors include interest rates, exchange rates and inflation. For example, a decrease in interest rates will make it cheaper for firms to borrow money and invest.  

Social factors 

The social factors that impact businesses include population changes, age, gender, culture, the wealth of people, access to education, access to healthcare etc. For example, access to basic healthcare may be low in a particular country. This could lead to a decrease in the number of people healthy and fit to work. This could help contribute to an overall decrease in real output (GDP).

Technological factors

The technological factors that could impact business include, research and development, automation, improvements in capital equipment etc. An increase in technological innovation (dynamic efficiency) within an industry or company can help a business cut its costs and become more profitable.

Environmental factors

Environmental factors include recycling, pollution, weather, climate change etc. For example, consumers may stop purchasing food from a fast-food chain if their operations or packaging are harmful to the environment.

Legal factors

Legal factors include health & safety law, trademarks, copyright, patents, consumer law, employment law etc. These factors can affect how a company operates, its costs, and the companies decisions. For example, Apple needs to make sure they have all of their Patents, Copywrite and Trademarks in place to protect their work from being copied.

 

Questions

1.What does the acronym PESTLE stand for?

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2. To what extent will a change in two PESTLE factors of your choice impact U.K businesses? (12 Marks)

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