Page 72 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes (h) Brainstorming
(i) Demand/hazard forecasting
The above techniques are briefly discussed below:

PESTEL Analysis

PESTEL Analysis is a checklist to analyse the political, economic, socio-cultural, technological,
environmental and legal aspects of the environment.

While doing PESTEL analysis, it is better to have three or four well-thought-out items that are
justified with evidence than a lengthy list. Although the items in a PESTEL analysis rely on past
events and experience, the analysis can be used as a forecast of the future. The past is history and
strategic management is concerned with future action, but the best evidence about the future
may derive from what happened in the past. It is worth attempting the task of deciphering this
hidden assumption anyway. For example, when the Warner Brothers invested several hundred
million dollars in the first Harry Porter film, they made an assumption that the fantasy film
market would remain attractive throughout the world. A structured PESTEL analysis might
have given the same outcome even though it is difficult to predict.

Notes Checklist for a PESTEL Analysis
Political future
Political parties and alignments at local and national level
Legislation, e.g. on taxation and employment law
Relations between government and the organization (possibly influencing the preceding
items in a major way and forming a part of future corporate strategy)
Government ownership of industry and attitude to monopolies and competition
Socio-cultural future
Shifts in values and culture
Change in lifestyle
Attitudes to work and issues
‘Green’ environmental issues
Education and health
Demographic changes
Distribution of income
Economic future
Total GDP and GDP per head
Inflation
Consumer expenditure and disposable income
Interest rates
Currency fluctuations and exchange rates
Investment – by the state, private enterprise and foreign companies
Cyclicality
Unemployment
Energy costs, transport costs, communication costs, raw material costs
Technological future
Government investment policy
Identified new research initiatives
New patents and products
Speed of change and adoption of new technology Contd...
Level of expenditure on R&D by organisation’s rivals
Developments in nominally unrelated industries that might be applicable
Environmental future
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‘Green’ issues that affect the environment
Level and type of energy consumed – renewable energy?
Rubbish, waste and its disposal
Legal future
Competition law and government policy
Employment and safety law
Product safety issues