How does the macro environment affect your success?
As part of a strategic marketing analysis you should look at the macro environment. Since also external forces at a country level define the attractiveness of that market. A PESTEL analysis, also called a DESTEP analysis, helps you identify the trends at macro level that could impact your business. The letters stand for Political, Economic, Social, Technological, Environmental and Legal.
Government policy may impact your organization or industry. It can affect the regions you can operate in, production methods or even the location of your corporate headquarters. Not only should you obide fiscal and tax policies, but also social policies. Moreover, entry and trade regulations (e.g. the EU & NAFTA) and the political policy and stability will significantly influence your options and success.
Economic factors indicate the health of an economic region and –indirectly- your profitability. For instance, you can draw conclusions for your success rate from insights on the disposable income of buyers. Or the economic growth and unemployment rates. But there are also factors such as the interest and foreign exchange rates and inflation. Not to mention the raw material costs and credit accessibility.
Social factors provide an insight on the mentality of individuals in a given market. And their needs and wants. In addition, you may want to look at demographics and education levels. But also lifestyle and attitudes define what and how one purchases (or not!).
The rate of innovation and development, in technology but also in areas such as distribution, manufacturing and logistics, can optimize internal efficiency and help a product or service from becoming obsolete. Factors are for instance:
- New development and innovations;
- Requirements for new technology (infrastructure);
- New platforms (e.g. VHS and DVD).
Both consumers and governments can penalize organizations for having a negative effect on the environment. By respectively switching brands or imposing fines for polluting. But environmental factors can also determine your operating costs or influence your choice of location. Factors include:
- Climate and availability required natural resources;
- Environmental laws;
- Energy consumption, waste disposal/recycling, sustainability;
- Market attitude towards the environment.
Local and international legislation, regulation and restrictions define the way one can operate in a region. Common legal factors include for example:
- Employment legislation;
- Competitive regulations and antitrust laws;
- Health and safety regulations;
- Patents, product and trade regulations.
You want to make sure that your insights are always up to date. So this situational PESTEL analysis should be repeated at regular stages (6 monthly minimum). In order to identify changes for the territories you operate in, isolating each opportunity and threat. Have you found new insights from your analysis? Do let us know!
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