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Pestel analysis is the tool used by the marketers to analyze the macro –economics factors which directly affect the organization. Pestel analysis consist of political, economical, social, technological, environmental, legal factors. Pestel Analysis describes the macro-economic factors used in environmental scanning which are the components of strategical management. It is used to understand the market growth, direction and potential of operation, and business position in the market.
POLITICAL FACTOR- political factors are related to the government interference in the economy which has a direct impact on business. Political factor includes environmental law, labor law, tariffs. Trade restrictions, political stability, and tax policy. It has the direct impact on the infrastructure of a nation, education, and health. Any changes or amendments made by a government has the direct impact on the organization the impact can be positive or negative depending upon the nature of the change.
ECONOMICAL FACTOR- economic factors consist interest rate, inflation rate, exchange rate, and economic growth.changes in such rates have the high impact on the business operations and decision-making power.Likewise, change in interest rate will have the impact on the cost of capital of an organization which further will affect the business growth, and expansion plan, change in exchange rate will have the impact on exporting power of an organization which further will affect the supply and price of the product. This is how economic factors affect the organization.
SOCIAL FACTOR- social factor consists of culture, population growth rate, age distribution, health consciousness, emphasis on safety and career attitudes. Change in trend, change in culture directly affect the production of the organization therefore it is the major factor which an organization should consider at every step .the product which is in high demand today may fall tomorrow due to the change in trend such factors has to be considered by the organization in a day to day process.
TECHNOLOGICAL FACTORS- technological factors consist of automation, the rate of technological rate, technological incentives, and R&D activities. Change in technology will have the direct impact on an organization futher will affect the quality, costs and leads to innovation.
ENVIRONMENTAL FACTOR- environmental factor consist of environmental aspects such as weather, climatic change and ecological balance which may affect some specific industries like tourism, insurance, and farming. Moreover, people are getting more aware about the potential impacts of climatic change everyday which is having a direct impact on how campanies operate and the products they offer both the things are creating new markets and destroying the existing one.
LEGAL FACTORS- legal factors consist of consumer law, employment law, discrimination law, antitrust law and health and safety law. This can affect how a company operates, the demand of products and its cost. Change in legal factors may have the positive or negative impact on an organization depending upon the type of change.