3.1.4 impact of external influences

pestle analysis

track the environment companies are operating in or are planning to launch a new project/product/service etc

pestle

Political

Economic

Social

Technological

Legal

Environmental

questions a business needs to think of while doing pestle analysis

• what is the political situation of the country and how can it affect the industry?

• what are the prevalent economic factors?

• how much importance does culture have in the market and what are its determinants?

• what technological innovations are likely to pop up and affect the market structure?

• are there any current legislations that regulate the industry or can there be any change in the legislations for the industry?

• what are the environmental concerns for the industry?

porter’s five forces

a framework for analysing the competitive forces within an industry

• vertical forces: buyer power and supplier power

• horizontal forces: entry threat and substitute threat

supplier power

how much control suppliers have over prices and supply

buyer power

• the power consumers hold over businesses through them buying from the business

• as they grow their bargaining power improves

entry threat

how easy it is for new firms to enter the market

• low threat if barriers are high (e.g. high costs, strong brands, patents, economies of scale, regulations)

substitute threat

risk that customers switch to alternative products or services

• this is high when substitutes are cheaper, better or easier to switch to

• substitute = alternative