1.5 External environment

STEEPLE analysis

  • STEEPLE analysis: acronym standing for social, technological, economic, environmental, political, legal and ethical external factors that impact on business; it refers to a framework for analyzing the external environmental factors affecting business objectives and strategies.

  • STEEPLE analysis for McDonald’s restaurants (example)

    • Social issues:
    • How are dietary trends changing and how different are customer tastes from those in other countries (e.g. cultural and religious factors)?
    • What proportion of couples both work less time to prepare meals?
    • Growing health consciousness - is the demand for healthy foods increasing?
    • Is the population aging? Do the elderly buy more or fewer fast-food meals than the young? Is the population growing?
    • Technological issues:
    • Can the food production process be automated? Is technical support available?
    • Online selling - is full internet/broadband coverage available? Will customers order online?
    • Are IT support services available locally?
    • Economic issues:
    • Economic growth - is this slowing or even negative (recession)?
    • Unemployment - is this rising and reducing consumer incomes? Interest rates are these high or low?
    • Exchange rate - is this likely to appreciate or depreciate?
    • Is the government’s fiscal policy likely to lead to increases or reductions in consumer incomes?
    • Environmental issues:
    • Environment - is environmentally friendly packaging technically possible and available In this country?
    • Are waste-recycling facilities available?
    • Is sustainable/renewable energy available in this country?
    • Are environmental pressure groups powerful in this country?
    • Political issues:
    • Is the government stable and are there likely to be any demonstrations against the government?
    • Are government grants available for setting up In the country?
    • Is the government committed to increasing or reducing taxes?
    • Does the country belong to a free-trade area or political unions?
    • Does the government put tariffs or quotas on imported goods? For example, supplies needed from the USA for McDonald's restaurants.
    • Legal issues:
    • Political stability of the country is civil unrest likely
    • Employee and consumer protection laws - how restrictive are these, e.g. health and safety laws?
    • Trade restrictions or membership of free trade bloc - can food be imported without tariffs?
    • Environmental regulations - what forms of packaging of fast food are allowed?
    • Health concerns about fast food - could the government pass new laws about the contents of fast-food products?
    • Ethical issues:
    • Are there any high ethical standards in public and commercial in this country?
    • Do suppliers treat workers ethically?
    • Is bribery and corruption widespread in this country?

Impact of technology

  • Impact on objectives and strategies:

    • Focus on new product development
    • Improve stakeholder communication
    • Developing new and better processes
    • Cost benefits
    • Competitive advantage
    • Outsourcing and offshoring - the impact of globalization

  • Economic influences:

    • Economic growth and recession
    • Interest rates - the use of monetary policy
    • Exchange rates - increases (appreciation) and decreases (depreciation) in the value of a currency value against other currencies
    • Tax changes through the use of fiscal policy
    • Unemployment
    • Inflation (cost-push and demand-pull)

  • Environmental influences:

    • Environmental controls on business activities such as waste disposal, use of sustainable energy, reducing packaging
    • Threats from natural events such as drought, earthquakes and floods
    • Natural resources
    • Infrastructure road and air transport facilities, for example

  • Political influences:

    • Government stability
    • Form of political structure, e.g. democracy
    • Government’s attitude to private ownership
    • Trade policies and membership of free-trade areas or Customs Unions (e.g. EU)

  • Legal influences:

    • Improved employee legal protection, e.g. better health and safety at work, redundancy pay, protection from discrimination, minimum pay levels, maternity pay
    • Consumer protection laws that constrain businesses from advertising inaccurately or inappropriately, selling faulty goods or those described incorrectly, high-pressure selling tactics, not allowing consumers to change their minds after signing credit agreements
    • Competition laws can restrict unfair competition or restrictive practices by businesses, monopoly exploitation of consumers, mergers and takeovers (external growth) that could lead to a monopoly.

  • Ethical influences:

    • National differences in the values and attitudes held by the majority of the population