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