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