PESTLE
Absolutely. Here are Gizmo-friendly questions and answers from this page, written as short revision flashcards for CIMA E2.
Traditional Approach to Understanding Markets
Q: What tools are traditionally used to analyse the business environment?
A: PESTLE analysis, Porter’s Five Forces and Porter’s Generic Strategies.
Q: What is the purpose of PESTLE analysis?
A: To analyse the external business environment and identify opportunities and threats.
Q: What does PESTLE stand for?
A: Political, Economic, Social, Technological, Legal and Environmental/Ecological.
Q: Why is PESTLE analysis important for an organisation?
A: It helps an organisation understand external opportunities and threats and supports current and future strategic decisions.
Q: What does Porter’s Five Forces analyse?
A: The profit potential of an industry and an organisation’s competitive position within it.
Q: What are Porter’s three Generic Strategies?
A: Cost leadership, differentiation and focus.
PESTLE Factors
Q: What are political influences in PESTLE?
A: Government-related factors such as legislation, government policies, competition policy and import duties.
Q: Give examples of economic influences.
A: Changes in GDP, consumer income and expenditure, population growth, and domestic or international economic conditions.
Q: Why might economic analysis differ between multinational and domestic organisations?
A: A multinational considers international economic conditions, while a domestic organisation may focus more on developments within its own country.
Q: What are social influences?
A: Changes in population, age profiles, attitudes, values, beliefs, lifestyles, education and health.
Q: What are technological influences?
A: Changes in technology affecting material supply, processing methods and new product development.
Q: What are environmental/ecological influences?
A: The impact an organisation has on the external environment, such as pollution.
Q: What are legal influences?
A: Changes in laws and regulations affecting areas such as competition, patents, sale of goods, pollution, working regulations and industry standards.
Application Questions for Gizmo
Q: The government introduces a new import tax. Which PESTLE factor is this?
A: Political.
Q: Consumers have less disposable income because of an economic downturn. Which factor is this?
A: Economic.
Q: The population is ageing and customer preferences are changing. Which factor is this?
A: Social.
Q: A new production technology allows a company to manufacture products faster. Which factor is this?
A: Technological.
Q: A company faces pressure to reduce pollution and its environmental impact. Which factor is this?
A: Environmental/Ecological.
Q: New regulations change the standards that a company must meet. Which factor is this?
A: Legal.
Q: How can PESTLE factors create both opportunities and threats?
A: External changes may create new markets or advantages, but they can also increase costs, competition or regulatory requirements.
Q: What is the key exam point to remember about PESTLE?
A: PESTLE analyses the external macro-environment surrounding an organisation.