Pestel and Porters Diamond

Lecture Describe

• Examination of Macro Environment

The External Environment


• Market analysis

– 5 Makes Model

• Life-Cycle Style

Understanding the EnvironmentIssues

• Variety

– Various influences

Levels of the business environment

• Complexity

– Interconnected influences– eg Technology changes the size of work- alterations lifestyles- changes consumer behavior

• Speed of transform

– Particularly ICT –means more and faster change

Macro-environment – PESTEL (1)

Macroenvironment – PESTEL (2)


• Govt stability • Taxation insurance plan • Foreign trade restrictions • Cultural welfare policies • • • • • • •


Business periods GNP trends Interest rates Cash supply Inflation Unemployment Throw-away income

Macroenvironment – PESTEL (3)


• Inhabitants demographics • Income circulation • Cultural mobility • Lifestyle changes • Attitudes to work and leisure • Consumerism • Levels of education

Macroenvironment – PESTEL (4)


• Environmental security laws • Waste disposal • Energy ingestion • • • •


• Government investing in research • Government and industry focus on technological efforts • New discoveries /developments • Velocity of technology transfer • Rates of obsolescence


Competition legislation Employment law Health and security Product basic safety

Key Aspects of PESTEL Examination

• Not just a list of affects • Have to understand important drivers of change • Focus is on foreseeable future impact of environmental factors • Mixed effect of some of the factors likely to be most important

Probably Future Styles

• Portable Information Products • Alternate Energy Sources– Geothermal, hydroelectric

• GMC foods and farming • Growth of Woofies • Environmental Awareness

External Environment

Situation Analysis

• How the business environment may develop in the future based on crucial environment changes around which there is a substantial degree of doubt. • Magazine Industry – Influence of electronic press

Issues Goal Matrix

• Identify likely trends:

– Societal and task conditions

• Ideal environmental concerns

• •

Assess possibility of trends occurring

– Low to High

• Energy Market

– Middle section East Circumstance – Environmental issues

Determine likely impact of developments on the corporation

– Low to Large

Issues Goal Matrix

Likely Impact on Organization High Moderate Low

Porter's Diamond

• PESTEL elements differ from region to country –their competitive impact can differ from region to region • Porter's (1990) advises reasons why some countries will be more competitive than others

Probability of Occurrence



High Top priority

High Goal

Medium Concern

High Top priority

Medium Concern

Low Priority


Medium Priority

Low Priority

Low Priority

Porter's Diamond

The Determinants of National Advantage

Porter's Gemstone

• Factor conditions

– Education, system, cash, for example, Taiwan

• Demand Conditions, eg, Japanese demand for top quality. • Organization Strategy, Composition & Rivalry. Eg, Taiwan's SME sector • Assisting Industries, eg Italy, leather-based, Silicon Valley pc related market Source: M. Porter, Competitive Advantage of Nations around the world, Macmillan, 1990.

Industry Evaluation


A group of firms making a similar service or product, such as soft drinks or financial services.

Industry Evaluation

Industry Research (1)

Menace of New Entrants -Barriers to entry:

• • • • • • • Economies of Scale Item Differentiation Capital Requirements Transitioning Costs Use of Distribution Channels Cost Drawbacks Independent of Size Government Policy

Sector Analysis (2)

Rivalry Between Existing Businesses -Intense rivalry related to:

• • • • • • • Number of competitors Rate of Industry Progress Produce or Service Features Amount of Fixed Costs Capacity Elevation of Quit Barriers Diversity of Competitors

Industry Analysis (3)

Menace of...



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