Essay on PESTEL Analysis: Understanding the Modern Business Environment

Introduction

Over the years, there has been an emergence of new markets leading to the entry of foreign competitors. There has been increased deregulation of industries and privatisation of state-owned organisations. It, therefore, means that globalisation has become an undeniable fact in all sectors. The entry into new and foreign markets requires that companies have a comprehensive understanding of the modern business environment. PESTEL analysis is an analytical tool that can aid in understanding a business' external environment and especially concerning international markets (8.2 PESTEL 2012). It helps the organisation's leadership to understand the threats and opportunities, and hence develop an appropriate vision for the business. PESTEL involves the examination of political, environmental, sociocultural, technological, environmental, and legal factors. In this case, it entails the analysis of these factors in the globalisation context.

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Political Factors

The political environment has critical implications on the business and influence consumer behaviour. For instance, the stability of the political environment is vital to companies investing in foreign companies (8.2 PESTEL 2012). There are government regulations and taxations and political considerations such as the EU and NAFTA.

Economic Factors

The business needs to consider the macroeconomic factors impacting the short-term and long-term success of the business (International Business 2020). There are issues such as inflation, interest rates and tariffs, among others.

Sociocultural Factors

There is a variation of social and cultural factors in different countries. Some of these include local languages, religion, cultural perceptions, age and demographics. They also involve attitudes towards consumerism and environmentalism (Wozniak 2019). For instance, Coca-Cola Company has grown its business due to the prevalence of consumerism.

Technological Factors

The recent years have seen the advancement of technology. For instance, technology has enabled the cost-effective production of high-quality products (8.2 PESTEL 2012). For example, technology has enabled the mass production of goods in China at a lower cost.

Environmental Factors

The environment is another factor that affects an organisation's strategy, and especially from the availability of raw materials. For instance, there is the issue of carbon footprint and waste management.

Legal Factors

Lastly, there are legal factors which involve the establishment of law, the possibility of l regulations changing and the expense of regulatory compliance.

The Impact of the EU on Organisations with Global Presence

The EU plays a critical role in the global space through diplomacy, promotion of human rights, trade, development and working with multilateral agencies. First, it is a contributor to international peace by facilitating solutions in conflicts globally. For instance, it led to an international agreement in Iran's nuclear program (The EU's international roles, 2019). Second, it has a European Neighbourhood Policy which seeks to uphold good relations with different countries. Third, it is one of the major donors in development aid through official development assistance. Fourth, it contributes to global security under the Common Security and Defence Policy (Blavoukos and Bourantonis 2011). Fifth, it advocates for action on climate change. It also acts as a trading bloc and helps in negotiating and signing international trade agreements.

Role and Responsibilities of International Organisations

The increasing globalisation has witnessed the development of international organisations. The role of these international organisations includes maintenance of standards to promote safety, aiding developing nations realise economic security and establishing standards for making trade agreements and conflict resolution (Roy 2018). Some of these organisations include GATT and WTO. GATT provides trades rules and a platform for discussion of issues of a trade by members. The WTO works to ensure governments can discuss trade issues they are facing and includes a set of rules and agreements which require governments to keep trade policies within the appropriate limits (Hyatt 2017). There are also other organisations such as UNIDROIT, ICC, and UNCITRAL, among others.

References

Anon., 2012. 8.2 PESTEL, Globalization, and Importing [online]. PESTEL, Globalization, and Importing. Available from: https://2012books.lardbucket.org/books/challenges-and-opportunities-in-international-business/s12-02-pestel-globalization-and-impor.html [Accessed 13 May 2020].

Blavoukos, S. and Bourantonis, D., 2011. The EU presence in international organizations. London: Routledge.

Hyatt, P., 2020. The role of international organizations in international business law [online]. Trade Ready. Available from: http://www.tradeready.ca/2017/topics/researchdevelopment/role-international-organizations-international-business-law/ [Accessed 13 May 2020].

Anon., 2020. International Business: PESTLE Analysis [online]. PESTLE Analysis - International Business - Subject guides at University of Sydney. Available from: https://libguides.library.usyd.edu.au/c.php?g=508109&p=6621287 [Accessed 13 May 2020].

Roy, A., 2018. International Organizations That Play a Role in Importing and Exporting [online]. Shipping Solutions Export Document Software - Home Page. Available from: https://www.shippingsolutions.com/blog/international-organizations-that-play-a-role-in-importing-and-exporting [Accessed 13 May 2020].

Anon., 2019. The EU's international roles [online]. EEAS. Available from: https://eeas.europa.eu/headquarters/headquarters-homepage_en/3637/The EU's international roles [Accessed 13 May 2020].

Wozniak, K., 2019. Social and cultural factors affecting business [online]. CEOpedia. Available from: https://ceopedia.org/index.php/Social_and_cultural_factors_affecting_business [Accessed 13 May 2020].