Pestel Analysis: Economic and Environmental Factors (Essay Sample)

PESTEL ANALYSIS
It has been documented that PESTEL model are best for use by marketers as a tool for assessing its business environment. Specifically, the model assesses the external environment factors that affect sustainability and existence of a firm. It looks at political, social, economic, legal, environmental and technological factors. Consequently, leading to identification of strengths and weaknesses used in the SWOT model. It is an important model for new firms and those investing in foreign countries (Yüksel, 2012). The current analysis will look at economic and technological factors.
ECONOMIC FACTORS
This are factors that show how the economy is running. They include; economic growth, exchange rate, inflation rate, consumers disposable income and unemployment rate. This factors have an effect on the consumer’s purchasing power and could consequently affect demand. For instance, high inflation increase product prices resulting to reduced consumption or substitution to cheaper products (Birnleitner, 2014). This could affect how companies price their products. For instance, in the year 2018, inflation rate in China was raising at a very fast, the cost of living was seen to increase by 4.4% which consequently, affected the purchasing power of consumers. The prices of food went up by 10%. Investment reduces and most companies laid off workers (Essays, 2018). Hence this kind of analysis is important as a firm tries to enter China for it to devise policies that will help it set prices accordingly.
ENVIRONMENTAL FACTORS
Environmental degradation by producing companies have raised concerns hence governments are in the front line to reduce pollution. Polices like the polluter pay principle, licencing, bans and taxes have been used by China to regulate pollution caused by firms. Loss of biodiversity has also raise concerns as firms drain their waste into water bodies, soil and the air. As a measure to abatement, firms are required to carry out CSR, use environmental friendly energy and technologies (S