Pestel factors free essay sample

The ever-dynamic nature of the business environment coupled by political, economic, social, technological, environmental and legal factors (PESTEL) have contributed to a number of implications to business startup and or operation. Miller (1997) noted that, PESTLE is a strategic framework for understanding external influences on a business. The central thesis of this essay is to cite at least one of each of the PESTEL factors, discussing the implications of each of the factors to business startup or operation. Firstly, Political factors assess that, the country risk rating will remain high because of the just ended elections. The new government has indicated its intention to pursue empowerment programs across all sectors of the economy and the gazetted Indigenization Regulations aimed at attaining that objective. The timing of the implementation of the regulations when there is no money in the market to recapitalize companies, or to fund the purchase of equity under the program; the indiscriminate targeting of foreign investors on a racial criteria irrespective of whether or not such investors contributed to, or benefited to the impoverishment of Zimbabweans prior to independence, and the preoccupation with majority ownership by indigenous Zimbabweans to the exclusion of other modes of empowerment that do not necessarily require equity participation, has raised fears of expropriation of private property. Alexander (1991) added that, although empowerment concepts may appear noble and grand on paper, past experience has characterized the implementation of similar programs with violence, acts of expropriation and clashes between civic society and the State. The new government is likely to perpetuate the polarization of the Zimbabwean society along political lines through it indigenization, with possibilities of violence with impact negatively on business continuity. Consequently, businesses requires regular review their strategic plan as the political situation unfolds and in light of the prevailing economic environment. Further, Economic factors in terms of Fiscal and Monetary Policy shifts are expected as the economy continue the search for a working formula. The economic situation is characterized by high tax regime is likely to persist as the government seeks to generate revenue. Short term survival driven economic policies are likely to perpetuate the marginalization of the poor. Low remuneration for employees could lead into labour unrest. The informal sector is likely to collapse as arbitrage opportunities that were created by hyperinflation disappear. In the short to medium term, the economy is most likely going to be characterized by limited liquidity, short term investor sentiment, high consumptive expenditure with focus on food and other consumables, influx of cheap imported goods, and further strain on the productive sectors of the economy. Also the country does not have its own currency. All commercial activity is conducted in United States Dollars while our Central Bank, The Reserve Bank of Zimbabwe (RBZ) does not have rights to print the currency nor does it have any capacity to supply cash. The cash in circulation is being imported and exported (soiled notes) at a cost. Kaplan and Norton (1996) postulated that, the cost of importing and exporting (soiled notes) small denomination notes is high. Consequently, there is a shortage of change on cash transactions. This shortage of change tends to push prices up as merchants round off the prices of goods and services to the nearest higher denomination. This scenario paints great potential and opportunities for plastic money which puts Steward bank in particular at an advantage with its cash card product and recently lunched Eco-Cash. Socially, the national health situation will continue to be plagued by the HIV pandemic. Shrinking disposable incomes will impact on all citizens, with further increases in poverty, disintegration of family units, deterioration in education standards, and the breakdown of the morals of the society with increase in crime, prostitution, and superstitious practices of magic, occultism and prosperity seeking religious fanaticism that emphasizes instant and miraculous wealth transference at the expense of the values of commitment and hard work. Alexander (1991) emphasizes that, there has also been an increase in robberies including armed robberies as people have to carry cash in order to transact. As the country gets accepted into the international community, foreign cultures will influence social priorities, tastes, and expenditure patterns. Therefore, Steward Bank must insure that they would undertake intensive marketing strategy to put normal moral in the movement of cash in the economy. Besides, through good corporate governance the bank must instil confidence with the local banking sector to the generality of the Zimbabwean populace their by strengthening social well-being of the economy. In Technological sense, in the financial services sector, a poor communications infrastructure has resulted restricted service provisioning by banks and other players in areas outside the major cities. The slow development in communications infrastructure is mainly caused by the high costs in licensing fees as set by POTRAZ and, previously, by the hyperinflation experienced in the country during the Zimbabwe dollar period. In recent times and since the adoption of the Unites States dollar as the main trading currency, players in the ICT industry have embarked on projects to improve the state of communication infrastructure in the country. Similarly, the number of telecommunication services available to users has also increased and the cost of data and voice services is reducing. It is anticipated that these improvements will encourage players in the financial services sector to increase their footprint through technological driven services to the general populace. Other constraints affecting the financial sector with respect to the acquisition of technology include the high costs of software applications and licenses and the acquisition of computer hardware and networking equipment. Despite the constraints mentioned above, wide spread usage of the internet and e-mail will give people easy access to information data bases. Improvement in telecommunications will make the dissemination of economic information easier. Environmental factors include weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness to climate change is affecting how companies operate and the products they offerit is both creating new markets and diminishing or destroying existing ones. Legal: Zimbabwe has been plagued by a low respect for the rule of law. This has fuelled corruption and a lot of crime that has gone unpunished. The legal system has also been open to abuse. The restoration of the rule of law will take time as it will be heavily dependent on political developments. Okumus F (2006) noted that, those benefiting from the status quo that encourages selective application of the law are likely to resist the restoration of the rule of law. As a result country risk has been perceived to be unacceptably high by the international community. This has hampered the flow of Financial Direct Investment (FDI) into the country and has negatively impacted on accessing Lines of Credit from international financial institutions. Conclusion: In conclusion it is essential for a business to effectively â€Å"scan† it external environment through PESTEL analysis as it have a great influence to the business. In addition it is also important to be aware of the action of your competitors as these PESTEL factors are in a state of change. Therefore, business need to take a pro-active approach and be ahead of these changes, rather than hurriedly making changes to product and processes in a reactive ways.