The environment in which businesses operate. Most businesses have little or no control over this environment. The environment needs to be monitored constantly in order to react to any changes that occur.
A more competitive business will anticipate changes instead of just reacting to it.
PESTLE Analysis:
Political Economic Social Technological Legal Ethical/Environmental
PESTLE analysis is a good list to work through when analysing the external environment.
Political:
- Competition Policy
- Industry regulation
- Government spending & tax policies
- Business policy & incentives
Economic:
- Interest rates
- Consumer spending & income
- Exchange rates
- Economic growth (GDP)
Social:
- Demographic change
- Impact of pressure groups
- Consumer tastes & fashions
- Changing lifestyles
Technology:
- Disruptive technologies
- Adoption of mobile tech
- New production processes
- Big data and dynamic pricing
Legal:
- Employment Law
- Minimum/ Living Wage
- Health & Safety Laws
- Environmental legislation
Ethical and Environmental:
- Sustainability
- Tax practices
- Ethical sourcing (supply chain)
- Pollution & Carbon Emissions
PESTLE Analysis Activity
Politics may impact the future of Amazon because governments may become concerned about the influence of Amazon. Therefore, to regulate competition, the government may choose to prevent a monopoly by taking action against Amazon.
Economic factors influencing business strategy:
- Interest Rates
- Unemployment
- Inflation
- Recession
A recession will directly impact the amount of revenue Amazon generates, meaning that Amazon may have to restructure their business model to survive.
If Amazon does not keep in the loop with social changes, then they will be seen as out of touch and will lose customers.
Legal factors are typically enforced by laws, forcing the company to follow specific regulations.
Amazon has frequently been seen to package items inefficiently, wasting excess plastics and polluting the environment. This means that Amazon has to change in order to retain customers.