mportance of PESTEL Analysis in Strategy Management &

Planning Process

Strategy planning process often requires five steps –

1. Choosing the vision, mission and the reason of existence for Mother Earth.

2. Analyze the Mother Earth external competitive environment to identify opportunities

and threats. PESTEL analysis is critical to understand the external threats & opportunities
arising because of the macro environment developments. Changes in macro
environment forces can impact the Porter Five Forces & industry attractiveness. Thus
significantly impacting the ability of Mother Earth to build sustainable competitive
advantage

3. Analyze Strengths and Weaknesses of Mother Earth.

4. Developing strategies that can capitalize on Mother Earth strengths and help mitigate
weaknesses and impact of threats of macro-environment.

5. Execution of the strategy and building a feedback loop, using which managers at
Mother Earth can fine tune processes and strategies going forward.

The Industrial Organization (I/O) approach advocates that for sustainable competitive
advantage external factors are as important as internal factors of the Mother Earth.
According to Michael Porter organizational performance is to large extend determined
by various industry forces.

What are Political Factors in PESTEL / PEST Analysis

The political factors play a huge role in not only investment decision by transnational
corporations but also by companies such as – Mother Earth. Political environment and
other factors not only impact the cost of doing business but also long term
sustainability. Some of the political factors are – governance system, democracy &
institutions, military coup chances, probability of armed conflict, law and order in market
etc.

Political Factors that Impact Mother Earth: Great Design,

Great Values
- Transition of Government and Changes in Policy – There is consistency in policy
making from one government to another. Secondly governments from all parties adhere
to the treaties made by the previous governments.

- Size of Government Budgets – both Local Governments and National Government –

The government at both national level and local levels are running deficit budgets which
is boosting growth in the short term but may lead to increase in inflation over medium
term. The bond rating of national government is investment grade.

- Role Local Governments Play – Local governments are highly influential in the policy
making process and implementation as most of the policies and regulations are
implemented by the local government as enforcement agencies mostly report to local
government in their own states regarding various laws.

- Government Regulations and Deregulations – The government is adhering to all the

rules and regulations under World Trade Organization norms. There is consistency in
both policy making and implementations of those policies.

- Segregation of Political Responsibilities between Different Government Agencies –

There are numerous government agencies which reduces the risk of overwhelming
pressure by one agency. But on the flip side it does increases both time and cost of
doing business and getting certifications and clearances.

- Threat of Terrorist Attacks – We believe in the world of post 9/11, corporations such as
Mother Earth have to live with operating under the shadow of a terrorist attack. The
prudent policy should be to take insurance and other types of hedging instruments to
mitigate the losses occurring because of the terrorist attacks.

- International Trade & Other Treaties – The country has a good record of adhering to
international treaties it has done with various global partners. The government of each
party has adhered to the treaties done by previous governments, so there is a
consistency in both rule of law and regulations.

- Regulatory Practices - The regulatory practices are streamlined with global norms
which have helped the country to improve its “ease of doing business” ranking.

What are Economic Factors in PESTEL / PEST Analysis

Economic factors of a country and region have a direct impact on the potential
attractiveness of a given market. Some of the economic factors that Mother Earth
should evaluate both in the present market and one in which it wants to enter are –
inflation rate, GDP growth rate, disposable income level etc.

Economic Factors that Impact Mother Earth: Great Design,

Great Values

- GDP Trend & Rate of Economic Growth – The higher GDP growth rate signals growing
demand in the economy. Mother Earth can leverage this trend by expanding its product
range and targeting new customers. One way to start is by closely mapping the changes
in – consumer buying behavior and emerging value proposition.

- Level of Household Income and Savings Rate – Increasing consumption and stagnant
household income in United States had led to credit binge consumption. It has
decimated the culture of savings as people don’t have enough to save. Mother Earth
needs to be careful about building marketing strategy that is dependent on “Purchase
on Credit” consumer behavior.

- Government Spending – As mentioned in the political factors, government of the

country is running deficit budgets. The implication for Mother Earth is that it can boost
sales of its product in short run but also expose Mother Earth to medium term forex and
currency depreciation risks.

- Price Fluctuations in both Local and International Markets – Compare to the level of
quantitative easing in last decade the prices of Mother Earth products and prices of
overall products have remained sticky in the US market. Mother Earth should consider
the fact that at deficit levels of United States in an emerging economy can lead to
rampant inflation and serious risks of currency depreciation.

- Fiscal and Monetary Policies – The Republican government tax break culture has
increased the deficit and it can lead to fiscal trouble for the economy in coming years.
- Work Force Productivity – Work force productivity in US has grown by 25-30 % in last
two decades even though the salaries are not reflecting those gains. It can enable
Mother Earth to hire skilled workforce at competitive salaries.

- Demand Shifts from Goods Economy to Service Economy – The share of services in the
economy is constantly increasing compare to the share of manufacturing, goods, and
agriculture sector.

Social Factors that Impact- Mother Earth: Great Design,

Great Values

- Attitude towards Authority – Various cultures in different part of the world have
different attitude towards authority. In Asia authority is respected while in west it is
something to rebel against. Mother Earth should carefully analyze the attitude towards
authority before launching a marketing campaign for its products and services.

- Education Level in Society – Education level of the society impacts both the quality of
jobs and level of income. High level of education often results in better jobs, higher
income and higher spending on complex and aspirational products.

- Birth Rate – Birth rate is also a good indicator of future demand. USA has avoided the
European Union style stagnant economy on the back of slightly higher birth rate and
higher level of immigration.

- Attitude towards Savings – The culture of saving in US and China is totally different
where savings rate in China is around 30% , it is well below 15% in United States. This
culture of consumption and savings impact both type of consumption and magnitude of
consumption.

- Attitude towards Leisure – Mother Earth should conduct an ethnographic research to

understand both attitude towards leisure activities and choice of leisure activities.
Experience economy is one of the fastest growing segments both among millennials
and among baby-boomers.

- Nature of Social Contract between Government & Society – Before entering into a
market Mother Earth needs to understand the nature of social contract between
government and society. For example it has been extremely difficult for US companies
to enter UK health market as UK health system is a nationalized system and everything
goes through contracts at national level.

- Immigration Policies and Level of Immigration – What are the immigration policies of
the country, what is the level of immigration, and in which sectors immigration is
encouraged. This will enable the Mother Earth to determine – if required can it hire
talent globally to work in that particular market.

- Types of Immigration & Attitude towards Immigrants – Given the latest developments
such as Brexit and Immigrant detention on Southern border of United States. Attitude
towards immigration has come under sharp focus. Mother Earth should have capabilities
to navigate under this hyper sensitive environment.

What are Technological Factors in PESTEL / PEST Analysis

Technology is fast disrupting business models across various industries. Some of the
technology trends that are impacting the macro environment are – developments in
artificial intelligence, use of machine learning and big data analytics to predict consumer
behavior, growing importance of platforms over service providers etc.

Technological Factors that Impact Mother Earth: Great

Design, Great Values

- Mobile Phone & Internet Penetration – Mother Earth should assess the level of internet
and mobile phone penetration in the country as it will it in building a requisite business
model based on local needs and realities.
- Intellectual Property Rights and Patents Protection – Before entering new market
Mother Earth should focus on the environment for intellectual property rights.

- Likelihood of Technology Disruption – If the country is hub of technology companies

then there is a high chance of technology disruption among various industries. Mother
Earth has to assess whether it can live with the fast pace of technology disruption in its
industry.

- E-Commerce & Related Infrastructure Development – As E-Commerce is critical for

Mother Earth business model. It should evaluate the e-commerce infrastructure,
technology infrastructure etc before entering a new market.

- Integration of Technology into Society & Business Processes – Uber failed in China
because it tried to enter before smartphone were widespread in China. Mother Earth
should build a strategy that can integrate societal values, infrastructure, and Mother
Earth business model.

- Research and Development Investment Levels – If there is high level of investment in

technology development sector then there are high chances of building a self sustaining
ecosystem that drives innovation. Mother Earth can leverage such a situation to hire the
best people in business.

- Property Rights & Protection of Technology Oriented Assets – Mother Earth should
analyze the legal status of various property rights and intellectual property rights
protections that are common in US.

- Level of Acceptance of Technology in the Society – Mother Earth has to figure out the
level of technology acceptance in the society before launching new products. Often
companies enter the arena without requisite infrastructure to support the technology
oriented model.

What are Environmental Factors in PESTEL / PEST Analysis

Environmental factors are fast gaining traction not only among consumers but also
among regulators and policy makers. Climate change and changing ecosystem is
leading to the extinction of more than 20% of species on the planet by the turn of this
century.
Environmental Factors that Impact Mother Earth: Great
Design, Great Values

- Per Capita and National Carbon Emission – What is the per capita carbon emission of
the country and what is the overall level of carbon emissions of the country. This will
help in better predicting the environment policy of the country.

- Level of Consumer Activism Regarding Environmental Concerns – Mother Earth needs

to know the level of consumer activism regarding environmental concerns is. It will help
Mother Earth in both developing environmentally friendly products and thwarting PR
stumble blocks.

- Influence and Effectiveness of Environmental Agencies – The role of environment

standards enforcement agencies is critical in safeguarding norms. But often in emerging
countries these agencies delay the process as a tactic to extract bribes. Mother Earth
should be aware of presence of such practices in a country.

- Corporate Social Responsibilities Culture – Are Mother Earth present CSR efforts
applicable in the new market or does it needs to have new initiative to cater to the
prospective market.

- Environmental Regulation Impacting Absolute Cost Advantage Dynamics in the

Industry.

- Paris Climate Agreement and Commitment of National Government under the

Agreement – What are the commitments of the country under the Paris Agreement and
what is the general level of consensus regarding Paris Climate Agreement in the country.
For example Trump not standing by US commitments created an environment of
uncertainty.

- Focus & Spending on Renewable Technologies – How much of the budget is spend on
renewable energy sources and how Mother Earth can make this investment as part of its
competitive strategy.

What are Legal Factors in PESTEL / PEST Analysis

Legal factors often govern – conditions to enter the market, laws to operate in the
market, and procedure to resolve any dispute with other stakeholders. If the legal
system is not strong then Mother Earth can face numerous challenges – from consumer
petitions to shakedowns from authorities.

Legal Factors that Impact Mother Earth: Great Design,

Great Values

- Employment Laws – What are the employment laws in the country and are they
consistent with the business model of Mother Earth. For example Uber employment
system is not consistent with French laws and it is facing challenges in the country.

- Transparency in Judiciary System & Processes – Transparency is essential for fair and
consistent decision making. If the process is consistent and transparent then Mother
Earth can plan ahead with greater conviction.

- Health & Safety Laws – What are the health and safety laws in the country and what
Mother Earth needs to do to comply with them. Different countries have different
attitude towards health and safety so it is better for Mother Earth to conduct a thorough
research before entering the market.

- Time Taken for Court Proceedings – Even if the country has best of the laws, it doesn’t
mean much if they can’t be enforced in a timely manner. Mother Earth should do a
primary research regarding how much time it often takes to conclude a court case in the
country given the sort of legal challenges Mother Earth can face.

- Data Protection Laws – Mother Earth needs to assess what are the data laws in the
country and what it needs to do to comply with them. For example most of EU countries
now want the EU citizen data to be saved in EU countries only.

- Consumer Protection Laws – Mother Earth needs to know what are the consumer laws,
what is the rate of enforcement, what is the attitude of authorities towards consumer
protection laws, and what is the role activist groups in enforcement of consumer
protection laws.
- Independence of Judiciary and Relative Influence of Government – The judiciary
independence often reflect both strength and credibility of the institutions in the
country.