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PEST Analysis

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Introduction

Shahid Islam PEST Analysis Pest Analysis is a way looking at how external factors will affect the business. 'PEST' stands for Political, Economical, Social and Technological issues. Political issues involve how different laws affect a business, for instance Trades Description Act. Economic Issues involve how the state of the economy affects businesses, e.g. interest rates. Social issues look at how social factors affect businesses, e.g. concerns about obesity. Technological issues look at factors on how technology assists businesses, for instance the growth of the Internet in recent years. Political Issues All businesses have to abide by laws and rules in this country. The government enforces these laws for the good of the business and themselves. There are few political issues which affect the business and these mainly are: - Direct Tax and Indirect Tax - Local Authorities - Consumer and the law - Employment and the law - Environment and the law 'Direct Tax' and 'Indirect Tax' both come under the heading of Fiscal Policy. This is when the government attempts to influence demand in the economy through its spending and taxation policy. For instance, if the government increases taxes, people will have less money to spend on goods and services, i.e. disposable income. Therefore, the demand will be reduced and businesses won't make as much profit or turnover. If this scenario happens, businesses will have to win customers back, and one way they could do this is by reducing the prices of their products, but this will affect their revenue. But if that were in my business I will reduce the price of the products temporarily to attract customers and demand and then increase the price back again if successful. If the government reduces taxes it will have the opposite effect. There are a number of ways the government can increase of decrease taxes. These can be either 'direct' that is taken directly from income or 'indirect' that is placed on goods and services like cigarettes. ...read more.

Middle

less promotion would mean less customers know about my business so I would need to think about a cheaper alternative option like local newspapers. Inflation happens when there is a general increase in the price of goods and services. For instance, if pay increased by 5% last year but inflation was 2%, the pay increase would be: 5% - 2% = 3% 'in real terms'. The causes of inflation are usually because too many people are trying to buy too few products resulting in price increases. Also, employees asking for pay rises can lead to companies and businesses rising prices for their goods to cover wages. Finally, inflation is also caused when the government is spending more than it's received from taxes resulting in printing more money to increase the money supply. This is known as 'Monetary Policy'. However, inflation affects businesses in a number of ways: - Wage bill will increase as workers may demand higher pay increases to keep with inflation - Price of goods and services which are exported will increase, therefore businesses that sell overseas will see a loss of profit - Prices of raw materials will increase, which means costs will increase and a reduction in profits. - Businesses might become cautious over the inflation rate and might not want to invest too much because they might be unsure of what happens to their profit and sales. For my business, I will have to be wary of the inflation rates because my shops imports and exports goods from abroad. Therefore, the might be an increase on costs of importing and exporting and I might not have sufficient money to fund as well as handling other costs. To overcome this problem, I may need to reduce on the number of importing and exporting I do to reduce costs and think of another way of making extra profit, perhaps increasing pricing of games and consoles. ...read more.

Conclusion

On the other hand, businesses have gone out of sales because of new technology, for example shops that used to sell typewriters. This shows that it's important for businesses to research into new products so they could compete against others. New production techniques such as EPOS, CAD and robots have benefited businesses in a number of ways: - Robots and machines have replaced workers so the wage bill is reduced. Also machinery wouldn't get tired and go on continuously. However installing them is expensive. - Reduction in storage space and costs as materials are available at the right place and the right time. - Increased quality as robots produce products of a high standard of time continuously. - Increased output as new technology and techniques allow businesses to increase production. Also, nowadays big businesses have opened up an Internet website were people can buy products from and then have it delivered in their doorstep. This is a great way off beating off your competitors if they do not have their own website. Not only is this a way of promoting your business but it could lead to customer loyalty and repeat sales. Other benefits include that if small businesses produce specialist goods, they can sell them anywhere in the world, thus increasing their market. Cost can be reduced because the Internet user and not the provider pay for the cost of downloading information, so items such as brochures are not needed. Also, sales staff is no longer needed, as the information is online. As my business is new to the market, I wouldn't have too much money to spend on the latest technology so my business might suffer. However, my first priority will be to sell the products in store and maximize my profits. Thereon, I would then open up an Internet website to promote and order my products. But another problem will occur as my competitors will have an advantage and will attract more customers. Although there might be a solution by promoting my business in different ways to attract customers. ...read more.

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