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Pest Analysis

526 words - 3 pages

STEP analysis stands for Social, technological, economic and political analysis and is described as a framework of macro-environmental factors used in the environmental scanning component of strategic management. In some circles it has been referred to as PEST and some analysis added Legal, Environmental, Education and Demographic factors giving it a range of names such as PESTLE and STEEPLED among others. STEP is a part of the external analysis when conducting a strategic analysis or doing a market research, and gives an overview of the different macro-environmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.
Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and ...view middle of the document...

They may determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality and lead to innovation.
- R&D aspects (a number of University supporting R&D can help on sustainability)
- Automation (scale of growth of plantations and also to meet the growing market; to meet HACCP standards automation improves on reducing contamination)
- Technology incentives
- Rate of technological change
- Impact on Barriers to entry
- Minimum efficient production
- Costs, quality and lead to innovation

Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how business operate and make decisions. For example interest rates affect a firm’s cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting and the supply and price of imported goods in the economy.
- Economic growth (strong trade links with the global markerts e.g. President making ties with these; Strong GDP in SA making it a good investment environment but prone to destabilisation e.g. via global economic shocks e.g. recession 2009)
- Interest rates (in SA allows for borrowing)
- Exchange rates (gaining making exports expensive)
- Inflation rate
Political factors, are how and to what degree a government intervenes in the economy. Specifically, political factors includes areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads). Futhermore, governments have great influence on the health, education, and infrastructure of a nation.
- Tax policy
- Labour law
- Environmental law
- Trade restrictions
- Tariffs
- Political stability
- Merit goods
- Demerit goods

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