PESTEL Analysis in Capsim Simulation
A PESTEL analysis is a way to analyze an issue and identify the factors that might be at play. It can be applied to different types of issues and problems. If you are a current or aspiring capsim simulation participant looking for the best avenue to expand your knowledge, this is the right platform for you. Access the best knowledge and practical skills in PESTEL Analysis from our experienced tutors. Place your ORDER NOW.
The PESTEL ANALYSIS approach is an analytic framework for understanding complex systems in terms of five interrelated concepts: P – Political, E – Economic, S – Social, T – Technological, E-Environmental and L- Legal. It helps in making sense of the interactions between elements such as economy and society. It identifies the deep structure of a given issue and helps avoid assumptions about it. It also helps you see how political decisions can affect something else down the line. The aim of this technique is to help decision-makers understand how different aspects of the environment are likely to affect their decision making.
PESTEL analysis is a model for understanding the political, economic, social, technological and environmental forces at work in an organization or society. PESTEL analysis helps organizations to understand the dynamics of their local and global environment. It provides a five-step process to identify the key issues that could affect an organization’s strategy and planning. PESTEL Analysis is a strategic planning tool developed especially for business and management students. As it provides useful insights into different aspects of an organization’s strategy, it has been used by top companies such as Apple Inc., Exxon Mobil Corp., IBM Corp., Walmart Inc., Sara Lee Corp., HSBC Holdings PLC, Siemens AG, and many more.
In this article we will discuss the components and benefits of PESTEL Analysis.
Political variables are important in determining the aspects that can affect Capstone business’s long-term profitability in a given country or market. Most Capstone businesses operates in the industry in more than a dozen nations, exposing itself to a variety of political risks. Diversifying the systematic risks of the political environment is necessary to accomplish success in such a dynamic market across several countries. Before entering or investing in a market, Capsim participants can carefully consider the following factors:
- Political stability of the country where the investment is to be undertaken
- Bureaucratic procedures for undertaking the business
- Legal framework of the country
- Taxation structure of the country
- Pricing regulation
- Consumer protection policies
- Labor remuneration regulations
The aggregate demand and development in the economy are determined by macroeconomic factors such as inflation rate, savings rate, interest rate, foreign exchange rate, and economic cycle. Microenvironmental elements such as competition standards have an impact on the company’s competitiveness. Capsim simulated business can forecast the growth trajectory of not only the financial performance but also the organization using country’s macroeconomic factors such as growth rate, inflation, and industry economic indicators such as industry growth rate, consumer spending, and so on. Capstone business participants should examine the following economic considerations while doing a PESTEL analysis:
- Per capita income of the target market
- Economic system of the country
- Economic cycles in the investment region
- Inflation rates
- Inflationary and deflationary policies of the government
- Employment levels of the target market
- The factors affecting demand and supply in the country
- Interest rates
- Economic growth rates
- The currency stability of the country in terms of exchange rates
The cultural and social norms of a society have an impact on the culture of the company in a given context. Capstone business’s marketers will analyze the customers of a specific market and build the marketing message for their particular industry consumers based on shared ideas and attitudes of the people. The following are social aspects that Capstone business leadership should consider while doing a PESTEL analysis:
- The population structure of the country
- Religion, tribes and cultural practices of the individual communities in the targeted market
- Education levels of the target market
- Dynamics of the tastes and preferences of the targeted market
Technology is rapidly disrupting numerous businesses. The electronics business is an excellent example of this. Over the last five years, the sector has changed at a breakneck pace, leaving established players with little time to adapt. Apple and other electronic dealers Samsung have dominated the mobile phone, computer appliances and other electronics in recent years.
Besides the electronic industry, the T automotive industry is rapidly heading toward automation, with internet companies such as Google leading the way, and production is being disrupted by Tesla, which has declared an electronic car revolution. A company should not only do a technological analysis of the industry, but also determine the rate at which technology disrupts it. Slower speeds allow for more time, whilst faster speeds allow for less time for a company to cope and remain profitable.
Technological factors include the current innovation trends of competitors, attitude of the consumers to technological revolutions and the cost of emulating new technology.
Varying industries have distinct characteristics or environmental regulations, which might have an impact on a company’s profitability. Even within the same country, states can have disparate environmental and liability legislation. In the United States, for example, California and Georgia have separate culpability rules in the event of an accident or an environmental disaster. Similarly, many European governments provide beneficial tax incentives to businesses who invest in the renewable energy sector.
Before entering new markets or starting a new operation in an existing market, a company should thoroughly assess the environmental criteria that must be met in those markets. Some of the environmental factors include weather and climatic changes, sources of energy, the land terrain and the state of environmental pollution.
Analyzing legal factors is crucial for every business. The decision making process requires a careful consideration of the legal environment of a business. The capsim simulation management must also assess the legal rights of the business in terms of the protection of intellectual property rights. Most of the legal factors still fall on the political factors segment discussed above. They include consumer protection laws and general legal business requirements.
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