Q.

Macro environment deals with the impact of external factors that are affecting the business. These include
competitors / other players in the industry OR other players who could offer substitute products that could
impact the business, the industry performance as a whole and the other political factors, law of the land /
international laws that affect the business and other social / economic/ natural factors that may impact the
business.

A. PESTEL

1. Political Environment: This includes factors like (a) political processes-party system, elections and their funding, (b)
degree of politicization of economic and business issues, (c) foreign policy and defense policy of the country, and (d)
relations of the country with other countries. India is a democratic nation wherein the government plays an active role in
business affairs. Political changes exercise a significant influence on business. For example, Coca Cola and IBM were
forced to leave India due to very strict policy of the government during 1977-1980. Bangalore and Hyderabad have
become the most popular locations for information technology (IT) firms due to supportive political climate. Changes in
political scenario led to the entry of Coca Cola, Pepsi cola, IBM, and other multinational corporations in India.

2. Economic Environment: Economic environment exercises direct and most significant influence on business because
business is an economic institution. For example, declining lending rates of interest have reduced the cost of capital for
business firms in India. Economic environment of business includes (a) economic system of the country, (b) the stage of
economic growth, (c) economic planning system, (d) economic policies, (e) economic indices, like gross national
product, national income, rate of savings and investment, price level, balance of payments, employment levels,
productivity, et cetera, (f) economic infrastructure, and (g) product markets, factor markets, capital market and money
market.

3. Social Environment: The social environment of business includes (a) social institutions and groups, (b) caste structure
and family organisation, (c) mobility of labour, (d) customs and traditions, (e) educational system and level of literacy,
(f) cultural heritage, and (g) social values and attitudes. Social and cultural forces exercise significant influence on
business. For instance, social consciousness among the people demands more responsible behaviour on the part of
businessmen. The practices and procedures of business must be in tune with the norms and beliefs of the socially. For
example, growing number of working women and changing lifestyles have increased the demand for household
appliances in India.

4. Technological Environment: Technological environment refers to the state of science and technology in the country
and related aspects such as the rate of technological change. institutional arrangements for the development and
application of new technology (research and development systems), manufacturing processes and equipment, etc.
Technology means systematic application of scientific and other organized knowledge to practical tasks Technological
environment depends upon several factors such as spirit of invention and innovation among people, facilities for
research and development, incentives and concessions for development and application of new technology, legal
protection for intellectual property rights, access to foreign technology, etc. Technological environment exercises a
significant influence on industry and commerce, Advancements in technology help to improve productivity and quality.
Technological progress increases competitiveness of industry by reducing costs. But advanced technology requires huge
capital investment and skilled manpower.

5. Ecological Environment: According to Regner, Johnson, and Scholes (2019), ecological indicators include the
weather, climate, environmental policies, climate change et cetera. It refers to those factors and aspects that are
influenced of the surrounding environment. With the rise in importance of CSR (Corporate Sustainability
Responsibility) and sustainability, this element is becoming more central to how organisations need to conduct their
business. Indicators also include climate, recycling procedures, carbon footprint, waste disposal and sustainability
(Bruin, 2016; Oxford College of Marketing , 2021).

6. Legal (Regulatory) Environment: Business has to function within the framework of laws and regulations of the
country. Legal environment, therefore, exercises a significant influence on business activities. The main components of
the legal and regulatory environment are (a) rights and duties of citizens as specified in the constitution, (b) laws
concerning promotion, operation, and expansion of business, (c) Flexibility and adaptability of laws, and (d) Judicial
system of the country
In recent years substantial modifications have taken place in various laws and regulations governing business in India.
Removal of controls over foreign exchange and liberalization of foreign direct investment have led to the entry of
several multinational corporations in the country. Deregulation of capital markets has created a surge in primary and
secondary capital markets. Now companies in foreign countries can directly issue shares to Indian investors.

External Strategic Factors to include in strategy formulation

 Trend Analysis – Study environment issue trends
 Probability Analysis – Study the occurrence of incidents / trends / performance
 Likely Impact Analysis – Testing strategies formulation with available data

A PESTEL analysis helps organisations in terms of strategic business planning, workforce planning, marketing
planning, product development, and most importantly, organizational change. When we look at it from a perspective of
strategic management of a business, we see that PESTEL is vital and crucial for an enterprise as it provides a plethora of
contextual information about the company like the direction in which the business is heading, brand positioning, growth
targets, and the areas of concern that may lead to a decline in growth and productivity. It helps businesses in terms of
decision-making and planning, which allows them to enjoy a competitive advantage over new and modern trends as well
(Pathak, 2020).
In accordance with Frue (2017), Strategic management requires the information from PESTLE analysis to be useful. By
combining the two, a company will keep a close eye on the factors that directly affect their business. They will monitor
these factors and seek out opportunities. And will continuously optimize business performance and objectives to work
with these influences. Since these influences cannot be directly affected, businesses need strategic management to
ensure businesses are working with the factors. Otherwise, the company can be left behind by competitors. The benefits
of PESTLE analysis is having an idea of where opportunities lie. And to begin a plan of action to reduce risks and
threats. Strategic management means you can take these influences and ensure the business aligns with the factors for
success. According to Jurevicius (2022) explains the strategical aspects that businesses look into, based on the
opportunities and threats it builds/creates for them, as follows:

>Political
 Government stability and likely changes
 Bureaucracy
 Corruption level
 Tax policy (rates and incentives)
 Freedom of press
 Regulation/de-regulation
 Trade control
 Import restrictions (quality and quantity)
 Tariffs
 Competition regulation
 Government involvement in trade unions and agreements
 Environmental Law
 Education Law
 Anti-trust law
 Discrimination law
 Copyright, patents / Intellectual property law
 Consumer protection and e-commerce
 Employment law
 Health and safety law
  Data protection law
 Laws regulating environment pollution
>Economic
 Growth rates
 Inflation rate
 Interest rates
 Exchange rates
 Unemployment trends
 Labour costs
 Stage of business cycle
 Credit availability
 Trade flows and patterns
 Level of consumers’ disposable income
 Monetary policies
 Fiscal policies
 Price fluctuations
 Stock market trends
>Social
 Health consciousness
 Education level
 Attitudes toward imported goods and services
 Attitudes toward work, leisure, career and retirement
 Attitudes toward product quality and customer service
 Attitudes toward saving and investing
 Emphasis on safety
 Lifestyles
 Buying habits
 Religion and beliefs
  Attitudes toward green or ecological products
 Attitudes toward and support for renewable energy
 Population growth rate
 Immigration and emigration rates
 Age distribution and life expectancy rates
 Sex distribution
 Average disposable income level
 Social classes
 Family size and structure
 Minorities
>Technological
 Basic infrastructure level
 Rate of technological change
 Spending on research & development
 Technology incentives
 Legislation regarding technology
 Technology level in your industry
 Communication infrastructure
 Access to newest technology
 Internet infrastructure and penetration
Uber
>Uber provides an outstanding, technically advanced mobile app for customers – it is much helpful for users, as they can
book their cabs from anywhere. App also gives information like estimated ride charges, drop off location, traffic, and
weather. Users can pay their charges through the app.
> Uber makes use of social media and other electronic media for promotional activities – people post positive views on
the various social media platforms. It has helped the company to grow fast and is helping the company in a positive
manner.

>Ecological/Environmental
 Weather
  Climate change
 Laws regulating environment pollution
 Air and water pollution
 Recycling
 Waste management
 Attitudes toward green or ecological products
 Endangered species
 Attitudes toward and support for renewable energy
Adidas
>Adidas claims that none of its factories and manufacturing units produces any restricted products. The company
follows the industrial process which is not at all harmful to the nature and the ecology.
>It keeps control/regulation of the volatile and different organic compounds as well as emissions, with the use/adoption
of modern technologies. Adidas focuses on producing sustainable products. It helps them in increasing/enhancing the
product quality and brand image.

>Legal
 Anti-trust law
 Discrimination law
 Copyright, patents / Intellectual property law
 Consumer protection and e-commerce
 Employment law
 Health and safety law
 Data Protection
Nike
>the Nike Corporation needs to adhere to health and safety protocols to maintain its global reach
>Nike should keep an eye on the copyright of designs of shoes and apparel it manufactures.
>It also has to make sure it is not involved in child labour or breaking/violation of any employment rules.

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Real-Life Example (PEPSICO) [https://pestleanalysis.com/examples-of-pestle-analysis/]

PepsiCo is the largest selling beverage the world over, of course after its arch rival Coca Cola. It accounts for a 37%
share of the global beverage market, and therefore they need to understand each and every country’s market in order to
stay in line with their PESTLE situations. Their advertisements feature major celebrities and athletes like David
Beckham, Robbie Williams, Britney Spears, and Michael Jackson etc. Their market reach is also very diverse, as they’re
present in almost every country from the US to New Zealand. Their PESTLE analysis is given below:

Political:
Pepsi is a non-alcoholic beverage and is therefore regulated by the FDA. So, they’re supposed to maintain a firm
standard of the laws set out by the FDA with consistency. Also, many different markets across the world have different
set of regulations that are either relaxed or are either stringent. There is competitive pricing by Pepsi’s competitors and
that is one factor that Pepsi has to keep in mind at all times. The political scenario also matters greatly as there can be
some civil unrest in certain markets or due to inflation the sales of the product can fall. Most importantly, cross border
situations are starkly different therefore Pepsi has to stay in line with all those policies and changes so that they can
adapt to all those changes accordingly.

Economic:
As the recent economic downturn has plagued the economy, companies had to restructure their sales and marketing
campaigns greatly. Also, with diminishing profits they had to undergo downsizing internally and re-think upon how to
penetrate the market. Economic conditions have the highest influence on a business, regardless of what trade it is in.
Though, in Pepsi’s favor, the economic downturn that started in 2008 resulted in increased sales of its beverages mainly
as people were being laid off from jobs, they were spending time with friends and family or at home.

Social:
Social factors greatly impact Pepsi, as it’s a non-alcoholic beverage it has to remain in line with the strict and stark
differences of cultures the world over. Also, Pepsi has to communicate its image as a global brand so that the people can
associate it with themselves as something that connects the world together. Usually, the social implications are seen in
marketing campaigns for example certain countries have religious festivals, so Pepsi has to keep in line with all those
festivals in order to understand the psyche of their market and how they can cash upon the opportunity.
Technological:
With the advent of the new age in technology, companies have completely integrated themselves with all the recent
changes that have taken place. To mention a recent trend that has greatly picked up and something that almost every
business is turning toward is Social Media. The social media explosion has allowed for increasingly interactive
engagement with the consumers with real time results so Pepsi has to stay ahead of all the developments that take place
with keeping in view how the youth of today utilizes technology for their benefit and how can Pepsi reach them in order
to keep on increasing brand recall and brand engagement.

Legal:
There can be many legal implications upon the beverage industry. I would cite one very famous incident took place in
India, where Pepsi was accused of using contaminated water, given a lab test that was done upon the water flowing into
the Pepsi factory that was located nearby an industrial estate. A massive recall was issued for the products from shelves
and then the product was tested costing the company many billions of dollars upon the tests as India is a very major
market.

Environmental:
These factors can affect Pepsi, but not immensely alter its trade and profit generation as these factors affect agri-
businesses much more.

References:
Bruin, L.de, 2016. Scanning the Environment: PESTEL Analysis. B2U Business-to-you. Available at:
https://www.business-to-you.com/scanning-the-environment-pestel-analysis/ [Accessed January 20, 2022].

Frue, K., 2017. PESTLE Analysis in Strategic Management. PESTLE Analysis - SWOT and Business Analysis Tools.
Available at: https://pestleanalysis.com/pestle-analysis-in-strategic-management/ [Accessed February 7, 2022].

Gupta, C. B., Chand, S. (2019). ISC Commerce Vol II: S.Chand School.

Jurevicius, O., 2022. PEST & PESTEL Analysis. Strategic Management Insight. Available at:
https://strategicmanagementinsight.com/tools/pest-pestel-analysis/ [Accessed February 7, 2022].
Oxford College of Marketing , 2021. What is a PESTEL Analysis? Available at:
https://blog.oxfordcollegeofmarketing.com/2016/06/30/pestel-analysis/ [Accessed January 20, 2022].

Pathak, R., 2020. What is PESTLE Analysis? Everything you need to know about it. AnalyticSteps. Available at:
https://www.analyticssteps.com/blogs/what-pestle-analysis [Accessed February 7, 2022].

Regner, P., Johnson, G. and Scholes, K. (2019) Exploring Strategy Text and Cases PDF eBook. Harlow, United
Kingdom: Pearson Higher Education & Professional Group. (e-book is available via Discovery). (Chapter 2:Macro-
environment Analysis)

https://www.business-to-you.com/scanning-the-environment-pestel-analysis/
https://blog.oxfordcollegeofmarketing.com/2016/06/30/pestel-analysis/