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Topic 1 Business Organisation and Environment. External Environment . Learning Objectives . Be able to prepare a PEST analysis for a given situation Use PEST analysis to examine to examine the impact of the external environment on a firm

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learning objectives
Learning Objectives
  • Be able to prepare a PEST analysis for a given situation
  • Use PEST analysis to examine to examine the impact of the external environment on a firm
  • Evaluate the impact on a firm’s objectives and strategy of a change in any of the PEST factors
  • Analyse the impact that external opportunities and threats may have on business objectives and strategy
  • Explain how external opportunities and threats can impact on business decision-making
pest analysis
PEST Analysis
  • Political, economic, social and technological
  • Analytical framework for external environment factors affecting business objectives and strategies
  • Sometimes can be refereed to as STEEPLE which includes ethical, environmental and legal
  • Or PESTLE which includes environmental and legal
Political factors
  • Economic factors
  • Social factors
  • Technological factors

Opportunities and threats for each


Political & Legal


Conduct a brief PEST for McDonalds in Mexico




Political & Legal


  • Growing internationally, they need to keep the prices low for consumers
  • Franchising opportunities
  • Health and safety guidelines – increased obesity
  • Pressure groups about wastage packaging
  • Recycling issues
  • Wars and conflicts in the country where McDonalds operates
  • America – they have become a symbol of capitalism and a target for terrorists



  • Health fears so customers opting for places like Subway now
  • McDonalds now put nutritional information onto their packaging so customers can make informed decisions
  • Food safety– suppliers have safety management systems in place
  • Taken advantage of technology to streamline their processes and improve efficiency
  • Touch orders to place order via handsets
  • Speed Pass – cashless payment system
  • Explain why each factor on the PEST analysis is where it is, and why it is in that part
  • Write a short piece explaining how the firm should exploit/avoid some of the issues you have identified and how they may achieve this

Advantages of PEST

  • Simple and only costs time to do.
  • Provides an understanding of the wider business environment.
  • Encourages the development of strategic thinking.
  • May raise awareness of threats to a project.
  • Can help an organisation to anticipate future difficulties and take action to avoid or minimise their effect.
  • Can help an organisation to spot opportunities and exploit them.
  • Disadvantages of PEST
  • Usually a simple list and not critically presented.
  • The rapid pace of change in society makes it increasingly difficult to anticipate developments that may affect an organisation in the future.
  • Collecting large amounts of information may make it difficult to see the wood throughthe trees and lead to "paralysis by analysis."
  • The analysis may be based on assumptions that prove to be unfounded.
  • PEST analysis only covers the external environment and the results need to be considered with other factors, such as the organisation itself, competitors and the industry in which it is working.