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Environmental and pest analysis: An approach to external business environment.

Here we will define the role of environmental analysis and the strategic planning of business. Also the strategic human resource planning.This paper introduces how to apply PEST analysis in a new manner.

The PEST analysis

The PEST analysis considers the external business environment and stands for political, economic, social and technological analysis. The enterprise reacts to change in its external environment and the strategy requires a fit between capabilities and the external environment. Political changes includes general changes in the domestic political climate. Economic changes contain the effect of economic cycle, patterns of world trade, commodity price, labour markets and rates. Social change is likely to include the effect of demographic patterns, tastes and habits. Technological change covers of technological change on products and process. PEST analysis is very general in nature which makes it difficult to give clear rules. The value of the PEST analysis relates directly to the quality of the effort put into it.

Industries: Global competition

During long time most of the industries change through maturity to decline. Industry life cycle helps to explain and predicting trends. Lets take an example: when any industry is new people usually buy the products no matter the price. And then when new competitors come along, prices drop because of competition. Competitors then try to make their products different to avoid the fierce competition. When an industry reaches maturity products become more like commodities. And when consumers become sophisticated eventually, purchasing decisions will mainly depend on the information. As the industry shifts through decline, the products growth rate may start to decrease. And then the industry will move around fewer competitors. 

In a contrast global industries operate worldwide with MNCs making a bit changes for country circumstances....