Significance of PESTEL Analysis Criteria †MyAssignmenthelp.com

Question: Discuss about the Significance of PESTEL Analysis Criteria. Answer: Introduction: Porters five forces is a very strategic framework that provides guidelines for investigating competition, investment attractiveness and profitability within a particular industry. This model was introduced by Michael E. Porter in his book Competitive Advantage: Creating and Sustaining Superior Performancein the year 1980 (Argyres and McGahan 2017). It was developed as a strategy tool that aims to examine the competitive environment of the industries. There are a total of five forces in the Porters framework that shape each and every market and industry. These five competitive forces are threat of entry, threat of substitutes, power of the buyers, power of the suppliers and competitive rivalry (Yunna and Yisheng 2014). The threat of entry is associated with the complexity to enter a specific industry. Threat of substitutes on the other hand is considered as competitive goods which has the potential to replace the offerings of an organization. Apparently, consumer buying power is all a bout the bargaining ability of the customers in order to control the profitability of the suppliers. The fourth force, which is- suppliers power is concerned with how suppliers can reduce the power of the organizations in debate for buying essential resources as well as their profitability. Lastly, competitive rivalry describes how rest of the four forces interrelates with each other and shapes the competition structure within a particular industry. It is considered to be one of the best tools used for strategic planning. Every successful corporate and business strategy must modify the above mentioned five forces in such a way that it can improve the position of the industry. PESTLE model is one of the widely selected tools for determining the macro environment (Dockalikova and Klozikova 2014). It is a very popular concept in competitive and strategic analysis. However, it is not yet known who the real developer of this model is. It is to be noted that PESTLE has been emerged from the PEST analysis model, which encompasses a total of four factors- Political, Economic, Social and Technological. The PESTLE model encompasses these factors along with Legal and Environmental factors (Gupta 2013). This model assimilates several factors of the changing external environment, including how these factors can affect the business of an organization. In this framework, the political factors are related to the changes in particular to political climate of a country. This is extremely important in this globalised business era. The economic factors concern about the economic atmosphere within a business landscape. Social factors on the other hand are related to current h appening in societal aspects and their influence in the business environment and organizational strategy. It is all about the features of societal context where an organization exists. Furthermore, the technological factors are associated with how the change in technologies can have significant affect on the company and the market. The environmental factors are all about the occurring in the environmental aspects. Lastly, the legal factors are related to the changes in the legal aspects or legislations and about how the government can influence the business environment (Tourki, Keisler and Linkov 2013). References: Argyres, N. and McGahan, A.M., 2017. Introduction: Michael Porter's competitive strategy.Academy of Management Perspectives. Dockalikova, I. and Klozikova, J., 2014, November. MCDM Methods in Practice: Determining the Significance of PESTEL Analysis Criteria. InEuropean Conference on Management, Leadership Governance(p. 418). Academic Conferences International Limited. Gupta, A., 2013. Environmental and pest analysis: An approach to external business environment.Merit Research Journal of Art, Social Science and Humanities,1(2), pp.13-17. Tourki, Y., Keisler, J. and Linkov, I., 2013. Scenario analysis: a review of methods and applications for engineering and environmental systems.Environment Systems Decisions,33(1), pp.3-20. Yunna, W. and Yisheng, Y., 2014. The competition situation analysis of shale gas industry in China: Applying Porters five forces and scenario model.Renewable and Sustainable Energy Reviews,40, pp.798-805.