Pestle analysis is a strategic management tool used to assess the external
environment affecting a business it then enables the business to create a
strategy to limit these impacts this video explains all six pestle factors
in common areas within those that businesses need to consider each factor
has a link to Amazon and what area is this massively successful business needs
to consider
first of all what is pestle pestle is an acronym that stands for political
economic social technological legal and environmental it allows a business to
assess the external environment and once certain factors have been identified the
business can then put in place a strategy to limit any negative impacts
to the business these factors can link closely to the opportunities in a threat
section of a SWOT analysis as whatever has been identified in a pestle analysis
could be seen as either an opportunity or threat to the business for more
information on SWOT analysis see our video on SWOT which again links to
Amazon now we know what pestle is let's have a look at each pestle factor in
detail and the most common things that businesses need to be aware of the first
of the external influences that can impact a business is political despite
political decisions being outside of the business's control governments around
the world can make decisions that have a direct impact on the operations of the
business common political factors include regulating competition taxation
corruption and business policies otherwise known as red tape these
political decisions and influences can have wide-ranging consequences for a
business despite the business having little control over them one current
threat to Amazon is that governments are becoming increasingly concerned
that they monopolized too much of the market this links directly to regulating
competition in the USA forty-nine percent of online shopping in 2018 was
done through Amazon such domination may lead to political decisions being made
to block further expansion Amazon will identify this political influence
and put a strategy in place to limit its impact the second factor is economic
what areas of the economy will have an impact on business practices one of them
could be interest rates unemployment low unemployment in
country that the businesses operating in is an indicator of a healthy economy and
as more people are in employment it should result in more spending even
higher potential profits for Amazon and therefore their strategy may be to
invest more in expansion during these prosperous times another one is
inflation and finally recession if recession hits this will hit Amazon
directly and will mean they may have to change their direction in terms of their
pricing strategy or items that they sell as consumers will have less disposable
income to spend on non essentials the business may need to strategize by
reducing non-essential costs in the business by identifying such economic
factors the business has more chance of success in future the next factors are
social factors that impact the business these can be things like the demographic
of the population the makeup of the population will affect things such as
disposable income per person and buying behavior if consumers have common traits
business can target these much more easily pressure groups consumer trends
this is something that Amazon are particularly interested in it is
increasingly popular in developed countries to shop online and the social
change in shopping behavior is greatly impacted the rise of Amazon however
continued changes in shopping trends means that Amazon must identify these
and again what a strategy in place to maximise their success for example
they're smart speaker Alexa is poised to be an opportunity for Amazon as people
are starting to shop via voice making the shopping experience more
frictionless and simple for the consumers this in turn will have a
positive impact on Amazon's finances and the final thing that could impact the
business is the health of the population the T in pestle
stands for technology technology is fast moving and has changed drastically over
the years Amazon will assess the technological environment and strategize
over how technological changes will impact the future of the business
areas such as artificial intelligence many of us think of humanized robots
like Sophia when it comes to AI however the future of AI and its impacts
on Amazon may just be improvements in algorithms that can highly target users
by using machine learning to recommend products they will like and in turn
purchase Amazon will need to keep on top of such improvements in AI and
therefore they may strategize to employ the best people in the world to improve
their machine learning capabilities another area they could investigate is
cyber crime big data and finally robotics robotics will have a major
impact on the future efficiency of the business if Amazon manage to keep on
top of improvements in robotics that could mean better customer service
ie drone deliveries and their Scout delivery service Amazon will want to
continue to improve their delivery efficiency and the future of Robotics
could do this for them these are just a few technological impacts and as these
change so rapidly so will Amazon Strategy L stands for legal legal links
very closely to political however things that are political are not always put
into law therefore the legal part of PESTEL tends to focus on specific laws
for example employment law minimum wage laws the minimum wage is a legal
requirement amazon must abide by when operating in the UK this is an external
factor as they have no control over it and any future change to this rate will
directly impact their operating costs any Rises they deemed to be too
excessive may mean they decide to strategically move outside of the UK to
somewhere where labor costs are substantially lower and in turn save
themselves money on labour costs health and safety again any changes in this law
will need to be adhered to by Amazon and may impact the way the business operates
EU laws also impact Amazon and when the business is operating in the EU they
must abide by these laws all these laws need to be followed in differing
countries and strategies over changes to these laws are important to
of Amazon the final of the festival factors is environmental common
environmental factors include a move towards more sustainable business
operations Amazon have been criticized in the past for their lack of
sustainable packaging with images popping up online of small items being
delivered with excessive amounts of packaging with such points being raised
Amazon will look at this and put a strategy in place to avoid
sustainability issues impacting the future of their business further to this
pressures over pollution and supply chain management these are particularly
influential factors at Amazon as their whole operation is based around
logistics Amazon will assess the future of transportation and can plan to reduce
their impact on polluting the environment by using new methods in
greener delivery methods a final factor that could impact the business is
ethical sourcing Amazon needs to be wary of where they're sourcing their products
from and how these are being produced overall PESTEL is a useful tool for
identifying which factors are most important to the future success of a
business and then it allows that business to put strategies together the
lessen the impact of factors outside of the business's control the most
important external factors to assess depends on the industry and country the
business is operating in for example environmental factors will have a
greater impact on the automotive industry rather than something such as
hairdressing thank you for listening and I hope this
has helped you understand pestle analysis and how it can be used as a
strategic management tool in the description is a link to a free
worksheet so you can apply your understanding of pestle analysis if you
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