Chiou Kim research on affect of PEST factor

PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macroenvironmental factors used in environmental scanning. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. The use of it can be seen effective for business and strategic planning, marketing planning, business and product development and research reports and gives a certain overview of the different macroenvironmental factors that Dyson has to take into consideration.

Political factors include government regulations and legal issues. Legal factors which Dyson must operate include the overall general legal framework which will determine the basic ways of doing business, ownership issues, right and responsibilities, company law, employment law, health and safety, data protection, environmental considerations like pollution control and waste disposal, tax law, competition law dealing with cartels and price fixing and laws to protect consumers. The government is the nation’s largest supplier, employer, customer and investor and is responsible for creating and maintaining a stable framework in which business can be done. Government policy affects the whole economy and any change of it can have a significant impact on Dyson. Hence, Dyson must react to the attitude of the political party that is in power at the time to make sure that the political environment in any countries in which it may wish to operate is satisfactory. The addition or removal of legislative regulatory constraints can pose major strategic threats and opportunities.

The economic environment is an important influence at local and national level. It affects the purchasing power of potential customers and the firm's cost of capital. The overall growth or fall in gross domestic product (GDP) affects the demand for Dyson’s products. An understanding of local trends (e.g. type of industry in the area, office/factory rents and labour rate) is important for Dyson to invest and relocate its business. Exchange rates affect the price of Dyson’s products overseas and of any supplies being purchased from international sources. Interest rates determine how much it costs to borrow funds to undertake an investment. Inflation has an impact on business decisions such as wage inflation compensates for price inflation.

Social factors affecting Dyson often look at the demographic and culture aspects and also the implications of technology on working patterns. These factors affect customer needs and the size of potential markets. There is now a greater emphasis on work-life balance issues and this can impact on employment policies and approaches to managing work. The rate of growth or decline in population will affect the demand for Dyson’s products. Rising standards of living lead increase demand for its products. Other social factors include income distribution and consumerism. Observing social factors helps Dyson maintain its reputation among stakeholders.

Technology enables new products and processes to be developed in order to keep up with competitors. It increases manufacturing productivity and reduced costs through transportation technology, labour-saving and time- saving. It helps Dyson communicate more effectively with its customers via the internet (e.g. e-mail and the use of websites) and provides greater integration with the suppliers via computer link-ups. Database systems make it much easier to analyse the market place.