Political, Economic, Social, Technological, Legal, and Environmental are collectively called the PEST or PESTLE analysis. This strategic management ensures business growth and profitability.
PEST or PESTLE is a tool that allows businesses to identify and analyze these factors. PESTLE is an acronym for Political, Economic, Social, Technological, Legal, and Environmental. These are the frameworks that help any business track down the changes that are taking place in the environment.
It is a concept of strategic management that provides data to businesses in building an approach and strategies to achieve the goals of the business.
In our previous article, we learnt the basics of conducting PEST/PESTLE analysis for any business type. Now in this article, let us read more about conducting PEST/PESTLE analysis for an OEM or any related manufacturer, and how it can turn out to be highly beneficial for them.
Click here to read more about PEST and PESTLE analysis in detail.
How to conduct PEST or PESTLE Analysis?
Know the categories
PESTLE Analysis is conducted by considering all the factors and then developing a strategy.
- Political factors
Political factors are the authoritative power the government holds in an economy. These factors are taken into account when evaluating the political aspect. These aspects are beyond the control of manufacturing companies. Companies have to identify opportunities and adapt themselves according to such changes.
The political factors that affect the manufacturing business are mentioned below.
- Political stability
- Taxation policies of the country
- Regulatory practices and governing bodies
- Political leaders and their ideas
- Ideologies of government
- Foreign Trade Policies
- Educational System
- Policies on Infrastructure
- Fiscal and other relevant policies of the government
- Economic Factors
Economic factors are the crucial determinants of the performance of an economy. Such a maker acts as a decision-maker for the success and failure of the business.
A surge in inflation can leave an effect on the pricing of the products of a manufacturing company. It can inversely also impact the purchasing power of the consumers of such products.
These are the economic influences that affect the manufacturing companies
- Economic growth of the market
- Inflation rates
- Exchange Rates
- Gross Domestic Product
- Disposable income of the consumers
- Current and future interest rates
- Plans or Policies related to the manufacturing industry
- Consumers’ potential to spend
- Unemployment rates
- Expansion or Depression
- Social Factors
Social factors of a manufacturing business highly affect its production and sales trends. The social factor is more inclined towards the customers of the corporation.
In customers of the business, these are the factors that socially influence the working of a business.
- Demographics of market
- Social Costs
- Consumer buying patterns
- Lifestyle trends of people
- Buying Habits
- Level of Education
- Religious beliefs
- Age group of the customers
- Influence of media
- Religious and cultural factors
- Technological Factors
With the modernization of technologies, the way companies have been operating has changed influentially. Resultantly, it has enhanced the performance of the industry. These technological factors have a tremendous impact on entry and exit decisions for a manufacturing concern. Manufacturing companies need to invest strategically in buying technology and machinery for the production process. Therefore, they should conduct a proper analysis of the technology they are about to purchase and use for the production of their goods so that wherever they invest their money, it gives them efficient results.
These are the factors that influence the manufacturing companies in terms of technology
- Production techniques
- Information and communication resources
- E-commerce technologies
With automation and artificial intelligence reducing human intervention by replacing them in production lines, technological advancements have ensured efficiency and security. In this intensely competitive market, every business is striving for its existence. As technological innovations happen regularly, every business must adopt the upcoming technology, which leads to long-term benefits like efficiency, productivity, and increases customer relationships.
- Legal Factors
Health and safety laws, corporate laws, safety standards, employment laws, consumer protection laws, and such other legal regulations that a company is bound to adhere to are called the legal factors. Every manufacturing business needs to be aware of all the statutes that apply to its unit and meet such compliances. Failure of which attracts penalties from such statutory laws and tarnishes the brand image of the company.
- Environmental Factors
Environmental factors have become one of the pivotal factors that every company needs to pay special attention to. Especially the manufacturing companies are facing various penal consequences with the introduction of carbon footprint targets and pollution targets set by the government.
Corporate social responsibility is yet another integral part of the compliance that companies are bound to satisfy.
Do the research required
Once all the six known factors are comprehensively understood, the next step will be to research all such factors and derive elements that affect the manufacturing company. This step involves finding all the information related to such factors concerning the company, which has to be included in the report.
PESTLE Analysis Report
Put all the information of research into this report. Create six-factor sections and include all those factors that have an effect presently or in the future. The conclusion shall include the strategies designed to overcome such effects. The framework should be simple, and the report should be short, including only relevant information.
Advantages of PEST or PESTLE Analysis for OEMs & other Manufacturing Companies
- The analysis allows the manufacturing businesses to exploit any opportunity which they can use to their advantage. For example, for manufacturing companies, the government has recently announced a relaxed tax rate. It can reduce their expenses and increase revenue.
- Every manufacturing business is vulnerable to any external threat which can anytime impact the company. For example, manufacturing concerns use technologies that are bound to change and advance in a short time.
- The PESTLE analysis helps companies in recognizing these threats and taking appropriate actions accordingly. This is a cost-effective study that takes less time and energy.
- It helps the companies in gaining a comprehensive understanding of the external environment. Whether the company is developing a new product, this deeper understanding helps them in forming a responsive strategy.