For Miss Malathi Strategic and change management

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Executive Summary

This case study is going to assess the frame work of the PEST analysis it is widely considered to be one of the most effective analytical tools used to analyses the impacts of external factors to the company using the principles underlying the framework and therefore critically analyzing the external environment of the company the report will also show how the company faces the problems and how they solve it the report will also include some recommendations as well as solutions suggested

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Table of Contents
Executive Summary ...................................................................................................................................... 1 Questions sheet ............................................................................................................................................. 3 Question A .................................................................................................................................................... 4 Political ......................................................................................................................................................... 8 Economical ................................................................................................................................................... 9 Social/cultural ............................................................................................................................................. 10 Technology ................................................................................................................................................. 12 Bibliography ............................................................................................................................................... 14

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Questions sheet
Choose one of the strategic change and management framework highlighted below and critically analyze and evaluate with supporting examples. PEST Analysis Porters 5 Forces Porters Value Chain

Your report should attempt the following tasks:

a) Discussion of the principles underlying the framework. b) A critical evaluation on the application of the framework in actual business context. c) Relating the framework to an organization of your choice.

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Question A
Discussion of the principles underlying the framework. Introduction What is PEST?

PEST is an acronym for POLITICAL ENVIRONMENTAL SOCIAL AND TECHNOLOGY, it is useful to examine the environmental influences affecting the organization the PEST analysis will help to capture and understand the context by using the prompts, (Ruth, 2010)PEST it is also a technique that facilitates a wide scan of the context and actual or potential factors that would affect objectives of organizations if left unmanaged (Andreas, 2004) The PEST will further be analyses using the diagram below show the breakdown of the frame work and showing the scan too
Question B A critical evaluation on the application of the framework in actual business context. The environmental scan diagram /framework

Environmental Scan

External Analysis

Internal Analysis Microenvironment

Macro environment

P.E.S.T Source (Diabay, 2012)

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The political factors are those government regulations set by the government in power these could be legal or informal rules that companies under each industry are bound to follow some of the rules or policy that a government will impose in include (Diabay, 2012) Tax Policy Environmental laws Environmental regulations Trade restriction and tariffs Political stability The Economic factor The Economic factor will have to do with the purchasing power of the potential customers and the company cost of capital the macro environment will include (Diabay, 2012) Exchange rate Inflation rate Economic growth Interest rate The Social/cultural factors These are the cultural and the social aspect of the external macro environment that these factors affect such as the size of the potential markets some of these include (Diabay, 2012) Income distribution Career attitudes Emphasis on safety Culture Population growth rate Technological Factors This is a very strong tool which if used or followed correctly can lower barriers to entry minimum efficient production levels and could influence outsourcing decisions some of the technology factors include (Diabay, 2012)

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Rate of technology change Automation R & D activity Technology incentives

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PEST Analysis Starbucks

The PEST Analysis of Starbucks coffee POLITICAL Social/cultural Income distribution

Taxation

Taxation policy these are fines set by the This in the money intercalation within the government according the industry which a populations of a country company is serving Trade tariffs Culture

These are restriction set by a government of a According to the context here in focus, culture is country to control the import and export of goods principles and traditions of people in a country of among trading nations certain location

ECONOMICAL Globalization

Technology IT development

This is the process in which a company expands Ecommerce has been around for over a decade now globally opening branches around the world so most companies are marketing and providing entering into new markets Exchange rate information and services via the computers and smart phones. Rate of technology The US-dollar is the worlds currency so The rate of technological change in the current international trade is based on the rise and fall of world market is high, much higher than, say, thirty the dollar because price of one country's currency years ago. Much of this is down to the Internet and expressed in another country's currency the speed with which information can be communicated around the globe.

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Political

Taxation policy Starbucks is one of the companies that surfers from high taxations imposed on farmers in those countries producing coffee beans this means that Starbucks will pay a very high price for the coffee they purchase (QuickMBA, 2010) In Japan Starbucks faced similar political problems during entry in to the japan markets but Starbucks were not giving up so they Found a partner with similar corporate values and complementary strengths, this was strategy to lower the barriers on taxation and helped Starbucks grow much faster (QuickMBA, 2010) In the US they face problems such as deregulations 10years ago the US removed itself from the ICA (international Coffee agreement) this is an international body that that sets quotas on how much coffee would be in tread between producing nations and they kept the price of the coffee stable but when the US left price control and stability was over since then farmers have suffered and they no longer earn as much as they use too that made most of the farmers give up. (QuickMBA, 2010) The trade issue affected Starbucks badly because of exports this means that whenever a country s government impose a tariff its not only the results in an efficiency loss for Starbucks but large income as well may become inconsistent (QuickMBA, 2010)

Starbucks and Instability The worlds economy was hit by the aftermath of 9/11 this was the biggest economic down turn in the US this affected the sales of Starbucks and many other companies If the world market is in a slump it is not usually the ideal time for a business to look at grand expansion. (Starbucks, PEST, 2011) The Employment law and Starbucks A reduction in licensing and permit costs in those countries producing the coffee bean for Starbucks would lower production costs for farmers. This saving would in turn be passed onto the purchase

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Economical

Economic growth in Starbucks If Starbucks location growth is low in a nation like Malaysia then sales may also fall .and thus in the event of negative growth income tends to fall in that period this will make the consumer confident to fall as well because of less disposable income . (QuickMBA, 2010) Inflation rate can be defined Inflation is a condition of increasing prices this relates to Starbucks in a way that if in the UK Business costs rise Starbucks will face though inflation ,everything will increase from the cost of the coffee to the cups and even the general cost of production this will lead to increase in cost on the menu as star buck will have to create new price list this will also affect decision taking uncertainty is created when making decisions not least because inflation redistributes money from lenders to borrowers. (Starbucks, PEST, 2011)

Globalization Globalization did not come as a benefit to coffee farmers because this means they would earn far less money than they use to and because of low gain in the business of coffee a lot of people will be discouraged this will lead to decrease in production of coffee and this will result to drop in supply of coffee to Starbucks and probably low profit. (QuickMBA, 2010)

Competitive pricing This is an advantage to the consumer but a disadvantage to Starbucks because hat can drive down profits and profit margins as they attempt to increase, or at least maintain, their share of the market

Exchange rate When dealing with international trade Starbucks is faced with or affected by the exchange rate, if the value of RM falls in Tanzania or any other coffee producing nation this enable Starbucks to get frothier

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dollar when importing the goods to their country. This saving can be passed along to the customer. Exchange rates are forever changing throughout the world in today's market (Starbucks, PEST, 2011)

Social/cultural
Income distribution In locating a Starbucks shop or outlet they should take into consideration is where income is being distributed as it also demonstrate where they should target their marketing .Starbucks should target people with more disposable income because as coffee is regarded as a more of a luxury product so these people will likely to buy more coffee. (QuickMBA, 2010) Cultural Starbucks is a type of company that prefers an energetic, hands-on style and straightforward corporate governance to manage its fast-paced growth, employee satisfaction is priority to Starbucks in its hugely successful blend. (Starbucks, Starbucks coffee JAPAN, 2010) In the Japanese market, Starbucks face a cultural barrier because to Japanese the American style of nonsmoking environment or drink from paper cups in the street was an unacceptable matter adding that Starbucks would have to keep stores no larger than 500 square feet to save on rent. Furthermore, the consultants believed that no Japanese person would walk down the street carrying a Starbucks beverage because it was considered impolite in Japanese culture. (Starbucks, Starbucks coffee JAPAN, 2010) Attitude to work Starbucks have always strategically located their stores because they would not locate their store at where people have a poor attitude to work because it will affect recruitment level difficulty in training new employees and staff turnover will be high but attitude to work could also be an advantage to Starbucks because most staff do not like canteen food because it mostly do not teats good so people would rather go outside to eat or have coffee and this is to the advantage of the Starbucks and promote the shop as a place

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where people can meet up and so it will mean that they will get a larger amount of people in their stores at this time of the day (Starbucks, Starbucks coffee JAPAN, 2010)

Location Transport needs to the premises must be considered for both staff and customers. Easy accesses vital to ensure there is no excuse for staff to arrive late or for customers not to visit. (QuickMBA, 2010)

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Technology

Technological IT development Starbucks lunched it first e-commerce site in 1998 in too late 1999,starbucks decided the site needed to grow so they prepared it for the future of which is now and years to come but achieving this was a challenge they had to change their whole server to Microsoft Commerce Server 2000, one of the key Microsoft .NET Enterprise Servers. These increased their performance now having the right tool Starbucks can target customers, analyze site data, and deliver new features to the market in the shortest time possible (Starbucks, PEST, 2011) New materials and processes Starbucks made things much easier for their staff with machines and computers. Starbucks uses new cash registers this will enable their staff to work more quickly and efficiently. Thanks to Developments in the technology of coffee making this will result in customers being served quicker and create the potential to serve more customers in a day. This removes long queuing people standing thus improving customer relations along with increasing the customer base. (QuickMBA, 2010) Software upgrades In the short run, Starbucks must identify the most suitable software upgrades to use to keep up with the competition. This applies to the improving the accessibility of their website (www.starbucks.com) and also improving the speed and quality of the service provided on the shop floor. (QuickMBA, 2010)

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Limitations to PEST analysis

A simple presentation can also be considered a limitation. For PEST analysis, the usual procedure is to present a simple list of the environmental factors that can affect the project. Unless the attributing factors are critically examined (Mehdi , 2007)

PEST analysis is not only time consuming but costly as well, getting the latest data and keeping the analysis updated with it becomes a problem most times Collecting enormous amounts of relevant data from the right sources becomes a difficulty , especially since most of the pertinent data must be collected from external agencies. (wordpress, 2012) Making too many assumptions, the factors mentioned in the analysis are based more on assumptions and less on actual facts. An analysis based on unfounded assumptions can lead to planning disasters.

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Conclusions
In conclusion to this this study the reports shows that the PEST is a very useful business tool to help business or organization position their self in the industry but the PEST also have its own flaw as the PEST is mostly based on assumptions rather than facts. An example was shown in the study where Starbucks did not do a market research before going into Japan in which they assume the Japanese will walk on the street with a cup of coffee on their hands which in Japan is regarded as disrespectful according to Japanese culture

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Bibliography Andreas, B. (2004). Busniess Analysis. In B. Andreas, Business Analysis of web (pp. 7-8). Germany : AUflag . Diabay, L. &. (2012). Starbucks PESTEL Analysis. Reserch Methodology . Dictionary, B. (2010). Pest analysis. google. Mehdi , k. (2007). Utilizing and managing commerce and service online. In k. Mehdi, Utilizing and managing commerce and service online (p. 61). USA: Cyber Tech. QuickMBA. (2010). Strategic Management . PEST analysis. Ruth, M. (2010). PEST analysis . In M. Ruth, managenment of Risk Guidance and practitioners (pp. 88-89). norwich UK: TSO . Starbucks. (2010). Starbucks coffee JAPAN. starbucks japan. Starbucks. (2011). PEST. Sandra Low. Thakur, S. (2010, 12 26). Bright Hub PM. Retrieved 10 19, 2012, from project management website: http://www.brighthubpm.com/projectplanning/100700-limitations-of-a-pest-analysis/ wordpress. (2012). PESTEL analysis. Retrieved 10 20, 2012, from busniess analysis website: http://pestel-analysis.com/

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