How to make a Pestle Diagram - PEST analysis example of Starbucks
What is PEST or PESTLE analysis
Do you ever wonder how big companies decide what are the best decisions for their businesses? PESTLE or PEST analysis is a marketing analysis which helps with this purpose. It helps you decide whether or not the organization’s environment is conductive enough for profitability and takes a look at certain specific factors to determine a calculated course of action for a particular business
Pestle stands for Political, Economic, Social, Technological, Legal and Environmental factors that impact the performance of any organization. It helps us control to a certain extent some systematic external factors that could make or break an organization, depending on how they are handles and how much attention is paid to them.
How does it help an organization?
If we look at how to make a pestle diagram, we would be able to understand the concept much better. Every company has its own way of being run, it operates on its own principles and according to its own requirements and structure. We must take under consideration both internal as well as external factors to fully understand the working mechanisms required in order for the company to run smoothly. PEST analysis mostly helps with external factors and long-term strategic planning based on these factors. With the help of Essay help UK, let us first briefly discuss how each factor involved in PESTLE contributes in helping a business achieve its goals.
Political: Political factors have a great impact on the profit that the company makes, as well as the business itself. This is the one factor which is connected with multiple other ones, such as environmental and legal matters. This is due to the fact that it includes the degree of acceptance of the business in the government, i.e. whether or not the environment is friendly enough to accept the business and let it flourish. The environment for business is highly impacted by the stability of the political condition of the country, so if that happens to be sub-par, steps will have to be taken to bridge the gap and eliminate the harm caused to the business due to lack of government stability.
Economic: This one is very likely to create the most pressure on a company. Especially if a company is operating on a global scale, there is a lot that it will have to deal with. Global economy is the most variable and instable thing ever. It cannot be depended on and constant changes have to be made in a business in order for it to keep up with global standards and keep the company running smoothly. It’s quite obvious that products in companies are made for their customer’s consumption. The economy affects the customers, which in turn affects the business because how will the buyer purchase without having enough money?
Social: Society demands a lot from businesses. Imagine having to cater to the needs of several distinct societies at once through a global business. Definitely doesn’t sound like a party. Socio-cultural factors affect the profitability of a business due to changing demographics and the constantly changing needs of the consumers. Social factors such as old, retiring customers can seriously impact a company’s performance, losing large-scale professional consumers is a loss no big organization wants to face. Imagine being under that level of pressure. With social trends evolving at such a fast pace, consumer preferences change as well. This calls for continuous development in ideas. Any slacking there and you’ll probably lose valuable customers.
Technological: We all know and understand the rate at which technology is developing in the present time – we’re literally a part of it. It enables any company to keep everything in check and maintain all its information, technology helps with things such as finance, marketing, supply chain and HR. How do you plan on keeping tabs on anyone or anything without the use of a computer? It’s literally impossible. Not just this, but methods of working and making products needs to develop too. It would take a great aesthetic sense to pull of something outdated, and even then, it might not appeal to all of your audience, so it’s better to go with the safer option and just get newer things.
Legal: Legal factors include things such as taxes, labor laws, CSR (Corporate social Responsibility), social and environmental obligations. These factors have somewhat of a relationship with political factors, of course, aside from the fact that they include laws that are a bit more specific, such labor laws, discrimination laws, consumer protection laws, copyright and patent laws and safety laws. This is one of the most important things one must consider when running a business, whether it is at a small or a large scale. Any irresponsibility in this matter will most likely come back to bite you in the back sooner or later, considering that companies usually have competitors that are trying to get them out of the running somehow by potentially creating disputes and such.
Environmental: As we all know; the world is in a not-so-good state at the moment. We are losing resources and fast – and they need to be protected at all costs. The world is being destroyed and human beings have played a huge role in that for quite a while, and we are finally realizing the extent of the damage we have caused. Some things that need to be dealt with are shortage of raw materials, pollution targets, and carbon footprint targets set by governments. When running a business, we also need to keep in mind factors that are out of our hands such as climate, weather and environment offsets. Companies should jump at the opportunity of being able to attract a larger audience by creating environment-friendly products to expand their reach.
Introduction to Starbucks…not that it needs one.
Starbucks seems to be the go-to American coffee company and coffeehouse chain that has been stereotypically associated with white female Instagrammers who want to show off their seemingly perfect lifestyle. It has an ever-growing menu of a humungous selection of every kind of coffee imaginable, and there is always some sort of buzz about it on the internet. I’m sure we’ve all seen the memes.
Keeping its position and status in mind, we surely understand that the PEST analysis of Starbucks is something that would have to be done on quite a large scale. When a company is globally popular, of course, the external factors affecting it would be on an equally immense scale. It’s almost scary to think about running a company with so much at stake, the idea of the responsibility alone is terrifying. Let’s try to analyze the external factors potentially affecting the company.
We’ve got politics everywhere
The first thing the diagram would include is the political factors, if we consider the order of the acronym. This includes sourcing raw materials, which is a big part of running any company these days, especially a multibillion-dollar organization like Starbucks. Political stability in all the countries that Starbucks has now become affiliated with is an important factor in the company maintaining its position, so it has to keep a constant watch on how those conditions are changing in different countries.
The countries from where raw materials are sources are important allies, which means that a good relationship needs to be maintained with them. This need to maintain a strong relationship is further fueled by activism and increased political awareness in developing countries.
This act of sourcing raw materials from foreign countries has made Starbucks a source of attraction for many politicians in the West. They now have to make sure that they adhere to the “Fair Trade” practices that global corporations that they are involved with have agreed to.
Following laws in countries where it gets its materials from is also something that Starbucks has been making sure to pay extra attention to, due to the reason that one wrong step could cause them to potentially lose a lot of their business.
The economy can make or break you
As we all know, global economic recession has recently taken place, thus affecting businesses and organizations all over the world. Starbucks is one of the major corporations highly impacted by this, their profitability went down to a great extent and they are now trying to build on the remains, considering that the situation is slightly better now. However, this did cause investors to shift to cheaper and more profitable options because the gamble just didn’t seem worth it anymore. The blow that it took has impacted its economic condition to a great extent.
People do not want to cut down on their coffee consumption. As Starbucks increases prices to get back their former glory and make up for what they lost during the recession, the consumers have found cheaper alternatives and are enjoying the same beverages without the brand name. This has obviously impacted the business negatively and they may have some trouble getting their former position in the economy back.
Another thing negatively impacting the company is the rising operational and labor costs. This is one thing no business can escape from, and it is completely out of their hands. Things like this need to be kept under consideration and dealt with immediately in order to avoid the company potentially going bankrupt in a couple of years.
How is the company affected by social conditions?
Catering to this factor might not be the most difficult thing for a company like Starbucks due to its current social status in the world. They can possibly offer cheaper products, but they will have to compromise on the quality, which in the long run, may bring down the overall performance of the company. However, one really good thing to come out of this will be the expansion of consumers to lower and the middle-income tiers. People who could not afford it in the past will be able to do it now, and people like that make up a good chunk of the world’s population.
Starbucks will have to deal with the environment-loving part of their consumer body, which means they will have to maintain the “green” and “ethical” part of being a globally recognized company along with making their products cheaper. This will surely be a difficult feat to achieve due to organic ingredients and raw materials being more expensive than the cheap alternatives that they may plan to use.
As people retire and a new generation replaces them, they need to understand the needs of these new customers and change their policies and working methods according to newer demands.
Technological issues of Starbucks
Starbucks happens to be in a really good position as far as taking advantage of newly emerging technology goes. They can easily partner with companies like Apple to promote themselves, by doing things such as providing app-based discount coupons. You must know that all their outlets have free Wi-Fi, which of course attracts more and more customers to spend time there and thus, buy more of their goods. This means an overall improves customer experience, along with the introduction of mobiles payments, which makes the experience much easier and a lot more convenient for the consumer.
Riding the mobile wave is easier for Starbucks than most brans due to its demand by the more technologically advanced generation of our time. People have everything at the tip of their fingers, which makes it so much easier for even the busiest people to get everything they need delivered to their doorstep through services provided by their favorite companies, which in this case is Starbucks.
Introducing mobile payments was a huge step as far as catching up to the world’s rapidly improving technology goes. This will surely attract more loyal customers and improve its hold in the technological world, opening up endless new opportunities to strengthen its hold and improve in the business world.
The law demands attention
With a company on a scale this big, it is very important to ensure that it follows rules and regulations set by any other place, country or organization that it is affiliated with. Its position in the world means that there is certainly a lot of competition, and we all know how petty those can get; everyone is trying to strengthen their hold in the business world and no one is afraid to step on the necks of their competitors to get where they want to go. Thee company is affected by several factors, but some of them can easily be taken care of, such as the introduction to stricter customs and trade regulations, along with licensing regulations related to the industry.
Starbucks has several markets. Some of these are situated in the US and others, where it sources its raw materials from. They need to make sure that they adhere to the laws and regulations of these places in order to maintain their position and trusted buyers, because otherwise they might lose those vital sources to their business.
How not to offend the environment
Have you ever heard of paper straws? Or environmentally friendly grocery bags that are reusable? Even when advertising, brands have started to emphasize on how their products are environment friendly due to that becoming one of the greatest demands of consumers today. People have begun to favor products that are cruelty free or made of biodegradable materials and a lot of organizations have started working towards this cause. This is an amazing way to ensure bringing in customers that will promote you for free because of how much they will like your way of functioning, as well as loyalty from your target audience.
Along with this being an amazing initiative to protect the environment, from a business point of view, this would be a great way to attract more customers and promote yourself to a demanding audience. They’ll surely love showing off those paper straws on Instagram.
Starbucks is currently working towards getting all its stores to LEED building standards in order to achieve its environmental efficiency goals. This includes recycling as well as reducing the waste related to cups and other types of packaging.
To conclude from the above analysis, Starbucks holds a fairly stable position as far as external factors go. It already has a strong position and has endless potential to further strengthen it by collaborating with other big brands and taking care of some of the issues discussed above. Prioritizing rapidly changing consumer needs will surely keep the company at the top and secure its position there no matter the number of competitors.
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