HUMAN RESOURCES MANAGEMENT

The Human Resources Management (HRM) function includes a variety of activities, and key among them is deciding what needs you have and whether to use independent contractors or hire employees to fill these needs, recruiting and training the best employees, ensuring they are high performers, dealing with performance issues, and ensuring your personnel and management practices conform to various regulations. Activities also include managing your approach to employee benefits and compensation, employee records and personnel policies. Usually small businesses (for-profit or nonprofit) have to carry out these activities themselves because they can't yet afford part- or full-time help. However, they should always ensure that employees have -- and are aware of -- personnel policies which conform to current regulations. These policies are often in the form of employee manuals, which all employees have.

Note that some people distinguish a difference between between HRM (a major management activity) and HRD (Human Resource Development, a profession). Those people might include HRM in HRD, explaining that HRD includes the broader range of activities to develop personnel inside of organizations, including, eg, career development, training, organization development, etc.

There is a long-standing argument about where HR-related functions should be organized into large organizations, eg, "should HR be in the Organization Development department or the other way around?"

The HRM function and HRD profession have undergone tremendous change over the past 20-30 years. Many years ago, large organizations looked to the "Personnel Department," mostly to manage the paperwork around hiring and paying people. More recently, organizations consider the "HR Department" as playing a major role in staffing, training and helping to manage people so that people and the organization are performing at maximum capability in a highly fulfilling manner.

Entrepreneurship

The term entrepreneur has been overused, misused, abused, and tacked onto practically anything and everything from owning a business to holding particular view of the world.

Everyone from the corner shoe repair guy to the hotshot software designer claims to be an entrepreneur.

Entrepreneurs grace the covers of popular magazines and are guests on TV shows beamed to thousands of other entrepreneur hopefuls.

As a matter of fact,entrepreneurs come in amazing variety of types and styles.And are a unique breed.The ventures they create disrupt the economy.That's because an entrepreneur changes the way you and i do things- usually for the better.

Entrepreneurs create value in the marketplace in a wonderful variety of interesting new ways.

Putting together the pieces of an entrepreneurial venture:

1. The entrepreneur
2. Legal,Government
3. Suppliers
4. Competitors
5. Customers
6. Technology
7. Money

Individual Entrepreneurship

SWOT Analysis

Strengths, Weaknesses, Opportunites and Threats (SWOT).

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.

In SWOT, strengths and weaknesses are internal factors. For example:A strength could be:

• Your specialist marketing expertise.
• A new, innovative product or service.
• Location of your business.
• Quality processes and procedures.
• Any other aspect of your business that adds value to your product or service.

A weakness could be:

• Lack of marketing expertise.
• Undifferentiated products or services (i.e. in relation to your competitors).
• Location of your business.
• Poor quality goods or services.
• Damaged reputation.

In SWOT, opportunities and threats are external factors. For example: An opportunity could be:

• A developing market such as the Internet.
• Mergers, joint ventures or strategic alliances.
• Moving into new market segments that offer improved profits.
• A new international market.
• A market vacated by an ineffective competitor.

A threat could be:

• A new competitor in your home market.
• Price wars with competitors.
• A competitor has a new, innovative product or service.
• Competitors have superior access to channels of distribution.
• Taxation is introduced on your product or service.

A word of caution, SWOT analysis can be very subjective. Do not rely on SWOT too much. Two people rarely come-up with the same final version of SWOT. TOWS analysis is extremely similar. It simply looks at the negative factors first in order to turn them into positive factors. So use SWOT as guide and not a prescription.

Simple rules for successful SWOT analysis.

• Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis.
• SWOT analysis should distinguish between where your organization is today, and where it could be in the future.
• SWOT should always be specific. Avoid grey areas.
• Always apply SWOT in relation to your competition i.e. better than or worse than your competition.
• Keep your SWOT short and simple. Avoid complexity and over analysis
• SWOT is subjective.

Once key issues have been identified with your SWOT analysis, they feed into marketing objectives. SWOT can be used in conjunction with other tools for audit and analysis, such as Pest Analysis and Porter's Five Forces Analysis. So SWOT is a very popular tool with marketing students because it is quick and easy to learn. During the SWOT exercise, list factors in the relevant boxes. It's that simple. Below are some FREE examples of SWOT analysis - click to go straight to them

Do you need a more advanced SWOT Analysis?

Some of the problems that you may encounter with SWOT are as a result of one of its key benefits i.e. its flexibility. Since SWOT analysis can be used in a variety of scenarios, it has to be flexible. However this can lead to a number of anomalies. Problems with basic SWOT analysis can be addressed using a more critical Power Swot.

SWOT Analysis Examples

A summary of FREE SWOT analyses case studies are outlined as follows (those in the table above are far more detailed and FREE!):

Example 1 -WAL MART SWOT ANALYSIS: Strengths - Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.Weaknesses - Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.Opportunities - To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region. Threats - Being number one means that you are the target of competition, locally and globally.

Example 2 -STARBUCKS SWOT ANALYSIS:Strengths - Starbucks Corporation is a very profitable organisation, earning in excess of $600 million in 2004.Weaknesses - Starbucks has a reputation for new product development and creativity. Opportunities - New products and services that can be retailed in their cafes, such as Fair Trade products. Threats - Starbucks are exposed to rises in the cost of coffee and dairy products.

Example 3 -NIKE SWOT ANALYSIS:Strengths - Nike is a very competitive organisation. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.'Weaknesses - The organisation does have a diversified range of sports products. Opportunities - Product development offers Nike many opportunities. Threats - Nike is exposed to the international nature of trade.

Example 4 -INDIAN PREMIER LEAGUE SWOT ANALYSIS: Where will you find the Mumbai Indians, the Royal Challengers, the Deccan Chargers, the Channai Super Kings, the Delhi Daredevils, the Kings XI Punjab, the Kolkata Knight Riders and the Rajesthan Royals? In the Indian Premier League (IPL) - the most exciting sports franchise that the World has seen in recent years, with seemingly endless marketing opportunities (and strengths, weaknesses and threats of course!).

Example 5 -BHARTI AIRTEL SWOT ANALYSIS: Weaknesses - An often cited original weakness is that when the business was started by Sunil Bharti Mittal over 15 years ago, the business has little knowledge and experience of how a cellular telephone system actually worked. So the start-up business had to outsource to industry experts in the field.

Marketing Mix

The marketing mix principles are used by business as tools to assist them in pursuing their objectives. The marketing mix principles are controllable variables, which have to be carefully managed and must meet the needs of the defined target group. The marketing mix is apart of the organisations planning process and consists of analysing the defined:

• How will you design, package and add value to the product. (Product Strategies)
• What pricing strategy is appropiate to use (Price Strategies)
  
• Where will the firm locate?(Place Strategies)
  
• How will the firm promote its product(Promotion Strategies)

Introducing the marketing mix


A.Product Strategies

When an organisation introduces a product into a market they must ask themselves a number of questions.

1. Who is the product aimed at?
2. What benefit will they expect?
3. How do they plan to position the product within the market?
4. What differential advantage will the product offer over their competitors?

A product should be viewed in three levels.

Level 1: Core Product. What is the core benefit your product offers?. Customers who purchase a camera are buying more then just a camera they are purchasing memories.

Level 2 Actual Product: All cameras capture memories. The aim is to ensure that your potential customers purchase your one. The strategy at this level involves organisations branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors.

Level 3: Augmented product: What additional non-tangible benefits can you offer? Competition at this level is based around after sales service, warranties, delivery and so on. John Lewis a retail departmental store offers free five year guarantee on purchases of their Television sets, this gives their `customers the additional benefit of ‘piece of mind’ over the five years should their purchase develop a fault.

Product Decisions

When placing a product within a market many factors and decisions have to be taken into consideration. These include:

Product design – Will the design be the selling point for the organisation as we have seen with the iMAC, the new VW Beetle or the Dyson vacuum cleaner.

Product quality: Quality has to consistent with other elements of the marketing mix. A premium based pricing strategy has to reflect the quality a product offers.

Product features: What features will you add that may increase the benefit offered to your target market? Will the organisation use a discriminatory pricing policy for offering these additional benefits?

Branding: One of the most important decisions a marketing manager can make is about branding. The value of brands in today’s environment is phenomenal. Brands have the power of instant sales, they convey a message of confidence, quality and reliability to their target market.

Brands have to be managed well, as some brands can be cash cows for organisations. In many organisations they are represented by brand managers, who have hugh resources to ensure their success within the market.

A brand is a tool which is used by an organisation to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change?

Increasingly brand managers are becoming annoyed by ‘copycat’ strategies being employed by supermarket food retail stores particular within the UK . Coca-Cola threatened legal action against UK retailer Sainsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans.

Internet branding is now becoming an essential part of the branding strategy game. Generic names like Bank.com and Business.com have been sold for £m’s. ( Recently within the UK banking industry we have seen the introduction of Internet banks such as cahoot.com and marbles.com the task by brand managers is to make sure that consumers understand that these brands are banks!

B.Pricing Strategies

Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. The remaining 3p’s are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organisation. Pricing should take into account the following factors:

Fixed and variable costs.

Competition

Company objectives

Proposed positioning strategies.

Target group and willingness to pay.

Pricing Strategies

An organisation can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve.

Penetration pricing: Where the organisation sets a low price to increase sales and market share.

Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.

Competition pricing: Setting a price in comparison with competitors.

Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits.

Bundle Pricing: The organisation bundles a group of products at a reduced price.

Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of $200

Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, porsche etc.

Optional pricing: The organisation sells optional extras along with the product to maximise its turnover. This strategy is used commonly within the car industry.

C.Place Strategies

Refers to how an organisation will distribute the product or service they are offering to the end user. The organisation must distribute the product to the user at the right place at the right time. Efficient and effective distribution is important if the organisation is to meet its overall marketing objectives. If organisation underestimate demand and customers cannot purchase products because of it profitability will be affected.

What channel of distribution will they use?

Two types of channel of distribution methods are available. Indirect distribution involves distributing your product by the use of an intermediary. Direct distribution involves distributing direct from a manufacturer to the consumer e.g. For example Dell Computers. Clearly direct distribution gives a manufacturer complete control over their product.

Above indirect distribution (left) and direct distribution (right).

Distribution Strategies

Depending on the type of product being distributed there are three common distribution strategies available:

1. Intensive distribution: Used commonly to distribute low priced or impulse purchase products eg chocolates, soft drinks.

2. Exclusive distribution: Involves limiting distribution to a single outlet. The product is usually highly priced, and requires the intermediary to place much detail in its sell. An example of would be the sale of vehicles through exclusive dealers.

3. Selective Distribution: A small number of retail outlets are chosen to distribute the product. Selective distribution is common with products such as computers, televisions household appliances, where consumers are willing to shop around and where manufacturers want a large geographical spread.

If a manufacturer decides to adopt an exclusive or selective strategy they should select a intermediary which has experience of handling similar products, credible and is known by the target audience.

D.Promotion Strategies

A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisations promotional strategy can consist of:

Advertising: Is any non personal paid form of communication using any form of mass media.

Public relations: Involves developing positive relationships with the organisation media public. The art of good public relations is not only to obtain favorable publicity within the media, but it is also involves being able to handle successfully negative attention.

Sales promotion: Commonly used to obtain an increase in sales short term. Could involve using money off coupons or special offers.

Personal selling: Selling a product service one to one.

Direct Mail: Is the sending of publicity material to a named person within an organisation. There has been a massive growth in direct mail campaigns over the last 5 years. Spending on direct mail now amounts to £18 bn a year representing 11.8% of advertising expenditure ( Source: Royal Mail 2000). Organisations can pay thousands of pounds for databases, which contain names and addresses of potential customers.

Direct mail allows an organisation to use their resources more effectively by allowing them to send publicity material to a named person within their target segment. By personalising advertising, response rates increase thus increasing the chance of improving sales. Listed below are links to organisation who's business involves direct mail.

Message & Media Strategy

An effective communication campaign should comprise of a well thought out message strategy. What message are you trying to put accross to your target audience?. How will you deliver that message? Will it be through the appropiate use of branding? logos or slogan design?. The message should reinforce the benefit of the product and should also help the company in developing the positioning strategy of the product. Companies with effective message strategies include:

Nike: Just do it.

Toyota: The car in front is a Toyota.

Media strategy refers to how the organisation is going to deliver their message. What aspects of the promotional mix will the company use to deliver their message strategy. Where will they promote? Clearly the company must take into account the readership and general behaviour of their target audience before they select their media strategy. What newspapers do their target market read? What TV programmes do they watch? Effective targeting of their media campaign could save the company on valuable financial resources.

Push & Pull Strategies

Above a pull strategy (up) push strategy (down).

Communication Model - AIDA


AIDA is a communication model which can be used by firms to aid them in selling their product or services. AIDA is an Acronym for Attention, Interest, Desire, Action.. When a product is launched the first goal is to grab attention. Think, how can an organisation use it skills to do this? Use well-known personalities to sell products? Once you grab attention how can you hold Interest, through promoting features, clearly stating the benefit the product has to offer? The third stage is desire, how can you make the product desirable to the consumer? By demonstrating it? The final stage is the purchase action, if the company has been successful with its strategy then the target customer should purchase the product.

Promotion through the Product lifecycle.

As products move through the four stages of the product lifecycle different promotional strategies should be employed at these stages to ensure the healthy success and life of the product .

Stages and promotion strategies employed.

Introduction

When a product is new the organisations objective will be to inform the target audience of its entry. Television, radio, magazine, coupons etc may be used to push the product through the introduction stage of the lifecycle. Push and Pull Strategies will be used at this crucial stage.

Growth

As the product becomes accepted by the target market the organisation at this stage of the lifecycle the organisation works on the strategy of further increasing brand awareness to encourage loyalty.

Maturity

At this stage with increased competition the organisation take persuasive tactics to encourage the consumers to purchase their product over their rivals. Any differential advantage will be clearly communicated to the target audience to inform of their benefit over their competitors.

Decline

As the product reaches the decline stage the organisation will use the strategy of reminding people of the product to slow the inevitable

Internet promotion

The development of the world wide web has changed the business environment forever. Dot com fever has taken the industry and stock markets by storm. The e-commerce revolution promises to deliver a more efficient way of conducting business. Shoppers can now purchase from the comfort of their home 24 hours a day 7 days a week. However, particularly in the UK the e-commerce revolution is hindered by two factors. Firstly the cost of logging on to the net. Consumers are still weary of the time-spent surfing, the high cost is slowing down the take-up. The number of homes that are linked to the web in the UK is only 25% of all house owner. If e-commerce businesses are to succeed the home penetration rate of internet access must also increase. Secondly, most homes are linked to modems of 56K. As the growth of people signing on-line grows the access speed slows down. In America most consumers only spend 10 seconds browsing on a web page, before they change sites, within the UK it is 2 minutes. The future seems to be with ADSL networks which will speed up access to the Internet dramatically running at 512K per second. However, again whether this format is adapted depends much on the cost.

Owning a website is a now a crucial ingredient to the marketing mix strategy of an organisation. Consumers can now obtain instant information on products or services to aid them in their crucial purchase decision. Sony Japan took pre-orders of their popular Playstaion 2 console over the net, which topped a 1 million after a few days, European football stars are now issuing press releases over the web with the sites registered under their own names. Hit rates are phenomenal.

E-marketing

E-Marketing Mix

Traditionally the marketing mix is co-ordinated so efficient product, price, promotion and place strategies are developed for products purchased over the counter.
The internet is changing the way we sell our products and services. That’s a fact. Consumers now use the internet to research and purchase products/services online.
Organisation now need online strategies to attract and retain customers. The e-marketing mix considers the elements of presenting the marketing mix online. Lets look at it in more detail.

E-product strategies

We walk into a shop and see a product we like, we can assess it, touch it. Online, this immediate tangibility disappears. But, is that a disadvantage? Within the uk e-commerce sales are increasing at extremely high rates. Why? What does buying products online offer over one to one sales? Firstly there are clear online facts about the product you are purchasing. The buyer knows immediately about product features, the facts, not a sales persons assumptions. www.comet.co.uk a UK electrical store offers clear information on products and their specification, consumers know what they get if not there is a customer service number where they can find out more.

The buying process is also customised for returning visitors, making repeat purchases easier. Organisations can also offer immediately ancillary products along with the main purchase. For example, the chance to buy extra printer cartridges along with your purchase of your printer online. The product can also be customised to consumers needs. www.nike.com offer customised trainers to users online. Users can design and see their trainers online before they order!

E-price strategies

As mentioned in our marketing mix section, pricing is always difficult to do and must take into account many considerations. Traditionally pricing was about finding about your costs, discovering how much consumers are willing to pay, taking account competition pricing then setting your price. The internet has made pricing very competitive. Many costs i.e. store costs, staff cost have disappeared for complete online stores, placing price pressures on traditional retailers.

The internet gives consumers the power to shop around for the best deal at a click of a button. Website such www.kelkoo.com compare products from different websites informing consumers of where the best deal is. Such easy access to information helps to maintain prices within the online world.

The growth of online auctions also helps consumers to dictate price. The online auction company has grown in popularity with thousands of buyers and seller bidding daily.

E-pricing can also easily reward loyal customers. Technology allows repeat visitors to be tracked, easily allowing loyalty incentives to be targeted towards them. Payment is also easy, paypals, or online credit cards use allows for easy payments. However the downside to this is internet fraud, which is growing rapidly around the world.

E-place strategies

One of the biggest changes to the marketing mix is online purchasing. Consumers can purchase direct from manufacturers cutting out retailers totally. The challenge for online retailers is to ensure that the product is delivered to the consumer within a reasonable time. Location is important within our place strategy. Online location can refer to where links are placed on other websites. Placing a link on www.google.com home page would generate high consumer traffic for you. Knowing your customer and knowing where they visit should help you understand where to place your online links and advertisements.

E-promotion strategies

Promoting products and service online is concerned with a number of issues. Having a recognisable domain name is first stage towards e-promotion. Organisation such as egg.com have successfully positioned the brand on the online world as an online bank.
Most organisations today have some form of webpage used in most if not all advertisements. Placing banner advertisements on other webpages is a common form of e-promotion. Banner ads must be placed where potential customers browse. Web public relations (WPR) is another approach to promoting online. News worthy stories based on product or service launches can be placed on the companies webpage, or WPR articles sent to review sites for consumers to read. Hopefully this form of online promotion will pull the consumer in. Direct email is a popular and common form of e-promotions, although slowly becoming the most hated my many consumers. Organisations can send e-leaflets to hundreds and thousands of respondents, hoping a small percentage will reply. The problem is that for every 100 emails sent the response rate will be 1-2!. Direct emailing is also known as SPAM which stands for Sending Persistent Annoying eMail. (SPAM). To summaries e-promotion includes:

• Banner promotions
• Web public relations (WPR)
• E-leaflets
• Having a domain name.

The e-marketing mix must work together and support each other if the company is to have a successful online marketing strategy.

Principles and Practise of Marketing

What is Marketing?

The term marketing has changed and evolved over a period of time, today marketing is based around providing continual benefits to the customer, these benefits will be provided and a transactional exchange will take place.

The Chartered Institute of Marketing define marketing as ‘The management process responsible for identifying , anticipating and satisfying customer requirements profitability’

If we look at this definition in more detail Marketing is a management responsibility and should not be solely left to junior members of staff. Marketing requires co-ordination, planning, implementation of campaigns and a competent manager(s) with the appropriate skills to ensure success.

Marketing objectives, goals and targets have to be monitored and met, competitor strategies analysed, anticipated and exceeded. Through effective use of market and marketing research an organisation should be able to identify the needs and wants of the customer and try to delivers benefits that will enhance or add to the customers lifestyle, while at the same time ensuring that the satisfaction of these needs results in a healthy turnover for the organization.

Philip Kotler defines marketing as ‘satisfying needs and wants through an exchange process’

Within this exchange transaction customers will only exchange what they value (money) if they feel that their needs are being fully satisfied, clearly the greater the benefit provided the higher transactional value an organisation can charge.

P.Tailor suggests that 'Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer’ (P.Tailor 7/00)'

Business Objectives

All businesses need to set objectives for themselves or for the products or services they are launching. What does your company, product or service hope to achieve?

Setting objectives are important., it focuses the company on specific aims over a period of time and can motivate staff to meet the objectives set.

A simple acronym used to set objectives is called SMART objectives. SMART stands for:

1. Specific – Objectives should specify what they want to achieve.
2. Measurable – You should be able to measure whether you are meeting the objectives or not.
3. Achievable - Are the objectives you set, achievable and attainable?
4. Realistic – Can you realistically achieve the objectives with the resources you have?
5. Time – When do you want to achieve the set objectives?

Some Business Objectives:

There are a number of business objectives, which an organisation can set:

Market share objectives: Objectives can be set to achieve a certain level of market share within a specified time. E.g. obtain 3% market share of the mobile phone industry by 2004.

To increase profit: An objective maybe to increase sales 10% from 2003 – 2004.

To survive: The hard times the business is currently in.

To grow: The business may set an objective to grow by 15% year on year for the next five years.

To increase brand awareness over a specified period of time.

Marketing Environment - PEST Analysis

Introduction

An organisation’s success is influenced by factors operating in it’s internal and external environment; an organisation can increase it’s success by adopting strategies which manipulate these factors to it’s advantage. A successful organisation will not only understand existing factors but also forecast change, so that it can take advantage of change within the environments in which it operates.

PEST & Micro environmental Factors

The following type of forces influence an organisation’s operating environment:

• Pest Factors – These are external forces which the organisation does not have direct control over these factors. PEST is an acronym and each letter represents a type of factor (Political, Economical Social and Technological).
• Micro environmental factors – These are internal factors, which the organisation can control.

PEST & PESTLE analysis

A PEST analysis is used to identify the external forces affecting an organisation .This is a simple analysis of an organisation’s Political, Economical, Social and Technological environment. A PEST analysis incorporating legal and environmental factors is called a PESTLE analysis.

Political

The first element of a PEST analysis is a study of political factors. Political factors influence organisations in many ways. Political factors can create advantages and opportunities for organisations. Conversely they can place obligations and duties on organisations. Political factors include the following types of instrument:

- Legislation such as the minimum wage or anti discrimination laws.
- Voluntary codes and practices
- Market regulations
- Trade agreements, tariffs or restrictions
- Tax levies and tax breaks
- Type of government regime eg communist, democratic, dictatorship

Non conformance with legislative obligations can lead to sanctions such as fines, adverse publicity and imprisonment. Ineffective voluntary codes and practices will often lead to governments introducing legislation to regulate the activities covered by the codes and practices.

Economical

The second element of a PEST analysis involves a study of economic factors.
All businesses are affected by national and global economic factors. National and global interest rate and fiscal policy will be set around economic conditions. The climate of the economy dictates how consumers, suppliers and other organisational stakeholders such as suppliers and creditors behave within society.

An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. Conversely a “booming” or growing economy will have low unemployment, high spending power and high stakeholder confidence.

A successful organisation will respond to economic conditions and stakeholder behaviour. Furthermore organisations will need to review the impact economic conditions are having on their competitors and respond accordingly.

In this global business world organisations are affected by economies throughout the world and not just the countries in which they are based or operate from. For example: a global credit crunch originating in the USA contributed towards the credit crunch in the UK in 2007/08.

Cheaper labour in developing countries affects the competitiveness of products from developed countries. An increase in interest rates in the USA will affect the share price of UK stocks or adverse weather conditions in India may affect the price of tea bought in an English café.

A truly global player has to be aware of economic conditions across all borders and needs to ensure that it employs strategies that protect and promote its business through economic conditions throughout the world.

Social

The third aspect of PEST focuses its attention on forces within society such as family, friends, colleagues, neighbours and the media. Social forces affect our attitudes, interest s and opinions. These forces shape who we are as people, the way we behave and ultimately what we purchase. For example within the UK peoples attitudes are changing towards their diet and health. As a result the UK is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of organic food. Products such as Wii Fit attempt to deal with society’s concern, about children’s lack of exercise.

Population changes also have a direct impact on organisations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers fall. Conversely an increase in the global population and world food shortage predictions are currently leading to calls for greater investment in food production. Due to food shortages African countries such as Uganda are now reconsidering their rejection of genetically modified foods.

In summary organisations must be able to offer products and services that aim to complement and benefit people’s lifestyle and behaviour. If organisations do not respond to changes in society they will lose market share and demand for their product or service.

Technological

Unsurprisingly the fourth element of PEST is technology, as you are probably aware technological advances have greatly changed the manner in which businesses operate.
Organisations use technology in many ways, they have

1. Technology infrastructure such as the internet and other information exchange systems including telephone
2. Technology systems incorporating a multitude of software which help them manage their business.
3. Technology hardware such as mobile phones, Blackberrys, laptops, desktops, Bluetooth devices, photocopiers and fax machines which transmit and record information.

Technology has created a society which expects instant results. This technological revolution has increased the rate at which information is exchanged between stakeholders. A faster exchange of information can benefit businesses as they are able to react quickly to changes within their operating environment.

However an ability to react quickly also creates extra pressure as businesses are expected to deliver on their promises within ever decreasing timescales..

For example the Internet is having a profound impact on the marketing mix strategy of organisations. Consumers can now shop 24 hours a day from their homes, work, Internet café’s and via 3G phones and 3G cards. Some employees have instant access to e-mails through Blackberrys but this can be a double edged sword, as studies have shown that this access can cause work to encroach on their personal time outside work.

The pace of technological change is so fast that the average life of a computer chip is approximately 6 months. Technology is utilised by all age groups, children are exposed to technology from birth and a new generation of technology savvy pensioners known as “silver surfers” have emerged. Technology will continue to evolve and impact on consumer habits and expectations, organisations that ignore this fact face extinction.

PESTLE

A PEST analysis is sometimes expanded to incorporate legal and environmental factors; this is known as a pestle analysis. There are many statutes books containing company law as almost every aspect of an organisation’s operation is controlled through legislation from treatment of employees through to health and safety. Legal factors are important as organisations have to work within legislative frameworks. Legislation can hinder business by placing onerous obligations on organisations. On the other hand legislation can create market conditions that benefit business.

Diagram: PEST analysis and the marketing mix.

Economy

The economy is the realized social system of production, exchange, distribution, and consumption of goods and services of a country or other area. A given economy is the end result of a process that involves its technological evolution, civilization's history and social organization, as well as its geography, resource endowment, and ecology, among other factors. These factors give context, content, and set the conditions and parameters in which an economy functions. An economy does not have to be a specific size. An economy can mean the economy of a city (local economy), a country (national economy) or the world as a whole (international economy), provided that it is involved in the production of goods and services.Today the range of fields of study exploring, registering and describing the economy or a part of it, include social sciences such as economics, as well as branches of history (economic history) or geography (economic geography). Practical fields directly related to the human activities involving production, distribution, exchange, and consumption of goods and services as a whole, range from engineering to management and business administration to applied science to finance. All kind of professions, occupations, economic agents or economic activities, contribute to the economy. Consumption, saving and investment are core variable components in the economy and determine market equilibrium. There are three main sectors of economic activity: primary, secondary and tertiary.
Economic Sectors
The economy includes several sectors (also called industries), that evolved in successive phases.

* The ancient economy was mainly based on subsistence farming.

* The industrial revolution lessened the role of subsistence farming, converting it to more extensive and monocultural forms of agriculture in the last three centuries. The economic growth took place mostly in mining, construction and manufacturing industries.

* In the economies of modern consumer societies there is a growing part played by services, finance, and technology -- the (knowledge economy).

In modern economies, there are four main sectors of economic activity:[citation needed]

* Primary sector of the economy: Involves the extraction and production of raw materials, such as corn, coal, wood and iron. (A coal miner and a fisherman would be workers in the primary sector.)
* Secondary sector of the economy: Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing. (A builder and a dressmaker would be workers in the secondary sector.)
* Tertiary sector of the economy: Involves the provision of services to consumers and businesses, such as baby-sitting, cinema and banking. (A shopkeeper and an accountant would be workers in the tertiary sector.)
* Quaternary sector of the economy: Involves the research and development needed to produce products from natural resources. (A logging company might research ways to use partially burnt wood to be processed so that the undamaged portions of it can be made into pulp for paper.) Note that education is sometimes included in this sector.

More details about the various phases of economic development belong to the history section on this article. As this process was far from being homogeneous geographically, the balance between these sectors differs widely among the various regions of the world.