Importance of PESTEL Analysis in Strategy Management &

Planning Process

Strategy planning process often requires five steps –

1. Choosing the vision, mission and the reason of existence for Burger Miller.

2. Analyze the Burger Miller external competitive environment to identify opportunities

and threats. PESTEL analysis is critical to understand the external threats & opportunities
arising because of the macro environment developments. Changes in macro
environment forces can impact the Porter Five Forces & industry attractiveness. Thus
significantly impacting the ability of Burger Miller to build sustainable competitive
advantage

3. Analyze Strengths and Weaknesses of Burger Miller.

4. Developing strategies that can capitalize on Burger Miller strengths and help mitigate
weaknesses and impact of threats of macro-environment.

5. Execution of the strategy and building a feedback loop, using which managers at
Burger Miller can fine tune processes and strategies going forward.

The Industrial Organization (I/O) approach advocates that for sustainable competitive
advantage external factors are as important as internal factors of the Burger Miller.
According to Michael Porter organizational performance is to large extend determined
by various industry forces.

What are Political Factors in PESTEL / PEST Analysis

The political factors play a huge role in not only investment decision by transnational
corporations but also by companies such as – Burger Miller. Political environment and
other factors not only impact the cost of doing business but also long term
sustainability. Some of the political factors are – governance system, democracy &
institutions, military coup chances, probability of armed conflict, law and order in market
etc.

Political Factors that Impact The WORKS Gourmet Burger

Bistro

- Unrest within the Country & Chances of Civil Unrest – We don’t think that Burger
Miller business operations are facing any dangers from any kind of civil unrest or
internal militant operations in the country.

- Likelihood of Entering into an Armed Conflict – From the information in the The
WORKS Gourmet Burger Bistro case study, I don’t think there is a likelihood of country
entering into an armed conflict with a neighboring country.

- Threat of Terrorist Attacks – We believe in the world of post 9/11, corporations such as
Burger Miller have to live with operating under the shadow of a terrorist attack. The
prudent policy should be to take insurance and other types of hedging instruments to
mitigate the losses occurring because of the terrorist attacks.

- International Trade & Other Treaties – The country has a good record of adhering to
international treaties it has done with various global partners. The government of each
party has adhered to the treaties done by previous governments, so there is a
consistency in both rule of law and regulations.

- Regulatory Practices - The regulatory practices are streamlined with global norms
which have helped the country to improve its “ease of doing business” ranking.

- Role Local Governments Play – Local governments are highly influential in the policy
making process and implementation as most of the policies and regulations are
implemented by the local government as enforcement agencies mostly report to local
government in their own states regarding various laws.

- Government Regulations and Deregulations – The government is adhering to all the

rules and regulations under World Trade Organization norms. There is consistency in
both policy making and implementations of those policies.
- Transition of Government and Changes in Policy – There is consistency in policy
making from one government to another. Secondly governments from all parties adhere
to the treaties made by the previous governments.

What are Economic Factors in PESTEL / PEST Analysis

Economic factors of a country and region have a direct impact on the potential
attractiveness of a given market. Some of the economic factors that Burger Miller should
evaluate both in the present market and one in which it wants to enter are – inflation
rate, GDP growth rate, disposable income level etc.

Economic Factors that Impact The WORKS Gourmet Burger

Bistro

- Consumer Disposable Income – The household income of the country has increased
constantly in the last decade and half, compare to the USA market where household
income is still below 2007 levels and not increased in real terms since early 1980’s.
Burger Miller can leverage this trend to expand the market beyond its traditional
customers by employing a differentiated marketing campaign.

- Fiscal and Monetary Policies – The Republican government tax break culture has
increased the deficit and it can lead to fiscal trouble for the economy in coming years.

- Financial Market Structure and Availability of Capital at Reasonable Rates – The

quantitative easing policy of Federal Reserve has led to liquidity flooding all across the
global financial markets. Burger Miller can borrow cheaply under such circumstances.
But this strategy entails risks when interest rate will go up.
- Employment Rate – If the employment rate is high then it will impact Burger Miller
strategies in two ways – it will provide enough customers for Burger Miller products, and
secondly it will make it expensive for Burger Miller to hire talented & skillful employees.

- Price Fluctuations in both Local and International Markets – Compare to the level of
quantitative easing in last decade the prices of Burger Miller products and prices of
overall products have remained sticky in the US market. Burger Miller should consider
the fact that at deficit levels of United States in an emerging economy can lead to
rampant inflation and serious risks of currency depreciation.

- Inflation Rate – The inflation rate can impact the demand of Burger Miller products.
Higher inflation may require Burger Miller to continuously increase prices in line of
inflation which could lead to lower levels brand loyalty and constant endeavors to
manage costs. Cost Based Pricing could be a bad strategy under such conditions.

- Government Spending – As mentioned in the political factors, government of the

country is running deficit budgets. The implication for Burger Miller is that it can boost
sales of its product in short run but also expose Burger Miller to medium term forex and
currency depreciation risks.

What are Social Factors in PESTEL / PEST Analysis

Social factors such as demography trends, power structure in the society, women
participation in workforce etc have immense impact over not only the country's
economy but also on workforce talent availability and level of consumer demand.

Social Factors that Impact- The WORKS Gourmet Burger

Bistro
- Attitude towards Leisure – Burger Miller should conduct an ethnographic research to
understand both attitude towards leisure activities and choice of leisure activities.
Experience economy is one of the fastest growing segments both among millennials
and among baby-boomers.

- Attitude towards Health & Safety – The attitude towards health and safety is often
reflected in the quality of the products and cost structures of manufacturing processes.
Burger Miller has stringent norms for health and safety norms so in emerging
economies it may have to compete with players who don’t have high cost structures
that of Burger Miller.

- Nature of Social Contract between Government & Society – Before entering into a
market Burger Miller needs to understand the nature of social contract between
government and society. For example it has been extremely difficult for US companies
to enter UK health market as UK health system is a nationalized system and everything
goes through contracts at national level.

- Birth Rate – Birth rate is also a good indicator of future demand. USA has avoided the
European Union style stagnant economy on the back of slightly higher birth rate and
higher level of immigration.

- Societal Norms and Hierarchy – What sort of hierarchy and norms are acceptable in
society also influence the types and level of consumption in a society. In highly
hierarchical societies the power of decision making often reside at the top

- Power Structure in Society – Burger Miller should carefully analyze both - What is the
power structure in the society? How it impacts the demand in the economy. For example
the power structure in US economy is slowly moving towards the older generation as
that generation has higher disposable income compare to the younger generation.

- Attitude towards Savings – The culture of saving in US and China is totally different
where savings rate in China is around 30% , it is well below 15% in United States. This
culture of consumption and savings impact both type of consumption and magnitude of
consumption.

- Level of Social Concerns & Awareness in Society – Higher level of social concerns in
the society often result higher consumer activism and pressure from non-governmental
organizations, & pressure groups.
What are Technological Factors in PESTEL / PEST Analysis

Technology is fast disrupting business models across various industries. Some of the
technology trends that are impacting the macro environment are – developments in
artificial intelligence, use of machine learning and big data analytics to predict consumer
behavior, growing importance of platforms over service providers etc.

Technological Factors that Impact The WORKS Gourmet

Burger Bistro

- Likelihood of Technology Disruption – If the country is hub of technology companies

then there is a high chance of technology disruption among various industries. Burger
Miller has to assess whether it can live with the fast pace of technology disruption in its
industry.

- Empowerment of Supply Chain Partners – Burger Miller should analyze areas where
technology can empower supply chain partners. This can help Burger Miller to bring in
more transparency and make supply chain more flexible.

- Cost of Production and Trends – Burger Miller should assess - What are the cost of
production trends in the economy and level of automatization. We at EMBA Pro believe
that in near future the sector most disrupted by technological innovation is
manufacturing and production.

- Property Rights & Protection of Technology Oriented Assets – Burger Miller should
analyze the legal status of various property rights and intellectual property rights
protections that are common in US.

- E-Commerce & Related Infrastructure Development – As E-Commerce is critical for

Burger Miller business model. It should evaluate the e-commerce infrastructure,
technology infrastructure etc before entering a new market.
- Integration of Technology into Society & Business Processes – Uber failed in China
because it tried to enter before smartphone were widespread in China. Burger Miller
should build a strategy that can integrate societal values, infrastructure, and Burger
Miller business model.

- Transparency & Digital Drive – Burger Miller can use digitalization of various processes
to overcome corruption in the local economy.

- Acceptance of Mobile Payments and Fintech Services – One of the areas where US are
lacking behind China is Mobile Payments. Burger Miller should assess what are preferred
choice of mobile payments in local economy and chose the business model based on it.

What are Environmental Factors in PESTEL / PEST Analysis

Environmental factors are fast gaining traction not only among consumers but also
among regulators and policy makers. Climate change and changing ecosystem is
leading to the extinction of more than 20% of species on the planet by the turn of this
century.

Environmental Factors that Impact The WORKS Gourmet

Burger Bistro

- Waste Management – What is the policy of waste management in the prospective

market and how Burger Miller can adhere to the waste management requirements in
that market.

- Recycle Policies – What are the recycle policies in prospective market and how Burger
Miller can adhere to those policies.
- Paris Climate Agreement and Commitment of National Government under the
Agreement – What are the commitments of the country under the Paris Agreement and
what is the general level of consensus regarding Paris Climate Agreement in the country.
For example Trump not standing by US commitments created an environment of
uncertainty.

- Corporate Social Responsibilities Culture – Are Burger Miller present CSR efforts
applicable in the new market or does it needs to have new initiative to cater to the
prospective market.

- Influence and Effectiveness of Environmental Agencies – The role of environment

standards enforcement agencies is critical in safeguarding norms. But often in emerging
countries these agencies delay the process as a tactic to extract bribes. Burger Miller
should be aware of presence of such practices in a country.

- Environmental Regulation Impacting Absolute Cost Advantage Dynamics in the

Industry.

- Environmental Standards and Regulations both at National & Local Levels – Often the
environment policy at national and local level can be different. This can help Burger
Miller in numerous decisions such as plant location, product development, and pricing
strategy.

What are Legal Factors in PESTEL / PEST Analysis

Legal factors often govern – conditions to enter the market, laws to operate in the
market, and procedure to resolve any dispute with other stakeholders. If the legal
system is not strong then Burger Miller can face numerous challenges – from consumer
petitions to shakedowns from authorities.

Legal Factors that Impact The WORKS Gourmet Burger

Bistro
- Intellectual Property Rights Protection – Burger Miller should assess the level of
protection that intellectual property rights get under the legal system of the country.

- Laws regarding Monopoly and Restrictive Trade Practices – As a new player Burger
Miller shouldn’t be worried about the monopoly and restrictive trade practices law.

- Adherence to Common Law – Is the country following common law which is uniform
for all parties – whether domestic or international. If there is arbitrariness in the judicial
process then Burger Miller can’t be sure of the judgments.

- Health & Safety Laws – What are the health and safety laws in the country and what
Burger Miller needs to do to comply with them. Different countries have different
attitude towards health and safety so it is better for Burger Miller to conduct a thorough
research before entering the market.

- Independence of Judiciary and Relative Influence of Government – The judiciary

independence often reflect both strength and credibility of the institutions in the
country.

- Data Protection Laws – Burger Miller needs to assess what are the data laws in the
country and what it needs to do to comply with them. For example most of EU countries
now want the EU citizen data to be saved in EU countries only.

- Consumer Protection Laws – Burger Miller needs to know what are the consumer laws,
what is the rate of enforcement, what is the attitude of authorities towards consumer
protection laws, and what is the role activist groups in enforcement of consumer
protection laws.