MGT499 Mod 2 SLP - Strategic Management External Analysis - Coursework Example

PEST Analysis External environment of a firm involves the factors that are outside the firm that affect its operation. They normally are beyond its control. The best way a firm can survive in this environment is by getting in harmony with it, doing according to its demands (Mercer, 1992). External forces that affect the way a firm operates and progresses include government policies, customers, level of technology, competitors, and suppliers among others. These constitute the external environment of a business unit.

One aspect of the external environment is the PEST analysis. This stands for Political, Economic, Social and Technological analysis. It involves a scrutiny of the various elements in the external environment that relate to politics, the economy, the social realm and Technology. A PEST analysis for Colgate Company involves Political, Economic, Social and Technological analysis of the environment of a business. It has with time been rearranged to SLEPT, with the L standing for the legal environment of a business.

Models of the same have been used as STEEPLE and STEEPLED with the E and the D standing for Ethics and Demographics respectively (Rath, 2000). They attempt to give an analysis of the external environment of a firm. In the case of Colgate Company, a PEST analysis will be considered. The political environment of Colgate involves how government intervention in the economy affects the operation and success of the company (Rath, 2000). The company’s pricing of commodities is subject to the taxation on the merit and demerit goods in the eyes of the government.

Sometimes the Governments increases the taxation of raw products of the company like fluorspar. This hugely affects te operations of the firm and it is compelled to sell its products at a much costly price for the moment in time. Labor laws that also affect the way the company hires its workforce. It is compelled to gives equal chances to all applicants during employment in spite of gender, age or race. The payments given to the employees, as per labor laws are equal for people in the same capacity, unless factors like output differentiate it.

The sucking and promotion of workers is also kept transparent. The health standards of products in the Colgate Company are also kept the way the government through its agents requires it. Economic factors are those factors in the entire economy that affect Colgate Company as a business unit. These include the interest rates, economic growth rates, inflation and exchange rates. These generally affect the price at which the company sells its commodities. When the economic growth rate of a country is high, prices in the economy tend to go down.

This is followed by decrease in the price of the commodities the company. During high inflation, the value of the country’s currency depreciates. This means that people require more money to buy what they previously would have acquired at a lower price (Mercer, 1992). When this occurs, prices of commodities in the company like toothpaste, mouthwash, toothbrushes and the like rise due to its need to maintain value of its prices. During deflation, the opposite takes place. Interest rates in the economy show the much money is in circulation in that particular economy.

High interest rates are levied by financial institutions when money in circulation is high. Then, the prices are generally high. When interest rates are low, prices tend to be low, as money in circulation in the economy is low. It is also during low interest rates periods that the company can obtain debt finance from financial institutions easily, reducing need for high prices in order to make profit to facilitate savings for later financing. Favorable exchange rates lead to increased money supply in the economy.

This triggers the price of commodities in the economy, including those of the company to go high. Social factors that affect the way the company operates and progresses are the cultural aspects like religion of the society in which the company is and in which its products are marketed. These include the society’s beliefs, demographic structures, attitudes and health consciousness among others. There are several societies in the developing nations which do not believe in using toothpaste. They clean their teeth using other home based products such as salt and twigs plucked from trees.

There are some products that the Colgate company offers which are related to the social class that a society belongs. There are some societies which use toothpaste from the firm alright, but consider the aspect of using such products as mouthwash to be a little too exaggerated an something that belongs to the rich. Some religious cults believe in natural products and consider the products of Colgate Company to be unreligious. Technological factors that affect the Colgate Company operations include current changes in technology, either for improvement of current products or new products altogether.

This not only influences the kind of products the company offers but how it offers them too (Savioz, 2002). Technological advancements make the company devise mechanisms to produce quickly and hence to offer its products to the market at a reduced cost. This is an attribute alongside the brand name of Colgate that has led to its sprouting over the years and has made it survive the stiff competition that has been introduced in the oral health industry. REFERENCES Mercer, D., & Open University. (1992). Managing the external environment: A strategic perspective.

London: Sage Publications. Rath, J., & Centre for Research in Ethnic Relations (Economic and Social Research Council). (2000). Immigrant businesses: The economic, political, and social environment. Houndmills, Basingstoke, Hampshire: St. Martin's Press. Savioz, P. (2002). Technology intelligence in technology-based SMEs: Design and implementation of a concept to identify, collect, analyze, disseminate and apply relevant information from a company's technological environment to support business decision-making processes. S.l.: s.n..