PESTEL Analysis :: Business, External Environment

PESTEL Analysis The PESTEL analysis is an important and widely-used tool for understanding the big picture of a firm’s external environment. PESTEL is an acronym for the political, economic, socio-cultural, environmental, and legal environment in which a firm operates. The benefits of the PESTEL analysis are that it helps identify potential environmental influence, helps better understand existing opportunities and threats, and helps understand market growth and decline. Political The political environment has an influence on business. Political factors need to be considered when viewing the external environment. According to Binstock, â€Å"Clorox is voluntarily converting its plants in the United States to safer chemical process in order to protect against disasters and terrorism† ( 2010). More than 200 chemical facilities across the U.S. have converted to safer chemical processes. In the same article, it said that in 2006 congress passed a temporary law that bars the government from requiring disaster prevention. This is good publicity for the company and puts it ahead of its competitors if the government ever puts disaster prevention laws in to place. Economic Economic factors are important to Clorox because these factors affect the company’s profits. Clorox’s main economic concern appears to be increasing raw material cost. â€Å"Significant increases in the costs of energy and transportation, including the cost of diesel, or of key raw materials, including, but not limited to, resin, chlor-alkali, sodium hypochlorite, corrugate, agricultural commodities and other raw materials† (Clorox, 2010). A rise in the price of raw materials could force the company to raise prices to keep making a profit. A struggling economy could reduce consumer spending. â€Å"Sales totaled $1.27 billion, down 2.8 percent from the same quarter a year ago† (Avalos, 2010). Socio-cultural Today’s consumers are very environmentally conscious. The company is taking advantage of this by producing environmentally friendly products. The company has increased its profits through the sales of its Green Works product line. According to an article from the San Francisco Chronicle â€Å"†¦research says that Green Works accounts for about half that $100 million annual market for eco-cleaners† (Said, 2010). Customers like company that give back to the community. Clorox does this through the Clorox Foundation.† The mission of The Clorox Company Foundation is to improve the quality of life in communities where Clorox employees live and work† (Clorox, 2011). Technological Technology factors play a major role in what opportunities a company faces. â€Å"The Company has outsourced a significant portion of its information technology activities to Hewlett-Packard, including its data centers, which are primarily located in Alpharetta, Ga.