Retailers that offer deep discounts, such as Dollarama and Walmart, enjoyed an increase in their customer base as consumers sought to find ways to economize. Some businesses, however, actually prospered during the crisis. This dealt a huge blow to home builders, for example, who saw demand for new houses plummet because mortgages were extremely difficult to obtain. Bank failures during the economic crisis led to a dramatic tightening of credit markets. Rising unemployment discouraged consumers from purchasing expensive, nonessential goods such as automobiles and television sets.

The economic crisis of the late 2000s has had a tremendous negative effect on a vast array of organizations. It includes elements such as interest rates, inflation rates, gross domestic product, unemployment rates, levels of disposable income, and the general growth or decline of the economy ( Figure 3.5 “Economic Factors”). The economic segment centers on the economic conditions within which organizations operate. Overall, any changes in immigration policy will have implications for hospitals, farmers, restaurants, and many other organizations. Subway would then have to decide whether to absorb these costs or pass them along to customers by charging more for subs. Restaurant chains such as Subway would then pay higher prices for lettuce, tomatoes, and other perishables. In particular, if farmers were forced to employ only legal workers, this would substantially increase the cost of vegetables. Meanwhile, farmers argue that a tightening of immigration policy would be harmful because farmers rely heavily on cheap labor provided by illegal immigrants. Proposals to provide support to businesses are often featured within political campaigns. Some hospital executives have noted that illegal immigrants put a strain on the health care system because immigrants seldom can pay for medical services and hospitals cannot by law turn them away from emergency rooms.

What approach to take to illegal immigration into the United States from Mexico has been a hotly debated dilemma. Immigration policy is an aspect of the political segment of the general environment that offers important implications for many different organizations. This segment includes elements such as tax policies, changes in trade restrictions and tariffs, and the stability of governments ( Figure 3.4 “Political Factors”). The political segment centers on the role of governments in shaping business. Wise executives carefully examine each of these six segments to identify major opportunities and threats and then adjust their firms’ strategies accordingly ( Figure 3.3 “PESTEL”). In particular, PESTEL reflects the names of the six segments of the general environment: (1) political, (2) economic, (3) social, (4) technological, (5) environmental, and (6) legal. PESTEL is an anagram, meaning it is a word that created by using parts of other words. PESTEL analysis is one important tool that executives can rely on to organize factors within the general environment and to identify how these factors influence industries and the firms within them. Because the general environment often has a substantial influence on an organization’s level of success, executives must track trends and events as they evolve and try to anticipate the implications of these trends and events. The latter set of factors are said to exist within the general environment. The Elements of the General Environment: PESTEL AnalysisĪn organization’s environment includes factors that it can readily affect as well as factors that largely lay beyond its influence. Be able to offer an example of each of the elements of the general environment.

Explain how PESTEL analysis is useful to organizations.

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