1. State two benefits to a business of carrying out a PEST analysis.

Ans:
The two benefits to a business of carrying out a PEST analysis are:
i.

It helps to reduce the impact and effects of potential threats to the organization.

ii.

It provides a mechanism that enables the organization to identify and exploit new
opportunities.

2. Explain why STEM subjects are important to technology focused businesses.

Ans:
STEM stands for science, technology, engineering and mathematics where,
Science and science related subjects: e.g. medicine, nursing, agriculture, horticulture,
dentistry, veterinary science, animal science, geology, astronomy, science elements of
hairdressing, psychology and pharmacy.
Technology: e.g. I.T., manufacturing technology, electricity transmission, telecoms.
Engineering: e.g. aerospace, civil engineering, electrical engineering, motor mechanics,
marine engineering, power engineering, construction.
Mathematics: e.g. statistics, pure and applied mathematics
Stem skill often require for technological field and latest innovation. Many blue chip
companies consider their employees who are trained in stem field as core human
resources. For successful strategy business need to align its internal core competency
with external opportunity.
STEM subjects are important to technology focused businesses because STEM
education creates innovators and critical thinkers/workers. Innovation leads to new
products and processes that sustain the economy of a country. This innovation and
science literacy depends on a solid knowledge base in the STEM areas. A technology
focused business must have knowledge about technology basically; science and
technology are related to each other. Technology comes from science. It is important for
an organization to have their employees know about the latest technology to work
efficiently to obtain business goal. STEM subjects cannot be separated from one another.
All the subjects of STEM are equally important in technology focused business as all the
subjects are inter related. A STEM-literate person is able to make meaningful connections
between work, communities, school and global issues. Employees with

STEM knowledge have enhanced problem solving skill which is very important in
technology focused business. Thus, STEM subjects are important for technology focused
business.

3. Analyse how a company like Johnson matthey can use a PEST analysis of factors in its
external environmental to create a competitive advantage.
Ans:
PEST Analysis is a simple and widely used tool that helps you analyze the Political,
Economic, Socio-Cultural, and Technological changes in your business environment.
This helps us to understand the "big picture" forces of change that we are exposed to,
and, from this, take advantage of the opportunities that they present.
PEST Analysis is useful for four main reasons:
i.
ii.
iii.
iv.

It helps you to spot business or personal opportunities, and it gives you advanced
warning of significant threats.
It reveals the direction of change within your business environment. This helps you
shape what you're doing, so that you work with change, rather than against it.
It helps you avoid starting projects that are likely to fail, for reasons beyond your
control.
It can help you break free of unconscious assumptions when you enter a new country,
region, or market; because it helps you develop an objective view of this new
environment.
Competitive advantage means superior performance relative to other competitors in the
same industry or superior performance relative to the industry average. It can mean
anything that an organization does better compared to its competitors. Company like
Johnson Matthey must have at least one advantage to successfully compete in the market.
If a company cant identify one or just doesnt possess it, competitors soon outperform it
and force the business to leave the market.
PEST factors affect firms external environment. When these factors change many
opportunities arise that can be exploited by an organization to achieve superiority over its
rivals. For example, new superior machinery, which is manufactured and sold only in
South Korea, would result in lower production costs for Korean companies and they
would gain cost advantage against competitors in a global environment. Companies have
different resources, competences and capabilities and are differently affected by industry
or macro environment changes. The advantage can also be gained when a company is the
first one to exploit the external change. Otherwise, if a company is slow to respond to

changes it may never benefit from the arising opportunities. It depends on companys
ability to respond to the change.
The factors studied under PEST analysis are:
a.

Political
Government stability
Administration of government.
Taxes and insurance
Freedom of press
Export and import control
Trade unions
Environment and education law.

b.

Economic
inflation rates
interest rates
exchange rates
availability of cheap labour
unemployment trends (with a view to capitalize on this information)
labour costs,
disposable income of customers
fiscal policies
prices

c.

Socio cultural
educational levels of the people
their attitude towards imported goods and services
product quality and customer service
emphasis on safety
support for renewable energy
immigration rates
population demographics
family structure

d.

Technological
the level of basic infrastructure
investment in research and development
incentives for technological advances
laws regarding technology
access to newest technology
digital ecosystems

After analysis all the above mentioned factors, company like Johnson Matthey can gain
competitive advantage as the company would operate in a stable environmental way.
Avoiding having a violating economic business, having good social factors, such as good
marketing, and having the company on a leading position. Thus, PEST analysis helps to
create competitive advantage.
4. Evaluate which changes in Johnson Matthey external environment have had the biggest
impact on the business. Give reasons for your answer.
Ans:
Johnson Matthey went through various changes in external environment which had
various impacts on the business. But, recession in 2008 had the biggest impact on
business of Johnson Matthey. The recession in 2008 caused a drop in demand for
Johnson Matthey products. The company had to drop their costs and increase their
efficiency which made it hard for people to invest. The company set targets to reduce the
use of natural resources and decrease waste through lean production techniques. This
created a more sustainable model of production. It also focused on developing products
that contained fewer rare non-renewable raw materials such as platinum. It helps Johnson
Matthey have positive impact onsociety and environment as it minimized the use of non
renewable resources. As the world tries to emerge from recession, Johnson Mattheys
focus on being more sustainable and manufacturing more efficiently has improved its
position beyond where it stood in 2008. After 2008, Johnson and Matthey was able
increase its business due to the strategy it took in 2008.