An analysis of the impact of these factors is often referred

to as PESTEL analysis, an acronym that serves as a reminder of the six

components involved (political, economic, sociocultural, technological,
environmental, legal/regulatory).
Since macro-economic factors affect different industries in different ways and
to different degrees, it is important for managers to determine which of these
represent
the most strategically relevant factors outside the firms industry boundaries.
By strategically relevant, we mean important enough to have a bearing on
the decisions the company ultimately makes about its long-term direction,
objectives,
strategy, and business model. The impact of the outer-ring factors depicted in
Figure 3.2 on a companys choice of strategy can range from big to small. But even
if those factors change slowly or are likely to have a low impact on the companys
business situation, they still merit a watchful eye.
For example, the strategic opportunities of cigarette producers to grow their
businesses are greatly reduced by antismoking ordinances, the decisions of
governments
to impose higher cigarette taxes, and the growing cultural stigma attached
to smoking. Motor vehicle companies must adapt their strategies to customer
concerns
about high gasoline prices and to environmental concerns about carbon emissions.
Companies in the food processing, restaurant, sports, and fitness industries
have to pay special attention to changes in lifestyles, eating habits, leisure-time
preferences, and attitudes toward nutrition and fitness in fashioning their strategies.
Table 3.1 provides a brief description of the components of the macro-environment
and some examples of the industries or business situations that they might affect.
As company managers scan the external environment, they must be alert for
potentially
important outer-ring developments, assess their impact and influence, and adapt
the companys direction and strategy as needed. However, the factors in a
companys
environment having the biggest strategy-shaping impact typically pertain to the
companys immediate industry and competitive environment. Consequently, it is on
a
companys industry and competitive environment that we concentrate the bulk of
our
attention in this chapter.