All About Pestel Analysis of the Automobile Industry!!
Before diving into the topic of pestel analysis of the automobile industry, it is important for us to understand what does pestle means and why we are talking about this? How is it related to the Automobile industry? Why should everyone be aware of this? If you are looking for the answers to the above questions then you are at the right place. In this blog, we are going to discuss and try to understand the concept of pestle analysis. The automobile industry or automotive industry is one of the world’s largest industries by revenue.
PEST analysis stands for the environmental influences on a business. It is useful to identify the external environment factors in which a business operates. Pest analysis refers to political, economic, social, technological, environmental, and legal issues that could affect the strategic development of business.
Before applying any kind of marketing strategy, it is necessary to apply situational analysis, and Pestel is a part of it. Industries that successfully monitor and analyze the changes in the environment are able to make future plans and strategies in advance or gain a competitive image. Depending on the organization, the Pestel can be reduced to PEST or some areas like ethics can also be added.
PESTEL Factors of Automobile Industry
The PEST tool is very useful to analyze or to understand the reduction and growth of a certain market including the potential of the business.
- Political Factor – This refers to entire laws, rules, regulations, security assessment, that can be applied to the entire industry. These rules and laws are brought up in the matter of environmental issues, therefore, the automobile manufacturer had to take certain precautions. All newly manufactured cars should stick to the EU (Euro Standards) vehicle emission standard. Government makes rules by keeping in mind that no industry should cause any negative impact on the environment. Rules for example – once the UK government imposed a high tax charge on the automobile which produces high CO2 emission.
- Economic Factor – These are associated with the exchange rates, interest rates, worldwide economic rates, raw material costs, employment, or unemployment rates. These are the factors that impact the economic decisions thus impacting an organization and its profitability. The automobile industry is one of the most demanding industries in terms of infrastructural developments. High rate of car produced leading to high rise in new demands and revenue marketing.
- Social Factor – These factors are less related to the automobile industry as it includes changes in the social environment and identifies the emerging trends. It involves changes in demographics, lifestyle change, cultural trends, education levels, change in buying pattern, customer standard of living, etc. The customer always looks for the label of the automobile. There are so many different kinds of people, so does their taste and demands, thus, some customers buy bigger or spacious cars to suit their big family and some go for sporty, stylish cars in which they feel more comfortable.
- Technological Factor – The technological factor is related to development changes or any innovation that affect the market or industry. Technology in the automobile industry is changing in many different ways. In many countries, the developers are focusing on and creating vehicles that emit less air pollution. They are aiming to reduce the life casualties caused by transportation accidents. For example autonomous driving cars, robotized monitoring, etc.
- Environmental Factor – This element has become important with the rise of Corporate Sustainability Responsibility. Factors include climate, recycling procedures, waste sustainability, etc. The factors like surrounding environment and impact of ecological aspects are kept in mind while the manufacturing of vehicles.
- Legal Factor – Organizations or industries should be aware of any change in legislation and regulations within the territories they are working in. Factors include health and safety, consumer law, employment legislation, etc. These refer to all the laws that are directly related to a business or company.
Why should you do PESTEL Analysis?
It is an essential strategy analysis tool that considers external factors or the environment in which they operate. This is particularly important for big firms or organizations that can become more inward-looking. The PESTEL tool can provide you with a positive perspective by making out the threats and opportunities in advance hence giving firm time to react. It is particularly useful when synchronized with Porter’s 5 Forces analysis which is also an important tool for understanding the forces which shape the competition within the industry.
Pestel analysis is more often criticized by people on the basis of analysis that has been done poorly. This analysis should be done after every six months as the surroundings are changing very rapidly. Hire professionals or nominate people who can keep an eye on the pestel factors. The number of steps that are adopted while doing analysis are brainstorming, consulting, researching, evaluating, repeating the process until it has been narrowed down to insightful points in every step.
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Posted on May 18, 2021 by NAH
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