Situational Analysis The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business. A PEST analysis is a business measurement tool. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. In brief the PEST analysis describes a framework of macro-environmental scanning component of strategic management.
Royal Platinum Travel PEST analysis is illustrated in the table below Fig 3. 1 POLITICAL FACTORSECONOMICAL FACTORSSOCIAL FACTORSTECHNOLOGICAL FACTORS Trade restrictionsEconomic Growthpopulation growth rateResearch and development activity Tax policyExchange ratesCarrier AttitudesTechnological Shifts Environmental lawsInterest ratesCultural AspectsAutomation Labour lawsInflation ratesHealth Consciousness TariffsGeneral TaxationLifestyle trends Political Instability Current Legislation The table above shows Royal Platinum Travel’s PEST analysis even though some of the factors were not stated and can be addressed in a PESTEL analysis where the extra “E” stands for Environmental factors such as weather and climate and these have affected Royal Platinum Travel in divisions such as Sales since unanticipated rains hinder travelling to desired destinations which could have been successfully held by the division. “L” stands for legal and these are Government driven laws which may restrain a company from engaging in all business it is capable of since there will be strict and tough requirements.
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Employment laws have affected Royal Platinum Travel in some departments with growth potential. Political Factors •This refers to the level or degree in which government intervenes in the economy. These factors include political instability and this is mainly of unit government. This negatively affects the overall performance of the business. Due to the political instability the government’s funds are not being directed towards the growth of the economy but to the political parties and this is affecting many companies in this country including Royal Platinum Travel. However at the moment the inclusive government has brought some degree of confidence to the players in the industry. People are now free to choose to be represented by a lawyer of their choice and through the indigenisation policy individuals are now free to start their own companies through funds being issued by the government and these have been a drawback to Royal Platinum Travel since exorbitant tax rates have constantly negatively affected the company. Some factors such as poor infrastructure have hindered the distribution channel of various services offered by Royal Platinum Travel.
Economical Factors •These include exchange rates, economic growth, interest rates and inflation. The key exchange rate for the company which is USD to Rand varies significantly and has tended to affect Royal Platinum Travel. Due to the stagnant economic growth These factors have negatively affected Royal Platinum Travel since it also relies on foreign exchange rates mainly in sales. Inflation and slow economic growth have made Royal Platinum Travel to experience slow growth. Page 18 Social Factors •These are factors experienced such as population growth rate, uneducated citizens and ageing population.
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Royal Platinum Travel has been affected mainly by an increase in population growth rate since it has led to some families staying home during festive holidays to avoid the expenses of travelling. Technological Factors •These are factors which surface mainly because of technological backwardness and automation. Some divisions at Royal Platinum Travel have been affected namely those that use technical equipment such as the Research division whereby competitors are now using better computers and software to create adverts etc.
