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In the 21st Century, it is imperative to embrace the PESTLIED Model which exhibits the external factors that affect the industry and commerce. Therefore, for the firms to be competitive there is a need to understand the PESTLIED Model. The following section discusses the PESTLIED Model.

What is a PESTLIED Model?

A PESTLIED Model is a framework or tool which is used to analyse external environment factors that impact on the performance of an enterprise especially in the dynamic VUCA world. A VUCA world is an environment which is Volatile, Uncertain, Complex and Ambiguity (Fridgeirsson, Ingason, Johasson and Kristjansdottir, 2021).

It is from this background that the outcome from the analysis of the PESTLIED Model could be considered to identify the strengths, weaknesses, Opportunities, and threats, during the SWOT Analysis. External factors are the environmental factors which impact the performance of organisations (Hnedina, 2019 and Mutambara & Govender, 2019). 

What is the meaning of the PESTLIED Model?

PESTLIED Model is an acronym which stands for different external factors that are used in assessing the impact of the external environment that ultimately affects organisational performance.

Acronym  External Factor 
P POLITICAL 
E ECONOMIC 
S SOCIAL 
T TECHNOLOGICAL 
L LEGAL 
I INTERNATIONAL 
E ENVIRONMENTAL 
D DEMOGRAPHICS 

Table shows the PESTLIED Model which represents the external factors that impact in the 21st Century as they affect organisational performance.

Political Factors:

This is perceived as how the governments assist and contribute to the economy. The factors include government policies, political stability, or the country’s instability in relation to peace and war.

The other factors include but are not limited to foreign trade policies, tax policies, labour law, environmental law, trade restrictions and overseas markets. Therefore, political factors have an impact on organisational performance hence the need to analyse and assess these factors to establish whether they are favourable as they enhance competitiveness. 

Economic Factors

The economic factors have a significant impact on organisational profitability and the enterprise’s market share. The factors include but are not limited to economic growth, interest rate, exchange rates, inflation, disposable income of the inhabitants and taxation.

In most cases, the governments control interest rates and impose taxation policies. These factors may influence consumer spending and hence impact on organisational performance.   

Social Factors

These may be known as socio-cultural factors and they cover the areas which deal with beliefs, norms, and attitudes of the general population.

These factors are important as they impact organisational performance hence it is important for enterprises to understand the social-cultural of the society/community in which it is operating. 

Technological Factors

These factors are very important as they enhance the performance of the industry and commerce. Therefore, any organisations that fail to embrace technological landscape changes will be left behind as they may not perform according to market expectations which may lead to the closure of operations.

Technological factors influence how organisations do their businesses in several ways including innovative and creative ways of producing and distributing competitive goods and services for different target markets. 

Legal Factors

It is imperative for enterprises to analyse the impact of legal factors such as safety, health and environment laws, employment laws, equal opportunities, advertising rules and regulations, consumer rights and laws, product labelling and product safety as these factors impact the performance of the organisation.

In addition, failure by an enterprise to follow the rules and regulations may result into lawsuits leading to organisational reputational risk. Therefore, enterprises are encouraged to observe and respect the legal factors as they may impact the overall organisational profitability. 

International Factors

It is important to understand that the famous PESTEL analysis does not include the international factors as they may be embedded in the political factors. As a point of departure at this juncture it is imperative for enterprises to separate the international factors from the political factors and treat or address these factors as a stand-alone.

Due to one global village, it is important to consider international factors as separate environmental factors as they provide a direction in which an enterprise may compete around the globe. It is from this background that failure to consider international factors companies may not recognise the important perspective of competing at international markets.

Lastly, there is a need for enterprises to understand international trends and factors, such as the exchange rates and international trade laws and the impact of international finance. 

Environmental Factors

These factors have been very useful especially during the COVID 19 Pandemic era. They are seriously recognised due to the increasing scarcity of non – renewal energy, raw materials, pollution targets which lead to sickness, firms doing business unethical and not in a sustainable manner, issues surrounding the carbon footprint targets set by governments.

It is from this background that more and more consumers are demanding that the goods and services they associate with are sourced ethically and from sustainable responsible suppliers. 

Demographics Factors

Again, it is important to understand that the famous PESTEL Analysis does not include the demographics factors as they may be embedded in the social factors. These factors are important to understand at macro and micro level, that it is from the governments and Industry perspectives.

These factors include but not limited to age distribution, population growth and health consciousness. It is imperative to understand the dynamics of age distribution especially for the productive age group as both the governments and the industry sector should plan, predict, and forecasts their manpower requirements.

It is from this background that most countries are having an ageing population hence the need to import skilled workers to remain competitive. 

Conclusion

This article included the two additional external factors as stand – alone such as international factors and demographics factors so that governments and the industry are aware that it is important to recognise these factors separately.

Furthermore, failure to recognise these factors may lead to poor organisational performance which results into closure of firms. Therefore, governments and enterprises are encouraged to embrace all the eight (8) external factors as they significantly impact on profitability, market share and economic growth.  Finally, the PESTLIED Model matters in the 21st Century based on the above explanations from this article. 

 

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