PESTEL is among the primary tools for evaluating the sociocultural factors affecting business environments. In the traditional sense, it was referred to as PEST (Political, Economic, Social, and Technological; however, recently, it was expanded to incorporate the Environmental and Legal aspects, hence the acronym PESTEL. Managers and board members use the PESTEL framework for strategic planning and enterprise risk management. It is also popular among consultants who rely on its components to help clients develop appropriate, relevant, and innovative products and market initiatives. Additionally, financial analysts use it to assess areas where sociocultural factors may affect financial decisions and model assumptions. The relevant sociocultural factors affecting strategic management include the aging population, dynamic consumer behavior, career shifts, growth in communication models, and ethical business standards and requirements.
The Aging Population
The aging population is a blessing for modern organizations, hence its importance to strategic management. The PESTEL Framework falls under the Political, Economic, and Social aspects because of the policy, financial, and social requirements for managing the needs of the population, social aspects. The increase in life expectancy makes it central to managing the external environment of strategic management. The WHO forecasts the global population of people 60 years and above to be one in every five people by mid-century, an increase of 900 million in 2015 to about 2.1 billion by 2050 (Irving, 2022). Aging populations offer companies a continuity opportunity since most individuals live to reach retirement age. Further, it eliminates the costs of recruitment that typified companies in the early years when replacements of workers were mainly because of high mortality rates (Irving, 2022). The increase in the aging population provides operational continuity and eliminates frequent labor replacements.
However, the increase in the gaining population also challenges the external environment of strategic management. For example, it necessitates special medical insurance arrangements, job responsibilities adjustments, increasing costs or employee retirement benefits, and special care, as evidenced during the COVID-19 pandemic (Miller, 2020). The vulnerabilities of these individuals, especially those awaiting retirement, can be a critical burden to most organizations. Typically, they are more susceptible to more health complications than younger populations. Further, from a Social perspective, they may require attention from family members who may also have to reduce their work hours for such reasons. Therefore, as the number of the aging population increases, companies may also experience an upsurge in the rate of employee absenteeism, especially among those with older parents.
The Dynamic Consumer Behaviour
Consumer trends are not standard, implying that they change frequently depending on prevailing conditions. For instance, the job losses during the COVID-19 pandemic have significantly affected the purchasing power of most families, making this both a Social and Economic factor under the PESTEL Framework. Research shows that the reduction in disposable income is among the leading factors affecting strategic management’s external environment because firms must mainly produce essential products (Baliyan, 2021). It also affects marketing strategies by determining whether a company’s products and services are lucrative, helping firms tailor their product development and marketing plans to appropriate target markets. Further, consumer behavior can influence a company’s pricing model, forcing them to sell high or cheaply depending on demand, ultimately increasing or decreasing profitability (Gordon R. et al., 2021). Companies must monitor consumer behavior to remain relevant in pricing, product development, marketing, and sales.
Changing jobs has social and political, economic. For instance, it can offer satisfaction, which falls under the social and economic aspects of the PESTEL framework. In contrast, government interventions in protecting workers and firms in such situations fall under the political element. Typically, people change jobs and careers either in search of better salaries or to move closer to family members. Research shows that career shifts are the leading contributor to the human resource management challenges typified by costly persistent recruitment and training of new employees (Reina & Scarozza, 2020). These findings affirm that strategic management professionals must continually identify and address issues that may lead to such phenomena to establish and maintain consistency and operational continuity in organizations. Sometimes it may have legal implications, mainly when employees or their employers breach the contract terms during the career shift process. For example, employees with terms binding them to their firms for a minimum period before shifting may seek legal redress to make the changes.
The disparities in the growth across different sectors may also increase the number of workers joining specific sectors and decrease those entering the low-performing industries. Such a phenomenon requires businesses to develop programs that promote employee retention, some of which may hinder their profitability options. For instance, introducing bonuses to reduce the rate of employees moving from the firm eventually reduces its profits (Reina & Scarozza, 2020). In addition, technological advancement in some sectors may reduce the number of available jobs, further exacerbating the problem. The latter argument implies that Technology is among the PESTEL elements that can contribute to a career shift. In addition, the increase in communication models eliminates opportunities in areas such as customer care, further necessitating career shifts in most sectors.
Ethical Business Standards and Requirements
Modern businesses must align their operations to ethical standards and requirements. However, the change in these aspects may require adjustments that can impede seamlessness in business operations and continuity. For instance, businesses must respect the rights of minority groups, including women, people with disability, and minority ethnicities, in their workplaces (Steiger & Henry, 2020). Consequently, any breach of these requirements may have legal implications, making this one of the leading Legal factors in the PESTEL framework. The fact that these standards are dynamic necessitates readiness to adjust and adapt, which may be costly, primarily because of the need to train employees every time the changes occur. Firms that only allude to the requirements sometimes face legal ramifications that are equally costly and detrimental to their image and overall appeal. In Kenya, reporting under the criteria of Integration and Reporting is mandatory from the first year of business operations and makes (Global Compact, 2022). The reports help the government assess adherence to ethics and business standards, encompassing compliance with regulations and treatment of minority groups in the workplace.
The Attitudes, Beliefs and Social Values
The Attitudes, Beliefs, and Social Values significantly influence the pace and effectiveness of decisions in strategic planning. For example, organizations that promote entrepreneurial culture depend on feedback from employees and other stakeholders in decision-making, further aligning the three aspects to the Social element of the PESTEL Framework (Chebbi et al., 2020). The beliefs and social values of the population also determine the development of marketing content and promote the ethical approach to problem-solving and expansion strategies. Some of the leading social values include accountability, dignity, honesty, and fairness, all of which are crucial to the effectiveness of organizational strategic management (Chebbi et al., 2020). Thus, organizations that require the support of the stakeholders and their employees must consider and respect their attitudes, beliefs, and social values.
In conclusion, the most relevant sociocultural factors affecting strategic management include the aging population, dynamic consumer behavior, career shifts, growth in communication models, and ethical business standards and requirements. Under the PESTEL Framework, the aging population falls under the Political, Economic, and Social aspects because of the policy, financial, and social requirements to manage the population’s needs and social aspects. In addition, the job losses during the COVID-19 pandemic have significantly affected the purchasing power of most families, making this both a Social and Economic factor under the PESTEL Framework. Changing jobs has social and political, economic. For instance, it can offer satisfaction, which falls under the social and economic aspects of the PESTEL framework. In contrast, government interventions in protecting workers and firms in such situations fall under the political element. Finally, Ethical Business Standards and Requirements may also affect the external environment of strategic management.
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