Industry-specific concepts and applications

Industry Specific

My industry of choice is the auto industry, and I will analyze it using the PESTEL framework. The political environment is critical to the auto industry for a couple of reasons. In most countries, the auto industry is significant, and therefore becomes politicized. The bailouts of GM and Chrysler are just two examples -- albeit extreme ones -- of the intense government involvement in the shape and size of the automotive industry. Another good example is NAFTA, which has resulted in production shifts to Canada and Mexico, but also the opening of the Mexican market. The current climate holds that the governments of the U.S. And Canada are divesting some of their control over GM and Chrysler, but will remain heavily involved in the industry, with the objective of supporting the Big Three, as well as major foreign automakers. The political environment also shapes demand conditions. For example, high taxes on gasoline in Europe have that market geared towards smaller vehicles. Government support for ethanol vehicles, or emissions restrictions implemented by states, all form part of the political environment. Currently, there is a move among governments for cleaner vehicles, but otherwise the political environment is generally favorable.

The economic environment is generally unfavorable for the automobile industry. Europe faces significant economic struggles, the U.S. is only having a slow recovery, and while Asian markets are driving growth in the industry even their growth is starting to slow. The price of gasoline falls under the macroeconomic variables, and is generally unfavorable with a rising trend lately. Thus, there is little optimism for a large-scale increase in auto sales in the coming years.

The social environment remains favorable, however. This environment measures how people respond to the product, and there are few who have a negative attitude towards cars. Even those critical of emissions realize that cars are an indispensable part of modern life. The social environment does, however, emphasis cleaner vehicles, as sales of the Prius in particular indicate.

The technological environment is exciting for the auto industry right now. The industry is heavily dependent on technology in both design and production functions, so firms in the industry need to ensure that they have high levels of technological capability. Beyond those functions, the development side is driving industry success, in particular with alternative fuel technologies. Most automakers are focused on developing these products because of both consumer demand and government guidance in that direction.

The environment is driving the concern about emissions, and this has focused the industry on meeting emissions requirements and reducing the impact that their industry has on the environment. The fixed amount of oil in the earth is also an environmental concern, because it is becoming harder to find and more expensive to extract. This is driving up the cost of driving, affecting demand for cars.