The Pest Analysis for Pc Market in Uk

The PEST Analysis for PC market in UK

Changes in interest rates, exchange rates, technology and the law are all external factors, which can affect a firm. These factors can affect the firms' costs or the market as a whole. Changes that take place in the external environment can be evaluated and analysed by using a PEST analysis.

To analyse the firms' external environment, the following headings are used;

Political, Economical, Social, and Technological.

A PEST analysis has been used to analyse our firm in the PC market,

2.2.1 Political

The change in government policy will have a big impact on the PC market; for example, recent proposals to extend membership of the EU will lead easier access into the market for UK firms.

This part of the PEST analysis deals with the political factors affecting the external environment of the PC market.

Government policies would have major impact on the PC market these are as follows;

The legislation that has recently been changed is the law of minimum wage. This may have a great impact on our firm in the PC market. In the last 2 years, the minimum wage has gone up from Ј3.50 to Ј4.10 and there have been rumours that it should go up in the next year or so. Trade unions say it should be raised by another 10p but it needs to be higher than what it is now. This would be good overall but it would also be good for our firm, as consumers' income has increased, therefore they have more money to spend and may feel that now they can afford to buy a computer.

The government has tried to improve the skill and knowledge of IT in the UK. Due to this effect, the population in the UK may feel more skilled in using PCs, and therefore this impact may increases the use of PCs at home, leading to a greater demand as consumers feel more confident in using them.

The government may decide to allocate more money to schools or a proposed statue stating, "schools need to invest in more or new up-dated computers" could have an effect on our firm or the PC market. As it is a law, schools have to invest in the computer, therefore the demand for computers will go up. In the recent budget Ј800 million pounds has been allocated to schools, therefore they may use this to improve resources in schools, along with repairs and teacher recruitment.

The general election could also affect our firm or the PC market. Different parties running in the election may have different views on the imports and exports legislation, e.g. one party may have a more restricted view on imports and exports, and therefore this will affect us trading with foreign countries.Another way this could affect us or the PC market as a whole is, as components of a computer are from different countries if the imports are restricted then the manufacturer of computers will not be able to finish manufacturing therefore our goods will not be supplied.

2.2.2 Economical

The economical factors that need to be considered when analysing the external environment of a firm of market include, interest rates, exchange rates and inflation.

This part of the PEST analysis deals with the economical factors affecting the external environment of the PC market.

If the UK has a good economic growth, this would encourage overseas computer firms to set up in the UK; this would increase competition for us.

Interest Rates/Inflation

If the government was to put up interest rates, consumers are likely to spend less. If interest rates are high people are more likely to invest their money in banks and building societies. This is due to the fact that if they save it, consumers will be getting a better return on their money. Also because loan repayments will be high, loans will not be taken out as much and goods will not be bought on credit, as consumers will have to pay for buying goods on credit.

If, on the other hand, the interest rates were to go down, consumers would not be saving as much because if they put it into banks and building societies, they will not be getting much on it, therefore they are more likely to spend. This would be good for the PC market and our firm, as they have got money to spend and might want to buy the computer on credit and as interest rates are low consumers will not be charged as much for buying on credit.

The PC market is a fast growing market and if the government reduces interest rates too much it can lead to inflation. It would be cheaper to borrow money to finance spending in the economy. This could lead to high demand in the economy. As the demand for PC would be high, supplier can't keep up with demand, therefore they push their prices up. This is known as demand push inflation.

Also as the prices are too high for materials (in this case components to manufacture computers) in the UK therefore this will lead to higher costs for our firm. Due to the costs being too high to manufacture the computers, we would have to cover our costs by putting the prices up on our computers.

If there is inflation in the economy it will lead to higher cost of living, therefore as it is too expensive to buy things in the economy, employees will demand a wage increase therefore this will increase cost for our firm, and again extra costs are being added to our product. This is known as cost-push inflation. In this case inflation would be a big problem for our business.

All these costs going up will in the end reflect on how much we sell our product for, as costs are going up, the prices of our computers will be going up and therefore consumers will not want to buy as it is too expensive.

Exchange Rates

Exchange rates will effect our firm the most as we will be purchasing imported computers and selling our computers aboard.

For example, the exchange rate was Ј1 is worth 2.5 francs and the new rate is Ј1 is worth 2.0 francs. This represents a fall in the currency; therefore this will affect our imports and exports. If our firm had suppliers abroad it would be more expensive for us to buy our computers from abroad because we will not be getting at much for our money, where as exports will become relatively cheaper, as its cheaper for other firms to buy their computers from the UK. If exchange rates were to go