Though structure and leadership play a large role in business success, external factors can

also shape your company's potential. One method for systematically discovering and
quantifying those factors is the PEST analysis.

PEST is an acronym for political, economic, social, and technological external factors
that commonly affect business activities and performance. Created by Harvard professor
Francis Aguilar in 1967, PEST can work alone or be used in combination with other
tools, such as Porter's Five Forces and SWOT analysis, to determine an organization's
overall outlook.

Jim Makos, founder of the Pestle Analysis website, says PEST can help companies
improve their decision making and timing. "The best outcome of the PEST analysis
would be if your company is able to make the right decisions at the right time by
analyzing different factors. Another benefit of PEST analysis is it could aid you in
predicting the future by looking at the present. You will be prepared to tackle future
challenges. It also helps you highlight the opportunities you can cash in on and threats
which could harm your business," Makos told Business News Daily.

PEST factors

To get the most out of a PEST analysis, businesses should understand each of the four
factors.

Political

This factor looks at how government regulations and legal issues affect a company's
ability to be profitable and successful. Issues that must be considered include tax
guidelines, copyright and property law enforcement, political stability, trade regulations,
social and environmental policy, employment laws and safety regulations. Companies
should also consider their local and federal power structure, and discuss how anticipated
shifts in power could affect their business.

Economic
This factor examines the outside economic issues that can play a role in a company's
success. Items to consider include economic growth, exchange, inflation and interest
rates, economic stability, anticipated shifts in commodity and resource costs,
unemployment policies, credit availability and unemployment policies.

Social

This issue analyzes the demographic and cultural aspects of the company's market. These
factors help businesses examine consumer needs and determine what pushes them to
make purchases. Among the items that should be examined are demographics, population
growth rates, age distribution, attitudes toward work, job market trends, religious and
ethical beliefs, lifestyle changes, educational and environmental issues and health
consciousness.

Technological

This factor takes into consideration technology issues that affect how an organization
delivers its product or service to the marketplace. Among the specific items that need to
be considered are technological advancements, government spending on technological
research, the life cycle of current technology, the role of the Internet and how any
changes to it may play out, and the impact of potential information technology changes.
In addition, companies should consider how generational shifts, and their related
technological expectations, are likely to affect those who will use their product and how it
is delivered.

PEST example

To better understand how a PEST analysis should be conducted and the benefits it offers,
businesses can examine numerous examples online. The online site Buzzle conducted
several PEST Analysis examples, including one for restaurants. It examined the various
political, economic, social and technological factors that a potential restaurant owner
needs to consider when entering the industry.
 Political factors:

Government regulations regarding employee hygiene, health and food regulations,

food standards, etc.
Government policies regarding the restaurant industry and managing eateries. These may
include licenses, inspections by health and food departments, etc.

Economic factors:

Interest rates would affect the cost of capital, the rate of interest being directly
proportionate to the cost of capital.
Rate of inflation determines the rate of remuneration for employees and directly affects
the price of the restaurant's products. Again, the proportion between the inflation rate and
wages/prices is direct.
Economic trends act as an indicator of the sustainability and profitability of your business
in the chosen region and help you in deciding your marketing strategy.

Social factors:

Eating habits of the people in your chosen business environment may, and certainly will,
affect your marketing decisions.
Ratio of people preferring to eat out regularly.

Technological factors:

A good technical infrastructure would lead to better production, procurement and

distribution logistics, resulting in reduced wastage and lower costs.
Effective technology may be a decisive factor for food technology innovation, better
presentation, more effective business marketing, etc.

Going further

If you are interested in getting more from your PEST analysis, consider adding more
vectors to the analysis or expanding into SWOT (strengths, weaknesses, opportunities
 and threats), MOST (mission, objective, strategies, tactics), or SCRS (strategy, current
state, requirements, solution) analysis.

"Some variations may also add legal, environmental (converting into a PESTLE
analysis), demographics and ethical factors, which makes the analysis more powerful
because it considers more factors as compared to a normal PEST analysis," Makos said.
"The more factors you consider for analysis, the better the results you can achieve from
your strategy."

- See more at: http://www.businessnewsdaily.com/5512-pest-analysis-definition-

examples-templates.html#sthash.MH0WW7bV.dpuf

Political / Economic Social Techno

Legal Economic growth Income log
distribution
Environmental regulation
Monetary policy ica
and protection.
Demographic
l
Government Government
Taxation(Corporate s
spending spending on
consumer)
research
Policy towards Labor /
International trade regulation
unemployment social
Consumer protection mobility Government
Taxation and industry
Employment law Lifestyle cha focus on
Exchange rates nges technologica
Government organisation / l effort
attitude Attitudes to
Inflation
work and New discov
Competition regulation leisure eries and
Stage of the developmen
business cycle t
Education
Economic "mood" - Speed of
consumer Fashions and
technology
confidence fads
transfer
Health and
Welfare Rates of
technologica
l
 Living obsolescenc
conditions e

Energy use
and costs

Changes in
material
sciences

Impact of
changes in
information
technology

Internet

Pest Analysis For a Restaurant(Example)

Political Factor- Government
regulation from a restaurant will
be hygiene, health, food
standards, and food they are
allow to serve. Restaurant
industry must include from the economic policies of government licenses, inspection by
the health ministry department.

Economic Factor- Interest Rate, and it has to be proportionate to the cost of capital.
Economic trends helps you to indicate the sustenance and profitability of the business

Social Factor- Certain culture are not allowed to eat specific food. Like Hindu's they are
not allow to eat beef and Muslim are not even allowed to touch pork. Therefore, you need
to learn the culture and the background of the country before starting up a restaurant.The
eating habit will certainly may make an affect on the business. And ratio of people like to
eat out at the country.

Technological- A good technical infrastructure would certainly help the business by alot.
By using new technology will reduced wages and lower some specific cost.

SWOT and PESTEL analysis of a

Seafood Restaurant
Published: 23, March 2015
SUMMARY
Jack Sprat is the owner of seafood restaurant in a coastal town. He is 60 year old and
doctor has advised him to take rest so he had appointed a Manager to look after the
business operation and he use to come to see the business once in a week. But once he
handed over the business to the manager his business is not doing well and there is
continuous declining in the business.

So in order to find remedy owner has been approached to the author to analyse the case
and suggest as what should be done to bring back the business of the restaurant.

Author has analysed the business with the tools of business (case) analysis-SWOT, and
PESTLE and further financial data has also been taken into consideration to find out the
declining trend and come to a conclusion as why business is going down.

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In order to evaluate the business operation and put the findings in the report author has
done extensive research-secondary research and analysed the case with his valuable
suggestions.

ACKNOWLEDGEMENT
Author would like to convey his gratitude to those entire people who helped him to
enhance his understanding of the case and analyzed the situation so that a valid
conclusion of the case can be drawn. Author has completed this case successfully and has
been presenting his findings with suggestion in this report. So author would like to thanks
to the Module tutor for kind support and guidance.

INTRODUCTION
Jack Sprat is 63 year old owner of 60 seat licensed seafood restaurant that is situated in a
costal town. Before starting this business Jack was simply a Manager at a local
Bluebeckers Restaurant. But an inheritance left this restaurant to him. Since the opening
of this restaurant business it has given very good return.

The belief of Jack towards success f this business is the Maintenance of high standards in
fod production and presentation. Other fact is Menu and beverage list has been fairly
constant since beginning of this restaurant. Jack did not change menu and beverage list
because business was giving modest return since beginning.

But jack is not regular to the restaurant and he has appointed a Manager to manage the
business operation and he use to come to the restaurant to see the business operation once
in a week. This is because at this age (63) he has been suffering from health problem and
his doctor has advised him to take rest. But business of this restaurant has gone down as
soon as it was handed over to the manager. Absenteeism of the staff has been increased.

Keeping in mind the remedy of the situation author has established aim and objectives of
this report, here are the aim and objectives written in detailed:

Aim of this report is to find remedy of the existing problem or discrepancies of the
restaurant and give valuable suggestions to overcome from these problems so that
business can be put on its old pattern-profitable.

Objectives are:

Finding most important problems

Identification of further information that would be helpful in making realistic plans for
the future of the business

To list the priorities

Drawing an action Plan

The structure of this report is as follows: First of all main body has been presented
wherein SWOT, PEST, and other detailed analysis has been done. Then conclusion has
been drawn and bibliography (list of references) has been given followed by appendix
section where additional informations has been provided.

MAIN SECTION
Aim and objective No.1: Finding important
problems:
Before providing solution of anything one has to find the problems first. So to find
problem related to any business it is very first step to conduct SWOT analysis and PEST
or PESTLE analysis.

Before going for the SWOT analysis of the business concerned it is important to
understand SWOT first. "SWOT ANALYSIS is the detailed search and listing of factors
from situational analysis that might or will impact the business's strategy. Strategic
marketing is based on the SWOT analysis. The process by which SWOT factors are
derived is to carefully review the internal analysis for strengths and weaknesses, and the
environmental analysis for opportunities and threats, and to then record". (Reich, Z.A,
1997)

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According to (Morrison, J 2002) "The SWOT analysis is a commonly used planning tool,
which assesses the firm's strategic profile in terms of its strengths, weaknesses,
opportunities and threats. Focusing on both internal and external environments, it serves
to highlight a firm's distinctive competences, which will enable it to gain competitive
advantage".

Based on the above information from the scholars it is true that business environment can
be divided into two part-internal and external environments. Internal environment
consists of all factors that is internal part of the business. These internal factors are within
the control of the business. Strength and Weaknesses of the business can be found in the
internal environment of the business. External factors are those factors which are not
within the control of the business and to be into existence business houses has to change
in their internal policy and adjust itself to cope with the external environment factors.
Opportunities and Threats are the factors that are part of external environment of a
business.

SWOT : Strength, Weakness, Opportunities and

Threat Analysis of Seafood Restaurant
Business of Jack Sprat:
STRENGTHS
WEAKNESSES
Earlier this business was profitable
It is established organization

Maintaining high standard in food and presentation

Staffs are familiar with their work

Customers feel that restaurant is conveniently placed and charges reasonable price

Owner is not able to give full time attention to the business

Manager is less empowered-as he feels less scope has been given to him for the
development of this business

Number of staff has been increased-which is extra burden on payroll expenses of the
business.

No refurbishment done properly & yearly

Maintenance and Hygiene problem

Insufficient fund/ resources for spending on maintenance and Hygiene

Menu choice is stale and boring

Improper management of food due to lack of proper forecasting of guests.

OPPORTUNITIES
THREATS
Restaurant is old so having established market

Market Image is good- reasonable price and consistent standard

Dilution of market share due to inability to refurbishment

Environment Health officer may not be informal in future and there will be time when
formal notice will be issued.

PEST ANALYSIS
Before analyzing PEST or PESTLE factors from a business point of view it is important
to understand these factors: (Political, Economical, Socio cultural, Technological and
Legal).
"A PEST analysis is an analysis of an external macro environment that affects all firms.
Such external factors usually are beyond the firms control and sometimes present
themselves as threats. For this reason, some say that pest is an appropriate term for these
factors. However changes in the external environment also create new opportunities and
letters sometimes are rearranged to construct the more optimistic terms of STEP
ANALYSIS. Many macro environmental factors are country specific and the pest
analysis will need to be a performed for all countries of interest".

"Political Factors
Tax policy

Employment laws

Environmental regulations

Trade restrictions and tariffs

Political stability

Economic Factors
Economic growth

Interest rates

Exchange rates

Inflation rate

Social Factors
Health consciousness

Population growth rate

Age distribution

Career attitudes

Emphasis on safety"

Technological Factors
R&D activity
Automation

Technology incentives

Rate of technological change

www.netmba.com/strategy/pest/ Accessed on
2/01/2011
Aim and objective No.2: Identification of
further information that would be helpful
in making realistic plans for the future
of the business:
Information needed towards market
segmentation-target market:
Information to the case is very important to analyze any business health or problem. It is
equally important like medical tests are important for human body for remedy of any kind
of complain of a patient.

There are other tests or scanning is needed for business analysis. Market segmentation is
one of them. Market segmentation: - "market consists of buyers differ in one or more
ways. They may differ in their wants, resources, locations, buying attitudes and buying
practices. Because buyers have unique needs and wants, each buyer is potentially a
separate market. Ideally, then a seller might design a separate marketing program for each
buyer. For example a caterer can customize the menu, entertainment, and the setting to
meet the needs of specific clients. However, most companies are unable to offer complete
segmentation. The cost of complete segmentation is high and most customers cannot
afford completely customized products. Companies therefore, look for broad class of
buyers who differ in their product needs or buying responses. The restaurant industry
offers many examples of segmentation by a variety of variables". (kotler,p 2004)

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The reason behind knowledge of market segmentation is needed because until unless its
not known that which segment is being targeted by the organization concerned (in this
case Restaurant of Jack Sprat), it would be very difficult to compare the strength of that
segment for the business. In this case its not given in the case so its important to analyse
this business from its segment point of view.

Information Needed for competitor analysis:

"To get success of the business it's needed to deal with customers, suppliers, employees,
and others. In almost all cases there will also be other organizations offering similar
products to similar customers. These other organizations are competitors. Objective of the
other organizations is the same as yours - to grow, make money and succeed. Effectively,
the businesses are at war - fighting to gain the same resource and territory; the customer.
And like in war, it is necessary to understand the enemy: How he thinks; What his
strengths are; What his weaknesses are; Where he can be attacked; Where the risk of
attack is too great ?. And so on. And like in war, the competitor will have secrets that
can be the difference between profit and loss, expansion or bankruptcy for the business.
Identifying these secrets is thus crucial for business survival'.
(http://dspace.dial.pipex.com) accessed on 2/01/2011

Other information needed is about its competitors. Information of competitors is very

important to know the business of competitors and further business concerned can be
compared with the competitors. So competitor analysis is very important.

Aim and objective No.3: To list the

priorities:
First of all instant action should be taken to solve Hygiene problem.

Proper forecasting of guests so that underproduction and overproduction both can be kept
under control

Extra manpower has to be reduced so that there will be less burden on payroll cost

Choice of menu has to be increased

Manager should be empowered or can be changed (as information is not given properly
and in detailed so it is impossible to say to change)

Somehow owner has to be in touch even over the phone to monitor the business operation
and if possible frequency to visit may be increased.

Local bank should be approached for short term loan for the refurbishment activities.

Aim and objective No.4: Drawing an Action

Plan:
Action plan is a process that includes assessments of own strengths, available resources
and market opportunities. There must be idea about marketing objective of the
organization concerned then a plan can be prepared and further implemented to achieve
the determined objective. In other words these informations are basic and needed at very
first step towards making action plan:

Market and trading environment of the business concerned

Decision about market business is targeting to

Knowledge about differentiation or advantage of uniqueness of own product and services

Deciding marketing mix

Estimation of Fund etc.

ACTION PLAN:
PRODUCT: Option in Menu list will be given

PRICING : May charge little higher than what has been charging

PROMOTION: There is need to promote the product and create awareness to remove the
negative image of the organization. So it can be done through normal aids of
advertisement-News papers or T.V Channels. Through T.V Channels it may little costly
affair in that point of view daily is better.

Other Actions to be taken:

It could have opened even on Sunday to attract customers want to utilize their holidays.
So it will be open all 7 days.

Fund should be managed instantly- It can be done by approaching Commercial Banks for
short term loans.

Refurbishment will have to be done as soon as loan is approved.

Employees have to be re-motivated so that absenteeism of staff can be kept under control.

FINANCIAL ANALYSIS:

2006-7

2007-8

2008-9

Particulars

Amount (Rs.)

% of sales

Amount (Rs.)

% of sales

Amount (Rs.)

% of sales
Food Sales

205000

213815

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222261

Liquor sales

58750

62257

71962

TOTAL SALES
263750

276072

294223

Food Cost

86212

42.05
87997
41.16
96973

43.63
Liquor Cost

35088

59.72
35923

57.70
41671

57.91

TOTAL DIRECT EXP

121300

123920

138644

Gross Profit Food

118788

57.95
125818

58.84
125288

56.37
Gross Profit Liquor

23662

40.28
26334
42.30
30291

42.09
Gross Profit Total
142450
54.01
152152
55.11
155579
52.88

Labour

78500

29.76

86978
31.51

97711

33.21

O/H and operating Exp

23151

8.78

19910

7.21

24603

8.36


Maintenance

4250

1.61

3876

1.40

2674

0.91

TOTAL INDIRECT EXP

105901
40.15
110764
40.12
124988
42.48


NET PRFIT TOTAL
36549
13.86
41388
14.99
30591
10.40

REVENUE (SALES) POINT OF VIEW:

Food sales has been increased in 2007-8 by 4.3% compared to 2006-7, and it gone down
in the financial year 2008-9 by 3.95% compared to 2007-8 sales of food.

Liquor Sales has been increased in 2007-8 by 5.97% compared to 2006-7 and further it
increase by 15.59% in the year 2008-9 compared to 2007-8.
Overall Total Sales has been increasing in the financial year by 4.67% in the financial
year 2007-8 compared to 2006-7, and further increased by 6.57% in the financial year
2008-9 compared to 2007-8.

DIRECT COST POINT OF VIEW:

In the financial year 2006-7 food cost was 42.05% of its sales and in 2007-8 it became
little favorable by going down to 41.16% of its sales figure and in the year 2008-9 in
again gone up to 43.63%

Direct cost of Liquor is 59.72% of its sales in the financial year 2006-7, and 57.70% in
2007-8 and further 57.91% in 2008-9. So its favorable as its in declining trend.

Total direct cost is 54.01%, 55.11% and 52.88% in the financial year 2006-7, 7-8, and
2008-9 respectively which also seems favorable because in 7-8 it gone little up but again
it gone down by good margin-around 2 to 3%

GROSS PROFIT POINT OF VIEW:

Gross profit of food is 57.95%, 58.84% and 56.37% in the financial year 2006-7, 7-8, 8-
9. This shows increase in 7-8 and further decline in 8-9.

Gross profit of Liquor is 40.28%, 42.30% and 42.09% in the financial year 6-7, 7-8, and
2008-9 respectively. Overall it is in favorable trend.

Gross profit in the financial year 2006-7 is 54.01%, 55.11% in 2007-8 and 52.88% in
2008-9 which seems declining trend. In the year 2007-8 it gone up but in 208-9 it came
down. This is because there was declining of sales of food in the financial year 2008-9 by
3.95%, otherwise sale of liquor in this financial year was good and direct costs were also
behaving favorably.

INDIRECT EXPENSES POINT OF VIEW:

There are three component of indirect expenses-labour, overheads and operating expenses
and maintenance expenses. Amount spent in labour is in increasing order i.e., 29.76%,
31.51% and 33.21% in the year 6-7, 7-8, and 2008-9 respectively. This shows restaurant
is spending more % every year in its staffing.

Overheads and Operating expenses seems within control as its 8.78%, 7.21% and 8.36%
in the year 2006-7, 2007-8, and 2008-9 respectively.
Maintenance expenses is 1.61% of sales in the financial year 2006-7, 1.40% in the
financial year 2007-8 and 0.91% of sales of financial year 2008-9. This shows that
organization is spending very less on maintenance expenses.

Overall total indirect expenses is 40.15% of its sales in the financial year 2006-7, 40.12%
in 2007-08 and gone up in the financial year 2008-9 to 42.48%

NET PROFIT POINT OF VIEW:

Net profit is 13.86%, 14.99% and 10.40% in the financial years 2006-7, 7-8, and 8-9
respectively. This shows that Net profit has going down, and in the financial year its gone
down with huge gap compared to previous years percentage.

Overall it's a matter of discussion and management should pay attention to the indirect
costs as percentage of indirect cost is very high. As gross profit is in 50% so almost 40%
of sales are being spent for indirect expenses. Although management is not spending
much in maintenance component of indirect expenses but other components i.e.,
overhead and operating expense, and payroll expenses are very high that is the reason Net
profit of the restaurant is not attractive.

CONCLUSION
Author has analysed the case of Jack Sprat's restaurant and found that major problem is
its hygiene and maintenance and indirect expenses. These two of the factors has to be
kept under control and converted into favorable mode only then this organization can
earn profit like previous time.

There are other areas also that needs attention i.e., arrangement of fund, manpower
management, empowering manager etc.

BIBLIOGRAPHY
Britton, C and Worthington. I (2003) The business environment, 4th Edition, UK:Prentice
hall.

Hooley.G(2004) Marketing strategy and competitive positioning, 3rd edition: UK:

Prentice Hall

Kotler, P. (2004) marketing for hospitality and tourism, 3rd Edition, Delhi:Person

Luck.D and Rubin, S.R (1996) Marketing Research,7th Edition, USA:Prentice hall
Morrison, J (2002) the international business environment, 1st Edition, New York; Pal
grave.

Reich, Z.A (1997) Marketing Management for the hospitality Industry,1st Edition,: Wiley
and sons Canada.

Wearne.N (2001) Hospitality Management, 1st Edition, New Delhi: Global

www.netmba.com/strategy/pest/ Accessed on 2/01/2011

http://dspace.dial.pipex.com) Accessed on 2/01/2011

Sample of a SWOT Analysis for a Restaurant

by Nancy Wagner, Demand Media

Your restaurant may

serve the most
delicious food or
provide the best table
service in your area.
But if you do not know
the strengths and
weaknesses of your
business or the
opportunities and
threats facing your
business, your business may suffer. As you prepare to perform your SWOT analysis, invite your restaurant
manager as well as your chef and assistant managers to get involved so you gain more insight from different
points of view.

Strengths
The strengths of your restaurant lie in what you do best, whether its serving tasty food, offering quality service
at the table or providing decor that makes the fun of eating at your restaurant a memorable experience. Other
strengths may consist of your pricing structure, such as offering a lower-priced menu than similar restaurants in
your area. If you currently generate traffic during slow times by offering special promotions, such as buy two
meals, get one free before 5 p.m. to get patrons in the door, thats a strength. Other strengths may include
serving a specific type of ethnic food not served elsewhere in the area.

Weaknesses
Weaknesses give you an idea of things to improve in your restaurant. For instance, your wait staff may create a
weakness for your restaurant, since youre dependent on them for the personal service they provide to each table.
Another weakness may exist if you do not provide adequate employee training, such as showing wait staff how
 they should attend to tables or explaining to culinary personnel how you want food prepared and presented. Other
weaknesses may include not getting consistent supplies that result in menu items not being available. Relying on
an outdated point-of-sale system or using paper to keep track of ordering and stocking is a weakness, because
there are better ways of calculating your stockroom, order and financial needs.

Related Reading: SWOT Analysis Techniques

Opportunities
Look for opportunities that help your restaurant increase its profits, such as expanding or providing different
types of food and beverages. Taking advantage of trends related to eating healthier may mean featuring more
organic dishes or salads on your menu. Finding ways to generate more traffic during slow times, such as in the
afternoon, may represent an opportunity for growth. Selling some of your restaurant products, such as salad
dressings or baked goods, for people to buy and take home represents an opportunity. Offering delivery services
and take-out or setting up a drive-through to meet the needs of people on the go represents another potential
opportunity.

Threats
Competing restaurants located nearby represent a threat to your business, especially if you sell similar types of
food or have similar dining experiences. New restaurants opening up in your area also represent a threat, since
area diners have more options on where to spend their dining dollars. Other threats consist of the potential rising
price of certain foods. For instance, if you make seafood dishes and something negative impacts the shrimp
market, a threat exists if you need to raise prices or find new suppliers, because you may lose business.

Strengths: Weaknesses:

Selling products directly to the customers No partnerships or strong relationships with

Keeping costs below that of competitors computer retailers
Higher responsiveness to customer demands

Opportunities: Threats:

Desire of customers for one-stop shopping Stronger brand name of competitors like IBM and
Customers increasing knowledge about what they Compaq
want in computers Strong relationship of competitors with retailers
Internet as a marketing tool
 Try more general SWOT analysis examples
For more general SWOT Analysis examples, here is one with some general entries. You
can let the factors relevant to your situation stay while removing and adding accordingly:

Strengths: Weaknesses:

Have an excellent staff for handling sales with strong
knowledge of current products
Strong customer relationships
Strong internal communications system
A strong geographical location with high traffic input
Well-designed and successful marketing strategies
Business reputation of being innovative
Too many missed deadlines and a lot of work on
pending
High cost of rental for the office
Infrequent cash flow system
Too much stock in inventory and higher inventory
costs
An inefficient record maintenance system in place
Outdated market research data

Opportunities: Threats:

Products similar to yours in the market are expensive
or of poor quality
Customers in the market are loyal
Seasonal high demand of the product
High demand for product or similar merchandise
A lot of competitors in the market with similar
products
A new advertising campaign launched by competit
A competitor opening new shop in a nearby locatio
A downturn in economy and less spending budget
people

With these SWOT Analysis examples, you can easily understand how you can use this to
analyze a business situation in a comprehensive way. After careful analysis, you can
determine whether a new venture have enough positives in its favor to be pursued.