Evaluate the usefulness to WTZ of external environment analysis (PEST) as a framework to develop business strategy.

Mark scheme

Marking points from the official mark scheme (May/June 2022). The mark or mark type is shown in brackets.

1. PEST - Political, Economic, Social and Technological [reward even though clearly signposted in case]
2. Understanding of different elements of PEST:
3. Political - laws and regulation
4. Economic - factors influencing demand and macroeconomic environment
5. Social - demographic change
6. Technological – advances in automation
7. Identification of PEST analysis as a strategic analysis tool.
8. Strategic analysis is the first stage in strategic management answering the question, where are we now?
9. Need to understand the external environment – requiring a detailed PEST analysis.
10. Understanding of business strategy – outlines a plan of action to achieve the vision and set objectives of an organisation and guides decision-making processes.
11. Role of objectives in developing business strategy.
12. Explanation of other strategic analysis techniques – SWOT, Porter's Five Forces, Boston Matrix, core competencies.
13. Application
14. WTZ appears to have objective to expand given its history and the growth strategies being considered.
15. Core competency of WTZ is recycling waste materials links to Option 2.
16. PEST applied to WTZ – making use of information in Appendix 1 to illustrate usefulness of PEST.
17. Political - increased regulation provides opportunities and threats to WTZ's core business. Link to potential takeover of Lacpас.
18. Economic - economic growth in country R is stable and high, giving opportunities for further expansion decisions.
19. Economic - interest rates set to decrease and link to financing decisions.
20. Social - increasing interest in environmental considerations link to increased focus on CSR.
21. Technological – innovations in processing of waste materials e.g. use of computer controlled machinery.
22. Other techniques applied to WTZ e.g. SWOT.
23. Strengths e.g. brand reputation.
24. Weaknesses e.g. high gearing linking to financing any future expansion.
25. Opportunities e.g. market growth in countries R and S.
26. Threats e.g. competition from Hippo Barrel.
27. Analysis
28. Analysis is about the use of the techniques to shape strategy
29. Analysis of how PEST might guide strategic decisions:
30. Reduction in interest rates may enable more ambitious strategy such as Option 1.
31. Opportunities to process plastic waste from developed countries e.g. Option 2
32. Regulation on food packaging may favour takeover of Lacpac.
33. Anticipating changes to the external environment will enable WTZ to take decisions to reduce risk and take advantage of opportunities.
34. Analysis of how other SA techniques can shape strategy:
35. Focus on strengths and core competencies in choosing strategy will reduce risk to the business.
36. Identification of weaknesses that need to be addressed when making decisions or alternative sought e.g. financing.
37. Evaluation
38. Clear conclusion as to the usefulness of PEST and strategic analysis to developing business strategy including:
39. Critical comments on PEST:
40. PEST on its own is not enough to develop strategy - need understanding of internal factors as well
41. WTZ operates in a dynamic environment so analysis may quickly become outdated.
42. Importance of understanding where the business is now in order to generate ideas and/or support for expansion.
43. Subjective interpretation of the models – one manager's opinion of SWOT may be very different to another.
44. Ranking the usefulness of the techniques in relation to expansion plans.
45. An assessment of the importance of timing and a timescale in carrying out analysis.