What is meant by STEP analysis?

Answer 1

—The STEP checklist:

—It refers to the environmental factors that affect the organizations : Social, Technological, Economic, and Political factors.

—The advantage of the STEP framework is its simplicity and wide applicability.

—STEP can be used to think about the current and future effects of those factors on the organization.

—Work in groups to generate subcategories under social, technological, economic and political factors.

¡Sociological Factors:

§Demographic changes in the age and structure of populations, patterns of work, gender roles, patterns of consumptions and the ways in which the culture of a population or country changes and develops.

¡Technological Factors:

Business have been greatly affected by information and communication

technology (ICT). The implications of the technological change for businesses

include the following:

§ICT is lowering barriers of time and place and opening up great global opportunities for businesses, which also means increased competition.

§ICT creates new industries, not only in areas of hardware, software and telecommunications, but also in start-ups, new businesses, and e-commerce (e.g. ICT enabled many banks and insurance companies to start by building their operations solely on the basis of electronic information and communication).

§Many individual jobs and internal service functions have been transformed and are now based on ICT systems (e.g. production planners and credit controllers). This has led to a massive shift in the skills needed for most jobs (e.g. computer literacy is now essential for many jobs)

¡Economic Factors

§Economic factors that affect businesses include the rate of economic growth, interest rates, inflation, energy prices, and levels of employment.

§The state of a country's economy affects all aspects of business life. It affects the level of demand for goods and services, the availability and cost of raw materials, buildings, land and labor.

§If businesses and individuals expect the economic growthto be high, business are likely to invest and expand and individuals to spend more. In contrast, if the economy is expected to contract, businesses invest less and individuals spend less.

§Government s change interest rate in an attempt to achieve short-term adjustment in the levels of demand, investment and spending.

§Exchange rate is the price of a particular currency and is based on the supply and demand of such currency; global communication technology has resulted in very high levels of currency trading, leading to high volatility in exchange rates. Varying exchange rates cause the following problems for businesses:

1)If the domestic currency strengthens (becomes worth more in relation to other currencies), exporting becomes more difficult because the price of goods exported is higher and foreign products are more competitive in the home market.

2)If the currency weakens, exports are easier and opportunities may open up foe new markets, while imports become more expensive.

¡Political Factors:

There are political influences on business in terms of rules and regulations

imposed by government, as well as the influences of such organizations as

chambers of commerce, trade unions and co-operatives. The following list

emphasizes the importance of political factors for businesses:

§Legislationaffects many aspects of business life, such as health and safety at work, equal opportunities and employee protection.

§Trading relationships are influenced by political factors such as the World Trade Organization (WTO) and the European Union (EU).

§Government is a major party to many transactions. Government is one of the largest employers and the largest purchaser of goods and services.

§The level and nature of public services (e.g. health services, education) are determined on political grounds.

§Governments determine levels of taxation - on the individual, on businesses, on property and goods and services.