Pestel Analysis Of Advertising

Francis Aguilar (1967) is the first known reference to the origin of the PESTEL analysis. In his study known as Scanning the Business Environment, he studied the environmental factors that affect business environment and come up with the first acronym ‘ETPS’ which meant the Economic, Technical, Political and social factors (Aguilar, 1967). Later Arnold Brown (1967) focused on the study and came up with a new perspective towards the study of social-technical, economic, political, and ecological (STEPE) factors. In 1980, Porter among other authors scanned the business environment and came up with the current acronym PESTEL meaning political, economic, social, technological, legal, and environmental factors (FME, 2013). According to Collins (1997),

Economic factors include factors like inflation, economic growth, interest rates, and currency exchange rates (Kotler, 2009). When an economic crisis occurs, it may lead to an economic recession, which affects the advertising industry. Whenever an economic crisis occurs, the advertising industry is the first one to experience a financial cut-down. During economic recession companies view advertising as an extra expense which the can ignore to stabilize the financial status. Such a cut-down affects the industry and anyone related to this sector. On the other hand, inflation rates have a negative effect on the growth of the advertising industry. Inflation rates affect the prices of goods and services which also affects the purchasing power. If the purchasing power of the consumers decline, manufacturing industries will experience low returns. They will shift the burden to the advertising industry by reducing investment in the industry and therefore affecting growth. The other economic factors also affect growth in one way or another (FME, 2013). The interest rates also affects the investments in the advertising industries. If the interest rates increases, the investment in the advertising industry will be more attractive and more investors will be willing to invest. As more investors are willing to invest in the advertising, industry there will be more opportunities to explore and therefore

Technological factors pertain to invention and innovation of new ways of performing activities. Technology changes very fast and it affects how the organization produces, transports and markets its product and services. In the advertising industry, technology affects the way of communicating to the target market. Technology presents many methods that the advertising industry can communicate to the consumers such as TV, phone, tablets, and digital billboards. The use of social networks such as Facebook, twitter, Instagram among others enables the advertising industry to customize adverts according to the user interest that prompts the consumer to view the adverts. However, choosing the appropriate technology is essential to the success of the advertising industry because different markets prefer different ways of conveying information. The use of applications in phones or e-commerce to order goods and services all over the world may be appropriate to a certain market, but media may be appropriate to an illiterate market (Porter, 1998). The development of smart phones is also an added advantage to the development of marketing activities in the advertising industries. For instance, in Singapore China the Taxi industry uses the application in the smart phones to access the consumers. Although the media are one of the appropriate medium to convey the adverts to the consumers,