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PEST Analysis

PEST analysis consists of Political, Economical, Social and Technology which will affect the external factors of the organization.

Political Environment

The Government has tightly controlled the production and sales of acholic drinks which said that will lead to the abuse of health therefore the legislation imposes high excise duty which leads to increase in excise duty of Diageo's Income Statement.

The ban of smoking in pubs in many western European countries such as UK, France and Italy did play a role in the affecting the sales of Diageo' alcoholic drink, this is said so because some users will prefer to drink and smoke in the pub than to buy the drink home and consume.

Economical Environment

The current recession that can be seen on the share price shows that the economic growth rate is decreasing which means, the unemployment and income per capita has reduce over the year and the buying power of consumers which was affected by the recession leads to lower consumption as can be seen on the Income Statement. Though the sales of Diageo have been increasing, but the amount of increasing is very little. Tax on alcohol is also a reason for the decrease on consumption of alcohol.

Social Environment

Many people on earth have come to realization of the importance of having a healthy life. This could mean that, even though user's still do consume alcoholic drinks, but they will consume it in a very low amount which will not affect their health. The taste of consumer maybe a worrying factor as some customer may find substitute drinks if they find the alcohol price is to high. For example, soft drinks or wine which is good for health.

Technology Environment

All consumer looks for the best product in the market. Therefore quality of the product plays an important role. The way the product and services delivered to users can determine the satisfaction of consumers. The packaging of the product and brand of Diageo using new technology will give Diageo a better chance in increasing it's sales.

PEST does play am important role to determine the external factor of Diageo PLC. Though PEST cannot be controlled by Diageo, but Diageo can use internal analysis to over come its PEST analysis defects.

FORCES - PORTER

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