THE MACRO-ENVIRONMENT (PEST ANALYSIS)

We have here another acronym of a useful tool, and framework, to understand either the growth or downturn of a market, doing a scan of the external macro-environment of your company. The PEST Analysis stands for:

• Political
• Economic
• Social
• Technological

Whereas SWOT Analysis will help to measure a business unit, idea or project; PEST Analysis will help you measure a market or a contextual environment.

In spite of there are variations for the PEST acronym, being very common STEEP, PESTELI, etc, adding  factors like Ethical, Environmental, Ecologic, Legal, International, etc. It is an unnecessary job, because all them can be assigned to one of those PEST factors – Political, Economic, Social or Technological. My preferred is always the use of originals: PEST or STEP. Use whichever is easier to remember, avoiding the variations. See figure below with some important factors that you can consider, as well as others can be added.

• Political
• Environmental regulations and protection
• Legislation to the industry
• Regulatory bodies and processes
• International trades and regulations
• Contract enforcement law
• Government policies:
• Government term and change
• Trading policies
• Funding, grants and initiatives
• Lobbying/pressure groups
• International pressure groups
• Wars and conflict
• Political stability
• Economic
• Economic growth/downturn
• Home economy situation
• Home economy trends
• Overseas economies and trends
• Inflation rates
• Unemployment policies
• Taxation
• General taxation issues
• Taxation specific to product/services
• Seasonality/weather issues
• Market and trade cycles
• Specific industry factors
• Market routes and distribution trends
• Customer/end-user drivers
• Interest and exchange rates: 
• International trade/monetary issues
• Social
• Lifestyle trends
• Income distribution
• Demographics
• Social mobility and labor
• Work/career and leisure attitudes 
• Entrepreneurial spirit
• Consumer attitudes and opinions
• Media views
• Law changes affecting social factors
• Brand, company, technology image
• Consumer buying patterns
• Fashion and role models
• Major events and influences
• Buying access and trends
• Ethnic/religious factors
• Advertising and publicity
• Ethical issues
• Living conditions
• Technological
• Competing technology development
• Research funding:
• Associated/dependent technologies
• Replacement technology/solutions
• Maturity of technology
• Manufacturing maturity and capacity
• Information and communications
• Consumer buying
• Mechanisms/technology
• Technology legislation
• Innovation potential
• Technology access, licensing, patents
• Intellectual property issues
• Global communications
• Energy uses and costs
• Total Cost of Ownership
• Changes in Information Technology
• Changes in Internet
• Changes in Mobile Technology
• Rate of technology transfer

PEST factors are important role, however they are beyond the control of the company, normally must be considered as either threats or opportunities, which can be applied in the SWOT Analysis. They are macro-economic factors, so they usually differ per continent, country or region. They are virtually unlimited. The firm must prioritize and monitor those factors that influence its industry/company. Below an example for a car rental company in a country in the American continent, outside Brazil and USA.

Maybe you figured out that PEST Analysis can vary from business and strategic planning, marketing planning, depending also of the product and service of your portfolio, therefore you can reduce or increase the list of items for each factor.

BEST PRACTICES AND GLOBAL STANDARDS

I'm surprised to see how many entrepreneurs still spend a lot of money and time trying to reinvent the wheel, because they have not realized that there are many best-practices available in the market, which could be adopted in their companies, saving money and disappointments.

Even today, some business owners, directors and managers believe that innovation must necessarily start from an idea of ​​their own, from scratch, creating their own solutions. That's not true! Imagine if the cars makers or computers manufacturers would be thinking in that way... What we would have today? Maybe the same cars and computers built ten years ago.

Pay attention! If the wheel has been invented, why waste time trying to reinvent it again? This is only an analogy, but think twice about this when starting a new project or enhancements. We actually find best-practice processes for almost everything. See some examples below.

1. Desiring a more organized business and better processes, maybe looking for Quality Assurance? Well, 5S and ISO 9001: 2008. They will help you! 
• 5S' book: 5S for Service Organizations and Offices: A Lean Look at Improvements); 
• ISO 9001:2008's book:  (ISO 9001:2008 for Small Businesses, Fourth Edition: With free customisable Quality Management System files!.
2. Are your projects going beyond the due dates, or worse, your company does not set dates for completion? The PMBoK is the best alternative for project management. Agility would be still better? If so, in spite of the Scrum had been designed for software development, it has been working very well for other industries, even for individuals, because it is simple and effective.
• PMBoK's book: A Guide to the Project Management Body of Knowledge: (Pmbok Guide);
• Scrum's books: The Enterprise and Scrum and Agile Project Management: Creating Innovative Products (2nd Edition).
3. People are discouraged? A big problem! To build products and delivery high quality services, you must do a retention of experienced employees, instead of compete for talents or recruit the best, because this is usually expensive. Retain a workforce with the knowledge and skills and willingness to acquire new competencies, team-based, flexible work arrangements, addressing diversity issues, conducting formal mentoring programs, align business and human resources strategies, empower employees to make decisions and award their accomplishments. A good formal framework to drive you on this direction is People Capability Maturity Model (P-CMM). Of course, there are also a couple of good companies doing well with Human Resources, so you can choose one of them for a benchmarking.
• P-CMM's book: The People CMM: A Framework for Human Capital Management (2nd Edition).
4. Does your company have a Customer Service Center (CSC), which is responsible for fulfilling customer requests or resolve problems that are reported by them, whether they are internal or external customers? The quality of services has been below the expected? In this case, ITIL will help you! ITIL is a framework created for Information Technology people,  however it is perfectly applicable to any type of CSC, for example: a customer care department, central of reservations and vehicle maintenance workshop. ISO/IEC 20000 is also a similar approach.
• ITIL's books: Defining IT Success through the Service Catalog (Pink Elephant Guides) and The Visible Ops Handbook: Implementing ITIL in 4 Practical and Auditable Steps;
• ISO/IEC 20000:  - Implementing Service Quality based on ISO/IEC 20000.
5. The strategies are well developed, but are having trouble sharing them with all employees and is difficult to deploy them effectively? If this is the case with your company, then you should know the Balanced Scorecard (BSC).
• BSC's book: The Balanced Scorecard: Translating Strategy into Action.

While all the subjects covered in this blog can be applied to many  companies, the examples are generally directed to the car rental industry. So let's talk a little bit of how to find out existing standards and best-practices of this market.

Many standards and best-practices have been established by global companies such as Enterprise Rent a Car, Hertz, Dollar, Thrifty, Avis, Europcar, National, Alamo, Sixt, etc. So if your company is a franchisee of one of them, you can get such information. However, if your company is an independent brand, or are looking for understand the standards and best-practices, then I recommend:

1. Hire an experienced organizational consulting, specializing in the car rental industry (Thermeon Corporation - http://www.thermeon.com - founded in 1967, specializing exclusively in the car rental industry since 1983).
2. Purchase a software, which has embedded the best-practices and standards of the global car rental industry, even for a local business (Thermeon Corporation - http://www.thermeon.com - CARS+ is the premier software for many global brands).
3. Study about the SIPP codes, which are the industry standard for describing vehicles, usually with 4 characters long, they are used to summarize the key features of a vehicle, for example ECMR:
1. First letter (size of vehicle)
1. M = Mini
2. N = Mini Elite
3. E = Economy
4. H  Economy Elite
5. C = Compact
6. D = Compact Elite
2. Second letter (number of doors)
1. B = 2/3 doors
2. C = 2/4 doors
3. D = 4/6 doors
4. W = Wagon/Estate
5. V = Passanger Van
6. L = Limousine
3. Third letter (transmission and drive)
1. M = Manual drive
2. N = Manual, 4WD
3. C= Manual, AWD
4. A = Autodrive
5. B = Auto, 4WD
6. D = Auto, AWD
4. Fourth letter (fuel, A/C = Air Conditioner)
1. N = Unspecified fuel, no A/C
2. R = Unspecified fuel, A/C
3. D = Diesel, A/C
4. Q = Diesel, no A/C
5. H = Hybrid, A/C
6. I = Hybrid, no A/C
4. Browse through the website of ACRISS on:
1. Sample Car Codes: http://www.acriss.org/car-codes/sample-codes/
2. Pseudo Car Codes: http://www.acriss.org/car-codes/pseudo-car-codes/
3. Expanded Car Code Matrix: http://www.acriss.org/car-codes/new-car-code-matrix/
4. Abbreviations: http://www.acriss.org/reference/abbreviations/
5. Special Equipment: http://www.acriss.org/reference/special-equipment/
5. Know the Enterprise Rent a Car history.
• Book: Exceeding Customer Expectations: What Enterprise, America's #1 car rental company, can teach you about creating lifetime customers (a very good history and benchmark, not only for the car rental industry)

From now on, not reinvent the wheel, but try to find out if there is any best-practice or some company to become your initial reference, maybe a benchmark, then improve and innovate.

GOAL SETTING USING “SMART”

Nowadays, goals are usually 1 up to 3 years of action statements. Goals are envisions, plans and commits to achieve a desired end-point. However the goals can not be too easy or too difficult, because in this way would be discouraging, not very effectives.

Let's make an analogy! Take a bottle and some rings. The goal is to put the rings on the bottle's neck, throwing the rings. If the bottle is very close, we will have 100% of accuracy. However, if the bottle is so far away, the accuracy will be close of 0%. Of course, for both settings would be very discouraging, wouldn't be? 


Therefore, if your goals seem to be so close, move them more far away from you, otherwise, if they are too far away, put them more closer. We must find out a mid point. However, how we can do this? We can use SMART!


SMART is an acronym for: Specific, Measurable, Actionable, Responsible, Time bound.


Specific – be specific when defining goals, usually using words like: “increasing” and “decreasing”. A specific goal has a much greater chance of being accomplished than a general goal.

• Examples

1. Increase customer satisfaction in 20%.
2. Increase vehicle utilization in 15%.
3. Decrease costs with refueling in 10%.
4. Decrease time expended to open a Rental Agreement to 5 minutes.

Measurable - establish concrete criteria for measuring progress toward the accomplishment of each goal. To determine that they are measurable, ask questions such as: How many? How much? How to know that I accomplished the goal?

• Examples

1. Increase customer satisfaction in 20%.
2. Increase vehicle utilization in 15%.
3. Decrease costs with refueling in 10%.
4. Decrease time expended to open a Rental Agreement to 5 minutes.

Actionable – it means that when you read it one year from now, you must remember your statement, which you wrote, outlining what you can do about it. In another words, after identify the goals that are most important to you, begin to figure out ways you can make them come true, developing abilities, skills, attitudes, marketing plans, financial plans, etc, so you will be able to accomplish them.

• Examples

1. Increase customer satisfaction in 20%
1. CAR WASH
1. Increase their quality of service, enhancing their processes.
2. FLEET MANAGEMENT
1. Decrease operational costs in 10%.
2. Implement Preventive Maintenances of Vehicles available in our system.
3. RENTAL AGENTS
1. Increase their quality of service, having monthly trainings with Supervisors.
2. Schedule an Annual Training to learn about world best practices.
4. PRICING MANAGEMENT
1. Create “Special Rates and Privileges” more attractive for frequent customers.
2. Create “Special Rates and Privileges” more attractive for corporates.
3. Create “Special Rates and Privileges” more attractive for tour agents.
2. Increase vehicle utilization in 15%
1. PRICING MANAGEMENT
1. Create “Special Rates” for Weekends.
2. Create “Special Rates” for Holidays.
3. Create “Special Rates” for Low and High Seasons.
2. MARKETING DEPARTMENT
1. Advertise our Special Rates to 100% of our frequent customers.
2. Meet all Tour Agents to advertise our Specific Weekend Rates.
3. Decrease costs with refueling in 5%
1. FLEET MANAGEMENT
1. Monitor refueling using resources available in our system.
2. Decrease non-revenue movements with our vehicles in 20%.
3. Negotiate a decreasing of 2% in Fuel prices with Gas Stations.
4. Decrease time expended to open a Rental Agreement to 5 minutes
1. RENTAL AGENTS
1. Monthly trainings with Supervisors.
2. Implement pre-printed Rental Agreements available in our system.

Responsible – define who will be in charge, taking actions to accomplish what is outlined in your statements.

• Examples

1. Increase customer satisfaction in 20%
1. CAR WASH (Supervisor: Tom)
1. Increase their quality of service, enhancing their processes.
2. FLEET MANAGEMENT (Fleet Manager: John)
1. Decrease operational costs in 10%.
2. Implement Preventive Maintenances of Vehicles available in our system.
3. RENTAL AGENTS (Operations Manager: Lucy / Supervisors & Agents)
1. Increase their quality of service, having monthly trainings with Supervisors.
2. Schedule an Annual Training to learn about world best practices.
4. PRICING MANAGEMENT (Marketing Manager: Bob / CFO)
1. Create “Special Rates and Privileges” more attractive for frequent customers.
2. Create “Special Rates and Privileges” more attractive for corporates.
3. Create “Special Rates and Privileges” more attractive for tour agents.
2. Increase vehicle utilization in 15%
1. PRICING MANAGEMENT (Marketing Manager: Bob / CFO)
1. Create “Special Rates” for Weekends.
2. Create “Special Rates” for Holidays.
3. Create “Special Rates” for Low and High Seasons.
2. MARKETING DEPARTMENT (Marketing Manager: Bob)
1. Advertise our Special Rates to 100% of our frequent customers.
2. Meet all Tour Agents to advertise our Specific Weekend Rates.
3. Decrease costs with refueling in 5%
1. FLEET MANAGEMENT (Fleet Manager: John)
1. Monitor refueling using resources available in our system.
2. Decrease non-revenue movements with our vehicles in 20%.
3. Negotiate a decreasing of 2% in Fuel prices with Gas Stations.
4. Decrease time expended to open a Rental Agreement to 5 minutes
1. RENTAL AGENTS (Operations Manager: Lucy / Supervisors & Agents)
1. Monthly trainings with Supervisors.
2. Implement pre-printed Rental Agreements available in our system.

Time bound – establish a period of time, with a specific deadline date, to accomplish each goal, reaching the end-point.

• Examples

1. Increase customer satisfaction in 20% by (1 year; at May 15, 2012)
1. CAR WASH (Supervisor: Tom) by (1 month; at June 15, 2011)
1. Increase their quality of service, enhancing their processes.
2. FLEET MANAGEMENT (Fleet Manager: John) by (1 year; at May 15, 2012)
1. Decrease operational costs in 10%. 
2. Implement Preventive Maintenances of Vehicles available in our system.
3. RENTAL AGENTS (Operations Manager: Lucy / Supervisors & Agents) by (1 year; at May 15, 2012 )
1. Increase their quality of service, having monthly trainings with Supervisors.
2. Schedule a annual training to learn about world best practices.
4. PRICING MANAGEMENT (Marketing Manager: Bob / CFO) by (2 months; July 15, 2011)
1. Create “Special Rates and Privileges” more attractive for frequent customers.
2. Create “Special Rates and Privileges” more attractive for corporates.
3. Create “Special Rates and Privileges” more attractive for tour agents.
2. Increase vehicle utilization in 15% by (6 months; November 15, 2011)
1. PRICING MANAGEMENT (Marketing Manager: Bob / CFO) by (2 months; July 15, 2011)
1. Create “Special Rates” for Weekends.
2. Create “Special Rates” for Holidays.
3. Create “Special Rates” for Low and High Seasons.
2. MARKETING DEPARTMENT (Marketing Manager: Bob) by (6 months; November 15, 2011)
1. Advertise our Special Rates to 100% of our frequent customers.
2. Meet all Tour Agents to advertise our Specific Weekend Rates.
3. Decrease costs with refueling in 5% by (6 months; November 15, 2011)
1. FLEET MANAGEMENT (Fleet Manager: John) by (6 months; November 15, 2011)
1. Monitor refueling using resources available in our system.
2. Decrease non-revenue movements with our vehicles in 20%.
3. Negotiate a decreasing of 2% in Fuel prices with Gas Stations.
4. Decrease time expended to open a Rental Agreement to 5 minutes by (6 months; November 15, 2011)
1. RENTAL AGENTS (Operations Manager: Lucy / Supervisors & Agents) by (6 months; November 15, 2011)
1. Monthly trainings with Supervisors.
2. Implement pre-printed Rental Agreements available in our system.

Through understanding the effect of goals setting on individual performance, your company will be able to improve organizational performance. It happens because people will perform better when they are committed to achieve specific goals, knows the  importance of the expected outcomes of goal attainment, works as a team, track performance to see how effective they have been, receive constantly feedbacks, work on an environment with many elements of motivation. So, works together with your HR department to motivate individuals follow your plans.