ACCA Strategic Professional · Strategic Business Leader

Environmental issues: formula sheet

Full chapter guide

Key formulas

The six PESTEL factors: P + E + S + T + E + L = Political, Economic, Social, Technological, Environmental, Legal; Use as a prompt list only. Select the factors relevant to the scenario.
Application chain: Factor → Evidence in scenario → Impact (opportunity or threat) → Strategic response; Use for every point you make. This is what earns application and analysis marks.
Prioritisation: Priority = likelihood of change × size of impact on the organisation; A judgement rule, not a calculation. Rank high-impact, high-certainty factors first.
PESTEL vs Five Forces: PESTEL = macro-environment; Five Forces = industry environment; PESTEL factors often act through the five forces, for example regulation changing barriers to entry.
The five forces: Industry pressure = new entrants + substitutes + buyer power + supplier power + rivalry; There is no calculation. Rate each force as high, medium or low using evidence from the case.
Barriers to entry (examples): Scale economies, capital needs, brand, switching costs, distribution access, regulation, retaliation; Higher barriers mean a lower threat of entry.
Buyer power drivers: Few buyers, large purchases, low switching cost, price sensitivity, threat of backward integration; More of these present means higher buyer power.
Supplier power drivers: Few suppliers, unique input, high switching cost, threat of forward integration, no substitute input; More of these present means higher supplier power.
Rivalry drivers: Many equal competitors, slow growth, high fixed costs, low differentiation, high exit barriers; More of these present means more intense rivalry.
Industry life cycle stages: Introduction → Growth → Shake-out → Maturity → Decline; Describes a typical pattern. Not every industry follows it in order or at the same speed.
Competitor response profile: Objectives + Current strategy + Assumptions + Capabilities → Likely response; Use this to predict how a rival will react to your move.
Strategic group map: Choose two strategic dimensions → Plot firms → Draw groups → Identify gaps and mobility barriers; Pick dimensions that really separate firms in the case, such as price and geographic scope.
Stage and strategy link: Stage → Demand and rivalry pattern → Fitting strategy; For example, growth favours investment and market share, while decline favours harvesting, divestment or niche focus.
The four determinants: Factor conditions + Demand conditions + Related and supporting industries + Firm strategy, structure and rivalry; Name all four every time. Each must be applied to the scenario, not just listed.
The two outside influences: Government + Chance; They affect all four determinants. Mention them when the scenario gives policy or unexpected events.
Core logic: Strong, mutually reinforcing determinants → national advantage in an industry → firms compete globally; Advantage is industry-specific, not a general national advantage.
Environmental uncertainty (conceptual): Uncertainty depends on complexity and dynamism (rate of change); A framework, not a calculation. Low complexity and low change is stable. High complexity and high change is the hardest to plan for.
Forecasting vs scenario planning: Forecast = one expected future. Scenarios = several plausible futures.; Use this contrast whenever the question asks you to compare the approaches.
Scenario-building logic: Key drivers → critical uncertainties → scenario logic → narratives → strategy test → signposts; A memory aid for the process. Exact stage names vary between authors, so describe the logic in your own words.
High power, high interest: Key players → manage closely; Involve them in decisions and seek their support. Their opposition can block strategy.
High power, low interest: Keep satisfied; Consult occasionally and avoid surprises. Interest may rise if they feel ignored.
Low power, high interest: Keep informed; Communicate openly. They can gain power by lobbying or allying with powerful stakeholders.
Low power, low interest: Minimal effort; Monitor for change. Do not spend significant resources.
Power and interest definitions: Power = ability to influence; Interest = willingness to do so; Interest is how much they care, not how much they are affected financially.
Sustainable development: Meet present needs without compromising the ability of future generations to meet their own needs; Brundtland definition. Quote the idea in your own words and apply it to the case.
Triple bottom line: Economic + Social + Environmental (people, planet, profit); Three areas of performance. They are not added into one figure. Each needs its own measures.
Environmental footprint: Inputs (energy, water, materials, land) + Outputs (emissions, waste, pollution) across the whole value chain; Check both direct and indirect effects, including suppliers and product disposal.
Typical response levels: Compliance → Efficiency → Strategic advantage; A simple scale for judging how mature an organisation's approach is. It is a teaching aid, not a fixed model.

Quick revision

PESTEL: political, economic, social, technological, environmental, legal. Judge impact, not just list.
Rank the factors by impact and likelihood, and focus on the few that matter most.
Five Forces: threat of new entrants, threat of substitutes, buyer power, supplier power, rivalry.
Five Forces explains industry profit potential and suggests how to respond, not only describes.
Industry life cycle: the stages are introduction, growth, maturity and decline, and each calls for a different strategy.
Competitor analysis looks at rivals' strengths, objectives, strategies and likely responses.
Porter's Diamond: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure and rivalry.
Scenario planning explores several plausible futures instead of predicting one.
Opportunities and threats come from external analysis, and strengths and weaknesses from internal analysis.
Mendelow's matrix plots power against interest: keep satisfied, key players, minimal effort, keep informed.
Stakeholder positions change over time, so reassess them.
Sustainability links to social responsibility, ethics and reporting, so state the business case as well as the moral case.
Every answer needs scenario application and a clear recommendation.

Common mistakes

Listing generic PESTEL points with no link to the scenario. Fix: Use scenario facts in every point. If you could paste the point into any other company's answer, it is too generic.
Describing the factors but not the impact. Fix: Always finish with 'so what': the effect on revenue, costs, risk or strategy, and what management should do.
Listing textbook drivers without using the case Fix: Quote or paraphrase a case fact for every force. Marks go to application, not definitions.
Analysing the company instead of the industry Fix: Frame each point around the industry. Then show what it means for the firm.
Listing the stages with textbook definitions and no case evidence. Fix: Name the stage, then quote at least two facts from the scenario that show it.
Assuming every industry moves through the stages in order. Fix: State that the model is a guide. Mention that innovation or new demand can extend or restart a stage.
Listing the four determinants without applying them to the scenario. Fix: For each determinant, quote a scenario fact and explain its effect. Marks are for application.
Treating demand conditions as market size. Fix: Focus on the quality and sophistication of home customers and how they push firms to improve.
Treating scenarios as forecasts, or as best, worst and most likely cases. Fix: State that scenarios are equally plausible stories used to test strategy. They are not predictions and are not normally given probabilities.
Listing PESTEL factors without selecting key drivers. Fix: Pick the few factors that are both high impact and uncertain, and explain why those matter to this organisation.

Exam tips

Always tie every PESTEL point to a named fact in the scenario or pre-seen material. Generic answers score poorly.
Prioritise. Markers reward judgement about which factors matter most, not equal coverage of all six.
For pre-seen cases, prepare a PESTEL for the industry in advance, then adapt it to the new facts released in the exam.
Link PESTEL to strategy, risk and stakeholders. Recommend actions and note uncertainty.
Follow the requested format, such as a report or briefing note, and write for the named audience to earn professional skills marks.
Always tie each force to a named fact in the case. Generic points earn little.
Use the same order every time and give a rating, so the marker sees your judgement.
Finish with a conclusion and a recommendation, which supports your professional skills marks.