PEST, regulation, CSR and the business cycle

Accounting Ahead | Original study resource | accountingahead.com.au

PEST, regulation, CSR and the business

cycle

MODULE 1 | PART E.4 | STUDENT COMPANION

PEST and its wider versions

Industry forces matter, but the external environment is wider than one industry. Use the version that captures the

factors that matter to the decision.

Version Factors covered Voltway Bikes (imagined e-bike retailer)

PEST Political, economic, social,

technological

State rebates under consideration; higher interest rates squeeze

budgets; more people ride to work; batteries lighter and cheaper

SLEPT PEST + legal Maximum motor power before an e-bike counts as a motorbike

PESTEL SLEPT + environmental Councils build bike paths to cut traffic and emissions

STEEPLED PESTEL + education and

demographics

Older riders and commuters are growing customer groups

Three issues that appear in almost every PEST analysis

1. Regulation (political and legal)

How regulation affects strategy Example

Limits which products may be offered;

changes who may compete; pushes prices

up or down

From 10 December 2025, platforms covered by Australia's social

media minimum age law must take reasonable steps to stop

under-16s having accounts, with fines of up to about A$49.5 million.

A customer segment, and the advertising aimed at it, disappears;

age-checking costs rise.

Deregulation and trade agreements open

markets to new entrants

Lower trade barriers bring global opportunities and global threats

Source: eSafety Commissioner guidance and reporting by AP and Al Jazeera, December 2025.

2. Corporate social responsibility (social)

Porter and Kramer's framework helps an organisation see the social and environmental effects of what it does,

find chances to benefit society and itself at once, and choose which initiatives to take on. Responsibility is a

source of strategic opportunity, not just damage limitation. Research on Australian businesses found only about

one in every eight organisations had built environmental strategy into overall strategy; most systems were

compliance-focused.

STRATEGIC MANAGEMENT ACCOUNTING | M1 PART E.4 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Voltway (imagined): collecting and recycling old e-bike batteries reduces a real hazard, brings customers

back to the store, and builds a reputation an online discounter cannot easily copy.

3. The business cycle (economic)

Average level of activity

Boom

Rise to a peak

Recession

Peak back to average

Depression

Slide to a prolonged low

Recovery

Trough back to average

Peak

Trough

A recession is commonly defined as two quarters in a row of negative GDP growth. Turning points are hard to predict; cycles always

recur.

Case note: Australia's 2020 recession

After almost three decades without a recession, Australia's economy shrank by about 0.3% in the March quarter

of 2020 and then by about 7% in the June quarter, according to the first official estimates: the largest quarterly

fall since records began in 1959. Household spending on services collapsed, then activity recovered as

restrictions eased. Plans that assumed steady growth were wrong within months.

Source: Australian Bureau of Statistics national accounts, released 2 September 2020, as reported by The New Daily and InDaily.

Testing a plan against the cycle

Successful organisations test long-term decisions against negative, zero, low and high growth scenarios, and

challenge the assumption of constant growth.

Scenario What the new store would do Implication

High growth Strong sales; store profitable within a year A triumph

Low growth Sales just cover rent and wages Acceptable, little margin for error

Zero growth Losses each month; cash drains Risky under a ten-year lease

Negative growth Heavy losses; cash needed elsewhere Could threaten the whole business

STRATEGIC MANAGEMENT ACCOUNTING | M1 PART E.4 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Practice questions

MODULE 1 | PART E.4 | TRY THESE BEFORE THE WORKED ANSWERS

Question 1 - PESTEL for a childcare centre

Complete a PESTEL scan for a private childcare centre in a growing suburb.

Factor One relevant issue Possible response

Political

Economic

Social

Technological

Environmental

Legal

Question 2 - Which phase?

Headline Phase of the business cycle

(a) 'Second quarter of falling output confirms downturn'

(b) 'Unemployment stuck near record high as activity stays weak'

(c) 'Hiring picks up as economy climbs back from the low point'

(d) 'Spending surges; businesses report record orders'

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Question 3 - A cafe's expansion plan

A cafe owner plans to borrow $300,000 to open a second cafe, assuming sales grow 10% every year for five

years. Test the plan against negative, zero, low and high growth, and recommend two ways to limit the

downside.

STRATEGIC MANAGEMENT ACCOUNTING | M1 PART E.4 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Worked answers

MODULE 1 | PART E.4 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - PESTEL for a childcare centre

Factor Issue Response

Political Government childcare subsidies may change Model fees under different subsidy levels

Economic Interest rates and household budgets; wage

growth for educators

Plan fees and staffing costs carefully

Social More two-income families in a growing suburb Plan capacity; offer longer hours

Technological Parent communication apps; online enrolment Adopt apps to improve service

Environmental Heat waves and shade; energy costs Shade structures; solar panels

Legal Staff-to-child ratios, qualification rules, safety

standards

Budget for compliant staffing

Question 2 - Which phase?

Headline Answer

(a) Recession (two quarters of negative growth)

(b) Depression (prolonged low activity)

(c) Recovery (climbing from the trough)

(d) Boom (rising towards a peak)

Question 3 - A cafe's expansion plan

High growth: loan repaid comfortably. Low growth: repayments met, little buffer. Zero growth: the second

cafe may not cover its costs and loan repayments, draining cash from the first. Negative growth: both cafes

could be at risk.

Limit the downside: a shorter lease with options to extend; a smaller fit-out or a pop-up trial first; borrow less or

keep a cash buffer; agree flexible staffing; set a review point to pause expansion if sales fall below a trigger

level.

STRATEGIC MANAGEMENT ACCOUNTING | M1 PART E.4 | WORKED ANSWERS

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