Post Week 7

Post for week 7 

This week we looked mainly at PESTLE analysis. PESTLE which stands for political, economic, social, technical, legal and environment looks at how organisations could be affected by their external environment. Organisations should be aware of all the factors that could affect them, PESTLE analysis looks at the external factors just like porters five forces looks at the micro environment of an organisation PESTLE looks at the macro. Pestle analysis looks at the most important factors and provides a visual representation of the external pressures that could pose a threat to an organisations strategy. Pestle first looks at the political factors which consists of how changes the Government makes could affect an organisation, a new government elect could make changes to taxes, legislation, regulations etc., firms would need to be aware of these changes. For example the recent change in corporation tax dropping from 30% in April 2008 to 23% in April 2013 is an external factor all organisations would need to be aware of and it will drop to 20% in April 2015 (http://www.hmrc.gov.uk/statistics/ct-receipts/corporation-tax-statistics.pdf). Then there is the economic effects that organisations need to be aware of such as the exchange rates, inflation rates, consumer activity, unemployment rate, changes in the organisations costs (such as energy, rent, oil prices for transportation etc.), subsidies, etc. For example if the inflation rate is going up an organisation would need to increase it prices in order to keep up with the rising value of the currency

Pestle also analyses socio-cultural changes, such as changes in lifestyle,  the distribution of income, changes in season, demographics (an ageing population would affect pharmaceutical companies).

etc. This is one factor clothing line organisations would need to be particular about, for example they would need to keep up with fashion trends, also expensive stores would also need to locate their branches in high earning areas. Pestle analysis then looks at the effects of changes in technology and how organisations would need to watch out for new production methods, new patents and products, speed of change and adoption of new technology etc. For example, Nokia has been a powerhouse in the mobile phone industry until recent years when their failure to adopt new technology has left them lagging behind the likes of Samsung and apple.

Pestle also looks at the legal factors that could affect an organisation, such as; changes in law, competition law, environmental law, employment and safety laws etc. For example the Joint Stock Companies Act in 1862 where people were discouraged from investing in companies as they would be personally liable if it failed, until The Act in 1862 which limited their liability to the value of their shares meaning just the loss of their investment but not their personal belongings, this act coined the term ‘Limited Liability’ (Mickletwait and Wooldridge, 2003). Finally, Pestle looks at the environmental factors that could affect a company, such as green issues, energy consumption, refuse disposal, pollution etc. One main cost most production firms face is to keep try and keep pollution down in order to avoid law suits, or for example the case of the Coca cola company in India where the factories are causing water shortages in some small communities (http://www.righttowater.info/ways-to-influence/legal-approaches/case-against-coca-cola-kerala-state-india/)

Very useful video on pestle analysis - http://www.youtube.com/watch?v=ppl9WCARDK0

This week we also looked at stakeholders and the effects they could have. Freeman (1984) defines a stakeholder in broad terms as any group or individual who can affect or is affected by the achievement of an organization’s purpose. There are two types of stakeholders, these are internal and external stakeholders. Internal stakeholders  consist of managers, shareholders, employees and directors. While external stakeholders consist of the government, competitors, customers, suppliers, pressure groups etc. 

 Stakeholder Theory - http://www.fsu.edu/~pea/Stakeholder_Theory.html