Pest Analysis in Business Environment Essay

Table of Contents Part 1. PEST Analysis in Business Environment 1. Introduction 2 1. 1 PEST Analysis Execution2 Political Environment2 Economical Environment2 Social Environment3 Technological Environment 3 Part 2. Case Study On Organizational Business Strategy 2. Vodafone – Using Technology To Improve Economies ……………………………………………………. 4 2. 1 PEST factors affecting in different ways…………………………………………………………………….. 5 Political Impact on British Airways5

Economical Impact on McDonald’s5 Social Impact on McCain5 Technological Impact on Tesco Plc 6 Part 3. Understanding of Service Sector Management ( Personal Reflection ) 3. CONCLUSION. 7 3. 1 Vodafone SWOT analysis………………………………………………………………………………………… 7 Problems and Solutions8 REFERENCES………………………………………………………………………………………………………………………. 9 PART – 1 “If an organization is to be successful it must either fit into the environment in which it operates or manipulate it to suit its objectives.

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Discuss the implications and relevance of these approaches using an established organization to illustrate your arguments. ” INTRODUCTION PEST Analysis is a simple, useful and widely-used strategic planning tool that helps to evaluate Political, Economic, Socio-Cultural and Technological environment. It involves an organisation considering the external environment before starting a project. As such, it is used by business leaders worldwide to build their vision of the future. It is important for different reasons.

First, by making effective use of PEST Analysis, it ensures the job to be lined up positively with the powerful forces of change that are affecting our world. By taking advantage of change, it’s possible to spot opportunities and exploit them in the wider business environment. Second, good use of PEST Analysis helps an organization to anticipate future difficulties and take action to avoid or minimize their effect. Thirdly, PEST is useful when the business must start operating in a new country or region.

Use of PEST helps management break free of unconscious assumptions, and helps quickly adapt to the realities of the new environment. PEST ANALYSIS EXECUTION A PEST analysis will need to be performed for all countries of interest. Below are the interpretations of all four factors of PEST Analysis:- Political It refers to a governmental policies which influenced by the economic situation in a country. It deals with a macro aspect of an analyse which involved key changes to the policies of a country. It has influence to the business sectors as well as confidence of investors.

Such policies may include incentives, tax, quota, etc. On the other hand, the political stability in the country has great influence to the confidence of investors.. Example: Reduction in import duty of floor tiles for ceramic industry can have its fair share of influence to the industry. It is viewed as positive to the local ceramic manufacturer as imported tiles are more costly. However, it is negative impact to importers such as traders of such a product. 2) Economic This economic factor is an area where macro economic environment can affect the business outlook and its competitiveness.

Some key factors of macro economic are economic growth, exchange rate, interest rate, etc, All these factors have an effect to the profitability and cost of doing business in that business industry. Example: Unstable interest rate give rise to uncertainty to the cost of a business and it can be viewed as a Threat to do business. 3) Social This is Social factor that reflects the cultural aspects of a country. It includes growth rate in population, age group distribution, job preference etc. All these factors affect the workforce management include productivity and cost.

Example: Switch in job preference from heavy to light effort has great impact to the business sectors especial for those in the heavy industries. Workers tend to shy away from working there 4) Technological The Technological factor which is easy to validate as it is more tangible than the earlier three factors. It deals with environmental aspects, technology incentives such as Research & Development incentives, automation reinvestment, high capital setup and rate of technological change in certain business. Example: Changes of consumer preference toward high quality product which can be produced with higher technology.

The following grid can be used to record each factor:   * Government Stability * Government type * Freedom of press, Rule of law,Bureaucracy, Corruption * Regulation/De-regulation trends * Social/Employment Legislation * Likely political change| * Business cycle change * Growth, Inflation & Interest Rates * Unemployment, Labor supply, Labor cost * Disposable income/Dristribution * Globalization * Likely Economic Change| Figure 1: PEST Analysis in Diagrammatic Format

POLITICAL ECONOMICAL * Population Growth/ Age Profile * Health , Education Social Mobilty * Employment Pattern/Attitudes to work * Press, Public opinion, Attitudes and Taboos * Likely Socio-Cultural Change| * Impact of Emerging Technologies * Impact of Internet and reduced Communication Cost. * R&D Activity * Impact of technology Transfer * Likey Technological Change| SOCIAL TECHNOLOGICAL Source: www. businessballs. com, Redrawn by Author PART – 2 STUDY ON VODAFONE – USING TECHNOLOGY TO IMPROVE ECONOMIES

Vodafone is a leading international mobile communications company with interests in 27 countries and partnership agreements with a further 40 countries, including Safaricom in Kenya. It has over 71,000 employees throughout the world and in 2008 had more than 289 million customers. ( Vodafone, 2009) In the UK, more than 19 million people use Vodafone services. Its vision is to be a world leader in mobile communications. It takes a responsible approach to business. This is closely linked to its business strategy. Vodafone changes its approach according to the market it is working in.

Some markets, such as the USA and Europe, are saturated (i. e. most people have mobile phones and want extra features like games or music). Vodafone also looks for new markets like Africa to develop new business. This study shows how Vodafone’s technology affects developed and developing economies. Developed economies, such as the UK, produce large numbers of goods and services. People have a choice and expect more advanced products. Vodafone therefore needs to set itself apart from competitors. Vodafone’s latest mobile systems respond to this demand by being customer-focused.

Vodafone brings out new products that people want and takes a responsible approach to business. Some developing countries, like Romania, once had planned economies. They may face problems in moving to a mixed economy and find it hard to improve. Some developing countries such as Kenya may have market economies. However, both types share certain features that hold them back: • People live on very low incomes. • They have poor transport and other systems (infrastructure). • The communication systems are poor. • They have basic levels of health care and education. • The Gross National Product (GNP) is low.

Technology allows people to connect with each other. This, in turn, supports economic progress. Improvements in technology in developing countries like Kenya have had a positive effect. Many wage earners work in townships and find it hard to contact their families in the countryside. They need to send money home. Vodafone saw an opportunity to improve how money is moved. Vodafone partnered with Safaricom (another telecommunications company) and set up a system called M-PESA. This provides safe, secure money transfers using a credit system – like a pay-as-you-go mobile phone top-up.

Vodafone uses the capabilities of the mobile phone to bring value to both developing and developed economies. The impact of mobile technology on developed markets over recent years has been immense and has focused on providing added value to customers through new and improved functions and features. By comparison, the impact of technology on emerging markets such as Kenya has provided a real lifeline both to individuals and to small businesses. This has also helped socially by helping people to take advantage of employment opportunities away from their home towns and villages. PEST FACTORS AFFECT COMPANIES IN DIFFERENT WAYS

Political Impact The start of the millennium is turning out to be some of the most difficult times that the airline industry has ever faced. The events of terrorism attacks in September 11, 2001 in New York and July 7, 2005 in London along with the wars in Iraq have caused an unprecedented crisis and political instability. The events have caused the introduction of new security regulations from the EU and US that come into effect in summer 2006 and a fall in customer travelling confidence. Governments have controlled where airlines can fly and aspects of their product planning and pricing policies.

In recent years, substantial regulatory reform has taken place, giving companies more opportunity and increasing the market competition. Specially the political situation in Iraq has helped to drive oil prices to a record high and for BA, the oil price rise has added ? 100 million to their costs. In response, the cost of fuel surcharges has become always at risk. BA is in the business of carrying people to and from worldwide destinations for both business and pleasure. As the international economy is getting down, business trades less and fewer business people using planes. Equally, people are choosing less ‘exciting’ holidays.

Economical Impact Globalization is necessary for success and survival in the worldwide market. By the end of the twentieth century, the list of Fortune 500 companies was no longer only United States corporations due to an increase in international companies joining the list (Global Capitalism, 2005). As a leading food service retailer, McDonald’s joins those corporations with restaurants in 119 countries (McDonald’s, 2004). Important strategic decisions are a key factor to their success with consideration for both internal and external factors. When considering the foreign market, companies need to consider the risks factors.

There must be local marketing to appeal to the local consumers and also to build relationships and trust (Bateman & Scott, 2004). Therefore, the strategic planning for marketing has to be effective. McDonald’s caters its menu in other countries to the cultures of the regions. For example, in India, the non-vegetarian menu includes chicken and fish items only (Welcome, n. d. ). Beef is not on the menu in India because are considered sacred. Global marketing decisions are no different than those made domestically but the decisions are unique to each country (Sister & Sister, 2005).

Social Impact Bottom of Form | Eating habits are always changing. Currently one in four of all British potatoes consumed are eaten as chips. Recently McCain and other food producers have seen a slowdown in sales as a result of campaigns to encourage healthier eating . McCain got the message that all McCain potato products are made from simple ingredients such as whole potatoes and sunflower oil . McCain argued that these figures were very low in nature. For example, McCain’s Oven Chips contain only 5% fat, 0. 8% saturated fat and 62mg of sodium in every 100g portion(McCain2008).

They are made with only natural ingredients – specially selected potatoes and sunflower oil. A key way in which McCain has responded to changing customer tastes has been to improve the nutritional make-up of its products. All of McCain’s potato products are now pre-cooked in sunflower oil instead of regular vegetable oil to reduce saturated fats. There is no added salt in oven chips and added salt has been reduced by up to 50% ( McMcain, 2008)in other potato products. Technological Impact IT systems have played a key role in helping Tesco deliver strong profits.

The Tesco website, in which it has invested heavily in recent years, observed profits rise by 21 per cent to ? 48 million, on the back of an almost equal percentage sales rise. Online grocery orders lifted by 10 per cent to ? 7. 5 million. Advanced in-store queuing systems had improved shopping for 26 million of its customers by reducing checkout lines( Tesco PLC, 2009). The supermarket chain is using heat-sensing technology  to monitor lines at tills. It also said improved scanners, better self service tills, and checkout cameras were helping it reduce queues. Self-service checkouts now account for a fifth of all of Tesco transactions.

Having invested heavily in its supply chain, Tesco said on-shelf availability, measured through the in-store picking of tesco. com orders, had also been strengthened. Tesco has an ongoing efficiency programme, known as Step Change and involving IT improvements as well as general process efficiencies. The programme is on course to deliver savings of ? 450 million this year( Tesco, 2009) The supermarket has already taken steps to ready its technology for the Christmas sales peak, implementing ExpeTune performance management software from Macro 4 to manage its mainframe servers. Part – 3 CONCLUSION Strengths | Weaknesses| Experince and knowledge in the mobile phone business. * Multi-market and multi structure outlook on the mobile consumers and the many markets in which they are present. * Strong ability to manage change and acquisition * Immense market power, twice as big as nearest competitor| * Managerial resources thin due to rapid growth and numerous acquisitions * Low market power in Europe | Opportunities| Threats| * Restructuring and smaller acquisitions than Mannesmann. * Acquisition of Mannesmann to dominate many markets with economies of scale. | * Undervaluing themselves by overvaluing Mannesmann. Management can be overly focused on acquisitions. * Low differentiation. | A summary SWOT analysis and a Statement of problems facing the Vodafone company has been illustrated within the framework of SWOT, linking its strengths and weaknesses to the external environment and recommended solutions to these problems have been provided. Figure 2: Vodafone S. W. O. T Diagramme Source : Author A SWOT analysis of Vodafone is prepared to examine what the company does well and what aspects may need some attention (Figure 2). Also, Vodafone has many opportunities that are available to them in the future.

Just like any company though they do have threats that may pose a problem for them. Some of the main strengths of their company include the ability to manage change and acquisition, their customer service, and a tremendous market power. Although they do not have very many weaknesses, Vodafone should still work on increasing market share in Europe. Vodafone must continue to look for opportunities to expand their company in the future. The changing lifestyles of people can be an opportunity for them to penetrate the market even further and broaden their customer base. Also, Vodafone should look at other sites for possible acquisitions or artnerships. Vodafone must continue to expand internationally to keep the number one spot in this market. Threats to Vodafone’s business include the continual growth of other mobile companies and also overvaluing acquisitions. On the whole, they should keep a close eye on threats to their company and do what they can to make them opportunities for effective change. Problems and Solutions Vodafone as with all its competitors has a severe lack of differentiation. By adopting a greater focus on the customer and maintaining technological leadership, Vodafone can differentiate itself.

By maintaining a strong organizational structure through continual restructuring, Vodafone can strengthen its weak managerial resources. The expansion of markets will soon be the only way for Vodafone to continue its growth after penetrating European Union markets. The continuation of their acquisition strategy and strong managerial leadership will enable sustained growth into new markets. REFERENCES 1. Robinson, W. I. (2005). Global capitalism: the new transnationalism and the folly of conventional thinking. Science & Society, 69(3), 316.

Retrieved December 05, 2009 2. Sustar, B. & Sustar. R. (2005). Managing marketing standardization in a global context. Journal of American Academy of Business: Cambridge, 7(1), 302. Retrieved December 07, 2009 3. Bateman, T. S. , & Snell, S. A, (2004). Management: The New Competitive Landscape (6th ed). 4. Mind tools E-book, Published by Mind Tools Ltd, United Kingdom. 5. Technology helps Tesco beat crunch, By Leo King ,Published: 09:43 GMT, 01 October 2009 6. Case study on Vodafone,The Times 100 Edition 14, www. thetimes100. co. uK 7.

New Mexico State University: http://cbae. nmsu. edu/~dboje/sbc/pages/page3. html#index, Retrieved December 10, 2009 8. McDonald’s USA corporate responsibility report: 2004. (2004). Retrieved November 9, 2009, www. mcdonalds. com/usa/good/report. RowPar. 0002. ContentPar. 0002. ColumnPar 9. Case study , An analysis of British Airways Marketing Environment, Retrieved on December 08 2009, www. essayzone. com 10. Vodafone Air Touch: The Acquisition of Mannesmann , Case Analysis, Sky Huvard, Rodrigo Salcedo, Lateshia Tuppince, Matt Wentz, Lindsay Zolad, May 2007.


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