Importance of PESTEL Analysis for Organisations

This article discusses the importance of carrying out a PESTEL analysis for organisations and how it helps in identifying external factors and making strategic decisions. It explores the case of Barratt Development PLC, a residential property development company in the UK, and discusses its governance and structure, as well as the application of the PESTEL framework to analyze the external environment.

Barratt Developments
PLC

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
TASK 1............................................................................................................................................1
How company is governed and structured..................................................................................1
TASK 2............................................................................................................................................3
Importance of carrying out PESTEL analysis for an organisation............................................3
TASK 3............................................................................................................................................5
PESTEL framework to analyse the external environment of company. ....................................5
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business environment is a sum total of internal and external factors which directly
influence over organisation decision making potentiality in order to survive within competing
marketplace for longer period of time. In today's scenario of industry, there is an intense level of
competition or challenges among companies that impact firm's productivity and proficiency
ratio. Therefore, the understanding of business environment plays a crucial role within
organisation as it lead them to acquire best position among competitors in an innovative style
(Bogetić, Vidas-Bubanja and Lekić, 2014). Moreover, internal and external environment impact
establishment in a positive and negative manner for which implementation of appropriate
analysis enable firm to attain improved level of profit margin. In regard of this report, Barratt
Development PLC has been considered which is a largest residential property development
company in UK Housebuilding industry. It is founded in the year of 1958 and operate its
business activities in 30 countries. In this study, it encompasses company's structure and
governance, effectiveness of PESTLE analysis in firm. Finally, application of PESTLE
framework to determine the external factors of company for attaining sustainable growth.
MAIN BODY
TASK 1
How company is governed and structured
Barratt Development PLC is regarded as one the world's largest housebuilder, who build
impressive and attractive houses for entire Britain in an impressive and expeditious manner. It
incorporated its business operation in the year of 1958 and it is headquartered at UK. Along with
this, it deliver the services like UK house building and commercial construction and serve across
the globe by maintaining best quality of product or services. In addition to this, the brands which
Barratt Development owns are Barratt Homes, David Wilson Homes and Barratt London as well
as one commercial business brand Wilson Bowden. In relation to its governance, it follows an
organised and structured level of management which help organisation to run their function
smoothly without any hindrances. Along with this, it has organised business model which act
them as a guidance or direction towards an achievement of business goal or objective in a better
way. Hence, the business model of Barratt Development PLC are displayed below:

However, Barratt Development PLC each activities are governed or monitored by
different manpower who are highly capable and skilled to accomplish the business objective in
an innovative style. Henceforth, the entire functional unit of Barratt Development PLC is
monitored by John Allan who is a chairman of organisation who make an effort in managing
and coordinating the managerial activities to all functional unit in a better way. Moreover, there
are Executive and Non- Executive Directors who are obliged to manage and coordinate day -to-
day business function. In addition to this, Mark Clare who is a Chief Executive of company as
well as David Thomas, Group Finance Director who manages all kind of information related
to finance. Additionally, Barratt Development Board of Executives are lead by David Thomas,
Steven Boyes and Neil Cooper who determine market condition or trend and according to that
passes information to its subordinate with an aim of achieving determined objective in a better
manner (THE FUTURE OF HOUSEBUILDING, 2019). Furthermore, this Board of members re
responsible for various activities like effectiveness, leadership, accountability, stakeholder
Illustration 1: Business Model of Barratt Development PLC

engagement, remuneration, legal construction and so on. However, with the help of such
effective pool of workforce enable Barratt Development PLC to place their brand in a better
position and also to come up with novel ideas or technologies that lead them to gain competitive
advantage among competitors.
Structure of Barratt Development PLC
The aspect of structure refers to those areas which empower an organisation to manage,
control and direct each and every functional unit with an aim of acquiring best position within
the competing marketplace. The structure which an establishment follows is hierarchy in nature
which empower manger to identify its personnel capabilities or weakness and based on that
delegating them their roles and responsibilities. With the help of such activity, it motivate each
manpower to put their best contribution towards an attainment of sustainable productivity and
profitability in a innovative manner (Clark, Zera and Behmer, 2015). IN addition to this, it help
them to bring better coordination and collaboration among team members that motive them to
utilise available resources for obtaining profit maximisation within existing industry.
Furthermore, its internal process are highly effective which help them to cope up with all sort of
challenges or threat as well as lead them to grab every growth opportunity in order to enrich
volume of sakes before a pool of competitors in an innovative style.
TASK 2
Importance of carrying out PESTEL analysis for an organisation
The combination of internal and external factor form a business environment that effect
positively and negatively over company's brand value and sales growth in competitive
marketplace. Hence, internal aspect are those which take place inside the organisation and it is
controllable by organisation in a smooth manner. Some of the example are employees,
employers, structure, trade union and many more, as there whole activities occurs within the
premises of establishment. On the other hand external factor are those which carry out in outside
of the organisation and its beyond the control of company. Some of the elements which
encompasses under external factor such as government, competitor, customer, supplier and so
on. However, application of suitable action help an enterprise to gain competitive and aggressive
position in competitor industry at a desired duration. Therefore, there are various framework or

tool which is concern with examining the current or emerging trend of marketplace as well as
enable enterprise to obtain profit maximisation with an optimal utilisation of resources.
IN addition to this, PESTLE analysis is regarded as one of the integral approach which is
mainly deal with identifying external factor and also empower company to implement best
strategic decision for the attainment of improved level of productivity (Skorczynska Sznajder
and GIMÉNEZ MORENO, 2016). Moreover, the concept of PESTLE analysis is a business
analysis technique which comprises six external factors i.e. political, technological, legal,
environment, economical, social with an aim of enabling company to place their brand in a
competitive position in an innovative and creative style. In relation to Barratt Development PLC,
the industry where it operate its business operation is highly competitive and high level of rivalry
among companies that directly influence its ability to obtain sustainable growth and development
in a better way. Thus, the implication of PESTLE tool within Barratt Development PLC assist
them to cope up with all sort of existing and upcoming challengers or threat and can enhance the
profit margin ratio. Some of the importance of PESTLE analysis which has been identified by
Barratt Development PLC management before implying into their managerial and operation
function which is explained below:
Identification of market: This aspect is viewed as one of the basis element for every
form of organization as it knowledge of marketplace help firm to survive among competitors for
long period of time. However, the foremost effectiveness or reason which empower
establishment to adopt PESTLE analysis is that it assist company to determine its present and
upcoming industry (Hussain, Ismail and Akhtar, 2015). Moreover, it also lead them to take
corrective course of action in regard of acquiring best position within competing market. In
context of Barratt Development PLC, usage of PESTLE enable them to understand various threat
from different external factors like political, economical, legal social, environmental, technology
and etc. Along with this, it motive Barratt Development to develop a productive strategic
planning for enhancing their market share or size in an improved way.
Cost Effectiveness:The another component which demonstrates its importance within
organisation is that it is a cost effective approach as it only take less time and cost to carry out
entire activities in an amended manner. Therefore, this function aid Barratt Development to
enhance its sales performance and also can improve their overall productivity ratio.

Exploit Opportunities: This feature signifies that PESTLE analysis asst establishment
enormous opportunities which help them to grow and develop their profitability ratio. For
example, in relation to Barratt Development lower interest rate within real estate industry is an
economic factor which generate an opportunity to increase demand for housing, as housing loan
get cheap because of low interest rate.
Therefore, the above explanation highlights that PESTLE analysis is an important
approach for Barratt Development PLC as it aid them to identify market trend and also assist
them to grab all kind of growth opportunities in order to gain competitive advantage in an
improved style.
TASK 3
PESTEL framework to analyse the external environment of company.
As per the earlier discussion, it has been noted that PESTLE analysis is an important
phase within an organisation as it help them to handle or control every external factor in an
effective and efficient manner without any hindrances. Therefore, Barratt Development PLC
makes an initiative in adopting PESTLE framework within its functional unit which are
discussed below:
Political: This factor encompasses government rules, regulation, political stability,
policies, procedure and etch which effect enterprise capability in surviving among rivalries in an
competitive way. Recently, UK came across with an introduction of Brexit within its industry
which totally modify or alter the working process of an organisation and it also impact
negatively over Barratt Development PLC to maintain its brand value within housebuilding
sector. However, company take an initiate to tackle over this negative impact by adopting or
acquiring all kind of alteration or changes into its internal or external policies, rules, regulation,
activities (Khan, Alam and Alam, 2015). With the help of such action, it help Barratt
Development PLC to gain positive response from targeted customer as well as aid them to
enrich its housebuilding and commercial development business sales performance in an amended
manner.
Economical: IN this determinant, it is related with those aspect which comprises interest
rate, inflation or deflation ratio, economic growth, disposable income of consumers and so on
that effect firm's decision making process and also productivity rate. However, in recent years,

UK has gone through the severe recession period which negatively influence Barratt
Development volume of sales among competitors. Therefore, for overcoming such negative
effect, organisation makes an attempt to examine the market trend as well as consumer income
level and based on that they take corrective course of action. Hence, Barratt Development
decrease its house holding and commercial land price which help them to retain its existing
customers and also empower them to attract new consumer towards the brand that help them to
sustain competitively in UK house holding industry.
Social: This aspect is concern with those element which includes demographic factors
like age, gender, cultural norms, customer taste and preference and etc. that impact firm's
productivity ratio. In addition to this, there was a huge degree of demand among UK population
regarding building location and design which greatly influenced Barratt Development PLC
decision making ability. Therefore, company took this challenge as an opportunity to grow as
they adopted all kind of innovative and creative design into its house holding projects which
assist Barratt Development to capture the large number of consumer towards the brand.
Moreover, due to the implication of such action, it enable establishment to render increased level
of productivity as well as satisfaction among targeted customer which improves its brand value
within competing industry in a given time frame (Laudan, 2015).
Technological: Under this factor, it involves innovative technologies, advancement,
modern ideas or techniques and so on that impact company's growth strategy in an existing
marketplace. Hence, in context of Barratt Development, UK population was in highly demand of
innovative or advanced technologies which challenged or imposed threat over firm's sales
performance and productivity ratio. Thus, in order to cope up with such challenges in an
effective manner, Barratt Development makes an effort to determine the customer demand or
need as well as marketing environment. With the help of such initiation, it help them to develop
different online application which facilitate consumer to gain information about price, location,
design, feature of houses and also other commercial elements. Moreover, it lead company to gain
competitive advantage and also to enhance its market size or share in an innovative or productive
style (Ritchie and et.al., 2016).
Legal: Under this component, it is concern with those element in which it states
government legislation, regulation, rules, policies, procedures, rules which help organisation to
accomplish its desired objective or goal in a better way. However, in relation to Barratt

Development PLC, they always make an effort to comply with all type of policies, laws, rules
within its managerial and operational function. With the help of such initiation, it lead them to
reduce an intervention of government into their business premises and it help them to enrich their
brand value or profit margin in an improved manner.
Environmental: This factor is link with those elements which comprises eco friendly
product, measures to control pollution and many more which influence establishment decision
making process. Hence, In regard of Barratt Development PLC, it undergoes with an issue of
high demand of UK population regarding environmental friendly measures which challenged
organisation to attain sustainable productivity and growth. However, in order to overcome such
rivalry, Barratt Development Plc takes an initiative in developing measures or steps towards
environment like disposal of waste, protecting surrounding from pollution, tree plantation and
many more. Due to such activities, it enable Barratt Development PLC to enrich its brand value
and also to generate positive response among UK population towards the company in an
improved or amended mode (Rastogi and Trivedi, 2016).
Therefore, the above mentioned PESTLE analysis help Barratt Development PLC to
determine its external macro factors as well as lead them to implement best strategic decision in
order to place the brand in a aggressive and competitive position in a prescribed time limit
without nay hindrances.
CONCLUSION
It has been summarised from the preceding discussed report that every organisation is
surrounded by its own environment which effect their ability in attaining improved level of
proficiency ratio. Moreover, an establishment has governed by certain policies or structure which
lead them to accomplish their pre defined goal within a prescribed time limit. Additionally,
PESTEL analysis plays a crucial role in an organisation as it enable them to examine its external
factors in order to acquire best position in competing marketplace among competitors.

REFERENCES
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Online
THE FUTURE OF HOUSEBUILDING, 2019.[Online]: Available Through.
<https://www.barrattdevelopments.co.uk/>