Importance of PESTEL Analysis for an Organisation

This article discusses the importance of PESTEL analysis for an organisation in strategic planning, identifying threats and opportunities, and maximizing profit. It also explores the influence of PESTEL analysis on Pearson Plc, a multinational publishing and education company.

BUSINESS ENVIRONMENT
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK1.............................................................................................................................................3
Evaluation of company structure, management and its governance...........................................3
TASK 2............................................................................................................................................5
Determine importance of PESTEL analysis for an organisation................................................5
TASK 3............................................................................................................................................8
State influence of PESTEL analysis on chosen organisation......................................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
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INTRODUCTION
Business environment is a collection of micro and macro factors which can create an
impact on business. Such internal and external factors affect operations of company which can
directly or indirectly influence the business environment. Through scanning business
environment, an organisation can identify and evaluate opportunities, threats, utilize resources,
strategically plan and gain profit from their operations (Akhtar and Sushil, 2018). Business
environment involves suppliers, competitors, customers, investors, media and others. Pearson plc
is a learning company which operates in 70 countries. Pearson Plc was founded by Samuel
Pearson in 1844 in London, UK. Pearson plc aims to shape the future of learning and to provide
education to people which will help them in living everyday. This project report is based on all
micro and macro factors of an business environment and marketing approach such as PESTEL
analysis is used for analysing such factors and the importance of this analysis for the
organisation.
TASK1
Evaluation of company structure, management and its governance
Overview and history of company
Pearson Plc is an British multinational organisation that operates as a publishing and
education company. Pearson Plc was founded in England by Samuel Pearson. Person Plc
operated as an construction company from 1840's till 1920's through which they aim to provide
services related to building and engineering. After closing construction business in 1920's,
Pearson Plc started operating as publishing company. Pearson Plc is running as one of the largest
education company. Pearson Plc aims to help people and improve their living standards and lives
through learning. Pearson Plc focus on forming strategies through which they can provide
personalised learning at each stage (Anderson and et.al, 2017). Pearson Plc aims to enhance
employment rates through enhancing the skills and knowledge of the individuals through
promoting learning strategies and activities that can enhance the living standards of all
individuals. All revenues earned by Pearson Plc has been increased from past three years from
2017 to 2019 as 66% of total revenues of Pearson plc are digitally enabled.
Organisational structure of Pearson Plc
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Pearson Plc follows hierarchical organisational structure in which chain of command is
followed from top management to general employee's. The top management hold power and
authority which can be delegated to their subordinates. The CEO of Pearson Plc and other board
of directors holds maximum authority and power through which they can maximize
organisational success and maintain goodwill of the business. Pearson Plc have appointed several
top management employees who can contribute in achievement of organisational goal and
delegate roles and responsibilities to all subordinates and general employees working under them
(Barr and et.al, 2018). By following hierarchical organisational structure, Pearson Plc focus on
maintaining effective flow of communication by following top to down organisational structure
through which the business can share all necessary information and valuable data in most
effective manner and gain competitive advantage from their operations. Through strategic
planning and implementing strategies, top management aims to direct and guide their
subordinates through which all employee's can contribute towards the achievement of
organisational goal and enhance productivity and efficiency of business. By following the
hierarchical organisation structure, Pearson Plc communicate with all employee's through
following an clear line of communication which help business in building an clear picture of
authority. This organisational structure helps Pearson Plc in delegating authorities within an
organisation through multiple layers. Hierarchical organisation structure help Pearson Plc in
motivating all employee's of organisation through motivating them and encouraging them to
participate in all business activities. In context of Pearson Plc, business followed this
organisational structure through which they can recruit employee's based on their specialization
through which they can perform effectively and organisational goal can be achieved. This
organisation structure also help Pearson Plc in building a career path for all employee's within an
organisation through which they can motivate employee's and retain all talented candidates with
the business for long span of time. This organisational structure is an control oriented approach
through which Pearson Plc can deliver their message accurately and provide valuable products
and service in marketplace.
Board of Directors and executives of Pearson Plc
Pearson Plc have appointed 12 Board of Directors through which organisation aims to
provide valuable services and gain success from effective operations of an organisation (Beatty,
Samuelson and Abril, 2018). Board of directors of Pearson Plc are highly qualified and have
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good experience in carrying out all operations of organisation successfully. Several duties are
carried out effectively by Board of Directors through which they can make business earn
maximum profit and promote learning for enhancing standard of living. Pearson Plc have 6
executive directors who work with an aim of providing valuable services, implement strategic
plans which are cost and time efficient. Executive directors acts as motivators through which
they can enhance overall performance and productivity of organisation. The learning and
education organisation, Pearson Plc have appointed 6 non-executive directors who need to
perform all necessary functions that are required for strategic planning and they must show
commitment for achievement of success as the executive directors possess. Andy Bird is current
CEO of Pearson plc who have been appointed from 19 October, 2020. Sidney Taurel have been
appointed as Chairman of Pearson Plc since January, 2016.
TASK 2
Determine importance of PESTEL analysis for an organisation
PESTEL analysis is a framework through which a business can evaluate all micro and
macro environment factors which can influence an business environment. The initials stands for
Political, Economical, Social, Technological, Environmental and Legal factors are all responsible
factors which can influence an business environment. With the help of PESTEL analysis, a
business can analyse external factors, which will directly or indirectly create an impact on all
operations of an business (Boone, Kurtz and Berston, 2019). Through this marketing approach, a
business can enhance their business growth, develop plans and strategies and take an effective
decision for business through which they can achieve competitive advantage. Each external
factor plays an important role in the functioning of a business, all responsible factors are
explained below:
 Political Factors- Such factors are related to government interventions in an economy or
an influence of government on the operations of a business. Political factors include
political stability, policies, foreign trade or tax policy, trade restrictions, employment
laws, safety regulations and other factors which can influence the functioning of a
business directly or indirectly (Chasdi, 2017). Such political factors help a business in
monitoring and assessing the potential market through which a business can gain
competitive advantage. These factors help business in minimizing risk, earn more
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revenues, create an positive impact on international market and it will also enhance the
overall GDP of an economy. These factors help business in making marketing policies
through which an organisation can gain competitive advantage.
 Economical factors- These economical factors influence the performance of a business
which can affect the overall economy and profits that will be earned by an organisation.
The economical factors that have been monitored and evaluated using this marketing
approach are interest, employment and unemployment rates, material cost and foreign
exchange rates. Such factors directly or indirectly influence business environment for
long-term and can also create an impact on supply or demand and on buying potential of
all consumers (Das and Kundu, 2018).
 Social Factors- These social factors of an business environment help an organisation in
identifying emerging trends, consumer demands, cultural trends, family demographics,
lifestyle and attitude changes. Social factors such as age, income, safety and other aspects
plays a crucial role in the functioning of targeting potential customers and marketplace.
Such social factors are important to be monitored and analysed, as it help an organisation
in analysing influence of such factors on sale of the products, on revenue and profits that
will be earned by an organisation.
 Technological Factors- These technological factors create an impact on the decision
making of an organisation which are related to planning of ideas and manufacturing of
new product. These factors are related to the innovation and development of technology
and also focusing on various approaches through which a business can distribute,
manufacture and logistics.
 Environmental Factors- The environmental factors are related to pollution targets,
incline in scarcity of raw materials, conducting all business practices ethically and
enhance sustainability of a company. These factors are important for a business to
analyse as it will help an organisation in making effective decisions through which
growth and success of a company can be enhanced (Duca and Gherghina, 2018).
 Legal Factors- Such legal factors of an external environment which are analysed through
this approach are related to the health and safety, consumer rights, product labelling and
safety and aims to provide equal opportunities to all individuals. Legal factors of an
business environment plays a crucial role as it helps in making managerial decisions and
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also help business in creating boundaries and helps to focus on all necessary rules and
laws that needs to be followed.
Some of the importance of PESTEL analysis for a business are mentioned below:
 Identification of responsible factors- With the help of PESTEL analysis, an
organisation can identify and analyse responsible factors such as political, economical,
social, technological, environmental and legal factors which can create an impact on
functioning of the business and on growth of an organisation. Significant changes in these
factors can affect the business environment which needs to be identified and that can be
done through pestel analysis (Eling and Schaper, 2017).
 Identification of threats and opportunities- PESTEL analysis is a marketing tool which
helps an organisation in identifying all threats and opportunities that can be faced by an
organisation through scanning business environment by monitoring all activities of
market. The timely identification and evaluation of all opportunities can help an
organisation in achieving success from their functions. Through timely identification of
all threats can help a business in preventing barriers and conflicts which can affect an
organisation.
 Helps in strategic planning- PESSETL analysis is an marketing approach through
which a business can identify all consumer needs and demands which will help an
organisation it planning strategically and gain maximum profit from their operations that
will be carried out. Through this marketing approach the business can strategically plan
their operations through which they can grow and expand their business in the market
and earn maximum profit from their operations.
 To earn maximum profit and revenues- By strategically analysing and scanning a
business environment, an organisation can maximise the profit from their operations and
functions performed by an organisation (Fernandes, 2017).
 Better understanding of the environment- This marketing technique helps an
organisation in understanding an business by analysing all market and consumer trends
through environmental scanning and monitoring all demands and needs of the consumers.
 Cost effective methods- PESTEL analysis help an organisation to opt cost effective
methods for the functioning of a business operations by accurately organizing the inputs
and focusing on all valuable feedbacks.
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TASK 3
State influence of PESTEL analysis on chosen organisation
The influence of all external factors on business environment of the Pearson Plc have
been analysed with help of marketing strategy, PESTEL analysis has been explained below:
Political Factors: The political factors which create an impact on all business
environment of Pearson Plc are:
 Political stability: Through political stability in an business environment, a business can
predict the market growth and all market trends. In context of Pearson Plc, such political
factor influence growth of business and it also limits all opportunities through which they
business can focus on expansion (Gaganis, Pasiouras and Voulgari, 2019).
 Protest and governance system: Pearson Plc must identify such protests created by
pressure groups and worker unions who can help a business in forming policies. The
business can achieve all goals and objectives which are long term and international
business organisation can be effectively managed.
 Corruption: All corrupt and bureaucratic activities create an negative impact on business
activities such as contracting, licensing and different fraudulent lawsuits. These political
factors affect the sustainable development through destabilizing an society, damaging
justice system and other responsible factors which can influence an business environment
of Pearson Plc.
 Frequent changes in government policies: Due to frequent changes in the government
policies and uncertainty in such business environment, it can affect business
performance. In context of Pearson Plc, an organisation must identify all latest trends
and necessary changes in the government priorities as it will create an impact on
development of an organisation (Hamilton and Webster, 2018).
Economical Factors: The economical factors which create an impact on all functions
and operations of Pearson Plc are stated below:
 Employment rate: Pearson Plc abilities of long term strategies can be determined through
analysing the GDP growth rate. Operation and functioning in such business environment
can reduce cost of production of Pearson Plc. These factors can also influence profits and
international trades of an organisation.
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 Economic structure: Economic structure of Pearson Plc can be affected through
persuading economic structure of the business.
 Economic cycle: These economic factors create an direct impact on organisation's
performance and provide numerous opportunities for Pearson Plc. The company also
focuses on enhancing growth potential and aims to develop the infrastructure of an
organisation.
 Labor conditions: Through determining labor demand and supply, it will help Pearson Plc
in evaluating the wage rate and supply of all skilled personnels. Through analysing these
factors, Pearson Plc will enhance the business performance, productivity and attract and
retain talented workforce (Hillary, ed, 2017).
Social Factors: The social factors which can influence on functioning of Pearson Plc are
mentioned below:
 Demographic patterns: Through monitoring and evaluating demographic patterns such as
age, socio-economic variables will help Pearson Plc in effectively analysing and choosing
the right market segment through which the growth potential of business can be
enhanced.
 Equality and authority distance: The factors influencing Pearson Plc will help business in
performing effective business management practices through entering in such markets
that hold high or low power distance. By rapidly increasing inequalities in such countries,
it can influence the power structure of Pearson Plc.
 Class distribution: Pearson Plc must develop local teams and partnerships by which they
can understand the attitude of society by forming strategic marketing strategies. These
socio- cultural factors plays an important role in productive functioning through
international marketing managers.
 Spending potential: These factors are related to the buying and spending potential of
consumers in such market. Pearson Plc must analyse all consumer interest through which
they can fulfil the demands and offer variety of product (Khajeheian, Friedrichsen and
Mödinger, 2018).
Technological Factors: Technological factors which can influence the functioning of
Pearson Plc are mentioned below:
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 Digital marketing: Use of social media is an creative approach of marketing that has been
adopted by Pearson Plc for developing information and communication technology.
Pearson Plc use social media through which they can enhance the performance, promote
their brand and conduct effective campaigns (Kwilinski and et.al, 2019).
 Cost structure: Such factors affect value chain or cost structure of Pearson Plc through
examining investments that are made by the competitors on micro and macro level.
Through investing in such technologies, business can enhance performance, maximize
profits and gain competitive advantage.
 Product life-cycle: By adopting various technologies, the life-cycle of developing new
products has been shortened as the products can be developed easily and supply chain
management holds more authority. Pearson Plc can enhance their range of product,
maintain healthy relationships with value chain partners and flexibility of value chain can
be increased.
Environmental Factors: The environmental factors which can influence the functioning
of Pearson Plc are mentioned below:
 Waste management: Pearson Plc must follow practices through which they can plan
effective strategies for waste management in all urban areas. Various technological
factors will help Pearson Plc in adopting strategies through which they can follow
creative recycling practices.
 Renewable technology: By using renewable technologies, Pearson Plc can invest in such
technologies through which they can gain long-term sustainability and gain competitive
advantage from their operations. Pearson Plc can enhance the stakeholder satisfaction,
build and maintain brand image through investing in technological development.
 Eco-friendly products: As per rapidly changing environment, consumer demand for eco-
friendly products have been increased through which Pearson Plc can grab more
opportunities by adopting green business practices which will help in attracting numerous
stakeholders. Person Plc must focus on manufacturing and promoting eco-friendly
products for meeting customer demand (Liu and Yang, 2019).
Legal Factors: The legal factors which can influence the functioning of Pearson Plc are
mentioned below:
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 Employment laws: Employee protection laws or labor health and safety laws regulated by
the government for ensuring safety of all labours must be adopted by Pearson Plc.
Pearson Plc must follow all laws and policies that can benefit employment health, safety
and provide equal employment opportunities which will enhance brand image of an
organisation (Luiz, Ganson and Wennmann, 2019).
 Consumer laws: These consumer laws are created by government with the aim of
protecting privacy and security of customers. Pearson plc must focus on valuing
consumer protection laws through which they can ensure the quality standards and reduce
false marketing claims.
 Property laws: These laws and regulations are designed by government for protecting
patents and ideas of organisation. Pearson Plc must aim to protect the intellectual
property rights through which they can gain competitive advantage and strengthen their
brand image in marketplace (Rezaee, 2019).
CONCLUSION
Business environment plays a crucial role in functioning and operating activities of
business through which companies can gain competitive advantage and build their brand image
in marketplace. There are several factors such as internal and external factors that can influence
an business environment of an organisation. Several external factors such as political,
economical, social, technological, environmental and legal factors are analysed through using
marketing approach such as PESTEL analysis which will help business in identifying all
significant changes that have been raised due to such factors. These external factors are
identified and analysed in this project which highlights the influence of such external factors on
the business environment of Pearson Plc. An organisation aims to provide valuable services to
numerous customers through which they can enhance the standard of living and promote
education.
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