Importance of PESTEL Analysis for Business Organizations

This report discusses the importance of PESTEL analysis for business organizations and its role in identifying external factors that impact business operations. It focuses on Vodafone, a multinational telecommunication company, and analyzes its organizational structure, management, and governance. The report also highlights the significance of conducting PESTEL analysis and its application to Vodafone. It concludes with a PESTEL analysis of Vodafone's external environment, covering political, economic, social, technological, environmental, and legal factors.

Business Environment

INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
(A) An overview of your chosen company including its history and the organisational
structure. How is the company managed nationally, and/or internationally?..............................1
B) Brief discussions of how the company is governed................................................................2
TASK 2............................................................................................................................................3
Evaluate the importance of PESTEL analysis for a business organisation. Why is it important
for organisations to carry out PESTEL analysis?........................................................................3
TASK 3............................................................................................................................................4
Use the PESTEL framework to analyse the external environment of your chosen company.....4
Political factors :..............................................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business environment comprises of internal and external factors that drives organisations to
make changes in their existing policies and pre-determined plans so as to ensure long term
sustainability and profitability (What Is Business Environment, 2019). To deal with complexities
of market environment, PESTLE Analysis is most suitable to conduct which defined each
fluctuated factors that can affect either positive and negative on business operations. The present
assignment report is based on Vodafone which is a multinational telecommunication company
locating its headquartered in London, England. It owned and operates network in 24 nations in
the year 2020. The report discusses the structure and management of company along with how it
is governed. Along with this, importance of PESTLE for organisations and application of such
model on Vodafone also briefly discusses under this report.
TASK 1
(A) An overview of your chosen company including its history and the organisational structure.
How is the company managed nationally, and/or internationally?
Vodafone Plc is British Multinational organisation which is engaged in
telecommunication sector with an aim of generating huge profit. Its headquartered is located in
London, England. According to the data available on company’s website, Vodafone owned and
operated its network in 25 countries where it has networking partner with 45 nations which
increases their possibilities of sustaining into global market for longer period of time. The history
indicates that organisation has evolved themselves at a great speed where they have operated in
the field of latest market for radio technology in the field of military (About Vodafone Group.
2020). Earlier times, Vodafone works in distinct sector with the purpose of bringing
improvements in technological sector. It is important for every organisation to generate new and
innovative ways to succeed as if failed their rivals may move ahead in the competitive market.
Here, Vodafone follows matrix structure where employees are liable to report more than two
managers instead of one overseeing the activities of allotted project. It increases the productivity
and performance of employees due to getting guidance from seniors. Thus, their contribution
towards organisational goals and objectives are increased. The main benefit that Vodafone can
receive is to assist managers to identify actual problems faced by employees so that corrective
actions can be taken to resolve them and maintain a healthy working environment. Apart from
1

this, managing business is important as it assist management to identify the areas where they
need to improve to bring ahead than their rivals. For this, collecting feedbacks from both
employees as well as customers is an essential part of decision as these two provides actual
improvements that company needs to undertake in context of their offerings (Avramenko, 2012).
B) Brief discussions of how the company is governed.
Complying with the law is most important for every organisation as it makes easy for
them to run business smoothly without indulging in any legal problems. For this, understanding
of company law is important for management as it guides them how to work in any situation in
order to achieve desired goals and objectives (Berg, and Kilambi, 2014). To govern each action
within an organisation, the roles and authority of Board of Directors increases as they have prime
responsibility to take decision for bringing company ahead into rivalry market. In the context of
Vodafone, Hierarchy structure is followed in which all subordinates are liable to follow all the
rules and decisions made by Board of Directors. This drives organisation to run into market for
longer period of time without getting involved in any legal barriers (Preuss, 2017).
In the context of Vodafone, 11 directors are currently appointed who are having an
authority to make decision for betterment of an organisation. Directors are classified into two
groups which includes executive and non-executive. Executive directors have responsibility to
manage and monitor every single work within an organisation whereas non-executive director
are not actively participate in functions of business. At present, there are two executive directors
working within Vodafone whereas nine non-executive directors who performs delegated work
within an organisation (Chattopadhyay, and Bhawsar, 2017).
In an organisation, performing work on time with more effectiveness is important for
which Chairperson is responsible to set deadline along with the decision that how to complete
allotted work in given time period. In the context of Vodafone, Gerard Kleisterlee is currently
appointed as chairperson who have authority to make decisions for further improvement of an
organisation. He has been appointed as chairperson since 26th July, 2011. Alongside, Chief
Executive Officer also plays an important role as it makes decisions to boost the performance of
employees. They are responsible to give suitable guidance to any of the division if faces any kind
of problem. At present, Nick Read is the CEO of Vodafone who took responsibility since 1st
October, 2018.
2

TASK 2
Evaluate the importance of PESTEL analysis for a business organisation. Why is it important for
organisations to carry out PESTEL analysis?
PESTLE Analysis is an analytical model which is used to analyse external factors that
can have make huge impact on the existence of an organisation. Such impact can either be
negative or positive. It comprises of political, economic, social, technological, legal and
environmental. It is essential for every organisation to conduct such analysis in order to identify
fluctuated factors exist in market so that relevant changes can be done in existing policies and
plans to deal with them in more effective and efficient manner. For example, changes in taxation
policy directs management of Vodafone to re-think about their existing pricing policy and make
suitable changes accordingly (Draijer, 2020).
In present scenario, if PESTLE Analysis has conducted then there are several benefits
that organisations such as Vodafone can receive. The foremost benefit to use PESTLE model is
that it assists organisations to identify the factors that may fluctuate over a period of time so that
proper actions can be taken to deal with them more effectively. Along with this, decision of
making suitable changes in current policies and strategies according to the contingent
environment can also be done which helps organisations in retaining their strong market position.
It makes easy for management of organisations such as Vodafone to decide which plan or policy
they should cancel or add to tackle the negative impact faced from different factors of market
environment (What is PESTLE analysis. 2018).
The other advantages that an organisation can receive after conducting PESTLE Analysis is
that it helps management in gaining knowledge about the business and its potentiality on the
basis of which decision has been taken with given resources. It assists management to analyse
alternate ways to execute any task. Apart from this, there are few disadvantages which can faced
by Vodafone such as while conducting PESTLE some data are taken on assumptions that the
chances of taking decision may go wrong (Hilton and Platt, 2013).
Discussing the association like Vodafone Plc, they are needed to conduct PESTLE analysis
in view of the help it gives to the association. It is said that any of the organisation which is
performing inside the market will have the option to distinguish that how they have to take any
of the decision. The another significance for Vodafone Plc is that they are among one of global
organization where they generally attempt to extend their business and in this particular
3

conditions organization must take the assistance of PESTLE model. It is on the grounds that
organisation will have the option to distinguish that how they are expected to act in new market
and what are those plans which can permit the association to give intense rivalry to the
contention firm. Indeed, even management of Vodafone can utilize PESTLE model for
decreasing any of the superfluous costs since it surely enables the business to improve their
entire productivity in the market (Globocnik, Faullant, and Parastuty, 2020).
TASK 3
Use the PESTEL framework to analyse the external environment of your chosen company
PESTEL analysis is an analytical tool that stands for Political, Economical, Social,
Technological, environmental and Legal. It is applied for identifying, analysing, organising and
monitoring a key external factor which makes huge impact on business operations. Moreover,
there are various factors which impact the business that are discussed underneath:
Political factors :
These factors are about how government policies and actions intervene and economy and
other factors that can affect business. In the context of respected company Vodafone, company
has high growth and profit shares in UK. The stability of governmental policies and regulation is
an opportunity for company to increase the efficiency and effectiveness of business. However
demand for improved technology and technological services has grown in the country and it
could be a threat for the organization. To deal with these threats Vodafone can improve the
effectiveness of the technology for better costumer experience (Prins, and Cybercrime, 2017).
Economic factors : This defines exchange rates, interest rates, recession, inflation taxes,
demand and supply. In context of Vodafone, it expand its business into several countries and
innovating new digital technologies. Thus in UK company is facing the growth of GDP and level
of inflation rate, global crisis. Advantages : UK is providing free market to the company for its expansion which will
lead to its growth. It helps in increasing the foreign direct market investment. Disadvantages : Brexit has created certain pressures on the company which will affect
the profitability in UK. Economic activities are affecting the buying power of people
living in that region which is affecting the sales and profitability of Vodafone (Rusu, and
Roman, 2020).
4

Social factors: These factors are relented with cultural and demographic trends of society.
These factors also involved the shared beliefs and attitudes of population. Changes in
sociocultural of an economy of country have impact on sales and profitability on business of
respected company. To deal with this threats Vodafone can facilitates its costumers with
increasing speed of internet so that they can attracts costumers from different groups. Company
is developing thorough understanding of the lifestyle, beliefs, education and buying preference of
customers in country. It is an opportunity for company to grow in different social groups of the
country (Shirodkar, Strange and McGuire, 2020).
Technological factors : This refers to the variables which relate to the availability, existence,
and development of technology. In perspective of Vodafone, has introduced certain innovations
to reach its customers. In UK company is using social media platforms to create awareness and
to provide customer satisfaction. Advantages : Vodafone is using digital technology for proving discounts and promotions
to the customers. It has provided better services with effective laws in regard to
intellectual property.
 Disadvantages :In UK company is facing low technological development in comparison
with the other countries. Company should do the mapping to target the potential
customers for the growth of the business (Talamini, and et. al., 2013).
Environmental factor: It is crucial to find out PESTEL as this may supportive in acquiring
not many upgrading concern with respect to environmental factors into masses. At present,
individuals like to purchase eco-friendly items (Prins and Cybercrime, 2017). For instance: As
Vodafone has chosen to switching towards renewable resource of energy for effective supply.
 Positive impact: Due to this, they likewise focus to limit the organization wastage that
would help them in quickening business improvement just as increase clients demand.
This will enhance the overall productivity of business.
 Negative impact: The choice of switching towards renewable resources will result into
more expense to organization. It will likewise affect the financial position of an
organisation.
Economic factors: These are fundamental economy or market data which affects the
working of the organization. It includes exchange rates, interest rates, unemployment etc.
5

Positive and negative impacts of these factors upon Vodafone could be analysed with the help of
following discussion:
 Positive impact: Economic growth leads to high inflation rates which ultimately increases
the sale of products of the company such as Vodafone. Reduction in interest charges can
further help Vodafone to borrow money so that it can expand its operations.
 Negative impact: Sales of the business is affected in case of recession. Even increase in
tax rates reduces the profitability of Vodafone.
Legal factors- These factors play important role in the business operation of Vodafone.
All around the world the different governments and laws are enforced which increase the level of
control and oversight of businesses. This factor includes consumer laws, discrimination law,
copyright laws, health and safety laws and many other which can affect the working of company.
 Positive impact- Proper compliance with all the legal implications results in effective
execution of all the operations of Vodafone in UK as well as other countries.
 Negative impact- Continuous changes in legal; factors such as governmental laws may
affect functionality of Vodafone.
Thus, it is determined that, all the factors of PESTEL impact the Vodafone in both manners
positively and negatively.
CONCLUSION
It can be concluded from the above report that business environment contains lots of factors
including political fluctuations, economic stability etc. which can either impact negative or
positive on the business operations thus it is important for the management to conduct PESTLE
Analysis so as to determine the actual situation of market so that corrective actions can be taken.
Conducting PESTLE Analysis is an important for every organisations as it makes easy for
management to understand the market fluctuations and accordingly make suitable changes in
existing policies and plans. For an instance, changes in taxation policy of UK may direct the
organisation to make changes in their existing pricing policies.
6

REFERENCES
Books and Journal
Avramenko, A., 2012. Enhancing students' employability through business
simulation. Education+ Training. 54(5). Pp,355-367.
Berg, E. and Kilambi, K., Siebel Systems Inc, 2014. Method and apparatus to facilitate
development of a customer-specific business process model. U.S. Patent 8,639,542.
Chattopadhyay, U. and Bhawsar, P., 2017. Effects of changing business environment on
organization performance: The case of HMT Watches Ltd. South Asian Journal of
Business and Management Cases. 6(1). pp.36-46.
Draijer, C., 2020. Best practices of business simulation with SAP R/3. Journal of Information
Systems Education, 15(3), p.5.
Globocnik, D., Faullant, R. and Parastuty, Z., 2020. Bridging strategic planning and business
model management–A formal control framework to manage business model portfolios
and dynamics. European Management Journal, 38(2), pp.231-243.
Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Newman, C., Rand, J., Tarp, F. and Trifkovic, N., 2020.Corporate social responsibility in a
competitive business environment. The Journal of Development Studies, pp.1-18.
Preuss, L., 2017. Barriers to innovative CSR: the impacts of organisational learning,
organisational structure and the social embeddedness of the firm. In Innovative CSR
(pp. 331-351). Routledge.
Prins, J.R. and Cybercrime, B.U., 2017. Diginotar certificate authority breach’operation black
tulip’. Fox-IT, November
Rusu, V.D. and Roman, A., 2020. Starting New Business and Access to Finance: A Panel Data
Investigation. In Economic Development and Financial Markets (pp. 117-131).
Springer, Cham.
Shirodkar, V., Strange, R. and McGuire, S. eds., 2020. Non-market Strategies in Intercountryal
Business: How MNEs capture value through their political, social and environmental
strategies. Springer Nature.
Talamini, E., and et. al., 2013. Scanning the macro‐environment for liquid biofuels. Journal of
Strategy and Management.
Online
About Vodafone Group. 2020. [Online] Available Through: < https://www.vodafone.com/about>
What Is Business Environment? - Definition & Factors. 2019. [Online]. Available Through:
<https://study.com/academy/lesson/what-is-business-environment-definition-factors-
quiz.html>
What is PESTLE analysis. 2018. [Online] Available through:
<http://academicessayguide.blogspot.com/2018/04/what-is-pestle-analysis.html>.
7