Importance of PESTEL Analysis for Organisations

This article discusses the importance of conducting PESTEL analysis for organisations to understand the external factors affecting their business activities. It explains how PESTEL analysis helps in identifying and examining factors such as political, economic, social, technological, environmental, and legal factors. The article also highlights the advantages and disadvantages of using PESTEL analysis.

Business Environment
Table of Contents

INTRODUCTION.................................................................................................................................3
TASK 1.................................................................................................................................................3
Examine how your chosen company is governed and structured.......................................................3
TASK 2.................................................................................................................................................5
Evaluate the importance of carrying out PESTEL analysis for an organisation.................................5
TASK 3.................................................................................................................................................7
Use the PESTEL framework to analyse the external environment of your chosen company.............7
CONCLUSION.....................................................................................................................................9
REFERENCES....................................................................................................................................10
Books & Journal:.............................................................................................................................10

INTRODUCTION
Business environment Is a broader and wider concept which is need to be understood
as well as adopted by organisation in most efficient way so that goals and objectives are
achieved with proper manner. Tesco largest supermarket and Multinational Corporation and
headquartered in UK. The company deals in variety of products such as cosmetics, groceries,
consumer goods etc. Tesco is a globally located organisation and is also considered as a
business leader in the supermarket industry. It is defined as combining of internal and
external factors that affects the functions of operations and other activities of business as well
as regulations. This report includes company governed and structured, importance of
PESTEL Analysis in organisation, PESTEL framework to examine external environment. It
is needed to be aware and active about the factors which affects the activities at deeper level
so that decision making is being done in appropriate way. The present report give a brief
knowledge about the organisational way of identifying and examining mean external factors
affecting the business environment.
TASK 1
Examine how your chosen company is governed and structured
Tesco corporate governance
Corporate governance within the business is defined as body or set of rules,
regulations, practices and other processes which of these entities are being governed. This
also includes distribution of rights and responsibilities by all the members within the
enterprise. Governance at TESCO ensures that everyone in firm follows a proper decision-
making process so that interests of all the stakeholders are being protected (Čepel, 2018).
Purpose of Corporate governance-
 Main aim of corporate governance is to assist in achieving long term success as well
as economic growth and development.
 It has a positive impact on price of shares as because it develops the trust within the
market. (Frei, 2018).
 Moreover, corporate governance purpose is to give guidance and direction to the
owners and managers about the strategies and tactics of business.
 Also, to minimise risk, wastage of resources, risk management, miscommunication
and corruption in organisation.
 Another purpose is to create a goodwill and strong brand reputation at wider and
larger scale.

The board of Tesco PLC is supported by the board committees which ensures the right
level of attention as well as conditions are being given to the specific and particular matters.
Within the board there are different roles statements matters reserved for the board etc.
Moreover, it also includes Board, Diversity policy, stakeholders and their engagement, Tesco
subsidiary governance etc. are being considered important (Gaganis, 2019).
Organisational structure of Tesco follows the hierarchical structure in which three levels
are involved top middle and lower level and accordingly power are being used as well
distributed within the decision making process (Kováts, 2017).
TESCO Structure-
It has also seen that structure of TESCO, is been monitored and regulated by the head of
administrative staff and then comes in middle level in which board of directors and
shareholders are included. In this members which are to be known as assistant manager vice
president, general manager etc. The board meeting co-ordinate their functions as well as
operations of their members and departments and accordingly they fulfil responsibility. Then
at the low level comes regional manager executive personnel department, trading and non-
trading departments etc. It is a broader concept and it is responsibility of the HR manager to
make ensure that the procedure and activities as well as decision making is done in most
effective way without facing any problems or issues. Corporate governance is a beneficial

and integral part of organisation which helps them to increase the overall productivity by
making proper decision making and impact of factors over the business. Furthermore, it is
also necessary to understand structure with proper considerations so that duties and
responsibilities related with the all the three level top, middle as well as lower level are being
examined in appropriate way. With the help of the government structure it is easier for Tesco
to regulate & formulate the policies, procedures and other activities within the management
through which they are able to achieve their goals, objectives, vision and mission (Bhatt,
2017).
As the chosen company follows the hierarchical structure which is from top to the lower
which help them get the work done from others in most efficient way and also this creates the
control in management as well as employees. It is important to form a structure within the
organisation as it becomes easy to carry out all the functions as well as other operations in
most effectively with understanding the simplex procedure (Ntim, 2017). After a brief
analysis of above method it has been seen that forming a structure helps the entities to
understand their roles and responsibility and duties as well as how to complete a work in
proper manner. Therefore this also assist firm in examining the business environment which
affects the functions, operational activities at larger scale. It also defines the rules and
regulations which are need to be considered by everyone within the organisation and are to be
adopted by each and every department. Manager of the company needed to be aware about
the organisation as well as governance structure and other bodies which are essential for
everyone to be understood at deeper level which will help them to carry out their work in
most efficient manner. All the stated three levels are most important part of entity as they are
people who manage and maintain the critical task and projects within the business and have
the ability to match up with the committee decision.
TASK 2
Evaluate the importance of carrying out PESTEL analysis for an organisation
PESTEL Analysis is crucial model and Framework which is needed to be adopted by
the organisation to identify and examine the external factors which have a deep impact on
business activities. As the business environment is dynamic in nature & it is crucial to
understand with proper market research and decision making so that corrective measures are
undertaken at the right time. It is a time consuming process but is effectively used by
marketers and entities to analyse the external factors within the environment.
Importance of PESTEL Analysis
This framework is most important part of entity and which plays vital role in the
growth and development of enterprise. Weather businesses introducing new product or
expanding the business at new location of country this analysis is considered for developing
and implementing strategies as well as proper planning. Through this model, it is easier to
make decisions regarding the business activities and which results in use of resources and

information at optimum level. Moreover, it is also provider deep understanding of Factors
which are important and can have both positive as well as negative impact on functions and
operations of entity.
 Weather the entity is annuity based business or established one reviews of this Pestle
Analysis it help them and every entrepreneur in identifying various changes within the
business sector and which also assist in identifying of risk as well as issues in future
perspective.
 It also helps in identifying and implementing strategic planning as well as how to
expand the business using the same.
 Furthermore, framework could be used for controlling the activities and roles such as
marketing, sales and accounts.
 This model helps manager to use information and resources with correct measures and
at the time when they are required.
Advantages
Cost effectiveness- It is the cost effective method of identifying the external factors as
because in this manpower and time are required during the analysis. Also an appropriate
decision making is also required to achieve the positive result when conducting this analysis
(Gotcheva, 2019).
Deeper understanding- The main advantage of this Framework is that it gives a brief
understanding of the external factors that slows down the growth of business. When it comes
to introducing and developing of new product and increases the critical thinking as well as
deep understanding of factors such as technological trends, consumer laws etc.
Exploit opportunities- It also assists in exporting opportunities that rises and comes
from time to time due to the external factors. This also helps in generation of new ideas and
thoughts which is beneficial for the organisation (Pan, 2019).
Disadvantages-
 To implement the proper decision-making and achieve the result this framework has
to be conducted on the regular basis so that problems are examined properly.
 To conduct this model it is necessary to have a proper market research and
information inside the organisation.
 Also, it has been stated that it only gives qualitative results and do not provide any
quantitative data which is also essential for growth of business.
 Adopting of a wrong decision might cause a huge problem to the resources and
sources of entity and which will be cost expensive to recover.
 Moreover it required for proper time management and distracts other departments
from their core activities and role.
After a brief analysis of above paragraph it has been seen that it is important to use this
pestle analysis to have a proper knowledge of business environment and factors affecting the

growth which also results in making decisions properly. It is essential to be knowledgeable
about the market research is being conducted in appropriate manner without any error or
issues. Therefore, it is necessary for manager of the organisation to ensure that correct and
reliable information is being used within the framework so that problem does not occur in
near future or during the process. This model assist firm in analysing the changes which
occurs during the environment. To conduct this framework deep level of market research as
well les To comment this framework diploma of market research as a less internal analysis is
it so that only manpower and difference are being used in appropriate manner as well as at
larger scale & internal analysis is required so that manpower and resources are being used in
appropriate manner as well as at larger scale. This also reflects the changes which are to be
adopted and focused by the organisation within their management and business to carry out
their functions and other activities effectively (Kara, 2018).
TASK 3
Use the PESTEL framework to analyse the external environment of your chosen company.
In business environment to identify and examine external factor as well as understand the
environment marketers use PESTEL Analysis and model. It is a tool used by entities to
identify which factors affecting the business activities. This is the most beneficial model
adopted by the organisations to understand the changes within the environment and make the
decisions to achieve the goals and objectives. When it is used by the marketers, they need to
be active and aware about the responses which are to be made at the right time and with
proper measures. Also, this analysis gives a brief overview of business environment how it
can change the structure of management (Shatskaya, 2016). In relation with Tesco, they also
used this analysis to understand the external factors and their effect on business and such
factors are discussed below-
Political factors- This includes governmental, Labour law, text policy foreign trade
policy trade restrictions etc. It specifies the involvement of government and how it regulates
the economy. In relevance with Tesco, the impact of Brexit slows down the growth and
business operations as well as other activities of company has it become difficult for them to
run their activities at global level. It is important for an entity to respond to these changes and
anticipated future legislations to properly structure their policies and procedures accordingly.
Economic factors- This involves inflation and deflation rate interest rates disposable
income of consumers and business etc. In this involvement of government is more and it is
uncontrollable by the firm. In relation with the selected enterprise, interest rates are
changeable and dynamic within the market which makes it difficult for company to export
and import the raw materials. These factors distract the entities from their roles and
responsibilities which are to be considered at priority level.
Social factors- Then further comes the social factors in which it includes culture religion
belief attitude of the individual, population growth, age distribution gender etc. These are the
most important elements which are to be considered by the entities to achieve the overall

growth and development as because they have a deep impact on organisational structure. In
relevance with chosen enterprise, their target they market on the basis of demographic
variables and age distribution. This helps them to identify and examine the potential
customers as well as market (Stoyanova, 2017).
Technological factors- These factors involved use of advanced software and
hardware artificial intelligence and tools as well as equipment. With the changing period of
time technology has been become necessity and is being used by every individual. In relation
with selected entity, they also have been digitalize themselves through digital platforms and
use updated online management system which help them to feed and store the customer
information as well as data.
Environmental- Then arises the environmental elements in which it includes
pollution waste management weather temperature etc. By focusing on such factors on
addition increases the goodwill and fulfil their corporate social responsibility. In context with
Tesco, focuses on waste reducing and use natural ingredients within their resources also they
adopt the friendly materials.
Legal- This includes contract, agreement, mutual decision which is enacted by the
law and legislations. It is important to focus on such elements have a proper decision making
during the process. In relation with choose an entity they have a knowledgeable legal team
and department which keep them up to date about the changes in government rules or
regulations. This help entity to run their business without any problem or facing legal issues
and this also assist them in in implementing positive relation with the government (Rahman,
2019).
So, the above paragraph states that distended factors have a deep impact on
organisational activity and structure and it is responsibility of the manager to be aware about
search elements so that necessary decisions are taken at the right time.

CONCLUSION
After a brief analysis of above report, it has been concluded that business environment
is important for corporation to consider that their top priority level. This report gives a brief
knowledge about the external factors affecting the entity and their functions as well as
operations. Furthermore pencil has been considered as important tool and is being used at
larger scale. Moreover, governance and organisational structure is also essential to be
understood so that who is the owner, board of director, CEO etc. important people are being
analysed.

REFERENCES
Books & Journal:
Čepel, 2018. Business environment quality index in the SME segment.Journal of
Competitiveness.
Frei, 2018.Incumbents in the Energy Transition: how Electric Utilities adapt to their
Changing Business Environment(Doctoral dissertation, ETH Zurich).
Gaganis, 2019. Culture, business environment and SMEs' profitability: Evidence from
European Countries.Economic Modelling,78, pp.275-292.
Kováts, 2017. The pendulum strikes back? An analysis of the evolution of Hungarian higher
education governance and organisational structures since the 1980s. European
Educational Research Journal,16(5), pp.568-587.
Bhatt, 2017. Unit-3 Governance and Organisational Structure of IGNOU.
Ntim, 2017. Governance structures, voluntary disclosures and public
accountability.Accounting, Auditing & Accountability Journal.
Gotcheva, 2019. Governance for Safety in Inter-Organisational Project Networks. InSafety
Science Research: Evolution, Challenges and New Directions(pp. 39-55). CRC Press.
Pan, 2019. PESTEL analysis of construction productivity enhancement strategies: A case
study of three economies.Journal of Management in Engineering,35(1), p.05018013.
Kara, 2018. A contemporary approach for strategic management in tourism sector: pestel
analysis on the city Muğla, Turkey.İşletme Araştırmaları Dergisi,10(2), pp.598-608.
Shatskaya, 2016. PESTEL analysis as a tool of strategic analysis in international
markets. SCOPE ACADEMIC HOUSE B&M PUBLISHING, p.47.
Stoyanova, 2017. Analysis of the External Environment of Green Jobs in Bulgaria.Economic
alternatives, (1), pp.122-136.
Rahman, 2019. PESTEL analysis of Germany.