PESTEL/PESTLE Analysis

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From the course by University of London

Keeping up with Change: Issues for the Finance Professional

230 ratings

University of London

Keeping up with Change: Issues for the Finance Professional

230 ratings

This MOOC identifies and explores a number of challenges to the finance professional arising from the ever changing business environment. Increasingly, financial decisions must take account of strategic consequences. The first module, Exploring Strategic Position, Choice and Action helps in doing that – setting a strategic context for planning for, monitoring and controlling projects and activities. An on-going set of challenges is found in the evolution of International Reporting Standards. The second module focuses on some recent changes in Standards, identifying the drivers for changes, and examining evolution in controversial areas such as leasing and goodwill. The third and final module, Corporate Governance, examines issues which are causing people to re-assess the nature, purpose and scope of corporate governance, and challenges to making governance function effectively. Key issues here are the move to include a broader range of stakeholders, the perennial challenge of agency theory issues, shareholder activism, changing Board structures, and challenges to internal control to better manage risk. This MOOC will be right for you if you are interested in engaging with some of the challenges facing finance professionals, even if you are not one yourself. If you are thinking about returning to study this will provide a taster of academic endeavours through reading articles, critiquing ideas, and blending theory with reality.

From the lesson

Exploring Strategic Position, Choice and Action (Part 1)

Welcome to the first topic of 'Keeping up with Change: Issues for the Finance Professional'. In this module you will be exploring the four key areas of: Strategic Position, Strategic Direction and Choice, Strategic Action and Evaluating Strategic Action. Throughout the module you will have the opportunity to apply all of you learning into context, be that based on your own organisation, or your professional experience in general. This will enabling you to apply the theoretical models we cover in the module to your professional practice.

Exploring Strategic Position, Choice and Action- Introduction to week 12:19

The Strategic Planning Process and its Stages4:06

The Strategic Lenses7:09

Porter's Five Forces8:08

PESTEL/PESTLE Analysis8:03

Meet the Instructors

Dr Sarah Warnes
Teaching Fellow
School of Management, UCL
Dr Alan Parkinson
Deputy Director (Education), School of Management
UCL, University of London
Mr Suman Saha
Visiting Academic
UCL School of Management

[MUSIC]

Continuing with our theme of assessing the external business environment.

And I want to introduce you to PESTEL analysis.

And PESTEL analysis is focused on the environment in which

the organization is operating within.

So, it is not an analysis of the organization, itself.

It's analysis of the factors which can impact on the organization.

It's important to make that difference.

Focus on the environment, not the organization.

So, six factors to PESTEL.

The first one is political.

The second one is economic factors.

The third one is social factors,

sometimes you'll read and it'll say social cultural factors.

The fourth is technological The fifth is Legal.

And finally, the second E is Environmental.

Now, looking down that list, you'll be able to see that every

organization is impacted in some way against all of these factor.

And what's really important with all these strategic management tools,

it's the quality of the assessment.

The analysis rather than the quantity.

So, when organizations are analyzing their environment,

they're only putting in the key factors that really will have an impact,

potential impact, on the strategic success of the organization.

What I wanted to do is actually apply PESTEL in this video to

a very recent merger and that's of the Kraft Heinz

company merger which came about in 2015.

Now, when Kraft and Heinz merged,

their combined value is predicted to be $21 billion.

This is a big organization.

Ranked fifth largest in the world, and

third largest food and beverage retailer in the US.

So, you may be aware of Kraft products, Mac and Cheese.

Heinz baked beans, Heinz tomato sauce.

But what we're going to do is actually apply a PESTEL analysis to this

newly merged organization.

So, when we think about the political aspects,

we have to think about where these two organizations are operating.

So, Heinz is operating on a very much a global scale.

Kraft, at the moment, is mostly focused, mostly not entirely, on North America.

So, this merged organization has to understand the political stabilities

of the different countries that they're now going to be operating within.

They need to,

if they want global expansion which is a strategy that I believe they do want.

Then, they need to think about the countries that they want to go into and

what the political ideas are in those countries.

We also need to be aware of how the government itself,

can actually impact on these organizations.

So, things like setting a minimum wage, like we have in the UK.

There's also political pressure on organizations such as this.

And again, if I can use the UK as an example,

there's talk about adding taxes to food that's got high sugar content.

And there's a big pressure now for food retailers to actually have very specific

labeling and reduce the fat content, the sugar content in their goods.

So, these are political factors going on in the environment,

in which this huge food and beverage organization is now operating within.

If we think about economic, we're thinking about things like the recession.

How is that going to impact on our organization?

Now, the recession is now different stages in different countries of the world.

Again, we need to look at each country individually.

We need to think about how certainly in the U.K., the supermarket wars,

the big four and the discounters [INAUDIBLE] are actually pushing

prices down for customers that's affecting our business.

Can we afford to sustain these very low prices?

We also have to think about inflation and

tax in the different countries that we're operating in.

So, that's examples for economic.

Then we move down to social.

And when we're talking about social, we're talking about trends, social trends.

So again, thinking about these one now organization Kraft Heinz.

What we're thinking about is people's buying behavior,

their shopping habits have changed.

So, rather than doing big monthly shops,

people are now going into supermarkets more frequently.

They're happy to be in the smaller supermarkets.

More and more people now are buying their goods online.

There's definitely been rise in organic local produce which these organizations

currently, certainly local produce, fresh produce isn't their main product line.

Healthy eating is a big thing.

So, people are moving away from processed foods to more fresh foods.

People are interested in where foods come from, the ethical sourcing and

the fair trade.

So, this merge organization needs to really make sure that they can tap

into the customer base now.

As it is now, what customers are wanting, listening to customers.

So, coming up with innovative ways to actually, please their customers and

meet their customers needs.

In terms of technological, here we're looking at how the organization

can actually improve some of the systems that they currently have.

Maybe they need to have special apps for specific promotions or

loyalty schemes to attract new customers.

Or new product innovations,

that something I'm sure they're going to be looking to do.

And currently they both do on quite a large scale.

So, how can we improve our systems to make ir even better, the products, for

our customers?

And then we have the legal side of things.

Now, in food there's lots and lots of different laws

associated with things like food hygiene, food labeling,

Food Standards Commission, U.K. fat tax, it was so called.

Food safety, health and safety, etc.

So, what we're looking at there is all the different legal factors that can impact on

our business.

And what the government is introducing in terms of new laws,

organizations have to adhere to.

So, this is a must.

We have to be aware of what they are.

And we have to make sure that we are within, operating within,

the legal systems of our industry.

>> And then finally, and equally as important as all the other factors,

is the environmental.

So, when we're talking about corporate social responsibility,

business ethics, this is all coming under here.

So Kraft and Heinz need to make sure that they do purchase from sustainable sources.

They need to use recyclable packaging, fair trade goods, etc.

So, we want to see that this organization cares for

the environment and acts in a corporate social responsible way.

That's PESTEL.

Fact is explained to you and applied in context.

You will now apply your own PESTEL to the organization of your choice.

Thinking about the environment in which it operates within, and

then that will lead us to the end of this first lesson.

And I sure then look forward to seeing you for

Lesson two which we're exploring strategic direction and strategic choice.

[MUSIC]

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