According to Rob Watkins (2008) organisations are entities made up of interrelated parts which are intertwined with the outside world (the external environment). Business organizations and firms have to be wary of external influences that can affect their organization this can be a positive affect or negative effect. There are many factors that have an impact on the way organizations operate. Thus where an organization suffers from an external influence they need to adapt their products or services. Pestle stand for ‘Political, Economical, Social, Technological, Legal and Environmental. In this report I am going to use 4 articles which are about a specific firm and discuss how each one suffers from one of the factors of the PESTLE analysis
1.Tube gets first Wi-Fi connection at Charing Cross
1.1Technology is one external factor from the PESTLE analysis, The article is about project Wi-Fi which is about the introduction of the first Wi-Fi access in London undergrounds by the company BT. The company I’m going to talk about is BT, they aim to put on a six-month trial which will allow commuters to connect to the internet while on the train, and enable them to check emails and browse the net. Investment in technology and innovation is seen as a key success for an enterprise (Rob Watkins, 2008, p10). BT trialling Wi-Fi on the tube is going to have a positive effect on its sale for broadband as more customers are going to be enticed by its additional benefit of using the broadband service on the tube while travelling for example to work.
1.2The article states how the service will be free for BT broadband customers as a result this may gain them a competitive advantage against the likes of other competitors such as Talk Talk and Virgin. The reason for this would be because customers might be more inclined to switch to BT internet service for this extra feature they provide that no other internet services offer. As the maturity of technology is developing and the use of technology is increasing, this means that BT are able promote their service and attract a wide range of internet users and become even more popular within the nation.
1.3Though this new implementation of technology can be very advantageous it does have its disadvantages, for example one disadvantage in this case is the implementation of Wi-Fi in the underground could put the city at risk of terrorist attacks and with the Olympics coming up it raises huge security concern.
1.4One Advantage of Wi-Fi in the tube would be more efficient as it would allow customers to check their email, complete some work they could be doing in the office, in the tube thus saving them time that could be better used by allowing them to do more work in the office that could improve the overall performance and making the company more money.
2.Nintendo hit as high Yen takes its toll on business
2.1Economic factor is another external influence from the PESTLE analysis,
an organization has to be wary of these factors as it can have consequences on the businesses aggregate performance. For example the article states how due to the price of the Yen increasing this has caused Nintendo sales revenue to diminish as they are hit by the high ‘value’ of the Yen. The rising value of the Yen reduces the value of profits made abroad when converted back to the Japanese Yen.
2.2In all cases of changes in demand and supply the resulting changes in price act as both signals and incentives, a fall in demand is signalled by a fall in price, therefore this acts as incentive for firms to produce less of goods as they are now less profitable to produce. (Rob Watkins, 2008 pg 291). The article also states Nintendo sales also fell first half of the year partly due to lower demand for its Wii console. This will act as an incentive for Nintendo to stop producing more Wii consoles.
2.3Japan has little they can do with their currency, they are able to intervene in the currency market and do a lot of rounds of quantitative easing. However, this will not have lasting effects as competitive devaluation means it will be a race to the bottom as much larger countries, such as the US and China to also devalue which will only lead to temporary increases thus causing all parties to lose in the end. It’s also an expensive move that will ultimately return very little. Currency fluctuations are unavoidable as developing nations grow and weakening the Yen will only be a temporary solution for Japan.
3.Water to be tested from BP Oil Spill’
3.1Environmental influence is another external factor from the PESTLE analysis, Environmental considerations are an important influence on business behaviour, particularly for the large companies. It is argued that businesses have a duty that goes beyond the organization and to a corporate social responsibility, particularly with regard to the environment. “Corporate social responsibility means that a corporation should be held accountable for any of its actions that affect people, their communities and their environment” (Rob Watkins, 2008, p652).
3.2The news article is about the ecological impact the BP oil spill caused to the waters, this article concerns that of south of New Orleans, US coast guard reported seeing an area of discoloured water which could be from the oil spill.. Overall this disaster has had negative impacts on the environment and also the company shares and profits had fallen dramatically. The discharge of oil spill on the Gulf of Mexico has also had major health concerns.
3.3Environmental disasters can cause the government to get involved; the government tend to impose heavy penalties which often have unfortunate consequence for the company. All countries have environmental laws and policies based on a regulatory regime imposed by governments at different spatial levels (Economics for business, Ian Worthington, Chris Britton, Andy Rees P435).
3.4Environmental factors can have consequences on small firms that operate within the affected areas. For example the article states s that “local fishermen have reported seeing miles-long strings of weathered oil on the sea”. This disaster can affect animals and their habitats in the sea and thus can have negative impact on local fishermen’s supply and livelihood.
4.EU to launch Google search investigation
4.1The legal factor is another influence from the PESTLE analysis; Businesses operate within a framework of law which has a significant impact on various aspects of their existence (Rob Watkins, 2008 Pg 11). This article states “The EU launched a formal investigation into Google following allegations that the internet giant has abused its dominant position in the search and advertising market”. Clearly the external factor here concerns monopoly, monopoly is defined as “”. The monopolist has considerable market power and can determine price or quantity (The Business Environment, Rob Watkins, 2008).
4.2The problem with monopoly is it disrupts the free market because it creates a dead weight loss. Dead weight loss is defined as “the loss of consumer plus producer surplus in imperfect markets” In this case for example if Google manage to monopolize the advertising industry this will have serious consequence on businesses trying to establish themselves as Google will be able to price how much they went to advertise a company
The problem with monopoly is it disrupts the freemarket because it creates a dead weight loss Once u has market domination in that field the business can do whatever they want and don’t innovate because they don’t need to
Can act as an incentive
Worthington, I., Britton, C. And Rees, A. (2001) Economics for Business, Blending Theory and Practice (Essex): Pearsons Education Limited