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Analysing the

external environment

I&E 2010

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A couple of jobs…

• Junior Designer and Junior Web Developer– First one is a placement (1 year)

• Salary will meet national minimum wage for both• Closing date for applications: 2nd May 2010• How to apply: email CV and any examples of

work/URLs to • recruitment@kmp.co.uk• Start date: Summer 2010 • (“You should be passionate about all things

digital”)

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A research-type job:

• Demonstratorship position in UCL Interaction Centre in UCL, London.

• This position combines a 4 year PhD studentship along with teaching duties, for which training will be provided. The ad and job description with person specification can also be found on the UCLIC website: http://www.uclic.ucl.ac.uk/.

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A temporary job

•  Did you know that all students at Leeds Met are eligible to apply to take a year out to run the Students’ Union?  Not only is each of the five posts available paid over £17,500 per year but they will also get tonnes of CV boosting training and work experience!

  • The five roles available are:         President         Associate President Education        Associate President Diversity        Associate President Development –       Athletic Union President

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Layers of the business environment

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• Businesses need to understand the external factors affecting their business and their customers, suppliers and competitors.– And partner firms, eg distributors

• Fundamental for this is a PESTEL analysis.• This should represent a checklist of factors

currently affecting a business sector and likely to affect it in future.

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Do external factors really have an effect on businesses?

Many videos on youtube, eg http://www.youtube.com/watch?v=B7drEvHo7vA

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PESTEL-analysis:

Political factors

Economic factors

Socio-cultural factorsTechnological factors

Legalfactors

Environmental factors

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Suggested approach to PESTEL analysis

A deep analysis would include:An outline of the issue

A discussion of the implications for your proposedEnterprise

How you might deal with the implications

Example: Third Sector Foresighthttp://www.3s4.org.uk/drivers

Works through a PESTEL in voluntary sectorMany useful ideas/promptsGives idea of depth of analysis possibleNote slight difference in interpretation of PESTEL

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Our two examples• YCFC stadium issue:

– York City Football Club– A famous professional premiership football team fairly

close to Leeds Met– Issue for PESTEL – should they build a new stadium,

and if so where?

• Charity websites– Eg hungersite – thehungersite.com– Free Rice – freerice.com– If people visit these sites, “free” charity donations are

made

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Our two examples

• We’ll try to think of PESTEL items as we go along.

• Moore will also suggest some

• Nota bene – this will be examples only– There will be many others– Research likely to be needed for assessed work

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PESTEL-analysis

Political factors• Global, regional,local and national . Political parties’ differing policies•Proximity of next election• Taxation• Integration with other jurisdictions •Globalisation•Moore – can also be “politics

with a small ‘p’”

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Politics and our examples

• YCFC:– Local party politics – eg shall we help fund it– Pressure groups wanting to remain where we

are– York MP is raising it at Westminster

• Charity sites:– Global political issues perhaps– Digital divide?

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PESTEL-analysis

• Economic factors•Inflation rate•Interest rates• Labour costs• Other business costs• Private consumption and available income• Exchange rate• Public finances• consumer/business confidence• unemployment

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Economic factors and our examples

• YCFC:– Expense involved in new stadium– Cost of upkeep of current one– Need for loans….

• Charity sites– Many relevant factors, one example – free rice went

from 20 grains per click to 10 because of global recession

– Some development economists think such sites may lead to net reduction in donations

– Can it really be free? (Sandberg 2010)

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PESTEL-analysis• Demographic factors

•population• Changes in values/ attitudes• Changes in lifestyle• Attitudes toward work/ spare time• Education levels• Work environment factors• Health concerns• Changes in income distribution • Fads and fancies.• Media pressure

Socio-cultural factors

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Socio-cultural factorsand our examples

• YCFC:– Many older people (eg Moore) may find it hard to get

to new venue

– NIMBY maybe

• Charity sites:– Patronising?

– Eg cf. sponsor a child schemes maybe

– World-wide, hence usual HCI issues

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PESTEL-analysis

Technological factors

• Spreading of and breakthrough in new technology• Research & Development (R&D) • New materials, products and processes• Information Communication and Technology (ICT) changes.• Rates of obsolescence

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Technological factors and our examples

• YCFC:– Many opportunities were there to be a new

stadium

• Charity sites:– Depend entirely on WWW access– User profiling??

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PESTEL-analysis

• Global warming• Pollution factors• Green energy • Energy conservation• Recycling• Natural resource depletion

•Environmental factors

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Environmental factors and our examples

• YCFC:– Current ground is in city centre, close to

railway, but traffic congestion– New ground – outskirts of city – more cars but

perhaps less congestion

• Charity sites:– Computer emissions?

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PESTEL-analysis

Legal factors• Competition laws• Labour market legislation• Standards•Information disclosure•Intellectual property laws•Laws can be an opportunity as well as a problem.

Eg car emission laws,

DDA

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Legal factors and our examples

• YCFC:– Building and planning regs

• Charity sites:– Be aware of national laws

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Prioritising PESTEL factors

• Categorise according to predictability of implications and impact on your enterprise

• Concentrate on those that have predictable implications and appear to have high impact on your enterprise

• Source: http://www.3s4.org.uk/how-to/sort-drivers

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Possible advantages (CIPD 2008)

• Simple framework. • Facilitates an understanding of the wider business

environment. • Encourages the development of external and

strategic thinking. • Can enable an organisation to anticipate future

business threats and take action to avoid or minimise their impact.

• Can enable an organisation to spot business opportunities and exploit them fully.

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Possible disadvantages (ibid)

• Some users over simplify the amount of data used for decisions – it is easy to use scant data.

• To be effective this process needs to be undertaken on a regular basis. • The best reviews require different people being involved each having

a different perspective. • Access to quality external data sources, this can be time consuming

and costly. • The pace of change makes it increasingly difficult to anticipate

developments that may affect an organisation in the future. • The risk of capturing too much data is that it may make it difficult to

see the wood for the trees and lead to ‘paralysis by analysis’. • The data used in the analysis may be based on assumptions that

subsequently prove to be unfounded (good and bad).

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Using PESTEL

• It may well be useful in your future careers to apply PESTEL to any suggested innovation

• It might help re PIPE

• It will definitely help with I & E…

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PESTEL in I & E – assessment 1

You are required to develop an enterprise idea which will usually be based upon your final year project. However, it is possible to develop an idea that is unconnected with your project, so long as it is appropriate for your course. In this assignment you should outline the following aspects of this enterprising work:

Outline of your enterprise ideaPESTEL could come in here, but maybe better to leave until later

assessments, with perhaps a brief mention here

Analyse a main competitor in your chosen marketAnalyse the strengths, weaknesses, opportunities and threats

of your idea

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PESTEL in I & E – assessment 2

• You should present the main aspects of your enterprise idea, drawing on elements of the analysis that you have currently undertaken and discuss your plans for the remainder of the assignment.

• PESTEL could well be a part of the “elements of the analysis”

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PESTEL in I & E – assessment 3

• Critically evaluate the innovation involved in your ideaPESTEL could come in here

• Analyse the environmental factors driving innovation in your chosen marketPESTEL must surely come in hereNota bene – probably take “environmental factors” to align with

slide 2 above ie not just “ecology”

• Analyse the competitive forces in your chosen market• Assess the risks associated with your idea• Discuss any ethical issues

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Summary and reminders

• Summary:– We have had a very interesting and useful look

at PESTEL analysis– Could consider it for use in your future career,

your everyday life and PIPE– It would probably be folly not to use it in I&E

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Summary and reminders

• Reminders:– Not only is I&E very interesting, it’s also very

important, eg:• 64% of directors said recent graduates’ employability skills

were more important to their organisation as an employer than the specific occupational, technical or academic knowledge/skills associated with the graduate’s degree” (Prospects 2010, cf. HEA 2006)

– Assessment 1 deadline is imminent

– Tempus fugit!

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References

• CIPD (2008) PESTLE analysis. http://www.cipd.co.uk/subjects/corpstrtgy/general/pestle-analysis.htm [accessed 11/2/10]

• HEA (2006). Personal development planning and employability. Higher Education Academy, York.

• Prospects (2010). What do employers want? http://www.prospects.ac.uk/cms/ShowPage/Home_page/What_do_graduates_do_/What_do_employers_want_/p!efeeekL [accessed 9/2/10]

• Sandberg D (2010) Personal communication