Environmental Analysis– Use of PESTELIntroductionThisassignment will shed some light on how businesses experience the PESTLEanalysis, I will also be comparing and contrasting the different views and opinionsfrom different sources and link it back to the chosen business which is LEGO. Adefinition of what PESTLE analysis will also be mentioned in this essay.What Is a Pestel Analysis?Apestle analysis is a tool which is used by different marketing businesses.Marketers use this framework to assess the marketing environment factors thatmay have an effect on the business and will use this as a clear structure ofany problems arise. PESTLE analysis aims to defuse any threats and organizationcould have both internal and external. PESTELanalysis includes the following six factors:· P – Political· E – Economic· S – Social· T – Technological· E – Environmental· L – Legal Compare and contrastAs Imentioned above the pestle analysis is a tool which is powered by 6 six factorsto implicate any problems in a business. The PESTEL analysis supports anorganization with an overall idea of how macro-environment could modify.
(Johnson,Scholes and Whittington, 2008). A PESTEL analysis is a successful tool becauseit identifies the different factors of the macro environment. To ensure abusiness isn’t overshadowed by constant changing external factors, the analysishelps to develop certain strategic judgements. This will result in the businessbeing able to tolerate factors that may change and affect the business.
Abusiness needs to know its external factors and how it can change from how itis now to how it can be in the near future so businesses always need to be onstandby for any external threats. In order for businesses to achieve this, theywill use the Pestel analysis as it will highlight strategies which will help erasefactors. (Johnson, Scholes and Whittington, 2008). PESTEL analysis has itspurposes.
(Murray-Webster, 2010) It has been stated that ‘the subject must beclearly defined before the participants commence the analysis’ (Murray-Webster,2010). This means that when a business analyses external factors, they must begiven constant attention otherwise there may be consequences for the business. Thepurpose of the PESTLE analysis is to identify issues which are suitable for twokey points. The first one being, it may have some level of impact on thebusiness and the second point is the control of the business being externalwhich means outside the business.
All discussions must be taken into accountand must be carefully controlled to keep businesses clear on how to identifyproblems rather than trying to resolve them. Businesses need to also reflect onthe implications of any of the 6 factors to again identify problems and thepossibility of them occurring, however falling into set-ups by debatingpossible strategies must be avoided at all time by businesses. Pestle analysiswill help understand the aspects using the aspects by using the 6 factors.Completing a Pestel analysis is a very easy task than any individual in abusiness or without a business can start. The analysis was originally known as PEST;however, 2 variants were included in recent times to fulfil the full need ofthe analysis. The factors added were the legal and environmental factors.(Blackstone and Lewis 1962) states that the analysis which businesses use canalso be used estimate factors externally. This can cause effect to the businessis such problems come up.
If factors were to rise up at once in a business itwould cause affect to the certain departments in an organisation, in this caseit would be the human resources department, however leading with a PESTELanalysis will essential for the business. Showing the PESTEL analysis to anorganisation will benefit them because it will help limit alternative optionsto arise from such problems, However the problem could be classified as anexternal factor if it has nothing to do with the human resources department andthis will affect the entire company internally.Lego and PESTELPolitical factors show how much agovernment will interfere within the economy.
The government will get involvedin the following practises such as, government policy, political stability orinstability in overseas markets, foreign trade policy, tax policy, labour law,environmental law and trade restrictions. Lego does not take part in anypolitical event as it is against there policy, therefore due to this policythey denied a big order to one of China’s artists who goes by the name of AiWeiwei. Ai Weiwei had placed an order to Legofor one of his exhibitions in Australia. Lego mentioned in one of their statements”could result in misunderstandings or be perceived as inconsistent”. To overcomethis problem Ai Weiwei is taking charity from his followers all around the worldand is also appearing at auctions and buying Lego pieces second hand. In thepast Lego has appeared in exhibitions showing there Lego displays to attractmore customers, therefore the china man feels as though Lego has discriminatedhim. “Internal mistake” was mentioned in a comment by the vice-chairman of the Danishcompany about the whole situation. Legowas found in Denmark who own 75% of the business.
LEGO has taken the opportunityto get involved with a lower priced market, an example of this is going back tothe 1980’s when Legos prices were normal and it has stayed the unchangedcompared to its competitors. The EU has agreed for the company to sell itsmerchandise to countries who are within the EU. This has given Lego an edge toexpand its business internationally. Various markets have aided the company ingaining massive knowledge on management. In problems in 2004, Legos income andprofits had decreased alongside their marketing shares, therefore to overcome thisLego launched new products and colours. During this time Lego had cut down on manufacturecost and 80% of its suppliers, however on a positive side for Lego theirlicenses sets kept them in them stable until they overcome this situation.Another factor which affected Lego was when the value of the British pound coinwas dropped.
This affected Lego massively alongside other businesses. The valueof the pound coin had dropped by a massive 20%, Therefore to overcome this Legoincreased prices of its products. Customers are not aware that they are paying5% more in order to purchase Legos products.Asocial factor is based upon trends in both the social environment and the environmentitself.
The number of workers within the UK has increased due to socialfactors, also individuals from other countries moved to the UK for a betterlifestyle. Due to operation cost in America Lego was required to relocate inMexico due to it being cheaper than other places. In 2006 Lego put out astatement to the people in America saying they were going to shutdownmanufacturing in the US after 70 years of business. Over 1200 jobs were lostwhich caused chaos. In 2015 Lego joint with UNICEF to improve the lives ofchildren around the world. Playing is important for children in order for themto learn. Through this children progress in different kinds of skills.
Lego andUNICEF endorses in quality of learning in different areas. The technologicalfactors are the development of technology, Also the existence and availability ofdifferent variables. By using social media Lego has produced relationships withcustomers and different marketers. By going on the official website LEGOcustomers are able to purchase products instead of going into stores. Having awebsite has benefited both customers and the company itself. This is due to thefact that having an online website helps to reach the maximum potential ofcustomers.
Another technological factor which has benefitted Lego is easedpayment services. This is again beneficial for customers as they can justproceed with payments through this service and they can do this in the comfortof their home and receive the product at their home. Legalfactors discuss ways on how the law affects a business and how they functionexternally, also it helps how with customer’s behaviour. Lego has linked itselfwith other manufacturers to prevent any products being launched as fakes orother known as counterfeit products.
This affects Lego because counterfeit tendto be a much lower quality and are sold for a cheaper price to customers.Trademark copying is a lot of money therefor Lego took this action tostrengthen the anti-counterfeit laws. Lego products were copied by a company inChina who sold counterfeits in 2016. Lego were aware of this and took further precautionswhich resulted in the Chinese company facing the multi-millionaire company in courtand put out a lawsuit against the Chinese company, due to this Lego have becomestricter on Copyright. Environmentalfactors have been looked into more in the past 15 years, the reason thesefactors have come forward is because there has been a massive reduction in rawmaterials and carbon emissions, to overcome this problems Lego have made anagreement with World Wildlife Fund also known as WWF. Both businesses tend toreduce carbon emissions by 10%. Lego believe that reducing carbon emissionswill ensure positive impacts on the environment.
To do this LEGO have upgradedtheir technology to ensure the factories are more efficient. Sourcing renewableenergy is another thing LEGO do to ensure ethical behaviour. Sourcing renewablewill be a step towards balancing out global energy use. Regarding thissituation, LEGO have invested in wind farms which produce renewable energyoffsite.
Wehave seen a vast improvement in our own production facilities and found ways toreduce the amount of energy we use to produce LEGO® bricks. Our initiativesinclude upgrading our manufacturing equipment and cooling systems and makingour buildings more energy efficient.ConclusionIn conclusionI have an analysed, compared and contrasted different points on the Pestleanalysis and how different authors view the analysis.
The analysis is a toolused to assess the macro-environment. It provides business with implications on6 factors which are political, environmental, social, technological, economicand legal. These factors provide businesses to develop strategies to overcome problemswhich may occur on the external side of the business. The analysis has beenrelated to LEGO and the implications which may occur with the business. It providesLEGO with an understanding on how the factors of PESTLE affect the business asa whole.
Using the analysis will help them to overcome certain barriers theymay come across.