Environmental Analysis
– Use of PESTEL

Introduction

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This
assignment will shed some light on how businesses experience the PESTLE
analysis, I will also be comparing and contrasting the different views and opinions
from different sources and link it back to the chosen business which is LEGO. A
definition of what PESTLE analysis will also be mentioned in this essay.

What Is a Pestel Analysis?

A
pestle analysis is a tool which is used by different marketing businesses.
Marketers use this framework to assess the marketing environment factors that
may have an effect on the business and will use this as a clear structure of
any problems arise. PESTLE analysis aims to defuse any threats and organization
could have both internal and external. PESTEL
analysis includes the following six factors:

·        
P – Political

·        
E – Economic

·        
S – Social

·        
T – Technological

·        
E – Environmental

·        
L – Legal

 

 

 

Compare and contrast

As I
mentioned above the pestle analysis is a tool which is powered by 6 six factors
to implicate any problems in a business. The PESTEL analysis supports an
organization with an overall idea of how macro-environment could modify. (Johnson,
Scholes and Whittington, 2008). A PESTEL analysis is a successful tool because
it identifies the different factors of the macro environment. To ensure a
business isn’t overshadowed by constant changing external factors, the analysis
helps to develop certain strategic judgements. This will result in the business
being able to tolerate factors that may change and affect the business. A
business needs to know its external factors and how it can change from how it
is now to how it can be in the near future so businesses always need to be on
standby for any external threats. In order for businesses to achieve this, they
will use the Pestel analysis as it will highlight strategies which will help erase
factors. (Johnson, Scholes and Whittington, 2008). PESTEL analysis has its
purposes. (Murray-Webster, 2010) It has been stated that ‘the subject must be
clearly defined before the participants commence the analysis’ (Murray-Webster,
2010). This means that when a business analyses external factors, they must be
given constant attention otherwise there may be consequences for the business. The
purpose of the PESTLE analysis is to identify issues which are suitable for two
key points. The first one being, it may have some level of impact on the
business and the second point is the control of the business being external
which means outside the business. All discussions must be taken into account
and must be carefully controlled to keep businesses clear on how to identify
problems rather than trying to resolve them. Businesses need to also reflect on
the implications of any of the 6 factors to again identify problems and the
possibility of them occurring, however falling into set-ups by debating
possible strategies must be avoided at all time by businesses. Pestle analysis
will 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 a
business 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 of
the analysis. The factors added were the legal and environmental factors.
(Blackstone and Lewis 1962) states that the analysis which businesses use can
also be used estimate factors externally. This can cause effect to the business
is such problems come up. If factors were to rise up at once in a business it
would cause affect to the certain departments in an organisation, in this case
it would be the human resources department, however leading with a PESTEL
analysis will essential for the business. Showing the PESTEL analysis to an
organisation will benefit them because it will help limit alternative options
to arise from such problems, However the problem could be classified as an
external factor if it has nothing to do with the human resources department and
this will affect the entire company internally.

Lego and PESTEL

Political factors show how much a
government will interfere within the economy. The government will get involved
in the following practises such as, government policy, political stability or
instability in overseas markets, foreign trade policy, tax policy, labour law,
environmental law and trade restrictions. Lego does not take part in any
political event as it is against there policy, therefore due to this policy
they denied a big order to one of China’s artists who goes by the name of Ai
Weiwei. Ai Weiwei had placed an order to Lego
for one of his exhibitions in Australia. Lego mentioned in one of their statements
“could result in misunderstandings or be perceived as inconsistent”. To overcome
this problem Ai Weiwei is taking charity from his followers all around the world
and is also appearing at auctions and buying Lego pieces second hand. In the
past Lego has appeared in exhibitions showing there Lego displays to attract
more customers, therefore the china man feels as though Lego has discriminated
him. “Internal mistake” was mentioned in a comment by the vice-chairman of the Danish
company about the whole situation.

 

Lego
was found in Denmark who own 75% of the business. LEGO has taken the opportunity
to get involved with a lower priced market, an example of this is going back to
the 1980’s when Legos prices were normal and it has stayed the unchanged
compared to its competitors. The EU has agreed for the company to sell its
merchandise to countries who are within the EU. This has given Lego an edge to
expand its business internationally. Various markets have aided the company in
gaining massive knowledge on management. In problems in 2004, Legos income and
profits had decreased alongside their marketing shares, therefore to overcome this
Lego launched new products and colours. During this time Lego had cut down on manufacture
cost and 80% of its suppliers, however on a positive side for Lego their
licenses sets kept them in them stable until they overcome this situation.
Another factor which affected Lego was when the value of the British pound coin
was dropped. This affected Lego massively alongside other businesses. The value
of the pound coin had dropped by a massive 20%, Therefore to overcome this Lego
increased prices of its products. Customers are not aware that they are paying
5% more in order to purchase Legos products.

A
social factor is based upon trends in both the social environment and the environment
itself. The number of workers within the UK has increased due to social
factors, also individuals from other countries moved to the UK for a better
lifestyle. Due to operation cost in America Lego was required to relocate in
Mexico due to it being cheaper than other places. In 2006 Lego put out a
statement to the people in America saying they were going to shutdown
manufacturing in the US after 70 years of business. Over 1200 jobs were lost
which caused chaos. In 2015 Lego joint with UNICEF to improve the lives of
children around the world. Playing is important for children in order for them
to learn. Through this children progress in different kinds of skills. Lego and
UNICEF endorses in quality of learning in different areas.

The technological
factors are the development of technology, Also the existence and availability of
different variables. By using social media Lego has produced relationships with
customers and different marketers. By going on the official website LEGO
customers are able to purchase products instead of going into stores. Having a
website has benefited both customers and the company itself. This is due to the
fact that having an online website helps to reach the maximum potential of
customers. Another technological factor which has benefitted Lego is eased
payment services. This is again beneficial for customers as they can just
proceed with payments through this service and they can do this in the comfort
of their home and receive the product at their home.

Legal
factors discuss ways on how the law affects a business and how they function
externally, also it helps how with customer’s behaviour. Lego has linked itself
with other manufacturers to prevent any products being launched as fakes or
other known as counterfeit products. This affects Lego because counterfeit tend
to 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 to
strengthen the anti-counterfeit laws. Lego products were copied by a company in
China who sold counterfeits in 2016. Lego were aware of this and took further precautions
which resulted in the Chinese company facing the multi-millionaire company in court
and put out a lawsuit against the Chinese company, due to this Lego have become
stricter on Copyright.

Environmental
factors have been looked into more in the past 15 years, the reason these
factors have come forward is because there has been a massive reduction in raw
materials and carbon emissions, to overcome this problems Lego have made an
agreement with World Wildlife Fund also known as WWF. Both businesses tend to
reduce carbon emissions by 10%. Lego believe that reducing carbon emissions
will ensure positive impacts on the environment. To do this LEGO have upgraded
their technology to ensure the factories are more efficient. Sourcing renewable
energy is another thing LEGO do to ensure ethical behaviour. Sourcing renewable
will be a step towards balancing out global energy use. Regarding this
situation, LEGO have invested in wind farms which produce renewable energy
offsite.

We
have seen a vast improvement in our own production facilities and found ways to
reduce the amount of energy we use to produce LEGO® bricks. Our initiatives
include upgrading our manufacturing equipment and cooling systems and making
our buildings more energy efficient.

Conclusion

In conclusion
I have an analysed, compared and contrasted different points on the Pestle
analysis and how different authors view the analysis. The analysis is a tool
used to assess the macro-environment. It provides business with implications on
6 factors which are political, environmental, social, technological, economic
and legal. These factors provide businesses to develop strategies to overcome problems
which may occur on the external side of the business. The analysis has been
related to LEGO and the implications which may occur with the business. It provides
LEGO with an understanding on how the factors of PESTLE affect the business as
a whole. Using the analysis will help them to overcome certain barriers they
may come across.