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Matheas Ruziwa HR Issues
Organisations that regularly and systematically do analyses often spot trends before others, thus providing competitive advantage. As we kiss goodbye to year 2015, it’s important for organisations to analyse the environment in which they operate, to help them make effective strategic decisions for the New

Year and beyond. Some companies have already conducted strategic planning workshops, others are still in the process of doing so and it is more likely that there are some who are doing nothing.

Pestle analysis is an audit of an organisation’s environmental influences with the purpose of using this information to guide strategic decision-making.

The assumption here is that if the organisation is able to audit its current environment and assess potential changes, it will be better placed than its competitors to respond to changes as we go into the future.

There is no doubt that year 2015 has had its challenges in Zimbabwe and beyond but organisations which have survived against the odds were able to do so mainly because of the choice of strategic decisions.

For the avoidance of doubt, various scholars have stated that PESTLE stands for — Political, Economic, Sociological, Technological, Legal and Ecological/Environmental.

The term “Pestle” is particularly popular on strategic management, HR and marketing courses around the world. To help make decisions and to plan for future events, organisations need to understand the wider micro-economic and macro-economic environments in which they operate. (The micro-economic environment is the one in which we operate and have limited influence or impact, the macro-environment includes all factors that influence an organisation but are out of its direct control).

An organisation on its own cannot affect these factors, nor can these factors directly affect the profitability of an organisation. But by understanding these environments, it is possible to take the advantage to maximise the opportunities and minimise the threats to the organisation.

Conducting a strategic analysis entails scanning these economic environments to detect and understand the broad, long term trends.

Put differently, a Pestle analysis is often used as a generic orientation tool, finding out where an organisation or product is in the context of what is happening outside that will at some point affect what is happening inside an organisation.

The six elements form a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea. The model provides leaders and managers with a series of headings under which users can brainstorm which include the following:

Political: what is happening politically in the environment in which you operate, including areas such as tax policy, employment laws, environmental regulations, trade restrictions and reform, tariffs etc.

Economic: what is happening within the economy, for example; economic growth/ decline, interest rates, exchange rates and inflation rate, wage rates, minimum wage, working hours, unemployment, credit availability, cost of living etc.

Sociological: what is occurring socially in the markets in which you operate or expect to operate, cultural norms and expectations, health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety, global warming.

Technological: what is happening technology-wise which can impact what you do, technology is leaping swiftly, how this will impact your products or services, things that were not possible five years ago are now mainstream. New technologies are continually being developed and the rate of change itself is increasing. There are also changes to barriers to entry in given markets, and changes to financial decisions like outsourcing and in sourcing.

Legal: what is happening with changes to legislation? This may impact employment, access to materials, quotas, resources, imports/ exports, taxation etc.

Environmental: what is happening with respect to ecological and environmental issues?

The model in my view involves simple steps which include the following; deciding how the information is to be collected and by whom, identifying appropriate sources of information, gathering of the information, analysing the findings, identifying strategic options disseminating and discussing the findings and deciding which trends should be monitored on an on-going basis and what actions need to be taken.

Pestle analysis can be used for business and strategic planning, marketing planning, organisational change, business and product development and research reports.

It can also be used from a departmental or individual perspective to look at what you deliver, to whom and how you do it.

In business planning and marketing planning, A Pestle analysis is a useful document to have available at the start of a business planning process.

It can provide the management team with background and context information about targets towards growth, new product development and brand positioning.

The opportunities and threats identified can be fed into a SWOT process and strategies identified to avoid or minimise the impact of the threats, and equally strategies employed to build on the opportunities presented.

With regards to product development, it is often said that there are few ‘bad products’ but lots of wrong times and wrong places. A Pestle analysis provides a view of what is occurring in the external world, this will help when making the decision to enter or leave an area of product development.

When looking at changing one function or department a Pestle analysis can be a powerful tool for understanding the context in which the change is occurring and the potential areas of focus.

Best used in association with a SWOT analysis, a Pestle will provide information about potential opportunities and threats around labour changes, for example skills shortages.

Whilst the writer acknowledges that there are also other effective tools that may be used to conduct situational analysis of the business such as SWOT analysis, Porter’s five forces , competitor analysis or scenario planning etc., Pestle analysis has got the following advantages or benefits;

It is a simple framework.

It facilitates an understanding of the wider business environment.

It encourages the development of external and strategic thinking.

It can enable an organisation to anticipate future business threats and take action to avoid or minimise their impact.

It can enable an organisation to spot business opportunities and exploit them fully.

It’s important for our organisations to analyse the environment in which they operate, to help them make effective strategic decisions.

The Pestle analysis is an effective and structured way of thinking through this analysis.

May I take this opportunity to wish all members of the HR and business fraternity a happy and prosperous New Year. Although we have experienced serious challenges in 2015, I encourage you to remain strong and courageous. Please keep on challenging the challenges.

Disclaimer: Opinions expressed herein are solely those of the author

• Matthias Ruziwa is an experienced and progressing Strategic Human Resource Practitioner based in the Midlands Province, City of Kwekwe. You can contact Matthias at the following email address: — [email protected] /whatsapp 0773 470 368