What Is PESTLE Analysis?
PESTLE analysis is the acronym for political, economic, social, technological, legal and environmental analysis. PESTLE analysis evaluates how various aspects of the surrounding of a business may affect the activities or operations of the business. PESTLE analysis concerns the examination of the external environment of the organization. Henry suggests that PESTLE analysis can also be used to analyze the whole industry (2008). A PESTLE analysis has been effectively used in determining the various opportunities that may be available to business organizations as well as the risks and challenges that an organization may face.
Political, Economical and Technological Analysis for Virgin Group Company
Virgin Group is a multinational company based in London, United Kingdom. Virgin Group was founded by Richard Branson and has numerous subsidiaries in the United Kingdom, United States of America and other countries across the globe.
Political Analysis
The political analysis examines the influence of government, its policies, rules, and regulations on the industry or an organization. With reference to Virgin Group limited, it can be argued that various political factors such as labor laws, taxation policies and trade restrictions imposed by the government have had a great impact on its operations. According to Harvey and Allard, Virgin Group is faced with various political challenges due to its spread into foreign countries such as the United States of America and Australia (2009).
Some of these political challenges include licensing bureaucracies set by foreign governments, increased regulation and control of business operation by governments, political instabilities in certain countries as well as high customs and tariffs imposed by governments. For example, import customs and tariff imposed by the U.S. federal government negatively reduced the number of goods that the Virgin Group would export to the United States markets.
Additionally, new restrictions in the air transport industry imposed by the U.K. government in 2006 negatively affected the operations of Virgin Airlines, a subsidiary of the Virgin Group of companies. According to Warner, the deregulation of the air travel industry by the U.K. government in 2006 allowed easy entry of new firms into the industry (2010). This resulted in increased competition. Virgin Group thus had to develop and implement new strategies for marketing its products. Virgin Group has also faced threats of attacks by terrorists.
Additionally, in mid-2008, British Airways successfully lobbied for adoption of strategies that would favor its business operations. British Airways is the largest airline firm in the United Kingdom and thus could easily influence the policies of the federal government. This negatively affected the business of other industry players such as Virgin Airlines and the Fly Emirates.
Learn also asserts that the profits of the Virgin Group largely depend on annual subsidies provided by the U.K. government (2010). The government has a strong influence on the management of the Virgin Group. For example, Virgin Rail, another subsidiary of Virgin Group, had to comply with strict legal and regulatory policies imposed by the British government.
Other political factors that may affect business operations of Virgin Group include political stability, the shift in government, transparency of government transactions or dealings as well as employment laws or legislations. For example, Virgin Group has to comply with employment laws such as non-discrimination of workers, payment of minimum wages and allowing its workers to join and participate in the activities of trade unions.
Economical Analysis
The economic analysis deals with various factors that affect the whole economy. Examples of economic factors include inflation rates, price of goods and services, interest rates charged on capital and investments, economic growth and development and foreign exchange rates. Virgin Group has been faced with stiff competition from other firms in the industry, for example, the organization was forced to lower its flight rates following a review of prices for air travels by its major competitors in the air transport industry such as Fly Emirates, American Airlines and Qatar Airways. Other economic factors that have affected operations of Virgin Airlines include the high cost of fuels and entry of new airline companies like Singapore Airlines, into the industry.
Additionally, one of its subsidiaries in the United States of America, Virgin Mobile USA, has faced stiff competition from other mobile phone dealers like Nokia, Motorola, and Amazon (Capon 2010). Virgin Hotels have been affected by reduced rate of tourism. The global economic crisis has also negatively affected the business operations of Virgin Group. The economic recession experienced between 2007 and 2010 caused huge losses to the company. Additionally, unexpected fluctuations in both domestic and international economies have negatively impacted the operations of the Virgin Group.
Moreover, economic factors such as globalization and liberation of the consumer markets, high costs of factors of production such as land, labor, and capital, inadequate and unreliable supplies of organizational inputs and decrease in disposable income of consumers has negatively impacted the business of Virgin Group (Stoffels 2011).
Finally, high rates of unemployment have resulted in decreased purchasing power of consumers and thus reduced sales volumes by the Virgin Group. Negative changes in both national and international economies have also negatively impacted business operations of Virgin Group.
Despite these economic challenges, Kefalas postulates that Virgin Group has been successful due to strong brand images that it has created amongst its consumers (2007). The company also deploys various strategic marketing techniques that have greatly increased its sales volumes.
In my opinion, there is an urgent need for the Virgin Group to review its business policies and strategies so that it could remain competitive in the dynamic business environment. This would also facilitate its ability to meet the expectations and preferences of customers.
Technological Analysis
The technological analysis examines various factors that are related to technological advancements, for example, automation of manufacturing systems, increased rate of technological change, research and development activities, the cost of acquiring new technologies, business outsourcing processes, acquisition of technologically advanced machinery and equipment. Various aspects of technology such as quality and level or stage of technological advancement may affect the performance of an organization, for example, a company that uses low or poorly developed technology may lose competitive advantage over its competitors (Baron 2010).
Similarly, high rates of technological innovations and inventions may also enable an organization to improve its operational activities as well as the quality and quantity of production, hence increased profits. With respect to Virgin Group, I would argue that the company has faced various technological challenges, for example, difficulties in implementing effective online booking systems for its Airlines, online customer care agents and electronic commerce (e-commerce) portals. According to Saleem, the poor state of Britain’s railway infrastructure has greatly affected the ability of Virgin Rail to provide quality services to passengers (2009).
However, despite the technological challenges, some recent advancements in technology such as improved infrastructure in information communication technology (ICT) have enabled Virgin Group to cut its communications costs, hence a decline in operational expenses (Bocij, Greasley & Hickie 2008).
Additionally, the company has also benefitted from ease of transfer of technology from one organization to another. In my view, the company has also made use of emerging technologies such as business process outsourcing and electronic commerce to improve the quality of its products. Most of its operations are automated.
In my opinion, it is important for the Virgin Group to acquire more advanced machinery and equipment so that it could provide high quality and competitive services to its customers. The company should acquire ultramodern machinery and equipment. It is important for the Virgin Group to align its business operations with technological advancements and other technological changes in the industry.
Finally, I would argue that the Virgin Group has effectively managed to control and strategically deal with the various challenges that it has faced with respect to political, economic and technological factors. Effective management has enabled Virgin Group to gain a competitive advantage over its competitors in the industry.