Evans, C., & Richardson, M. (2007) - Assessing The Environment. Manager British Journal of Administrative Management

PULL-OUT SECTION i
October/November 2007
A message from
HELLO and welcome once again to Student Advisor. In this issue we feature the second article in Carl Evans and Mark Richardsons series on applying strategic tools of management. Organizations operate in an increasingly complex and dynamic environment, where increasing legislation, technological innovation, globalisation and the sustainability agenda represent just some of the many possible drivers of change. As a consequence, the objective evaluation of a range of environmental factors, which influence business environment, must be used to inform strategic planning. The approach taken to environmental scanning, and its influence on the strategic plan, will ultimately influence the success of an organization. This article initially identifies a framework to carry out an environmental analysis, applies this framework to the case organization, and then challenges readers to conduct an environmental assessment of their own business.
Steve Peet
Dont forget. If you have any thoughts or feedback, or if you would like to make any contributions to Student Advisor, please contact me through Roy Bass on royb@warnersgroup.co.uk
Strategy in Action
Assessing the Environment
by Carl Evans and Mark Richardson
An environmental analysis should identify any key external factors that require some form of organizational action. Several frameworks exist to support an environmental analysis; however, Johnson et. al. (2006, p. 65) prefer the PESTEL framework, which categorizes factors into: political, economic, social, technological, environmental and legal (refer to Figure 1). Figure 1
About the Authors

Mark Richardson is Head of U n i v e r s i t y o f Wo rc e s t e r Business School. Before entering academia, Mark was a marketing manager for Bass Taver ns, with significant managerial experience of key marketing functions: market a n a l y s i s , m e rc h a n d i s i n g operations and retail promotions. Carl Evans is a Senior Lecturer in the Business School of University of Worcester. Carl has a long association with the IAM. Having completed the Diploma (now Advanced Diploma) in 1986, he then became a Member of the IAM Council and a Chief Examiner. He now sits on the IAM Quality Board.
The PESTEL Framework
Political: could include changes in government, such as a new Prime Minister, and resultant policy changes. Economic: includes changes in public spending, interest or exchange rates, and the climate for business investment. Social: includes changes in lifestyles, attitudes, buying habits or demographic changes, such as extended life expectancy and the growth of the grey market. Technological: may include new products and services, or new approaches to research and development activity. Environmental: the impact of green policies to minimise the effects of climate change. Legal: includes new legislation, such as the introduction of the minimum wage or changes in Health & Safety legislation.
In addition to the PESTEL framework, organizations will need to examine competitors (current and potential), in order to determine their capabilities and strategies before evaluating their likely actions or responses. >> Continued on page ii
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A Case History
Applying the PESTEL Framework to the University of Worcester Business School Political
The Business School operates in a partially controlled market. The Higher Education Funding Council for England (HEFCE) allocates student numbers, and their attendant funding, to Higher Education Institutions on an annual basis. Significantly, the University of Worcester has secured a substantial increase in funding to support a 50% increase in student numbers by 2010. A proportion of these additional student numbers will have to be attracted to the University by courses offered by Worcester Business School. It is this requirement to deliver growth that led to the strategies for growth discussed in the Summer issue of Student Advisor article (Richardson & Evans, 2007). The UK Governments now re-stated intention to move to 40% participation in Higher Education by 2020 (Tysome, 2007) indicates significant and sustainable medium term growth potential for our core offer undergraduate business courses. The introduction of a 3,000 top-up fee made these additional student numbers more attractive to the Business School and, alongside HEFCE funding, made UK students more-or-less as profitable to the Business School as the traditionally more lucrative international student market. Whilst UK student numbers are regulated, international student numbers are not, and therefore continue to represent a valuable opportunity for growth.
Technological
The strategic direction of the University of Worcester is based around inspirational teaching & learning in a face-to-face context. Potential growth in distance learning, facilitated by new web-based technologies, is therefore not core to the strategic development of Worcester Business School.
Environmental
Whilst the University is determined to champion environmental sustainability, this is not driving the course portfolio or affecting the nature of the student population.
Legal
Whilst legislative changes do not solely have an effect on the Business School, we have to be mindful of general legal requirements affecting staff and students, such as health and safety legislation, employment law and equality and diversity policies.
Facing the Competition

The market environment is becoming increasingly competitive. University Business Schools are enhancing their market offer through a combination of product proliferation (and increasing the range and diversity of attractively titled courses) and enhanced marketing communications activities. Put together, the political, economic and social trends outlined above highlight a relatively benign market environment in which to operate, with growth in both UK and overseas markets. Furthermore, the University has secured a substantial proportion of the available growth in UK student numbers. Despite this relatively settled environment, an attractive market proposition will clearly be important if Worcester Business School is to thrive in an increasingly competitive market. Senior managers within Worcester Business School will need to constantly monitor the environment in which we operate and develop increasingly sophisticated responses to changes which are, in some cases unpredictable, and, in many cases, uncontrollable. Johnson et. al. (2006, p. 69) are keen to emphasize that managers should not merely list the environmental factors, but more importantly recognize the key drivers of change that could structurally affect the industry or market. For this, David (2003) recommends some form of ranking or scoring system, which could entail managers simply scoring each factor (out of 10), with a high score indicating a key driver of change or most important factor. Managers can obtain data on environmental factors from a variety of sources (refer to Figure 2). The important thing is to gather as much as possible it can be filtered down and evaluated by management teams afterwards.
Economic
The introduction of the 3,000 top-up fee appears to be having limited impact upon the total number of students wishing to study at University. Demand amongst our core 18 to 21 year old target audience is therefore forecast to remain stable. Top-up fees do appear to be having some impact upon the market. Firstly, the trend for students to study closer to home appears to be accelerating. Secondly, there appears to be an increasing tendency for students to consider vocational courses, such as Business and Management, which may benefit their future employability. Economic growth in key international markets, notably India and China, offers significant revenue potential, with numbers intending to study in the UK anticipated to grow significantly over the medium-term.
Social
The proposed growth of the University of Worcester is largely predicated upon the fact that its local geography, centred on Herefordshire and Worcestershire, is under-provided for in Higher Education a helpful factor, bearing in mind students increasing propensity to study from home. The demographic trends a growth in the 18-21 age group also support growth in the short term.
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iii
October/November 2007
A Continuous Process
Given the increasingly complex and dynamic environment within which most organisations operate, the assessment of the environment and subsequent strategic actions will ultimately affect corporate success. Consequently, the importance of scanning the environment cannot be underestimated. Nor should it occur once a year as part of the business planning/budget planning process, but be a continuous process of gathering and evaluating environmental data. The PESTEL framework, when combined with a competitor analysis, provides a useful structure to assess the environment. Assessing the environment should naturally lead on to the identification of potential opportunities and threats. Here, Johnson et al. (2006) highlight the importance of recognising opportunities and threats, especially when considering strategic choice. Consequently the challenge to readers is to apply the PESTEL framework in order to identify the environmental factors that are affecting, or could affect, your organization. Consider the implications of these factors and what actions you need to take in order to seize opportunities or nullify threats. Also consider where you are going to get this environmental data from; how effective and reliable are your existing sources? Who will you involve in the assessment of the gathered data? How will the subsequent actions be rolled out to teams? Be aware the process of assessing the environment now becomes a substantial undertaking!
Figure 2
Sources for Data on Environmental Factors

The Internet (for competitors annual reports), On-line databases, Government documents, Economic reports, Business periodicals, Trade magazines, University research centres, Newspapers, TV and Networking with others, particularly marketing and sales staff.
References
David, F. (2003) Strategic Management: Concepts & Cases, 9th Ed. Upper Saddle River, Prentice Hall. Johnson, G. Scholes, K. and Whittington, R. (2006) Exploring Corporate Strategy, Text and Cases. Harlow, FT Prentice Hall. Richardson, J. M. and Evans, C. (2007) Strategy in Action Applying Ansoffs Matrix. Manager, The British Journal of Administrative Management, July/August. Tysome, T. (2007), Embrace Leitch or lose out to FE, sector warned. Times Higher Educational Supplement, 20th July.
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What is the PESTEL framework and what factors does it analyze?

What are some of the political factors affecting the Business School?

PULL-OUT SECTION i

About the Authors

The PESTEL Framework

Facing the Competition

Sources for Data on Environmental Factors

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