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October/November 2007

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).

HELLO and welcome once again to Student Advisor. In this issue we feature the second article in Carl Evans’

and Mark Richardson’s 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.

Don’t 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

A message fromSteve Peet

Strategy in ActionAssessing the Environmentby Carl Evans and Mark Richardson

About the AuthorsMark Richardson is Head of

Univers i ty of Worcester

Business School. Before

entering academia, Mark was

a marketing manager for Bass

Taverns, with significant

managerial experience of key

marketing functions: market

analys is , merchandis ing

o p e r a t i o n s a n d r e t a i l

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.

>> Continued on page ii

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.

Figure 1

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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 Government’s 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.

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.

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 CompetitionThe 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.

A Case History Applying the PESTEL Framework to the University of Worcester Business School

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October/November 2007

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.

Figure 2 A Continuous ProcessGiven 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!

ReferencesDavid, 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 Ansoff’s 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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