PESTEL Analysis In this essay two organisations are examined that of WaterCo of WaterCo a British utility company and ,
Kodak an international consumer electronics company using a PESTEL analysis of the ,
various factors involved in their organisational change.
Political
Both significantly influenced by political factors in terms of organisational of organisational change although it can be argued that the influence on WaterCo has been more pronounced. The political context of globalisation though is a main consideration for Kodak but it is diffuse and spread over other factors as discussed subsequently. However WaterCo¶s existence as an independent private company can be attributed to changes in the political environment of the UK favouring privatisation under the prevailing economic ideology of the time which saw a large number of public utility companies privatised and/or broken up into smaller and more efficient companies. WaterCo privatised privatised in 1989 One of the major water companies in the UK with over 400 employees. The main responsibilities for this firm are providing fresh water and treating waste water for their UK based customers thus mainte nance work forms a core comp one onent nt of the services they provide
Economic
Kodak significantly impacted upon by changing externalities in the economic environment. As a result of globalisation opening up more markets and bringing more competition for the company. A socio-economic consideration is the changing demographics in terms of the customers it services Increased wealth and increased disposable income coupled with increased access to novel technological developments for a larger amount of people Radically altered certain parts of Kodak¶s market forcing it to adapt and adoptchanges Makes it a much more successfully competitive organisation. Economically also globalisation has increased the number of and size of competitors which threaten Kodak Economic considerations considerations in organisational change for Kodak have occurred at micro and macro levels. For WaterCo the principal economic concerns have been related to the cost of investment in personnel and technology it in response of the changes brought about in the company by the influence of these factors. The success will be determined by the cost-benefits arising out of the economic costs of pursuing these strategies in managing change success successfully fully for the company.
Sociological
Social changes have impacted Kodak in relation to changing demographics in terms of the customers it targets. targets. Changes in customer¶s needs and preferences for high-tech imaging products and changing life styles has increased the pace of organisational change in Kodak in terms of meeting these needs. Increased globalisation has led to customers demanding faster res ponses to their needs creating much more competitive business fields attempting to satisfy these desires.
According to the CEO of Kodak the company¶s business is not about technology but about pictures illustrating the company¶s attempt to relate to the lifestyles of consumers. This is because customers have become more service sensitive as well as technique and quality orientated as a result of higher educational levels and income levels creating much more discerning customers in relation to these.
For WaterCo, the sociological context of human resource has been a major influence. Flexibility in terms of labour in British firms has been mainly achieved by enlarging the scope of tasks and a relaxation of organisational boundaries. As a result employees in WaterCo have become more flexi-skilled and multiskilled following training This contributes to a flatter organisation architecture. In response WaterCo has developed a computerised management information system in order to produce a more effective communication channel with employees responsive to their concerns as well as providing training courses about health and safety to improve the performance of maintenance workers in relation to new regulatory procedures.
Technological
Technology from the analysis undertaken here can beargued as being the main factor in the external environment producing organisational change in both companies. 4 000 types of equipment in WaterCo Many of them are over 20 years old and not representative of new technological developments The rapid development of technology has meant more complex and advanced machines and electronic instruments being produced by suppliers¶ This leads to increased competition In contrast to the water industry the rate of technological development in the imaging industry has been and is even more rapid and has forced both new entrants and established companies to respond and adapt quickly in the face of radical and architectural innovation as defined by Henderson. As a result Kodak which has long held a global leadership in the imaging market had begun to fear that the development of digital technologies might provide vital threats to the company¶s core chemical processing business. At this stage technological changes which had occurred in the external environment had largely driven organisational changes within Kodak discussed subsequently below. ,
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Environmental
WaterCo is subject to intense regulatory scrutiny by Environmental Protection Agencies and Public Environmental Advocacy groups in relation to the conduct of its service in treating waste water and providing drinking water to the British public. Factors of influence here have seen the company be engaged in training programs for its employees and company wide in ensuring the company meets these standards and possesses the knowledge and skills to do so in terms of its human resources. Green issues have also been a concern for Kodak as the nature of its products historically have been ones hard to dispose of and ones which are unfriendly to the environment in terms of for example the chemicals used in the manufacturing process. However change for Kodak in terms of this influence has been clearly linked with developments in technology and a greater emphasis on more superficially friendly digital products. Superficially in the sense that environmental concerns are still expressed in terms of the construction of digital products by some advocacy groups globally.
Legal
Legal considerations are agai n more a concern directly for WaterCo in terms of the regulatory environment it must contend with as being a utility company providing services to the public. Furthermore a distinct process which has led to changes in WaterCo has been the development of new safety standards in relation to the operation of the equipment it uses. Such heavy machinery has seen a slew of legislative developments in the UK raising safety standards within the industry seeking to reduce the number of work related accidents. WaterCo has made a significant investment in educating training and retraining staff in light of these developments and the organisational change for the company in this regard has been a principal component of its human resource strategy. For Kodak principal legal influences arise out of considering the amount of countries which the company operates in. As discussed below Kodak has responded to these challenges through the pursuit of joint-ventures with mixed success. Thus Kodak can be said to attempt to minimise its expo sure as much a s possible in being a multinational company to the influences of national legal environments. ,
Discussion
It is useful to consider the external environmental forces which have had important effects on an o rganisation fro m both a macro view as defined b y Taylor and Cooper (1988) and from an industrial perspective (Pettinger 2004). In this way we can address the significant point concerning the complexity of contexts in which organisational change occurs. Rates of technological development have generated intense competition for WaterCo which to a large extent has increased the demand for internal adaptation to these technological changes. This is because the water industry is a highly mechanised process-orientated industry and the services provided by WaterCo depend particularly on the machinery used to deliver the process. According to Senior (2002) organisational change in the technological field can be seen as a radical change because of the vital influences of these proces ses on all levels of corporate operations. In additiona l to changes in physical resources organisational structure and human resource structures must change correspondingly also for these types of changes to be managed successfully (Grundy 1993). A flatter organisational structure can be used in order to improve communication processes and employee training (Graetz et all 2002). Skills are an essential factor for the company but the core of these skills needs to be retained in the face of increasing automation and complexity. As such technological change rarely occurs by itself (Baldry 1998). Change can be argued to have been mediated in an incremental and evolutionary way rather than a revolutionary one within the water industry (Senior 2002). ,
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Kodak like WaterCo has been significantly influenced by a variety of factors as identified by a PESTEL analysis which can be grouped under a general heading of globalisation. Kodak has similarly also been significantly influenced by technological changes in altering and changing its organisational structures and cultures. Kodak operating within a fast growth industry has suffered from a shorter period of evolutionary change and was faced with revolutionary changes much sooner and as Greiner argues (1998) long-term growth of organisations is pushed by a large degree by revolutionary change. Digital technology was hence already prominent in several markets but Kodak was too far behind and µill-suited¶ to develop and pursue the development of digital technologies on its own (Macher and Richman 2004). The management team at Kodak adopted a two-tier strategy which on the one saw them responding to the rapid technological change through merging with other companies that had already developed successful digital products such as the buying of the Imation Corporation¶s medical imaging business in 1998 (Kodak Buying Medial Imaging Operation 1998). Secondly they pursued joint venture tactics in order ,
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to react to the changes in this industry by matching with strong performers in areas of the industry.
However these tactics were unsuccessful as organisational conflicts occurred between joint-ventures and central management. It was obvious then that the firm¶s structure and systems at the time were not capable of developing new technologies efficiently thus the management team responded by sheltering the joint venture from Kodak¶s main body and making it an independent entity (Macher and Richman 2004). As a result this allowed the independent division to develop specific routines responsive to the project¶s demands and progress went efficiently from there. This corresponds with the findings of a recent survey of Information System managers which revealed that 39% of organisations have adopted an Object -Oriented (OO) technology process to some extent in project developments (Glass 1999). Researchers concluded that the OO approach is however only an evolutionary adjustment from the structured systems it supplants (Meli 1994; Parodi 1995; Booch 1996). In Kodak¶s case the revolutionary changes occurring in the technological field can be clarified as a radical change that spread into all the level of organisation (Senior 2002 Booch 1996). It is fair to say that future growth would seem to be very depended on the company engaging with and possessing the wi ll to carry out future revolutionary change s (Bigelow 1980). ,
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To conclude change in an organisation¶s architecture often determines the success of organisational change (Greiner 1998). Strategies need to effectively respond to outside forces causing revolutionary and evolutionary changes. As Greiner (2000) points out each of the growth phases begins with a period of evolution and followed with a revolutionary period which pushes the organisation into the next stage of growth for firms within the specified industry. However different strategies and organisational structures may be appropriate under the different circumstances characteristic to the specified industry. Therefore organisational change is the result of external environ mental changes and internal demands in terms of structure system product and human resources necessary for the organisation to mediate successfully the various elements in change. ,
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