PESTEL Analysis of Aberforth Smaller Companies Trust Plc

Posted by Freddie Murphy on Aug-02-2021

At EssayPandas, we can help you complete different MBA assessment projects and theoretical frameworks like PESTEL/PEST/STEP analysis of different companies. For instance, Aberforth Smaller Companies Trust Plc' PESTEL analysis will mainly focus on the external Macro-Environmental factors such as Political, Economic, Social, Technological, Environmental, and Legal, that can directly affect Aberforth Smaller Companies Trust Plc.

A detailed PESTEL Analysis can help managers explore three inter-related environments, i.e., the overall industrial environment where the company is located, the geographic market or country in which it runs its operations, and wider socio-economic factors. Below is a demonstration of how this PESTEL analysis can be written step by step. Ask us for custom PESTEL Analysis help if you still find it difficult.

1. Model introduction

PESTEL is an acronym for Political, Economic, Social, Technological, Environmental, and Legal Analysis. This environment scanning tool is mainly used to understand the external macro-economic influences on the industry, a particular sector, business, and its product/service offerings. These environmental forces are considered external as they cannot be controlled by a firm. However, an in-depth PESTEL analysis of Aberforth Smaller Companies Trust Plc can enhance the companies’ readiness to handle external environmental turbulence. It is one of the most widely used strategic planning and management tools that help management in assessing the impact of different environmental factors on the business and identifying the threats and opportunities that reside in the external environment. By gaining an in-depth understanding of the external environment, management can make wise strategic decisions according to the underlying context.

PESTEL analysis is a simple and easy to apply environment scanning framework that facilitates the understanding of the broader business environment. It encourages organizational management to think strategically, and quickly respond to the external environment changes to avoid or reduce the negative impact on business operations. It also encourages the management to analyze the external business environment from different possible dimensions. However, conducting a detailed PESTEL analysis involves extensive time, and the model cannot offer a full picture of the environmental complexity. Moreover, the model does not clearly highlight the complex inter-connectedness between different external environmental forces. Despite these limitations, the model is still extensively employed to make important business decisions. Model is found to be particularly helpful when firms need to make international expansion decisions. The effectiveness of this model increases when it is combined with other strategic planning tools.

2. Application of PESTEL Model on Aberforth Smaller Companies Trust Plc

2.1 Political factors in the PESTEL framework

2.1.1 What are political factors?

‘Political factors’ are the first component of the PESTEL framework that exert a strong impact on the business, and play an important role in determining the business’ long-term sustainability. Some examples of political factors are taxation policies and trade regulations that governments can levy around the year and it may influence the overall business environment. A strong presence at the international stage increases the vulnerability of Aberforth Smaller Companies Trust Plc to a variety of political, structural, and systematic risks. To ensure long-term survival, Aberforth Smaller Companies Trust Plc should consider the following political factors to enhance the readiness to changing political environment dynamics:

2.1.2 Stability

Political stability is important for business organizations as it influences customer and investor confidence, and therefore, has a wide impact on the economy. High political instability has serious implications for the consumption, investment, and economic growth of businesses. Currently, the geographic area in which Aberforth Smaller Companies Trust Plc is actively present is experiencing some political instability due to internal and external conflicts. Inability to understand and handle the prevailing political chaos can inhibit the company from achieving its growth objectives, and management will be reluctant to invest in new capital.

2.1.3 Uncertainty

Uncertainty in the political environment refers to the frequency of changes in government policies and regulations. Frequent policy changes affect business performance and make decision-making more challenging due to prevailing uncertainty. Aberforth Smaller Companies Trust Plc should actively scan the political environment to ensure quick adaptation with changing policies and reset the strategic priorities accordingly.

2.1.4 Governance system

The current governance system is based on democracy, which makes the business environment friendly for Aberforth Smaller Companies Trust Plc . Aberforth Smaller Companies Trust Plc can benefit from the economic freedom offered by the democratic governance system, which promotes entrepreneurship and free trade.

2.1.5 Pressure groups in government

Pressure groups can affect the business environment by finding strong allies in the media. These groups pressurize the organizations by arranging protests and running marketing campaigns. Aberforth Smaller Companies Trust Plc needs to keep an eye on the activities of these pressure groups as they can influence the government’s policies, which may ultimately affect the overall business environment. Aberforth Smaller Companies Trust Plc should closely collaborate with these groups to win their trust and should invest in ethical and social activities to develop closer ties with society.

2.1.6 Transparency

A transparent governance structure is crucial for promoting a friendly business environment. Aberforth Smaller Companies Trust Plc is currently facing several issues due to corruption and lack of transparency. This lack of transparency is mainly linked with the prevailing political uncertainty and instability. Due to corruption, fraudulent activities are on the rise, business activities like licensing and contracting have become more challenging, and law enforcement has weakened, which is hampering the stakeholders’ trust in the business entities and government institutions. Overall, rising bureaucratic corruption is halting economic growth, resulting in reduced growth opportunities for business organizations like Aberforth Smaller Companies Trust Plc.

2.1.7 Fiscal policy (taxation)

While making the expansion decisions, Aberforth Smaller Companies Trust Plc should carefully review the industry-specific taxation policies. . The taxation policies will be more favourable for industries that are on top government priorities. Currently, governments in many developing countries are interested in reducing corporate taxes in an attempt to attract foreign direct investment. Aberforth Smaller Companies Trust Plc should consider these countries, as it will be easier to make profits and invest in the innovation, new product and research and development activities due to low tax rate.

2.1.8 Trade policies

The business expansion decision of Aberforth Smaller Companies Trust Plc should also consider the prevailing trade regulations, and management should prefer the regions with free or flexible trade agreements. The region under consideration is currently reducing the trade restrictions to ease the environment for foreign business players, which increases the attractiveness of this region for Aberforth Smaller Companies Trust Plc , which is seeking international business growth opportunities.

2.2 Economic factors in the PESTEL framework

2.2.1 What are economic factors?

Economic factors- the second component of PESTEL framework, comprise multifaceted variables that directly affect the businesses’ ability to achieve their economic objectives. Aberforth Smaller Companies Trust Plc must gain an in-depth understanding of these factors to anticipate the short-term and long-term business growth in the chosen sector. Some of the key economic factors are explained below:

2.2.2 The efficiency of financial markets

High financial market efficiency shares a strong positive relationship with overall economic growth, making capital accumulation and goods/service production easier. Therefore, Aberforth Smaller Companies Trust Plc needs to choose the countries with highly efficient financial markets so that it could easily accumulate financial and human capital. By keeping an eye on the financial market efficiency, Aberforth Smaller Companies Trust Plc can successfully stay ahead of the competition.

2.2.3 Economic growth rate

Aberforth Smaller Companies Trust Plc should review the economic growth rate of the countries while making international expansion decisions. Countries with high economic growth rates provide more opportunities to pursue long-term growth objectives. A slow economic growth rate leads towards more cautious spending by consumers, which can directly affect Aberforth Smaller Companies Trust Plc’s revenue growth.

2.2.4 Inflation

The rising inflation rate can have a negative impact on the revenue growth of Aberforth Smaller Companies Trust Plc as its decreases the purchasing power of money and discourages consumer spending on goods and services.

2.2.5 Exchange and interest rate

Fluctuations in the exchange rate can affect business profitability. Aberforth Smaller Companies Trust Plc should study the exchange rate fluctuations to make accurate anticipations so that the undesired trade and business performance consequences could be avoided. High-interest rate means Aberforth Smaller Companies Trust Plc will make high-interest payments, and taken loans will cost more in the long run.

2.2.6 Industry lifecycle stage

Entering in mature industries that are approaching saturation point can achieve growth objectives more challenging for Aberforth Smaller Companies Trust Plc . Therefore, the industry lifecycle stage must be considered while choosing the countries for international expansion.

2.2.7 Demand and supply of labour

The performance of Aberforth Smaller Companies Trust Plc heavily depends on the skills and competencies of its workforce. The timely availability of skilled workers is crucial for Aberforth Smaller Companies Trust Plc to stay ahead of the competition. Aberforth Smaller Companies Trust Plc should analyze the labour demand and supply trends to understand how workers with the required skills set could be successfully recruited. A rigid labour market with powerful worker unions can cause various problems for Aberforth Smaller Companies Trust Plc . Like, it may pressure the Aberforth Smaller Companies Trust Plc to give an unfair wage raise, or may halt the production process by giving a strike call. Hence, it is important to analyze the labour market dynamics, anticipate the key trends and adapt the talent management strategies accordingly.

2.3 Social factors in the PESTEL framework

2.3.1 What are social factors?

In the PESTEL framework, social factors represent the key demographic characteristics, social values, norms, and customs of the society in which business organization functions. Aberforth Smaller Companies Trust Plc must carefully handle the social factors, as failure to adapt according to the socio-cultural environment has driven many highly successful business organizations towards failure. This article section discusses the implications of some key social factors for Aberforth Smaller Companies Trust Plc .

2.3.2 Consumption behaviour

The consumption behaviour shares a strong link with the economic factors. When consumers have more disposable income and are willing to spend more on goods and services to improve their lifestyle, it provides exciting growth opportunities to Aberforth Smaller Companies Trust Plc , as introducing new products and services to these customers is easier, and revenue growth chances also remain higher. However, as modern consumers are becoming more demanding, it is important for Aberforth Smaller Companies Trust Plc to carefully analyze their consumption/spending patterns preferences so that the marketing mix strategies could be adapted accordingly. It is also important for Aberforth Smaller Companies Trust Plc to understand whether the consumption is driven by utilitarian or hedonic motivations. Another important consumer behaviour variable that can affect the Aberforth Smaller Companies Trust Plc’s performance is the degree of ethnocentrism. Higher ethnocentrism can make the business environment more challenging for Aberforth Smaller Companies Trust Plc while operating in the international markets.

2.3.3 Demographics

High population growth and rising proportion of young population segment are two favourable demographic indicators for Aberforth Smaller Companies Trust Plc , when it specifically targets young consumers with its products/services. Other than that, it is also important for Aberforth Smaller Companies Trust Plc to study the host country’s attitude towards migration, as a positive attitude in terms of welcoming the immigrants from different cultural backgrounds indicates the importance of adopting effective diversity management practices. Aberforth Smaller Companies Trust Plc should adapt its marketing strategies to ensure diversity and inclusion. A positive attitude towards migration also reflects that Aberforth Smaller Companies Trust Plc can easily recruit staff from diversified cultural backgrounds. High workplace diversity is often linked with higher productivity, better innovation, and improved overall firm performance.

2.3.4 Social equality

Social class stratification and respect for hierarchy are some important social factors that can influence the business, marketing, and human resource management strategies of Aberforth Smaller Companies Trust Plc . A hierarchal structure with formal work culture suits Aberforth Smaller Companies Trust Plc when entering countries with high power distance. Similarly, higher social stratification also indicates the need to adopt effective market segmentation strategies, as Aberforth Smaller Companies Trust Plc cannot target multiple segments from different social classes with the same marketing mix.

2.3.5 Cultural and societal norms

Each country has its unique cultural norms, values, and traditions, which reflect consumer behavior. Inability to adapt the product/service offerings according to local cultural traditions can cause serious harm to the business. Aberforth Smaller Companies Trust Plc must conduct extensive research to gain local consumer knowledge. Being an international firm from a culturally distant home market, it could be difficult for Aberforth Smaller Companies Trust Plc management to understand the delicate cultural nuances. For this purpose, Aberforth Smaller Companies Trust Plc can develop a business partnership with local market players that could offer in-depth information about cultural norms and values that influence consumers’ perceptions and attitudes towards the brand.

2.3.6 Gender

Another important factor to be considered when developing business strategies is the gender role in that particular society. The marketing and advertising strategies in a highly patriarchal culture would be adapted according to prevailing patriarchal norms, otherwise, Aberforth Smaller Companies Trust Plc can receive a backlash from consumers and general society. The gender roles in that particular society could also affect the human resource management strategies of Aberforth Smaller Companies Trust Plc , as the company will find it difficult to ensure gender diversity across all management levels in countries where women are considered primarily responsible for managing domestic responsibilities.

2.4 Technological factors in PESTEL framework

2.4.1 What are technological factors?

In today’s business world when technological development pace is accelerating, and business organizations are extensively investing in emerging technologies to stay ahead of the competition, it is important for Aberforth Smaller Companies Trust Plc to study and anticipate the existing and future technological trends to ensure long-term business survival. This article section outlines some technological factors that have important implications for Aberforth Smaller Companies Trust Plc .

2.4.2 Technological infrastructure

Aberforth Smaller Companies Trust Plc should prefer countries with well-developed technological infrastructure, as supportive technological infrastructure makes it easier for a firm to achieve its cost reduction, innovation, and value creation objectives. Well-developed technological infrastructure also reflects that it will be harder for Aberforth Smaller Companies Trust Plc to derive sustainable competitive advantage from technology, which could be easily imitated by competitors.

2.4.3 Technological innovations

Technological innovation rate and development can affect the overall market and industry. By studying the emerging technological innovation trends, Aberforth Smaller Companies Trust Plc will be able to understand the new product development rate, product life cycle length, and innovative features being mostly liked by consumers. Research into consumers’ attitudes towards emerging innovative digital technologies can help Aberforth Smaller Companies Trust Plc in understanding whether shifting to e-commerce will benefit more than opening a physical outlet. Competitors’ investment in automation technologies to reduce costs can compel the Aberforth Smaller Companies Trust Plc to shift from manual to automated procedures, particularly when people in general in that particular society are tech-savvy. By investing in the right technological innovations, Aberforth Smaller Companies Trust Plc can optimize the user experience, achieve operational efficiencies, and position itself as an innovative organization.

2.4.4 Research and development

The research and development trend in chosen industry/region reflects the pro-activeness of firms towards introducing innovative solutions for consumers’ needs. However, Aberforth Smaller Companies Trust Plc must refine its understanding of how emerging technological innovations can benefit the firm besides creating value for customers. Extensive investment in research and development activities would be required in markets characterized by disruptive technologies. However, it is important for Aberforth Smaller Companies Trust Plc to adopt a long-term horizon, and do not expect a short-term return from its research and development efforts.

2.5 Environmental factors in the PESTEL framework

2.5.1 What are environmental factors?

Environmental analysis has gained significant importance in the contemporary business environment due to the increased vigilance of stakeholders towards sustainability and environment protection. Aberforth Smaller Companies Trust Plc should gain an in-depth understanding of environmental regulations to avoid lawsuits and reputational harm in the market. Implications of some important environmental factors are discussed below.

2.5.2 Environmental regulations

Stringent environmental regulations in many countries are pressurizing business organizations to reduce environmental harm. In response, Aberforth Smaller Companies Trust Plc should adopt responsible production practices, encourage responsible consumption practices among its targeted consumers, try to improve its brand image on sustainability grounds, and ensure full compliance with the international and local environmental regulations, as inability to do so can draw the serious, reputation damaging criticism from relevant stakeholders.

2.5.3 The growing use of renewable energy

The emergence of renewable technologies to reduce dependence on natural resources has emerged as a powerful trend in various sectors. Aberforth Smaller Companies Trust Plc should evaluate the extent to which a country’s technological infrastructure supports the use of renewable technologies to capture this environmental trend. In some world regions, governments offer attractive subsidies on the use of renewable energy sources. By taking the advantage, Aberforth Smaller Companies Trust Plc can incur investment in renewable energy sources to achieve sustainable business development objectives.

2.5.4 Industry norms of recycling, waste management, and optimum resource utilization

In some countries, the adoption of the closed-loop, circular economy principle is becoming a common norm in some industries/regions. Industries with supportive institutional mechanisms can make material recycling and re-using easier. Similarly, in some countries, customers take an active part in the recycling process. Aberforth Smaller Companies Trust Plc can benefit from these sustainability trends and use them as a tool to not only reduce the environmental costs but also achieve economic objectives in form of reduced production costs.


2.5.5 Weather

Lastly, weather conditions need to be considered as operational cost, efficiency, and employee productivity can derive a strong influence from the local weather conditions. Weather conditions also shape consumer behaviour, and require Aberforth Smaller Companies Trust Plc to integrate flexibility into its supply chain operations.

2.6 Legal factors in the PESTEL framework

2.6.1 What are legal factors?

Unlike political factors that offer a broader view, legal factors provide more detailed and specific information related to different laws and regulations, mainly including- employment laws, health and safety laws, intellectual property laws, and consumer protection laws. Aberforth Smaller Companies Trust Plc can face expensive lawsuits if it fails to comply with the host countries’ legislations.

2.6.2 Employment laws

Employment law is an umbrella term that covers various laws protecting employees’ rights, such as fair wage, equality, equity, inclusion, fairness, health, and safety. In some countries, there is no effective enforcement of employment laws, but some countries impose strict penalties upon violation of any of the employees’ stated rights. While entering/operating in those countries, Aberforth Smaller Companies Trust Plc should ensure work environment safety. Proper mechanisms must be placed to discourage any sort of direct and indirect discrimination. Effective compliance with the employment laws can help Aberforth Smaller Companies Trust Plc in strengthening its employer brand image, which is important for attracting and retaining the top talent from the market amid the ongoing war for talent.

2.6.3 Intellectual property laws

Strict compliance with the intellectual property laws makes the business environment safer for firms like Aberforth Smaller Companies Trust Plc , as their patents are protected from imitation, leading towards sustainable competitive advantage.

2.6.4 Consumer protection laws

In many countries, a variety of federal and state-level laws are in place to protect consumers from potential exploitation by businesses. In the information technology age, the laws have even become stricter to ensure consumers’ privacy. In the case of online transactions, Aberforth Smaller Companies Trust Plc must strictly comply with the data protection regulations to avoid lawsuits. While entering different countries, Aberforth Smaller Companies Trust Plc management needs to study the laws related to refund, discount, credit terms, quality, misleading advertisement, and maximum pricing (particularly in the case of basic essential goods).

The article ends with some concluding remarks about the overall effectiveness of the PESTEL framework as a strategic planning tool for modern business organizations.

3. Conclusion

PESTEL is a powerful strategic planning tool that can provide valuable guidance to the Aberforth Smaller Companies Trust Plc in making successful business strategies. An in-depth understanding of external environmental dynamics enables Aberforth Smaller Companies Trust Plc to make the right international business expansion decisions. Aberforth Smaller Companies Trust Plc can stay ahead of the competition by timely identifying the opportunities and threats imposed by external business environment, and adapting business strategies accordingly.


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