According to the PESTEL analysis approach, there should be key drivers of change that need to be understood together with their differentiated impact in the Irish market. There is a need to consider the future impact on the environment due to the business’ endeavors.
For most organizations to get their foot out of the mud, most managers must look into the business environment of the company as stated by The Economist Newspaper Limited 2009. This will involve the use of the PESTEL analysis. PESTEL is a combination of the factors that exist within the business environment as stated by The Times Newspapers Ltd. (2003). The term refers to the Political, Economic, Social, Technological, Environmental, and Legal status in the organization’s macroeconomic.
Considering the Irish economy as a case study, the political environment of the Irish territory will be part of the macroeconomic of the company. The political environment must have the stability of the government, the taxation policies, the foreign trade regulations, and the Social welfare policies may affect the business environment.
The economic environment of the Irish products will include the availability of disposable income, the general business cycles, the trends of the GNP, the Interest rates of investments into the economy, the supply of money, inflation, and unemployment rates are key economic factors to consider. All these factors are at some point a result of the government policies that have been implemented and the set sanctions of trade.
The social factors to look out for are the distribution of income among the Irish society, the changes anticipated in the lifestyle trends of the society, the population demographics, attitudes to work and leisure among people, the level of consumption and education, and finally the social mobility that exist. The society in which a company is to trade in is a main determinant of the expected financial outcome.
The technological aspects to consider are the new inventions of the times, the spending of the government on the various technological research works, there is also the rate at which technology transfers and finally consider the rate of obsolescence among the Irish society. the government ought to support technological developments that will enhance business efficiency and progress.
The key environmental aspect of a macroenvironment is details of the environmental protection laws, level of energy consumption in the society, the method of waste disposal. These factors look deep into the environmental agendas of the key business environment. The environment should be conducive for any business engagement. The business should incorporate policies and strategies that help conserve the environment.
The legal aspects include consideration of the laws on competition, employment health and safety, and the safety of the products, which in this case are varied in nature and serve different purposes. The legal environment of the firms is clearly outlined and should be adhered to by all the business operations.
FIAT Analysis
The approach adopted by Sergio Marchionne applies the first 4 aspects of the PESTEL analysis i.e. PEST. The foreign trade regulations agreed upon by Congress require that Chrysler remains an American household name that caters for the American working class (merger saved close to 300, 000 jobs).
The economic aspect is catered for in pricing and product considerations where the Dodge remains synonymous with masculinity and the smaller cheaper cars are targeted at consumers with low bargaining power. Also, Marchionne aims to introduce bigger Chrysler cars like the Dodge into the European(especially Italian Market) while in turn bringing smaller cars like the 500 minicars to America. This also applies to the socio-cultural aspect as it looks into the tastes and preferences of the consumers.
The technological aspect is seen in the consideration of Fiat sharing its innovations with the Chrysler brand to make a better product as well as adopting new technology as suggested in his conversation with House Speaker Nancy Pelosi recounted in the interview with John Reed of the Financial Times*.
According to the PESTEL analysis approach, there should be key drivers of change that need to be understood together with their differentiated impact on the American Economy. These factors determine the level and pace of development of any organization. There is a need to consider the future impact on the environment due to the business’ endeavors.
The PESTEL model as stated by Oxford University Press (2007) addresses the five forces influencing the development of a business. These forces in the case of Chrysler include the buyers who are American citizens, the suppliers of the materials for competing in car manufacturing, competitor firms such as Mercedes Benz and Renault which create a lot of market pressure, also some substitute producing firms that also affect the market structure e.g. Toyota cars instead of Fiat. All these factors create a competitive rivalry. This rivalry is important since the client or end-user of the automobile will be able to enjoy a variety of quality goods at an affordable price. “You only had to read last week and this week’s Motors to see that car prices in Ireland are at an all-time low and that some of the offers available on new cars are not likely to be repeated for quite some time” (Comyn, 2010). The latter statement is a clear indicator of how a stable political state like Ireland has maintained investor interest. The country has the quality and affordable cars to serve its ever-growing economy. The principles of the PESTEL analysis are prevalent and apply in the country hence making it the best environment for the car business.
Conclusion
In conclusion, Chrysler has acquired new management and new strategies for making the company a worthwhile investment. The Chief Officer of Fiat, an Italian automobile manufacturer, is now running the company. The Chief Officer, Sergio Marchionne is known to have lead Fiat to new management that has seen the company increase its profits and elevate its efficiency levels. The company using the PESTEL analysis will be able to uplift the lagging Chrysler company. Fiat would through PESTEL analysis enhance its business environment in collaboration with Chrysler namely the political, social, economic, environmental, and technological.
References
Oxford University Press., 2007. PESTEL analysis of the macro-environment. Web.
The Economist Newspaper Limited., 2009. Fiat and Chrysler forge a strategic alliance, Web.
The Times Newspapers., 2003. SLEPT analysis with example, Web.