PEST Analysis and Sony - Assignment Example

?Management: PEST Analysis and Sony Case Study Part PEST Analysis The importance of environmental analysis in a firm cannot be over d. The reason is that both the internal and external environments are crucial in developing and implementing relevant strategies. A PEST analysis is one of the most notable activities an organisation should undertake. According to Osborn and Brown (2005, p. 12), PEST analysis is a structured method of analyzing the different environmental factors that may call for change or innovation by a firm. Downey (2007, p. 6) provides further insight on what PEST analysis means, highlighting the fact that it is a scan of the external macro-environment within which an organisation operates. It is broadly broken down into political, economic, social-cultural and technological factors which form the four tenets of PEST analysis. This part of the study will explore the concept of PEST analysis using practical examples. The political aspect of the PEST analysis involves the effects of government policy on a firm since this consideration impacts nearly all aspects of the firm’s operations. Henry (2008, p. 52) states that the political factors affecting a firm do not merely arise from legislation but encompasses issues such as government stability, taxation policies and government regulation. With the advent of globalisation, government stability, which has traditionally not been a concern in developed nations such as the UK, can now not escape attention as firms seek to transform into multinationals. Establishment of supranational cooperation such as the European Union also comes into play as cross-national standardization takes course. Deregulation of an industry by the government may result in new entrants that practice competitive pricing and thus affect incumbents. The second aspect in PEST analysis involves economic considerations, where there is the analysis of economic indicators such as interest rates, people’s disposable incomes, unemployment rates, inflation, currency strength and global economics (Henry 2008, p. 54). A practical example is one in which a firm dealing with importations in the UK has to monitor the strength of the Sterling Pound since a strong Pound could easily make importation quite expensive. The same firm is also affected by global oil price dynamics and must have felt the repercussions of an economic downturn resulting from American economics. In such a recession, the spending power of consumers declines and lay-offs increase hence affecting such a firm’s sales. All of these should be analysed if the firm is to navigate the industry properly. Osborne and Brown (2005, p. 17) explain that firms are impacted by social factors like an aging population, social inclusion agitation, new social needs and transformation of previous needs and need for sustainable societies. All these affect a firm’s market size, customer loyalty and growth and thus are weighty considerations for firms. For instance, population demographics may determine the products that will have large markets and strategies that will access such markets. Different products and strategies appeal to both young and ageing populations in significantly different ways; hence a firm has to ensure it analyses population trends and future expectations. The last aspect of PEST analysis is technology, where a firm has to ensure it places itself in a strategic position to take advantage of new and useful technologies since the implications in terms of competitiveness are far-reaching (Gimbert 2011, p. 49). Some of the most impacting technologies include IT, internet and genetic engineering while emerging areas such as nanotechnology are bound to be influential. A practical example of how analysis of the technological factors is crucial is in the advent of the internet, where the first firms to capitalise on its advantages such as ease of communication and access to wider markets gained immense competitive advantages over their rivals. Part 2: a) Structural Problems Sony is a largely successful global brand, a leading global employer and has enjoyed industry leadership for quite a long time (Kennan, 2009). It has, however, lost its position as the head of the pack due to a number of organisational problems. The first of these is its complacent organisational structure, where it is observed that Sony ran its divisions as independent and separate entities even when it was necessary that all divisions cooperate. As a result, there was widespread lack of coordination to the extent that the divisions were unaware of each other’s efforts and thus developed product lines that would be in competition with each other. An example is a case in the 1990s where three lines were oblivious of developing digital cameras at the same time. To address this problem, Sony undertook a number of structural changes where a high level management group was established to improve coordination among the divisions. New products were to be developed and launched through temporary development committees referred to as virtual companies. The new Sony Mini-Disk player was the result of the efforts placed in increased cooperation and coordination amongst Sony’s traditional divisions. b) Staff Development Sony is a large multinational company and, as a result, has realised the need to develop a talented workforce with leadership potential and an international outlook. The first initiative by Sony involved staff development; this aimed at cultivating the next generation of global business leaders. This involved appointment of global talent directors from its regional HR managers in 2008 and who were charged with identifying business leadership potential amongst employees and developing them into future business leaders. Such employees are then rotated through job assignments in different businesses and regions. Sony seeks to develop a profile for a global business leader and has established development programs at the Sony University to complement the initiative of developing future business and global leaders. Sony also has employee training programs run by 230-strong technological experts who develop training curricula and textbooks. This set of employees also undertakes to train the rest of the engineering workforce according to their fields of specialty. Besides these, Sony also invites external trainers to help impart cutting-edge technology in their employees. The training programs take the course of both in-class and on-job training where an experienced and young employee tutors a recruit on basic organisational culture and specific skills. c) Industry Competition Despite the comprehensive structural changes and enviable staff training and development programs, Sony still finds itself embroiled in cut-throat and considerable competition from the likes of Apple, Microsoft, Dell and Time Warner. The direction in the industry is towards integration of technology and entertainment, and Sony was in a good position to take off in the right direction since it has content assets in music and movies and required technology. However, Sony has been slow in assessing product trends and has lagged behind in comparison to the quicker and earlier mentioned competitors. This has been identified as a major weakness in Sony. This is evident in its reversal of revival fortunes by 2011 after experiencing positive growth for some years. Decrease in sales was attributed to Sony’s failure to innovate despite the obvious competencies. The underlying cause for this scenario was blamed on Sony’s corporate culture. The management has, however, appreciated that this is the case and has, as a result, sought to undertake reorganisation in Sony’s organisation structure. The aim of this is to transform Sony into a more innovative firm entrenched in agility as per the industry’s standards. References Downey, J 2007, Strategic analysis tools, CIMA, London. Gimbert, X 2011, Think strategically, Palgrave Macmillan, UK. Henry, A 2008, Understanding strategic management, Oxford University Press, UK. Kennan, M 2009, Sony corporation history & background, viewed 5 November 2011, Osborne, SP & Brown, K 2005, Managing change and innovation in public service organizations, Routledge, UK. Read More