[MUSIC] Any organization, commercial, government, not-for-profit, social, is likely to be impacted, sometimes greatly, sometimes to a lesser extent, by factors in its external environment. The external environment being the big wide world in which it exists and operates. Some of those factors may be closely linked to its operations, those having an immediate impact. And others which are more general, linked to the contextual environment. Any one organization, whilst it's located in an external environment with other organizations, is actually located in one particular position. And that position impacts uniquely on that organization. After all, organizations are located in different places undertaking different business activities and with different products, services and customers. Even if one organization is remarkably similar to another, its managers will invariably view the environment differently to managers in other organizations, and draw different conclusions about the impact and consequences of the external environment. An environment, let's not forget, which is turbulent and ever changing. If we accept that this is the case, ongoing analyses of the environment makes plain common sense bringing a number of benefits. Including identifying those influences, bringing about change, anticipation of opportunities and threats. Enabling managers to acquire greater understanding over the external environment and facilitating better planning and ongoing management. And it would make sense to also identify and assess the organization's strengths and weaknesses in the context of how the ever-changing environment might impact upon it. To help in doing all this, there are a number of techniques which are available, and have been shown to be very useful. Key amongst those techniques are PEST analysis, sometimes with its scope extended to be called PESTLE, and SWOT analysis. PEST, or PESTLE analysis, is about examining the external environment in the context of factors impacting on an organization in the areas of political, economic, sociocultural, and technological influences. Increasingly, the impact of legal and environmental factors are being analyzed, extending PEST to PESTLE. A further subanalysis sometimes takes place at the local, national and global levels, leading to the acronyms Long PEST or Long PESTLE. Indeed, through the inclusion of whatever an organization thinks is important in its environment, and perhaps ethical and demographic aspects, the acronym might be presented with the letters extended in different orders. SWOT analysis is another useful technique. This helps the managers of an organization to identify and understand its strengths and weaknesses and to establish the opportunities open to it and the threats it faces. From an international perspective, the airline industry might be seen as an appropriate setting against which to set the ideas of PESTLE and SWOT analysis. Take the example of Ryanair. Originally a small low cost airline, it was faced with the challenge of entering an airline market dominated by established big players. It started in 1984, flying one route between Waterford in the Republic of Ireland to London Gatwick with one 15-seater airplane. It has grown enormously since then. Profits after tax in 2010 were 305 million euros and they've since grown to be over 1.2 billion euros in 2016. It's achieved its growth through a constant analysis of its external and internal environments. Looking at the changing business environment, identifying opportunities and threats, and being aware of both its strengths and weaknesses. The Brexit referendum vote in the UK in 2016 has been constantly analyzed and evaluated. And Ryanair has been developing strategies to alleviate the potential impact. It faces other periodic challenges associated with, for example, air traffic control strikes, and has developed ways of engaging with such challenges. Another example may be found in HSBC, the international bank. It operates in many countries around the world. Its operations will be impacted by government policies and regulations in the countries in which it operates. It will be affected by changing economic conditions, and moves towards increased mobile banking using technology. The international environment needs to be constantly analyzed and evaluated in the context of the bank's strengths and weaknesses. Other organizations operate internationally, some on a large scale, others on a very small scale. But all are impacted to a lesser or greater degree by the changing environment. And much better to be proactive rather than reactive. I recently purchased some furniture from a small UK based manufacturer. They use UK labor, but many of the materials are from other countries. And issues associated with currency exchange rates have at times impacted them both positively and negatively. On one occasion they produced an operating profit, but adverse movements in exchange rates caused the final profit to actually be, unfortunately, a loss. Clearly, we should explore the analytical models. Here, we explore the nature and applications of those techniques in some detail. And in so doing we consider PEST in a little more detail first. [MUSIC]
