PESTLE analysis challenging environment

INTRODUCTION

Wolters Kluwer Health (WKH) operates in a competitive and challenging environment, emphasised even more so by the current global financial crisis. Transformation, mergers, globalisation, downsizing, rightsizing, outsourcing, cost-cutting and empowerment are all having an impact on the organisation.

This report looks at the external environment of WKH through the PESTLE analysis. The analysis examines the impact of two factors on the business and the Human Resource (HR) function. It also highlights the opportunities for WKH and creates the opportunity to make contingency plans for any threats.

THE ORGANISATION

WKH is the leading global provider of information and business intelligence for healthcare professionals, serving physicians, nurses, allied health professionals, pharmacists, academics, and the life sciences with solutions for research and development at the point-of-learning, the point-of-dispensing, and the point-of-care.

With its 80 employees in the UK, WKH forms part of a global organisation, Wolters Kluwer, with approximately 19,500 people worldwide and a revenue of 3.4 billion (Wolters Kluwer Connect, Facts & Figures).

WKH aspires to be the professional's first choice for health and medical information. The Company mission is to provide current, accurate and expert information, leading-edge technology and solutions, and superior customer services to help current and aspiring health professionals make critical decisions effectively and efficiently.

The 3 year corporate strategy for 2008 and beyond is to accelerate profitable growth by strengthening the core market positions; by expanding into adjacent growth segments; by leveraging the global presence to capitalize on high growth opportunities and by institutionalizing operational excellence throughout the Company to improve efficiency and the quality of the products the Company delivers to the customers (Wolters Kluwer Connect, Corporate Strategy).

This report focuses on the UK organisation and its surrounding environment.

WOLTERS KLUWER HEALTH - THE PESTLE ANALYSIS

The PESTLE analysis looks at the external business environment and changes that occur or will occur on the national and international level which will affect the organisation's performance. PESTLE is an acronym for the following factors: Political, Economic, Social, Technological, Legal and Environmental (Farnham 2005).

These factors are usually beyond the organisation's control and may present themselves as threats, but can also create new opportunities for businesses.

The PESTLE analysis is a good starting point for any organisation when reviewing its strategy. For some organisations the results may have an impact on their expansion or even the alteration of their product offering.

The full PESTLE analysis of WKH is enclosed at the end of this report under Appendix A. This report concentrates on two factors from that analysis and explains in detail the impact they have on WKH and the HR function.

FACTOR 1 - THE OFFICE RELOCATION

This factor was chosen for the impact it may present to the organisation and its employees in the next two years.

Impact on the organisation:

The lease of the Waterloo Road premises expires in December 2011. The management is in discussions about possible relocation. Three locations are being considered. They are a building in Liverpool Street, the empty Wolters Kluwer building in Kingston-upon-Thames and the current building in Waterloo.

The relocation may lead to higher rental costs, reduced productivity during and after the move. WKH needs to consider possible redundancy costs and travel packages. The Waterloo Road and Kingston offices will need a full makeover, including air ventilation, heating and lift replacements which will add to the costs.

What it means for the HR function:

The relocation to Kingston may result in employees leaving. The HR function needs to prepare for possible redundancies, relocation and travel packages for the employees. The cost of new hires/replacements will increase as will the time spent in consultation meetings and recruitment. WKH may lose valued employees and may not be able to replace them. This may have an impact on employee motivation, morale, engagement and productivity.

The Company should consider inviting employees to put forward their ideas on the planning and redevelopment of the new offices, which may encourage the positive result and re-energise the employees.

The HR function may not have the capacity to deal with the issues arising from this relocation and may have to rethink its current strategy such as recruit an additional person, engage the services of an employee assistance programme etc.

FACTOR 2 - E-PUBLISHING AND PRODUCT DEVELOPMENT

Technology is a critical for WKH; therefore this factor was chosen to look for the threats the advanced technology brings but also to find opportunities to increase the brand portfolio.

Impact on the organisation:

WKH is split into two parts, the traditional books and journals publisher, and the online medical and health information provider. The growing technology is a threat to the traditional part of the business as more people seek out quick answers on line instead of buying books. The competition from information providers such as Google, Yahoo etc. who offer vast quantity of information for free will only increase in the future and may affect the Company sales.

The Opportunity - new product initiatives:

The development of an improved version of the OvidSP database is under way and the Company should consider increasing its online content to include e-book versions of all its book publications. This could bring further revenue for the business.

All WKH products are currently available in the English language with only a limited amount of books published in Spanish. The Company should look into providing the medical information in local languages such as French, Italian and Russian etc. This may be a lengthy process and WKH needs to research the market for any competitor initiatives perhaps using Porter's five forces model.

Impact on the HR function:

To keep up with the growing technology WKH needs to up skill its current workforce and recruit professionals with the right skills for the business.

In the event of expansion into another language region, the HR function should consider engagement and motivational practices for the managers and employees to increase their willingness to participate in the proposed changes to their job areas. There may be an increase in recruitment, outsourcing and job restructures. The expansion may leave a positive effect on the current employees showing that business is healthy and growing. The recruitment and training costs will increase, but it is anticipated that the engagement levels and productivity will follow.

The HR function needs to help out with the new vision and strategy communications and develop its managers to become the leaders taking the organisation forward.

THE LIMITATIONS OF THE PESTLE FRAMEWORK

"The external environment is complex, volatile and interactive, but it cannot be ignored in any meaningful analysis of business activity." (Worthington & Britton, 2006, p.3)

The PESTLE analysis is a useful strategic tool when looking at the external environment in which an organisation operates. Levi Strauss ignored the importance of the environmental factors such as needs and wants of its customers in the latter half of the twentieth century. The Company was slow to recognise the changes in the fashion tastes which consequently resulted in most of their customers switching to alternative products. (Worthington & Britton, 2006)

In his search for organisational effectiveness, McCann (2004) recognised that by following the Systems Theory and accepting the role of environments, any change that happens in the outside environment will affect every individual, group, department and the organisation's larger set of interdependent organizations as an interrelated whole. The Systems Theory links directly to PESTLE analysis in recognising the effects of environmental changes on every part of organisation.

The drawback of the PESTLE analysis is that it can become too focused on the historical or current instead of future environment (Pergamon Flexible Learning, 2005, p.32). It can become long and time consuming and it may be hard to predict the impact of the significant factors. The constant and unpredictable changes make the environment uncertain and organisations need to adapt faster (Huczynski & Buchanan, 2007). It also fails to mention potentially significant contextual factors such as demographic trends and issues relating to globalisation (Taylor, 2005).

Any organisation considering a review of their strategy should first of all identify all relevant factors that may affect the business on different levels and never use PESTLE on its own. It is imperative that organisations also use other strategic tools such as SWOT and Porter's five forces. SWOT will provide a picture of the internal strengths and opportunities and give direction on how to manage weaknesses so that they are not exposed to threats (Wickham, 2000). The Porter's five forces will review the competitive environment in which the organisation operates. It concentrates on the bargaining power of buyers and suppliers, the threat of new entry and substitutes and the intensity of rivalry (Porter, 1985).

The use of all three tools will lead to a robust set of information that can be used to provide guidance to the organisational strategy, however, this should be reviewed regularly and need to be considered in relation to the limitations of each tool.

CONCLUSIONS

The PESTLE analysis of WKH has led to two key factors being highlighted as needing immediate attention, the e-publishing and relocation. These factors were reviewed in more detail and should now be subjected to further review and action planning on how to address and resolve the issues.

Completing the PESTLE review of the business has highlighted the value of recognition of the external environments, the opportunities they present and threats which the leaders of WKH should prepare for.

BIBLIOGRAPHY

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