Definition and Applications
PESTEL analysis is an audit tool used to gain an overview of external factors relevant to the organization’s functioning (CIPD, 2015). It consists of six key elements exploring political, economic, social, technological, environmental, and legal factors that have a possibility of influencing the organization’s efficiency and efficacy. While it does not provide precise information, PESTEL analysis allows us to gain an overall understanding of the environment and is, therefore, useful for long-term planning and strategic decision-making. In addition, this tool is useful for spotting potential risks that reside outside the company’s influence and can be used to design intervention and risk mitigation tactics (CIPD, 2015).
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The most significant political influence Virgin Media is expected to consider is a set of governmental policies known as Communications Act 2003 (Department for Culture Media and Sport 2016). In addition, an updated version of a regulatory framework for telecommunications used by the European Union is implemented in the UK since 2002 (Department for Culture Media and Sport 2016). These are the fundamental tenets that define the principles under which Virgin Media and its competitors are operating. In particular, the regulations require accessibility and transparency of public services, which may require the introduction of specific services for certain organizations, such as a dedicated broadband channel for live feeds or multi-user conferencing accessible to external parties. Unless Virgin Media secures ensures the presence of these options, it can lose a substantial portion of its audience and experience a decline in corporate customers.
Internet access becomes a vital option in the modern world. However, the essential functionality is attainable at speeds far lower than that offered by Virgin Media. This fact, combined with a high price tag of Virgin Media services, suggests that customer income is one of the most important factors. It is expected that people will be less willing to pay for faster broadband packages if their income decreases (Sloman and Jones 2011). Another important economic factor is the potential influence of Brexit, which will most likely negatively affect prices. It is reasonable to expect that the communication segment will become more expensive on average in the oncoming years. Once the pricing policy becomes less attractive, the customer segment interested in budget deals may reconsider using Virgin Media Services and seek cheaper options. Thus, Virgin Media can lose some of its customers to budget broadband providers currently existing in the UK.
The median age of the population is an important factor for broadband providers. Virgin Media needs to work on improved accessibility to ensure that older customers are able to effectively use the offered services. This includes the functionality of its resources, such as a website and personal user area, customer services (e.g., the delivery of bills and communication channels), and marketing campaign accessibility (e.g., exclusion of complex terminology that may repel less technologically proficient audience). Another effect that needs to be considered is a growing concern with the privacy of the Web, which may alarm a certain amount of customers. As a result, it is reasonable to expect a surge in individuals seeking safety and reliability as a critical element of services. Finally, Europe demonstrates a growing concern with the influence of wireless technologies on health, which already led to the introduction of official regulation in some countries. This trend may be hard to address. Therefore it is important to acknowledge it as a possible setback.
The most significant technological factor is the present rate of advancement in communications. The majority of resources and online services are developed to make use of the recent hardware and broadband speeds, which makes them hard to use for people with a slow connection. To ensure even coverage, Virgin needs to update its current communication channels. However, construction of communication towers, installation and update of necessary equipment, and other activities related to expanding the up-to-date network are expensive enough to become a significant financial burden. In addition, the rate of technological improvement raises customer expectations regarding download speeds. For heavy downloaders, this would mean the growing dissatisfaction with the current throttling policies adopted by the company. Since they are more restrictive than those of the competing companies, Virgin Media should consider the possibility of reworking them to meet the changing demand.
Two chief concerns can be identified in the environmental domain. First, the construction, operation, and maintenance of telecommunication equipment fall under several EPA regulations. Considering the fact that Virgin Media needs to expand its coverage to address criticisms, it is likely that it will eventually need to face some of the restrictions, e.g., those described in Emergency Planning and Community Right-to-Know Act (EPCRA) (Department of Energy and Climate Change 2016). For instance, communication towers construction will likely fall under the rigorous scrutiny of local community-based initiatives and will require a meaningful and comprehensive response to the risk they pose to the environment. The second concern is energy usage rates. The telecommunications industry requires energy consumption at every stage of operation and is responsible for a considerable share of the total energy used in the UK. The company’s output needs to comply with the Carbon Plan and EU Emissions Trading Systems, among many others (Department of Energy and Climate Change 2016).
Two main areas require attention to avoid legal complications. First, the actual speed of the Internet connection is difficult to maintain at the described level, especially for the high-end packages and in the current conditions of uneven coverage. Unless properly defined in the user agreement, such a situation may be considered deceptive marketing and lead to legal action. Second, the privacy breach is not entirely impossible in the telecommunications industry and may result in serious violations of basic human rights. Therefore, the company needs to incorporate reliable means of personal data protection to minimize the possibility of data leak and ensure that the estimated risks are communicated to the customer base in the end-user agreement to avoid lawsuits.
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CIPD, 2015. PESTLE analysis [online]. London: CIPD. Web.
Department for Culture Media and Sport, 2016. 2010 to 2015 government policy: communications and Telecomms [online]. London: GOV.UK. Web.
Department of Energy and Climate Change, 2016. 2010 to 2015 government policy: energy demand reduction in industry, business, and the public sector [online]. London: GOV.UK. Web.
Sloman, J., and Jones, E., 2011. Economics and the Business Environment. 3rd Edition. Essex: Prentice-Hall.