Environmental Effects on company Performance
Introduction
It is fundamental to the operations of a firm to have a clear understanding of the environment under which it is operating and without this knowledge a firm is not able to adequately shape its strategies not only to respond to the circumstances but to proactively take advantage of these circumstances in formulating and implementing strategies to fulfill both short term, medium and long term goals.
There are various forces that inform the performance of a firm and various acronyms used to denote them. In this discussion we will employ the PESTEL acronym which constitutes of the political, economic, socio-cultural, technological, environmental (ecological) and legal forces surrounding the firm as outlined by . We will look into these in detail below:
Political environment
The political environment under which a firm operates has key impact on the performance of a firm. Political issues that touch on a firm’s operations include regulations, de-regulations, tax policy including rates and incentives, trade control, import restrictions, tariffs, competition regulation, laws governing workplace health and safety, employment, consumer protection, data protection and so forth. Change in taxes such as what happened in Kenya recently with the Kenya Revenue Authority imposing excise duty on each banking and other transactions and re-introducing taxes on certain goods in the market means that for the banking sector the cost of operations have gone up and some banks have passed this cost onto the customer which means that in the short to medium term there is a possibility that some banks may lose customers affecting their projected profit or growth margins.
In addition to taxes, regulations, tariffs and so on, other political challenges that can and do affect a firm’s performance include the level of corruption that is prevalent in a country. Kenya as a country has suffered being listed in various corruption index reports released by various global
It is fundamental to the operations of a firm to have a clear understanding of the environment under which it is operating and without this knowledge a firm is not able to adequately shape its strategies not only to respond to the circumstances but to proactively take advantage of these circumstances in formulating and implementing strategies to fulfill both short term, medium and long term goals.
There are various forces that inform the performance of a firm and various acronyms used to denote them. In this discussion we will employ the PESTEL acronym which constitutes of the political, economic, socio-cultural, technological, environmental (ecological) and legal forces surrounding the firm as outlined by . We will look into these in detail below:
Political environment
The political environment under which a firm operates has key impact on the performance of a firm. Political issues that touch on a firm’s operations include regulations, de-regulations, tax policy including rates and incentives, trade control, import restrictions, tariffs, competition regulation, laws governing workplace health and safety, employment, consumer protection, data protection and so forth. Change in taxes such as what happened in Kenya recently with the Kenya Revenue Authority imposing excise duty on each banking and other transactions and re-introducing taxes on certain goods in the market means that for the banking sector the cost of operations have gone up and some banks have passed this cost onto the customer which means that in the short to medium term there is a possibility that some banks may lose customers affecting their projected profit or growth margins.
In addition to taxes, regulations, tariffs and so on, other political challenges that can and do affect a firm’s performance include the level of corruption that is prevalent in a country. Kenya as a country has suffered being listed in various corruption index reports released by various global
References: 1. Ovidijus Jurevicius. PEST & PESTEL Analysis. Strategic Management Insight. 16th October 2013. http://www.strategicmanagementinsight.com/tools/pest-pestel-analysis.html