A concise introduction

by Richard Pettinger

Chapter 2 

The main things to draw from this chapter are:
  • knowing and understanding the environment and the constraints that are present and within which you have to work
  • knowing and being able to do the analyses: SWOT, PESTLE, SPECTACLES, Five Forces
You have to be able to evaluate the results of the analyses also. You have to be able to form your own judgements and be able to support these judgements as to which are the overriding strengths and forces, which have to be accommodated and managed within, and which can be ignored (for the moment at least).

The other key lesson is that you need to be constantly scanning and evaluating everything around you. Things can and do change very quickly: someone comes up with new production technology; someone else comes up with a system that transforms industry standards; the bottom drops out of the market for a product or service line – you need to be able to anticipate these things happening, and you need to be able to have ideas about what to do if and when these things do happen. You also need to know (if you have invented or implemented a radical new technology or product or service line) how long you are likely to be able to sustain a competitive advantage before others catch up with you.

One word also about the legal issues: you have always the remedy of the law if someone offends; but you always need to remember how long it takes for things to come to court and finally be settled. On the day that this was produced, Microsoft announced the settlement of one of its numerous disputes with the EU; this particular issue had been going on since 1998, and so if you do think of legal remedies then be fully aware of how long the matter is going to take to resolve.

Additional readings

R Cartwright (2000) Mastering the Business Environment – Palgrave Masters
It gives a very good and clear and comprehensive exposition of the business environment and the ways in which it operates, and the forces and influences which affect all aspects of organisational and managerial performance and viability. You are especially referred to the summary of the approach used in the book as follows:


For the specific purposes of developing the discipline of analysing the environment in full, and to ensure the maximum completeness of coverage, Cartwright (2001) proposes the SPECTACLES approach.  
Cartwright stated that it was not enough to limit consideration to political, economic, social and technological issues (the PEST elements); and so the wider view required was developed under the acronym SPECTACLES as follows.
  • Social: changes in society and societal trends; demographic trends and influences.
  • Political: political processes and structures; lobbying; the political institutions of the UK and EU; the political pressures brought about as the result of, for example, the Social Charter, market regulation.
  • Economic: referring especially to sources of finance; stock markets; inflation; interest rates; government and EU economic policy; local, regional, national and global economies.
  • Cultural: international and national cultures; regional cultures; local cultures; organisational cultures; cultural clashes; culture changes; cultural pressures on business and organisational activities.
  • Technological: understanding the technological needs of business; technological pressures; the relationship between technology and work patterns; the need to invest in technology; communications; e-commerce; technology and manufacturing; technology and bioengineering; technological potential.
  • Aesthetic: communications; marketing and promotion; image; fashion; organisational body language; public relations.
  • Customer: consumerism; the importance of analysing customer and client bases; customer needs and wants; customer care; anticipating future customer requirements; customer behaviour.
  • Legal: sources of law; codes of practice; legal pressures; product liability; service liability; health and safety; employment law; competition legislation; European legal pressures; and whistle blowing.
  • Environmental: responsibilities to the planet; responsibilities to communities; pollution; waste management; farming activities; genetic engineering; cost benefit analyses; legal pressures.
  • Sectoral: competition; cartels, monopolies and oligopolies; competitive forces; cooperation within sectors; differentiation; and segmentation.
Cartwright states that his intention is: 'to widen the scope of analysis that needs to be carried out in order to include a more detailed consideration of the environment and culture within which an organisation must operate, the customer base, competition within the sector, and the aesthetic implications, both physical and behavioural, of the organisation and its external operating environment'.

The main and critical strength of this approach is that it requires managers to take a fully detailed look at every aspect of their operations within their particular environment and niche.  It requires managers to understand fully the broadest range of environmental constraints within which they have to conduct effective operations.  It is also much more likely to raise specific, precise, detailed - and often uncomfortable - questions that many managers (especially senior managers) would rather not have to address around the cultural and social aspects of the company – the parts that are very often uncomfortable to confront. For example:
  • Critical questions about the culture of banks and the ways in which their staff behave are very often addressed only when lurid stories of extravagance and extreme behaviour are reported in the press;
  • Critical questions about the standards of professional behaviour and conduct in the UK health service were only addressed after a report was published into the shortcomings at the Mid Staffs Health Care Trust in early 2013.
In both cases, how the staff behaved and behave was well known to the organisations overall, and to the managers responsible for directing and managing them, and for setting standards of conduct, behaviour and performance. Had they taken a more detailed approach to organisational/environmental analysis then these behaviours would have been clearly identified, and managers would then have had to do something about them.

Discussion questions

Under what circumstances should you sue or prosecute erstwhile business partners, clients and suppliers? What are the opportunities and consequences in different cases?

What are the effects on currency fluctuations on companies and organisations? What can be done to mitigate these; and what are the risks as well as the opportunities attached?

What are the effects on companies and organisations in a particular area when:
  • a new hospital opens up;
  • a major supermarket closes down and relocates five miles away?
What responses might the company in question reasonably have to consider to these conditions?

Web links to other examples, materials and sources

You need to be especially aware of the following and to use them:

Business sites including:
All of these provide a foundation for getting good and substantial data on a daily basis; and they all provide links to other sources as and when specific situations and crises occur.

In the book we refer to industry structure and competitor analyses also; and with this in mind you need to be able to get to the resources provided by the sectors that you are either studying or else  in which you are working. Every industry sector has its own data bases and data sources, and you need to be able to access these whenever you need.