Course: MBA(WP) 2019-22 Semester: 04

Subject: Corporate Governance Assessment No: 02

Professor: Dr. Ravindra Babu

Name of the Student: Nivedha . K

Register number : 19MWPR0085

Topic : EY’s SWOT analysis, Porter’s Five Force Model and PESTEL

Student Signature Faculty Signature

Nivedha . K
 EY (formerly Ernst and Young)

EY PESTEL Analysis
PESTEL analysis is a widely used strategic planning and management tool. It is an acronym for
political, economic, social, technological, environmental and legal factors that shape the macro
business environment. EY. operates in a complex and dynamic environment characterized by
regulatory changes, growing environmental activism, collective social trends, technological changes
and evolving legal system.

Political Factors
Within PESTEL analysis, political factors exert a strong influence on the long-term sustainability and
profitability of EY. The presence at international stage increases the company’s sensitivity to changes
in political environments of different countries. In a political context, the key to success in a dynamic
international business environment is to diversify the systematic risks. The political environment of a
country comprises multifaceted factors. EY. needs to consider the following political factors during
the strategic planning process:

● Political stability

High political stability provides a stable and friendly business environment with predictable market
growth trends. However, when there is political chaos, it deters the investors and harms the
stakeholders' trust in economic and consequent organizational performance. Currently, EY. is
present in different countries, each having own political tensions. Growing tensions and instabilities
in the global political environment can affect the Gold industry growth and limit the growth
opportunities available to EY.

● Changing policies

Frequent changes in government policies harm business performance by increasing environmental

uncertainty. It is important for EY. to study the current trends in the country's political scenario as
changes in government may alter the government's priorities towards the development of different
industries.

● Protests/pressure groups and governance system

EY. should carefully analyze the protests by pressure groups, social/environment activists and
worker unions as such protests play an important role in the policy making process. Close
collaboration with such groups may enhance the EY.’s ability to collaborate with community and
achieve long-term corporate goals. Moreover, a well-developed governance system with a
democratic political environment makes the business environment more comfortable for
international business organizations like EY.
 ● Bureaucracy and corruption

Bureaucracy and corruption negatively influence the business environment. Operating in countries
with high corruption level and weak law enforcement makes the business environment increasingly
unpredictable for EY. due to jeopardized public trust on business organizations and overall political
and economic structure. The corruption can influence various business operations, ranging from
licensing, contracting, fraudulent deals to frequent lawsuits. If EY. decides to enter in markets with
the corrupt economic, political system, it will threaten the organization's sustainable development
by destabilizing the society, harming justice system and endangering the rule of law.

● Taxation, trade restrictions and intellectual property protection

Entering in countries with high taxation level will directly influence the profitability of EY. High
taxation affects international trade and prevents exports. EY. can enter in low taxation markets and
benefit from high profits that can be invested in research and development activities. The
organization may also study the industry specific taxation policies to understand the host
government's priorities and interest in developing industries. Similarly, high trade restrictions can
make the business environment more complex by affecting the exports and harming relationships
with foreign trade partners. Moreover, if the government of the country under consideration is not
serious about protecting the intellectual property rights of business organizations, it will deter the
entrepreneurs from investing in organizations due to high risk of ideas being stolen. Hence, EY.
should study how intellectual property rights are protected in the host country and make the
business strategies accordingly.

Economic factors
Importance of economic factors in the PESTEL framework

It is important for EY. to understand economic factors such as foreign exchange/interest rate, labor
market conditions, inflation and saving rates etc. as they determine the overall economic
environment of the country. A detailed understanding of the economic environment can help EY.
estimate the growth trajectory of industry and organization. Following economic factors need to be
considered by EY. to make informed decisions:

Economic factors that influence EY.

● Economic/business cycle stage

The economic development of a country directly influences organizational performance. Growing

economies offer wide-ranging growth opportunities to the EY. Similarly, it is important to
understand the industry lifecycle stage. Entering in mature industries can be more challenging due
to market saturation than industries at the growth stage. Moreover, the business performance of EY.
is also influenced by the extent to which the host country government has spent on core
infrastructure development. A well-developed infrastructure facilitates the business environment
and increases the growth potential of the gold industry in the respective country.
 ● Inflation/employment/interest/exchange rates

The GDP growth rate will determine the EY.’s ability to pursue its long-term growth strategies. High
GDP also signals the consumers’ ability to spend more on offered products. High unemployment
signals the availability of surplus labor at comparatively lower wages. Operating in such a market can
lower the production cost of EY. The organization should also carefully consider the interest rate and
its influence on borrowing ability and attitude towards investment. The high interest rate will
encourage the attitude towards investment and increase growth opportunities for EY. Finally, the
exchange rate fluctuation can also influence the profitability and international trade. The high
fluctuation on local currency can be a cause of serious concern for EY.

● Labor market conditions

The demand and supply of labor determine the wage rates and supply of skilled workforce. EY. must
study and predict the labor market conditions to understand how it can attract talented workers and
leverage their skills to improve business performance. When labor markets are flexible, EY. can take
advantage of higher labor productivity. Whereas, operating in rigid labor markets may cause labor
wage and other issues raised by powerful labor unions. EY. should also carefully analyze the
availability of skilled human capital as a shortage of skilled labor can affect business efficiency and
make talent attraction and retention more challenging.

● Financial markets efficiency

The global expansion strategies of the EY. are influenced by the financial market efficiency as
operating in highly efficient financial markets leads towards improved liquidity position and
strengthened ability to enter new markets. The health and efficiency of financial markets will
determine EY.’s ability to raise the capital at fair prices.

● Economic structure

The business practices of the EY. are influenced by the prevailing economic structure. The economic
and regulatory environment in a monopolistic or oligopolistic structure will be different from the
monopolistic competition and perfect competition

Social factors
Importance of social factors in the PESTEL framework

Organizational culture derives strong influence from the societal norms, values and trends.
Understanding the demographic trends, power structures, consumers’ spending patterns and shared
beliefs can help EY. design effective marketing messages and fulfil corporate objectives through
informed PESTEL analysis. The marketing department of EY. can use the information retrieved from
social, environmental analysis to target the consumer groups and increase the appeal of offered
products to potential buyers. EY. must consider the following social factors to conduct macro-
environmental analysis:

Social factors that influence EY.

 ● Demographic trends

Changes in demographic patterns like aging population, migration trends and socio-economic
variables have paramount importance for international business organizations like EY. Studying the
demographic characteristics can help EY. in choosing the right market segment/segments with high
growth potential. The business and marketing strategies are also influenced by migration. It is
important for EY. to understand the people’s general attitude towards migration as it can influence
firms’ ability to bring international managers to host country.

● Equality and power distance

The power distance within any society shows the acceptance of hierarchy and income inequality. EY.
must adjust its business management practices while entering in markets with high or low power
distance. The growing inequality in many countries is altering the power structure, which has serious
implications for international business organizations like EY.

● Gender Roles

EY. need to study the traditionally assigned gender roles to align its marketing and communication
practices accordingly. Marketing and human resource strategies in a traditional, patriarchal society
with clearly distinguished gender roles will be different from societies with low gender stereotypes.

● Societal norms and class distribution

Culture is considered an important variable by international marketing managers. Each society has
distinctive norms and values that play an important role in shaping consumer behavior. EY. should
develop local teams and develop local partnerships for understanding the societal attitudes and
norms to tailor marketing strategies according to unique cultural context. The observation of social
class stratification is also important for EY. Offering luxury products at premium prices to a market
where the high-end market is considerably small in number will require EY. to adopt the niche
marketing strategies. Similarly, market segmentation based on social class may be ineffective where
social class stratification is low.

● Online shopping

The advent of social media and e-commerce has encouraged online shopping behavior among
customers. EY. needs to understand the online shopping behavior by considering the generational
differences as younger consumers are more inclined to shop online than older customers. The
growing use of mobile phones and social networking sites must be considered when developing
marketing and communication strategies.

● Spending patterns and behavior

The consumers’ spending patterns are influenced by their purchasing power of money. Studying and
forecasting the consumers’ purchasing power based on relevant economic indicators is important to
analyze the customers’ interests and spending patterns. In some societies, consuming the offered
product is considered a status symbol, while, some people use the same products for functional
aspects. EY. should invest time on understanding the consumption motivations and social trends
that define the consumption behavior. EY. should also attempt to understand the degree of
consumer ethnocentrism and consider the country of origin effect to determine local consumers’
evaluation of foreign products. Lastly, EY. should study the consumers’ leisure interests and should
focus more on enhancing the customer experience if customers prefer experiential products over
traditional product offerings.
Technological factors
Importance of technological factors in the PESTEL framework

‘Technology' is the fourth factor of PESTEL analysis. The rapid technological advancement and
technological diffusion across the globe have increased the importance of understanding
technological factors during the strategic decision making process. A detailed analysis of the
technological environment can help EY. capture the technological trends to achieve certain business
advantages, such as- increasing profitability, boosting innovation process and enhancing the
operational efficiency. Following technological factors can influence the business performance of
EY.:

Technological factors that influence EY.

● Social media marketing

The development of information and communication technologies has led towards the adoption of
innovative marketing techniques to enhance collaboration with customers. Use of social media has
become common in a modern business environment. EY. can leverage the opportunities offered by
social media marketing to improve business performance. Technological trends can be used to start
the creative social media campaigns for developing online brand communities.

● Technological innovations and development level

EY. should carefully consider the on-going technological innovations to stay ahead of the
competition. A close eye should be kept on analyzing the 5G and determining its potential to deliver
positive business outcomes through enhanced user experience, increased speed and expanded
access. Technological innovations like this can bring major transformations in the industry and reset
the success rules for market players. Moreover, considering the development and maturity level of
technology in the respective market is also important. Entering in markets where technological
advancement has not reached the maturity means EY. can increase the market share by focusing on
emerging technological innovations.

● Research and development on technology and impact on cost structure/value chain

EY. needs to consider the investments made by competitors on a micro and macro level to
understand how new technologies influence the firm’s value chain and prevailing cost structure.
Research and development activities are highly important in an environment characterized by
creative disruption. In such an environment, EY. should invest in disruptive technologies to maximize
the profits and re-invest the profits for future disruptive technologies.

● Shortened product life cycles

The adoption of new technologies has shortened the lifecycle of new product development. Today,
new products are developed quickly, and supply chain partners have also gained more power. It
pressurizes the EY. to develop new products quickly, increase product range diversity, integrate
flexibility into the value chain and develop healthy business relationships with value chain partners.

Environmental factors
Importance of environmental factors in the PESTEL framework
The growing environmental consciousness and changing climatic conditions have made
‘environmental analysis’ an important part of the PESTEL analysis. The environmental standards,
laws and regulations vary across different markets. The international presence of EY. require the
organization to consider these differences to avoid undesired circumstances carefully. Detailed
environmental analysis is imperative before deciding to enter a new market or start a new product
line. Some examples of environmental factors that EY. need to consider are given below.

Environmental factors that influence EY.

● Recycling and waste management

The growing environmental pollution coupled with technological advancement has compelled
business organizations to adopt innovative recycling and waste management practices. In some
countries, recycling has almost become a business norm. Moreover, adopting efficient waste
management practices in organizational units that are located in or near urban areas is highly crucial
for EY. Many countries have placed strict norms to protect their urban areas through effective waste
management.

● Renewable technologies

Some countries offer subsidies for encouraging investment in renewable technologies. EY. can
benefit from it and invest in renewable technologies to ensure long-term sustainability. This
investment will also increase stakeholder satisfaction and expand the customer base due to
enhanced brand image.

● Weather and climatic conditions

Changes in weather and climatic conditions can influence business efficiency. For instance, extreme
weather conditions can increase the cost of operations and compel the EY. to make the value chain
more flexible. Such changes can also influence the consumers' spending patterns, causing the
organization to revise its product and marketing strategies.

● Attitude towards eco-friendly products

There is a growing trend towards the use of green/eco-friendly products. EY. can take it as an
opportunity and adopt green business practices to win the trust of stakeholders. Regulatory bodies’
emphasis on ensuring compliance with environmental norms is altering the product innovation
priorities. It requires EY. to prioritize and focus on marketing the eco-friendly nature of their
products over customary value propositions.

● Environmental regulations to avoid resource depletion

Excessive resource depletion by EY. can draw the negative response from media, environment
protection groups, customers and the general public. EY. must study the specific environmental
regulations of the country under consideration to understand which resources (like water, electricity
etc.) are considered rare or which species are endangered whose excessive consumption can cause
trouble for the organization.

Legal factors
Importance of legal factors in the PESTEL framework
“Legal” is the sixth factor of PESTEL analysis. EY. cannot enter a new market without studying in
detail the legal environment and regulatory structure of the new consumer market. A careful
evaluation of legal aspects is required to avoid getting into some serious trouble. Ignorance in this
regard can cause undesired circumstances for EY., such as- hurting competitive advantage as a result
of intellectual property rights violation and harmed organizational image due to violation of
consumer/employee/environment protection standards. EY. should consider the following legal
factors when exploring a new market.

Legal factors that influence EY.

● Employee protection laws (discrimination and health and safety)

EY. must follow the employee/labor health and safety laws as some countries have strict regulations
to ensure labor safety. Providing a secure work environment for the workforce is the ethical and
moral obligation of EY. Similarly, anti-discrimination laws (like equal employment opportunity) also
need to be carefully studied when developing human resource practices as discriminatory suits
against employer harm the organizational image and affect organizations’ ability to attract and retain
the talent.

● Consumer protection laws

The data protection has become an important issue due to consumers’ privacy and security
concerns. EY. need to study data protection regulations to protect the customer data. Moreover,
there are laws to set the maximum price, ensure a certain quality standard and protect consumers
from fraudulent marketing claims. EY. must consider these factors to ensure compliance with
consumer protection laws.

● Intellectual property laws

Intellectual property regulations are designed to protect the companies' patents and valuable ideas.
Inability to protect intellectual property rights can result in losing competitive advantage, which may
weaken the positioning of EY. against other market players.

Porter’s Five Forces Analysis

A model was put forward by Michael. E. Porter in an article in the Harvard Business Review in 1979.
This model, known as Porter's Five Forces Model is a strategic management tool that helps
determine the competitive landscape of an industry. Each of the five forces mentioned in the model
and their strengths help strategic planners understand the inherent profit potential within an
industry. The strengths of these forces vary across the industry to industry, which means that every
industry is different regarding the profitability and attractiveness. The structure of an industry, even
though it is stable, can change over time. These Porter’s five forces are as follows:

● Threat of New Entrants

● Bargaining Power of Suppliers
● Bargaining Power of Buyers
● Threat of Substitute Products or Services
● Rivalry Among Existing Firms
The Porter’s Five Forces model can be used to analyse the industry in which EY operates, in terms of
attractiveness through inherent profit potential. The information analysed using the model can be
used by strategic planners for EY to make strategic decisions.

EY Porter’s Five Forces Analysis

This section analyses EY using each of the five forces of Porter’s model.

Threat of New Entrants

● The economies of scale is fairly difficult to achieve in the industry in which EY operates. This
makes it easier for those producing large capacitates to have a cost advantage. It also makes
production costlier for new entrants. This makes the threats of new entrants a weaker force.
● The product differentiation is strong within the industry, where firms in the industry sell
differentiated products rather a standardised product. Customers also look for differentiated
products. There is a strong emphasis on advertising and customer services as well. All of
these factors make the threat of new entrants a weak force within this industry.
● The capital requirements within the industry are high, therefore, making it difficult for new
entrants to set up businesses as high expenditures need to be incurred. Capital expenditure
is also high because of high Research and Development costs. All of these factors make the
threat of new entrants a weaker force within this industry.
● The access to distribution networks is easy for new entrants, which can easily set up their
distribution channels and come into the business. With only a few retail outlets selling the
product type, it is easy for any new entrant to get its product on the shelves. All of these
factors make the threat of new entrants a strong force within this industry.
● The government policies within the industry require strict licensing and legal requirements
to be fulfilled before a company can start selling. This makes it difficult for new entrants to
join the industry, therefore, making the threat of new entrants a weak force.

How EY can tackle the Threat of New Entrants?

● EY can take advantage of the economies of scale it has within the industry, fighting off new
entrants through its cost advantage.
● EY can focus on innovation to differentiate its products from that of new entrants. It can
spend on marketing to build strong brand identification. This will help it retain its customers
rather than losing them to new entrants.

Bargaining Power of Suppliers

● The number of suppliers in the industry in which EY operates is a lot compared to the
buyers. This means that the suppliers have less control over prices and this makes the
bargaining power of suppliers a weak force.
● The product that these suppliers provide are fairly standardised, less differentiated and have
low switching costs. This makes it easier for buyers like EY to switch suppliers. This makes
the bargaining power of suppliers a weaker force.
● The suppliers do not contend with other products within this industry. This means that there
are no other substitutes for the product other than the ones that the suppliers provide. This
makes the bargaining power of suppliers a stronger force within the industry.
 ● The suppliers do not provide a credible threat for forward integration into the industry in
which EY operates. This makes the bargaining power of suppliers a weaker force within the
industry.
● The industry in which EY operates is an important customer for its suppliers. This means that
the industry’s profits are closely tied to that of the suppliers. These suppliers, therefore,
have to provide reasonable pricing. This makes the bargaining power of suppliers a weaker
force within the industry.

How EY can tackle the Bargaining Power of Suppliers?

● EY can purchase raw materials from its suppliers at a low cost. If the costs or products are
not suitable for EY, it can then switch its suppliers because switching costs are low.
● It can have multiple suppliers within its supply chain. For example, EY can have different
suppliers for its different geographic locations. This way it can ensure efficiency within its
supply chain.
● As the industry is an important customer for its suppliers, EY can benefit from developing
close relationships with its suppliers where both of them benefit.

Bargaining Power of Buyers

● The number of suppliers in the industry in which EY operates is a lot more than the
number of firms producing the products. This means that the buyers have a few firms to
choose from, and therefore, do not have much control over prices. This makes the
bargaining power of buyers a weaker force within the industry.
● The product differentiation within the industry is high, which means that the buyers are
not able to find alternative firms producing a particular product. This difficulty in
switching makes the bargaining power of buyers a weaker force within the industry.
● The income of the buyers within the industry is low. This means that there is pressure to
purchase at low prices, making the buyers more price sensitive. This makes the buying
power of buyers a weaker force within the industry.
● The quality of the products is important to the buyers, and these buyers make frequent
purchases. This means that the buyers in the industry are less price sensitive. This makes
the bargaining power of buyers a weaker force within the industry.
● There is no significant threat to the buyers to integrate backwards. This makes the
bargaining threat of buyers a weaker force within the industry.

How EY can tackle the Bargaining Power of Buyers?

● EY can focus on innovation and differentiation to attract more buyers. Product

differentiation and quality of products are important to buyers within the industry, and
EY can attract a large number of customers by focusing on these.
● EY needs to build a large customer base, as the bargaining power of buyers is weak. It
can do this through marketing efforts aimed at building brand loyalty.

EY can take advantage of its economies of scale to develop a cost advantage and sell at low
prices to the low-income buyers of the industry. This way it will be able to attract a large number
of buyers.

Threat of Substitute Products or Services

● There are very few substitutes available for the products that are produced in the
industry in which EY operates. The very few substitutes that are available are also
 produced by low profit earning industries. This means that there is no ceiling on the
maximum profit that firms can earn in the industry in which EY operates. All of these
factors make the threat of substitute products a weaker force within the industry.
● The very few substitutes available are of high quality but are way more expensive.
Comparatively, firms producing within the industry in which EY operates sell at a lower
price than substitutes, with adequate quality. This means that buyers are less likely to
switch to substitute products. This means that the threat of substitute products is weak
within the industry.

How EY can tackle the Threat of Substitute Products?

● EY can focus on providing greater quality in its products. As a result, buyers would
choose its products, which provide greater quality at a lower price as compared to
substitute products that provide greater quality but at a higher price.
● EY can focus on differentiating its products. This will ensure that buyers see its products
as unique and do not shift easily to substitute products that do not provide these unique
benefits. It can provide such unique benefits to its customers by better understanding
their needs through market research, and providing what the customer wants.

Rivalry Among Existing Firms

● The number of competitors in the industry in which EY operates are very few. Most of
these are also large in size. This means that firms in the industry will not make moves
without being unnoticed. This makes the rivalry among existing firms a weaker force
within the industry.
● The very few competitors have a large market share. This means that these will engage
in competitive actions to gain position and become market leaders. This makes the
rivalry among existing firms a stronger force within the industry.
● The industry in which EY is growing every year and is expected to continue to do this for
a few years ahead. A positive Industry growth means that competitors are less likely to
engage in completive actions because they do not need to capture market share from
each other. This makes the rivalry among existing firms a weaker force within the
industry.
● The fixed costs are high within the industry in which EY operates. This makes the
companies within the industry to push to full capacity. This also means these companies
to reduce their prices when demand slackens. This makes the rivalry among existing
firms a stronger force within the industry.
● The products produced within the industry in which EY operates are highly
differentiated. As a result, it is difficult for competing firms to win the customers of each
other because of each of their products in unique. This makes the rivalry among existing
firms a weaker force within the industry.
● The production of products within the industry requires an increase in capacity by large
increments. This makes the industry prone to disruptions in the supply-demand balance,
often leading to overproduction. Overproduction means that companies have to cut
down prices to ensure that its products sell. This makes the rivalry among existing firms
a stronger force within the industry.
● The exit barriers within the industry are particularly high due to high investment
required in capital and assets to operate. The exit barriers are also high due to
government regulations and restrictions. This makes firms within the industry reluctant
 to leave the business, and these continue to produce even at low profits. This makes the
rivalry among existing firms a stronger force within the industry.
● The strategies of the firms within the industry are diverse, which means they are unique
to each other in terms of strategy. This results in them running head-on into each other
regarding strategy. This makes the rivalry among existing firms a strong force within the
industry.

How EY can tackle the Rivalry Among Existing Firms?

● EY needs to focus on differentiating its products so that the actions of competitors will
have less effect on its customers that seek its unique products.
● As the industry is growing, EY can focus on new customers rather than winning the ones
from existing companies.
● EY can conduct market research to understand the supply-demand situation within the
industry and prevent overproduction.

Implications of Porter Five Forces on EY

By using the information in EY five forces analysis, strategic planners will be able to understand
how different factors under each of the five forces affect the profitability of the industry. A
stronger force means lower profitability, and a weaker force means greater profitability. Based
on this a judgement of the industry's profitability can be made and used in strategic planning.

SWOT Analysis of EY
Strengths of EY
● Distribution and Reach: EY has a large number of outlets in almost every state,
supported by a strong distribution network that makes sure that its products are
available easily to a large number of customers in a timely manner.
● Cost Structure: EY’s low cost structure helps it produce at a low cost and sell its products
at a low price, making it affordable for its customers.
● Dealer Community: EY has a strong relationship with its dealers that not only provide
them with supplies but also focus on promoting the company's products and training.
● Financial Position: EY has a strong financial position with consecutive profits in the past 5
years, along with accumulated profit reserves that can be used to finance future capital
expenditures.
● EY has a large asset base, which provides it with better solvency.
● Return on Capital Expenditure: EY has been successfully able to generate positive
returns on the capital expenditure it has incurred on various projects in the past.
● Automation: of various stages of production has allowed the more efficient use of
resources and reducing costs. It also allows for consistency in quality of its products and
provides the ability to scale up and scale down production as per the demand in the
market.
● Skilled Labor force: EY has invested extensively in the training of its employees that has
resulted in it employing a large number of skilled and motivated employees.
● EY has a diversified workforce, with people of many geographical, racial, cultural and
educational backgrounds that help the company by bringing in diverse ideas and
methodologies of doing things.
● EY has qualified and accredited professionals working under in its team.
 ● Entering new markets: EY’s innovative teams have allowed it to come up with new
products and enter new markets. It has been successful in past, in most of the initiatives
it has taken in new markets.
● Social Media: EY has a strong presence on social media with more than millions of
followers on the three most famous social media platforms: Facebook, Twitter and
Instagram. It has high levels of customer engagement on these platforms with low
customer response time.
● Website: EY has a well-functioning and interactive website that draws a large number of
internet traffic and sales.
● Product Portfolio: EY has a large product portfolio where it provides products in a large
range of categories. It has a number of unique product offerings that are not provided by
competitors.
● The geography and location of EY provide it with a cost advantage in serving its
customers, when compared to that with the competition.
● EY has a well-established IT system that ensures efficiency in its internal and external
operations.
● EY owns a number of intellectual property rights that include trademarks and patents.
These allow it exclusivity over its products and competitors cannot copy or reverse
engineer them.
● EY is a brand that has been in the market for years, and people are aware of it. This
makes its brand awareness high.
● Its products have maintained quality over the years and are still valued by customers,
who find it as good value for the amount of money that they pay.
● Partnerships: Strategic partnerships are established by EY with its suppliers, dealers,
retailers and other stakeholders. This allows it to leverage them if need be in the future.

Weaknesses of EY
● Research and Development: Even though EY is spending more than the average research
and development expenditure within the industry, it is spending way less than a few
players within the industry that have had a significant advantage as a result of their
innovative products.
● High Day Sales Inventory: The time it takes for products to be purchased and sold are
higher than the industry average, meaning that EY builds up on inventory adding
unnecessary costs to the business.
● Rented Property: A significant proportion of the property that EY owns is rented rather
than purchased. It has to pay large amounts of rent on these adding to its costs.
● Low current ratio: The current ratio that shows the company’s ability to meet its short
term financial obligations, is lower than the industry average. This could mean that the
company could have liquidity problems in the future.
● The company has low levels of current assets compared to current liabilities, and this
can create liquidity problems for it in operations.
● Cash flow problems: There is a lack of proper financial planning at EY regarding cash
flows, leading to certain circumstances where there isn’t enough cash flow as required
leading to unnecessary unplanned borrowing.
● Integration: EY's current structure and culture have resulted in the failure of various
mergers aimed at vertical integration.
 ● Diversification in the workforce: The workforce at EY is concentrated with mostly local
workers, and low amounts of workers from other racial backgrounds. Lack of
diversification makes it difficult for employees from different racial background to adjust
at the workplace, leading to loss of talent.
● Market Research: EY has not conducted market research within the market that is serves
since the past 2 years. As a result, it is making decisions based on 2 years old data, while
customer needs may have evolved over time.
● High employee turnover rates: EY has a higher employee turnover rate compared to
competitors. This means that it has more people leaving the job, and as a result, it is
spending more on training and development as employees keep leaving and joining.
● Quality Control: EY has a lower budget for its quality control department than
competitors. This leads to lack of consistency and the possibility of damage to quality
across its various outlets.
● Lack of legal experience and legal department employees are not highly qualified.
● A few products have a high market share, while most of the products have a low market
share. This reliance on a few products makes EY vulnerable to external threats if these
few products suffer for any reason.
● The workload is a high per worker as there are fewer workers than the actual work
required. This puts workers under psychological stress and is likely to be less productive.
● Worker morale is low due to company culture and politics that have grown in recent
years.
● Competition and qualified employees have been leaving the organisation in recent
years, which could mean a shortage of good talent for the company in the upcoming
years.
● The decision making is highly centralized, and decisions by teams need to be approved
by certain officials. This reduces efficiency in operations by making them more time
consuming. It also leads to reduced innovation.
● The performance appraisal is not in a systematic manner. People are often not appraised
for their performance. This leads to lower work morale and lack of promotion
opportunities for employees.

Opportunities of EY
● Internet: there has been an increase in the number of internet users all over the world. This
means that there is an opportunity for EY to expand their presence online; by using the
internet to interact with its customers.
● E-commerce: There has been a new trend and a growth in sales of the e-commerce industry.
This means that a lot of people are now making purchases online. EY can earn revenue by
opening online stores and making sales through these.
● Social Media: there has been an increase in the number of social media users worldwide.
The three social media platforms; Facebook, Twitter and Instagram, have shown the greatest
number of increase in monthly active users. EY can use social media to promote its products,
interact with customers and collect feedback from them.
● Technological developments: technology comes with numerous benefits among many
departments. Operations can be automated to reduce costs. Technology enables better data
to be collected on customers and improves on marketing efforts.
 ● There has been an increase in average household income along with an increase in
consumer spending following the recession. This will result in growth in EY’s target market
with new customers that can be attracted towards the business.
● Population: the population has been growing and is expected to grow at a positive rate for
the upcoming years. This is beneficial for EY as there will be an increase in the number of
potential customers that it can target.
● Inflation: The inflation rate has been low and is expected to remain low in the next two
years. This is an opportunity for EY as its cost of inputs would remain low for the next two
years.
● Interest rate: Lower interest rates than compared to previous years provides an opportunity
for EY to undergo expansion projects that are financed with loans at a cheaper interest rate.
● Green government drive: this provides an opportunity for EY for the sale of EY's products to
federal and state government contractors.
● Transport Industry: the transport industry has been flourishing in the past few years, and
shows growth potential in the future. This has reduced the costs of transportation, which is
beneficial for EY as it will lower its overall costs.
● Tax policy: the governments’ reduction in tax rate is beneficial for EY as a lower amount
would be expensed out as a tax.
● The government has also announced a subsidy on the sale of environmentally friendly goods
in this sector. EY can focus on these environmentally friendly products and make use of this
opportunity.
● Tourism: growth in tourism is beneficial for EY as it will provide new potential customers
that it can target in order to gain market share.
● Skilled workers: increase in education and training by numerous institutes has increased the
amount of skilled labor available within the country. This means that if EY is able to hire
skilled labor, it would have to spend less on training and development, therefore, saving
costs.
● The growth in consumer spending in the economy is likely to increase consumption for EY's
products.
● A number of new niche markets have opened up that are growing. EY can sell products in
these markets and take advantage.
● Globalisation: Increased globalisation does not restrict EY to its own country. It can extend
its operations to other countries, entering into these markets and making use of the
opportunities that lie in these markets.
● Consumers within the industry are becoming more conscious of health, and this is a segment
that is growing. EY can take advantage by manufacturing products that are beneficial to
customer's health.
● Trade barriers have been reduced on the import of goods. This will reduce the costs incurred
on inputs for production.
● Regulations have loosened in recent years making it easier for businesses to carry out their
operations.

Threats of EY
● Technological developments by competitors; New technological developments by a few
competitors within the industry pose a threat to EY as customer attracted to this new
technology can be lost to competitors, decreasing EY’s overall market share.
● Suppliers: The bargaining power of suppliers has increased over the years with the decrease
in the number of suppliers. This means that the costs of inputs could increase for EY.
● New entrants: there have been numerous players that have entered the market and are
gaining market share by gaining existing companies’ market share. This is a threat to EY as it
can lose its customers to these new entrants.
● Increasing competition: there has been an increase in competition within the industry
putting downward pressure on prices. This could lead to reduced revenue for EY if it adjusts
to the price changes, or loss of market share if it doesn’t.
● Exchange Rate: the exchange rate keeps fluctuating and this affects a company like EY that
has sales internationally, while its suppliers are local.
● Political uncertainties in the country prove to be a barrier in business, hindering
performance at times and making the business incur unnecessary costs.
● The fluctuating interest rates in the country do not provide a stable financial and economic
environment.
● Consumer tastes are changing, and this puts pressure on companies to constantly change
their products to meet the needs of these customers.
● Regulations on international trade keep changing, and this requires compliance by
companies if they are to operate globally.
● Substitute products available are also increasing, which is threat collectively for the whole
industry as consumption of current products decrease.
● The rise in prices of fuel has increased in the input costs for EY. These costs have also
increased as other industries that provide inputs for this company also have suffered from
increasing fuel prices, thereby charging more.
● Increased promotions by competitors have been a threat for EY. On most media, there is
more clutter than ever, and customers are bombarded with multiple messages. This reduces
the effectiveness of promotional messages by EY.
● Constant technological developments require the workforce to be trained accordingly as the
inability to keep up with these changes can lead to loss of business for EY.