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Foundations in Management - PESTEL and SWOT

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Karolina Król
Ulster University
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 PG Certificate in Professional Development
Enabling Business Recovery

BMG857
Foundations in Management
Dr Robert Kerr

Name: Karolina Król

Word count (pp. 2-8): 2066

Assessment task:
1. Conduct PESTEL and SWOT analysis on an organisation of your choice
2. Considering organisational strategy and structure - provide recommendations
regarding how the organisation can better meets it goals in future.

Northern Ireland, 2020

 Black Swan Events (Taleb, 2020) are creating many opportunities and threats for
organizations and require from managers strong adaptability skills, open innovation approach,
risk and strategic management to meet challenges caused by chaos and uncertainty. In this
assignment, the author critically reflects some elements of the strategic management process
on an example of a large company from the automotive sector located in Northern Ireland to
give a better understanding of how the organization can start build with reduced risk of failure
the new global world.
According to Robbins and Coulter (2018, pp. 316-319) the strategic management
process is a six-step process that encompasses strategy planning, implementation and
evaluation. This process includes both external and internal analysis which examples can be
PESTEL and SWOT analysis.
The PESTEL is a tool used by organizations to analyse the macro environment and
increase competitive advantage by efficient and effective use of opportunities and reduce risk
of threats. PESTEL stands for Political, Economic, Social, Technological, Environmental and
Legal factors. For managers, it is important to analyse how these factors are changing now and
how they are likely to change in the future, drawing out implications for organisations (Johnson
et al., 2015, p. 55). Limitations of the present approach to PESTEL rely on factors generally
have a qualitative structure and it doesn’t adopt a quantitative approach to measurement.
A second issue is a problem with a holistic approach because the analysed factors are generally
evaluated independently. In that scenario, independent evaluation of each macro-
environmental factor might not reflect the real situation. For example, it is not possible to
consider legal arrangements or economic conditions in isolation from political conditions
(Yüksel, 2012).
Traditional SWOT analysis involves identifying the organization’s strengths and
weaknesses and its external opportunities and threats. Proposed by Brandenburger (2019) new
SWOT analysis additionally recognizes that threats and opportunities can be both external and
internal and that they can be shaped by strengths and weaknesses and the strengths and
weaknesses of others. After completing the SWOT analysis managers are ready to formulate
appropriate strategies that exploit an organization’s strengths and external opportunities, buffer
or protect the organization from external threats or correct critical weaknesses (Robbins and
Coulter, 2018, p. 318). Limitation of SWOT analysis is connected with the fact that it represents
the only primary step of the business planning process. Using SWOT analysis can be difficult
to address uncertain or two-sided factors. For complex issues, organization should conduct

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more in-depth research and analysis to provide valuable input to business strategies and
decisions (Popescu and Scarlat, 2015).
As mentioned earlier the author chose to conduct PESTEL and SWOT analysis on the
private organization from the automotive industry as this sector is strongly affected by the
Covid-19 pandemic and in the near future the company will also face challenges caused by
BREXIT. Schrader Technologies / Sensata Technologies is a large firm located in Northern
Ireland with two sites in Antrim and Carrickfergus. Schrader Electronics was acquired in 2014
by Sensata Technologies. Sensata is a global industrial technology company which designs,
manufactures and distributes sensors and electronic controls. The company’s vision is to be a
world leader in mission-critical sensing and electrical protection while satisfying the world’s
growing need for safety, efficiency and a clean environment and being a partner, employer and
neighbour of choice (Courtesy of Sensata Technologies, Inc., 2020)1. Financial statements for
the last four years show that the company is in a good financial condition with average
operating profit of $ 59.7 million.

Year 2019 2018 2017 2016 2015

Currency GBP £ GBP £ GBP £ GBP £ GBP £
Turnover TBD after 327,288,000 333,566,000 339,839,000 337,216,000
US publishing in 167,419,000 133,426,000 172,450,000 165,178,000
Europe the 115,942,000 116,748,000 117,595,000 124,803,000
Rest of the world Companies 43,927,000 83,392,000 49,794,000 47,235
House
Cost of sales 220,091,000 225,451,000 244,102,000 241,290,000
Operating (loss)/profit 68,646,000 50,025,000 58,629,000 61,675,000
Staff costs 50,485,000 49,892,000 50,939,000 54,574,000
Number of employees 1198 1387 1432 1390
Production 744 960 1146 991
Selling and distribution 36 35 13 79
Administration 418 392 273 320
Stock raw materials 8,177,000 8,133,000 9,996,000 5,625,000
Cash at bank and in hand 3,785,000 4,015,000 13,079,000 10,249,000
R&D 20,600,000 18,400,000 17,100,000 16,500,000

Figure 1Own analysis based on the company’s report and financial statements for the year ended 31 Dec 2015-2018.

The author conducts PESTEL analysis oriented on the Northern Ireland market, new
Brexit rules which can affect company strategy and general automotive industry trends.

1
Sensata Technologies Website Terms of Use: https://www.sensata.com/resources/website-terms-use

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 PESTEL analysis

Political

Brexit and unstable political rules in the UK can affect company strategic decisions like
for example localization of mass production for future projects. According to the temporary
solution which is Article 5 of the Protocol on Ireland/Northern Ireland (2020) new EU customs
rules will be implemented for goods entering Northern Ireland from Great Britain what can
increase the cost of production, limit lean supply chain or just-in-time manufacturing. Another
example of threats can be VCA vehicle type-approval as type-approvals issued in the UK will
no longer be valid for sales or registrations on the EU market (The UK Department for
Transport, 2019). Next risk is uncertain future taxation policies. The Financial Times estimates
a budget deficit in the UK exceeding £337bn due to crisis caused by Covid-19 pandemic so at
some point, taxes are going to have to rise. Brexit can accelerate change the way VAT, Customs
and Excise duties operate in the UK but it’s hard to say about the scale of this change and
impact on the automotive sector.

Economic

According to the World Bank (2020) the baseline forecast envisions a 5.2% contraction
in global GDP2 in 2020. Boston Consulting Group (2020) forecasts that automotive sales most
likely will decrease 14-22% among the China, US and European markets in 2020 (Collie et al.,
2020) but Bloomberg (2020) reporting positive sales forecast for electric cars with a huge
increase from 2020 to 2027 (CAGR3 of 22.6%). Threats for Sensata can be also lack of future
funding from the European Regional Development Fund Programme focuses on improving
Northern Ireland’s sustainable economic growth and close of the Coronavirus Job Retention
Scheme in October 2020. The NI unemployment rate increased slightly over the Q2 2020 to
2.5% but still is below the UK rate 3.9% and the EU (27) rate 6.7% (Department for the
Economy NI, 2020).

Social

Socio-cultural trends and people’s preferences from many years setting new directions
and leading innovation in the automotive industry. Every year automobile companies launch

2
GDP = gross domestic product
3
CAGR = Compound Annual Growth Rate

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new models of cars to better meet consumers expectations. New social behaviour related to
Covid-19 pandemic like physical distancing, Millennials generation, green initiatives for
managing climate change or development of artificial intelligence are critical challenges with
which the automotive industry has to face.

Technological

Northern Ireland is the least innovative region in the UK (2016)4 but strong innovator
between 214 EU regions (2017).5 Some development potential gives £ 650 million investment
for Northern Ireland as the UK government’s support during Brexit transition which the
company can invest in new technology and digitalization. On the other hand, the Innovation
Strategy for Northern Ireland 2014-2025 may not meet goals due to the end of funding from
the EU. New technology in the automotive industry like advanced battery technologies with
cheaper Li-ion batteries can rapidly increase demands on electric vehicles. Furthermore, the
development of artificial intelligence utilized in self-driving vehicles and £250 millions of
government investment to position the UK as a global leader in Connected and Autonomous
Vehicles (UK Department for Business, Energy & Industrial Strategy, 2018) can open new
market possibilities for Sensata.

Environmental

The UK government in The Road to Zero and the 25 Year Environment Plan wants to
achieve clean air by ending the sale of new conventional petrol and diesel cars and vans by
2040. Similar targets implement also other countries to support global sustainable
development. In transition phase, government implemented electric car grants, incentives and
tax benefits to increase volumes. Furthermore, the company should consider impact of Low
Emission Zones which can change social preferences and steer decisions about car purchase.
Green technologies and initiatives require from automotive industry new challenges both in
automobile eco-design, eco-friendly parts in production, green supply chain and improved ease
of recycling.

4
UK Regional Innovation Ranking
5
EU Regional Innovation Scorecard

5
 Legal

The automotive industry is affected by many legislations which generate additional

operating cost. Furthermore, higher quality and safety standards are expected from car
manufactures. Some of them are defined in IATF 16949:2016 (International Standard for
Automotive Quality Management Systems). Organizations should also meet governments
regulation, tariffs and tax laws, construction and use regulations (e.g. Motor Vehicles
(Construction and Use) Regulations (Northern Ireland), 1999) fuel efficiency requirements
(e.g. Corporate Average Fuel Economy CAFE), emission laws (including also the
manufacturing process – EU Industrial Emissions Directive) or environmental law.

SWOT analysis

Due to the limitation of the SWOT analysis, the author decided to take into account
only critical for the company’s mission and vision areas of operation, which gives a greater
probability of leveraging growth and competitiveness in an uncertain market.

STRENGTHS WEAKNESSES

- a strong brand in the automotive - high ratio of production workers to non-

industry with more than 150 years of
experience in manufacturing
- the global leader in designing,
customizing and manufacturing of
TPMS (Tyre Pressure Monitoring
Systems) to a wide range of OEM
customers worldwide
- continuous increase investment in
Research & Development which is
important area of focus of the
company’s corporate strategy
- the company fosters innovation through
a diverse workforce (Best employer for
production workers with average staff
cost £ 42 141 (2018)
- permanent collective redundancies
which decrease employee’s motivation
and cut down intellectual capital (in
2020 loss of 270 jobs in Carrickfergus
and 160 in Antrim site)
- wastes in operational processes,
responsibility assignment matrix is not
always working properly, lack of Lean
Six Sigma or Lean Thinking approach in
administrative works
- a high stock of raw materials and
finished goods limits price

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 Equality & Diversity in NI – Large
Organisation 2019)
- the healthy company with strong free
cash flow which allows to react quickly
to changing market conditions.
(Courtesy of Sensata Technologies, Inc.,
2020)
OPPORTUNITIES
competitiveness with just in time
manufacturers
- small market diversification (in 2019:
58% revenue be auto, 16% heavy
vehicle, 5% aerospace, 21% industrial &
others).
THREATS

- the electric car sells increase (6%
growth from the previous year 2018)
and technological progress in the
electrification of two/three-wheelers,
busses and trucks (International Energy
Agency, 2020)
- Green strategies and development of
energy efficiency technologies
- modern workplace with Millennials
generation which is flexible and familiar
with digital technology
- projected increase in demand for private
cars due to social distancing and new
mobility behaviour
- industry 4.0 focuses on automation,
machine learning and real-time data.
- many of the company’s end markets are
highly competitive (quality and cost
strategy)
- trade conflict of increasing tariffs
between the US and China
- Covid-19 pandemic which has a
significant and lasting impact on the
economy and business
- political uncertainty related to Brexit
and its impact on vehicle demand e.g.
risk of new tariffs on UK-EU car trade
- the increasing unemployment rate in NI
can limit company mission: “employer
of choice”
- a decrease in households’ expenses and
potential growth for the used car market.

Figure 2 Schrader Technologies / Sensata Technologies - SWOT analysis oriented on company mission and vision.

Sensata Technologies operates in highly competitive markets. An essential element of

the strategy is to design and manufacture high-quality products at competitive prices. R&D is
in central of business strategy and critical to company future growths and maintaining
leadership positions in the markets (Courtesy of Sensata Technologies, Inc., 2019). In the next
5 years the main goal is to achieve equal market diversification between the auto and rest of
products. Company has a hierarchical organization structure with some elements of the matrix
structure.

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 In summary, the author’s recommendation is the implementation of Lean Thinking as
due to Covid-19 pandemic the company created new processes and most employees are
working from home for longer than half a year so beneficial will be value-stream mapping and
removing waste from added operations. Sensata should also consider an application of flexible
working hours, geographically dispersed virtual teams and holacracy what can reduce the
number of administrative staff and increase employee engagement and productivity.
Furthermore, to improve quality and processes the company can implement Six Sigma and
trainee all employees on at least Yellow Belt level. Regarding market diversification company
should be more oriented on electric vehicles and self-driving cars but also try to find new
opportunities in two/three-wheelers market, electrification of ships and ports operations,
medical devices, defence and industry 4.0. Sensata can increase investments in R&D and
innovation using funding from government programmes in UK and NI, e.g. R&D grants or
CAV technology development (The UK’s Industrial Strategy, 2017). Additionally, to leverage
competitive advantage the company can implement design thinking and be able to sustain that
advantage during uncertain times especially by reinforcing strategic flexibility.

8
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