Environment as a Source of Opportunities and Threats
There is no doubt that “understanding the environment that surrounds an organization is important to the executives in charge of the organizations” (Edwards, Try, Ketchen, & Short, 2014, p. 63). One of the fundamental concepts discussed in chapter 3 is the effect of the general environment on the organization and its performance. The first concept is that the general environment is a source of potential opportunities and alternatives as well as a source of risks and threats for a company. According to business report published by Bloomberg, “Volkswagen AG’s namesake brand reported a decline in U.S. sales for the third straight month as the automaker continues to face fallout from cheating on government emissions tests” (Butters & Surane, 2016). To put it otherwise, due to the “use of hidden software to deceive American regulators measuring emissions from diesel-engined cars” and due to the scandal associated with it, the company has created a hostile environment for itself (qtd. in Economist.com). This hostile environment, in its turn, resulted in significant threats, including sharp drop in sales, loss of reputation, managerial crisis within the organization, etc.
A Threat for One Organization – An Opportunity for Another
Another concept presented in chapter 3, which is crucial for understanding of managers and executives, presented in this chapter is “that virtually any environmental trend or event is likely to create opportunities for some organizations and threats for others” (Edwards, Try, Ketchen, & Short, 2014, p. 64). According to the Bloomberg article, the recent sharp downfall in U.S. deliveries “has hurt the automaker’s efforts to move past Toyota Motor Corp. to claim the worldwide sales crown” (Butters & Surane, 2016). In other words, the Volkswagen scandal and hostile environment in the automobile industry enabled Toyota Motor Corporation to maintain leadership in the automotive industry. It created numerous opportunities for other automotive companies to push up sales in order to make up for the defective VW cars.
Legal Factor in the PESTEL Analysis
Another major concept that should be taken into consideration is the PESTEL Analysis discussed in chapter 3 and the combined influence of six factors on the organization and its activity. Having regard to the chosen news article, it is reasonable to focus on the environmental and legal segments. “The environmental segment involves the physical conditions within which organizations operate. It includes factors such as natural disasters, pollution levels, and weather patterns” (Edwards, Try, Ketchen, & Short, 2014, p. 73). Speaking from the environmental perspective, when the Environmental Protection Agency of the U.S. disclosed their findings that Volkswagen diesel cars were equipped with special software cheating CO2 emissions, it resulted in the environmental scandal. The legal segment, in the meantime, focuses on how the courts and other authorities influence business activity. “Examples of important legal factors include employment laws, health and safety regulations, discrimination laws, and antitrust laws” (Edwards, Try, Ketchen, & Short, 2014, p. 73). The legal consequence of the VW environmental scandal is that on the basis of calculations of 482,000 cars sold, the fine at the rate of $18 billion could be in theory imposed on the company, which is a serious threat to the company’s activity and further existence overall. Therefore, it may be concluded that when several segments of the PESTEL analysis are negative and harmful to the company and its performance, the general environment can be determined as unfavorable and it is the fundamental responsibility of company’s strategic managers and executives to take remedial action as soon as possible.
References
Butters, J., & Surane, J. (2016, February 2). Volkswagen Brand's U.S. Sales Drop 15%, Missing Estimate. Retrieved February 5, 2016, from http://www.bloomberg.com/news/articles/2016-02-02/volkswagen-brand-s-u-s-sales-drop-15-missing-estimate
Edwards, J.; Try, D.; Ketchen, D.; Short, J. (2014). Mastering strategic management (1st
Canadian Ed.). BC Campus. Retrieved February 4, 2016, from http://open.bccampus.ca/find-open-textbooks/?uuid=91cdcf18-273d-44cc-8432-865d09005fda&contributor=&keyword=&subject
The Volkswagen scandal: A mucky business. (2015, September 26). Retrieved February 6, 2016, from http://www.economist.com/news/briefing/21667918-systematic-fraud-worlds-biggest-carmaker-threatens-engulf-entire-industry-and
