INTRODUCTION - MOD0003353 - Business environment Assignment
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A PESTEL Analysis is a structure to analyse the important factors such as Political, Economic, Sociological, Technological, Legal and Environmental) which influence the organization from outside the business environment. This analysis proved to be flexible as it helps management in making strategies and decisions regarding the operation of the business (Song et al., 2017). In this paper, the PESTEL Analysis for Royal Bank of Scotland has been presented showcasing the different Political, Economic, Social, Technological, Environmental and Legal factors that can be considered by the Royal Bank of Scotland along with the overview, history, organisational structure, governance. The importance and factors associated with the company and how these have an impact on business operations.
General Overview
The Royal Bank of Scotland PLC or RBS is a retail and commercial bank based in Scotland, founded in the year 1724 which provides banking and financial services internationally and it has around 700 branches in Scotland itself. It has also extended to major cities and town such as England and Wales (RBSinternational.com, 2021). Investment and Market banking are the branches of the Royal Bank of Scotland Plc Group. Since the company has taken over the National Westminster Bank in 2000, it has now known as NatWest Group. Its clients include multinational corporations, the Government and large institution dealing with financial services.
HISTORY
The Royal Bank of Scotland was established as a corporation by the Royal Charter in 1727 in Edinburgh. It opened its first branch in Glasgow in 1783 which was more successful than the head office based in Edinburg. In early 1728, the Royal Bank of Scotland gave the first overdraft to a customer worth £1000 as a credit (Connelly, 2021).
The bank then moved forward and opened another 6 branches by 1836 and with the downfall of Western Bank of Scotland in 1857 and the collapse of City of Glasgow Bank in 1878, the bank acquired a few other branches. The bank had around 900 staff and 158 branches by the year 1910 (Torrance, 2020).
As per the research conducted on the history of the company, it discovered that with the occurrence of the First World War, the business of banking surged encouraging a continuous merger. For example, The Royal Bank of Scotland acquired Messrs Drummond based in London in the year 1924 and Glyn, Mills & Co in 1939. In 1969, the RBS merged with the National Commercial Bank of Scotland (Harris, 2020). With this merger, The Royal Bank of Scotland and now The NatWest Group was formed to own the Royal Bank of Scotland and its subsidiaries.
Governance and organization structure
Board and committees
The Company Royal Bank of Scotland PLC, now NatWest Group is governed by its Board of Directors and Committees. The principal decision making of the company is the Board of Directors. The board has to decide on a series of committees so that there are effective governance and leadership in the company (rbsinternational.com, 2021).
The Board
The board members are responsible for the overall business operation and providing leadership within a company for effective and sensible control (Prudêncio, 2020). They are also responsible for the long term success of the company. Below are the members of the Board which are responsible for carrying out the mentioned tasks in the Royal Bank of Scotland.
Philip Brewster -chairman (June 2004)
Bruce Cannon - Non-Executive Director
Greg Branch - Non-Executive Director
Christine Ashton - Non-Executive Director
Philip Taylor - Non-Executive Director
Stuart Porteous - Non-Executive Director
Audit Committee
This Committee helps the board members in facilitating its responsibilities which are related to accounting policies, financial reporting and internal controls (Mabati et al., 2020). The Members of the Audit committee in RBS are as follows.
Patric Flynn - Chairman
Morten Friis - Non-Executive Director
Mark Seligman - Senior Independent Director
Robert Gillespie - Non-Executive Director
Risk Committee
The risk committee helps management in forecasting any present and future risk and help the board member in the strategic planning of RBS Holdings (Malik et al., 2020). The Risk committee in Royal Bank of Scotland PLC includes;
Morten Friis - Chairman
Robert Gillespie - Non-Executive Director
Patric Flynn - Non-Executive Director
Lina Wilson - Non- Executive Director
Executive Management team
This team helps the CEO in carrying out company operations (Gutierrez-Colina et al., 2020). The role of this team is to deliver and develop the strategies approved by the Board members. This team has an active role in promoting company values and culture. This team includes;
Andrew Mclaughlin - Chief Executive Officer (July 2015)
Lynn Clearly - Chief Financial Officer (2005)
Chris Harper - Chief Risk Officer - (2016)
Steve Camm - Managing Director, Private Banking - (2002)
Fiona Levy - HR Director - (2018)
Stephanie Duke - head of Legal, Governance and Data Protection (2017).
Richard Bolingbroke - Managing Director, International retail and commercial Banking (2013)
Stuart Foster - Managing Director, Institutional Banking (2019)
Jon Crouch - Chief Digital and Information Officer (2014)
Organizational Flow Chart of Royal Bank Of Scotland
Importance of PESTEL Analysis
PESTEL Analysis is a tool which measures the external Environment and it is used for activity with broad fact. It helps the business in making a decision based on the external factors and with the help of these factors the company can minimise any threat and maximize profitability and opportunities (Çitilci et al., 2020). The External environment is measured on the below factors in a PESTEL Analysis.
Political factors
Economic factors
Social factors
Technological factors
Environmental Factors
Legal factors
Source - Professional academy.com
Importance of PESTEL analysis in Political Environment
Political factors refer to the factors relating to the policies and plans of the Government that affect the business. These political factors are especially influenced by the elections as it proves to be an uncertain period where the factors such as Tax, Tariffs, Trade restriction and Bureaucracy is affected. With the help of PESTEL Analysis, the business can identify the potential risk associated with the external Political Environment such as regulation of taxes. political stability, the framing of environmental laws and labour laws (Matovic, 2020). For example, a recently launched company decides to carry out the business in a different state where a new government has been formed and have implemented a new policy related to the taxes and laws regarding labour and environment which will harm the business of the company. Therefore, to overcome such a situation, a PESTEL analysis is done before entering a new market (Kara, 2020).
Importance of PESTEL analysis in Economic Environment
The economic factors are related to the different areas of the economy. And how this economical factor can impact the business. The economic indicators such as Interest rates, Exchange rates, Inflation, GDPs and unemployment rates can affect any organization if there is a lack of PESTEL Analysis. Hence any company needs to carry out PESTEL analysis before making any decisions on any of the above-mentioned economic indicators. For Example, by analysing the PESTEL framework, the company can decide to refinance its credits when there is a low rate of interest (Rahman, 2019).
Importance of PESTEL analysis in Social Environment
Social factors refer to the demographic, cultural trend of society, the rules set by the society and behaviour of consumers for certain products. It takes into consideration the growth rate of populations, distribution of age, cultural perceptions. By analysing these factors with the help of PESTEL analysis will help understand the culture and consumer behaviour in advance for smooth operations of the business.
Importance of PESTEL analysis in Technological Environment
Technological factors refer to any development in the technology externally which will impact the internal operations of the organizations. With the help of PESTEL analysis, the organization can decide on the use of the latest technology. For example, A company decides to automate the operation for quick decision making.
Importance of PESTEL analysis in Environmental Environment
Analysing Environmental factors with the help of PESTEL Analysis will help the management to adopt and act as per any change in pollution, weather condition or climate change. For example, a company dealing with agriculture activities have to regulate the forecast of harvest due to any climate change (Soltani et al., 2020).
Importance of PESTEL analysis in Legal Environment
Legal factors in PESTEL analysis will help the company to have the latest knowledge regarding the legal and license permits, labour laws and industries regulation. If the company is operating without any analysis then it will prove harmful for the operations. For example, a hotel chain is closed down after the food quality is not as per the food safety standards set up by the law of the area.
PESTEL Analysis of Royal Bank of Scotland
Political factors impacting the Royal Bank of Scotland
For long term success, it is significant for the Royal Bank of Scotland to determine the Political factors that can have an impact on its business operations. The Banks is having its operations in more than one country under FMCB (Foreign Money Centre Banks) and therefore is underexposure to various political conditions and political risks. Thus, the Royal Bank of Scotland can analyze closely the factors before any investment or before entering any new market (Pan et al., 2019).
The importance of FMCB in the other country where the bank is going to enter or invest and the political stability of the given foreign country.
Military invasion risk that may incur during any political crisis.
The corruption level in any financial sector
Benefits of compulsory Employees
Taxation rates and rates of incentive in the political economy
Legislation on work regarding minimum salary
Regulation of Industrial safety in financial sectors
Favourable partners in trading
Contract enforcement legal framework
Regulation regarding pricing may be any mechanism of pricing in Finacial Industries.
Economic factor influencing Royal Bank of Scotland
The external environment conditions such as the rate of savings, inflation rate and exchange rate regulate the demand and investment in any economy (Maklan et al., 2017). Hence the Royal Bank of Scotland may consider the country's economic factor like inflation, the growth rate of FMCB, Spending by consumers etc to analyse the growth path of the Bank. The below economic factor that the Royal Bank of Scotland needs to focus on while doing PESTEL analysis are -
The intervention of Government in Financial Market
Rate of Exchange and rate of stability of the currency.
Quality of Infrastructure of FMCB.
Level of Education in the given economy
The growth rate of the economy
Rate of unemployment
Rate of Inflation
Rate of Interest
Social Factors impacting Royal Bank of Scotland.
The culture of society plays a huge role in the operations of any organizations. The cultural beliefs and behaviour of the population determine the Royal Bank of Scotland capacity to understand the customers' needs in given market conditions especially framing the design of messages used for marketing in the consumer of FMCB countries (Dinçer et al., 2020). The Royal Bank of Scotland should analyse the below in PESTEL analysis.
The structure of the different class systems, their power distribution in society and the level of the hierarchy.
The level of education and its standard in the Royal Bank of Scotland
Leisure interest
Different cultures related to the role of genders and conventions of society.
Health and environment-related behaviours of the consumers.
Spirit of Entrepreneur
Level of skill among the peoples in Royal Bank of Scotland
Technological factors impacting the Royal Bank of Scotland
Technological factors are important to any industry as technology is evolving in a faster way. The Transport Industry is a good example of technological evolvement where the taxi service industry such as Uber is being one of the top players in technological advancement and moving towards automation tools (Jadan, 2020). A company should not only embrace the technological evolvement but it should pace up with the advancement speed ate which the technology is growing. In the Royal Bank of Scotland, the analysis of technology should include the following factors which impact the internal decision-making process of the firm.
The latest development in technology by Royal Bank of Scotland competitors.
Impact of technology on products sold by the Bank
Structure of chain value in the financial market.
The rate of spreading of technological tools in the market.
Environmental factors impacting the Royal Bank of Scotland
There are different set of rules for different market environments which can affect the success or profitability of organizations. For example, there are different set of rules regarding the liability that occurs due to natural disaster or any accidents in the United States. Therefore, the Royal Bank of Scotland must calculate the standard related to the environment that requires to function in foreign market conditions (Islam, 2017). Hence, the bank should consider the following environmental factors before entering the new market.
Climate Change
Management of waste in financial sectors
Process of Recycling
Laws framed for any environmental pollution or hazards.
Regulation of water and air pollution in FMCB Industry.
Laws regarding the protection of endangered species
Behaviour while using green and environmentally friendly products.
Behaviour in support of renewable energy.
Legal Factors impacting the Royal Bank of Scotland
There are many countries where the legal laws are not strictly followed or it is not that strict. Therefore, to protect the company intellectual property and legal property, the Royal Bank of Scotland should evaluate the legal factors carefully before entering a foreign market as without analysing these legal factors, it may lead to theft of secrets of the organization by the competitors and therefore can ruin the healthy competition of the financial sectors (David, 2019). A few of the legal factors that the royal bank of Scotland needs to focus on areas below;
Laws relating to anti-trust in Foreign Money Centre Banks and the country as a whole.
Law regarding any discrimination that is followed in the given country
Law concerning patent and copywriting
Intellectual law
Law concerning employment
Data protection
Law related to health and safety.
Conclusion
To conclude, PESTEL analysis is an invaluable tool that helps the company in making strategic decisions based on Political, Economic, Social, Technological, Environmental and Legal Factors. This paper demonstrates several factors that help the Royal Bank of Scotland while conducting a PESTEL analysis. Since the management must be well aware of the factors that are prevailing outside the business environment so that they can make effective decisions regarding the operations of the Royal Bank of Scotland. In this study, the Governance and organization structure of the Royal Bank of Scotland has been briefed precisely. A PESTEL analysis has also been done of the company for its smooth operation.
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