BUSINESS ENVIRONMENT: PESTLE Analysis of the Royal Bank of Scotland

BUSINESS ENVIRONMENT

Executive summary

The evaluation of the business environment is able to provide the business organisation with a better understanding of the present situation. The evaluation of the external business organization will be able to provide a bird's eye view on the external environment that can influence business growth. The study focuses on the evaluation of the external business environment for a better understanding of the importance of taking the external business environment into consideration. This report deals with the business environment of the Royal Bank of Scotland and its macro environment. This study also includes the PESTLE analysis of the bank and how the factor has an impact on the organisation. It also studies the importance of using a PESTLE analysis to study a business organisation.

Introduction

The business environment is the collection of the entire internal and external factor operates within an organization such as people, suppliers, customer needs, owner activities by the government and so on. The business environment is of mainly two types – microenvironment and macro environment. A PESTLE analysis is a framework that studies the key factors – political, economic, Sociological, technology, legal and environmental. This study sheds light on the government and structure of Royal Bank of Scotland PLC. This report also evaluates the importance of carrying out the PESTLE framework to analyses the external environment of the organization.

Task 1

Describe the structure of the company, its management and how it is governed.

Structure of the company

Figure 1: Structure of RBS

(Source: inspired by rbs.co.uk, 2021)

The Royal Bank of Scotland (RBS) not one single unit but come under the NatWest Group PLC. The structure includes different subunits including retail and corporate banking. There are many Non-IT or semi-IT departments. NatWest Group PLC structured into the type of fences – Inside ring Fence and Outside Ring fence(rbs.co.uk, 2021).

Management of the company

The executive management of RBS supports the group of chief officers in managing the business. To form a recommendation to the board of the management it reviews challenges and debates about relevant items and supports the group of the executive officers (Xue, 2017). A matter of the management committee includes strategies, financial capitals, forecasting risk and issues regarding operations that are affecting the RBS. It even monitors the implementation of cultural change and the succession of executive planning. The executive management is responsible for promoting the NatWest group's value,culture,purpose and its subsidiariesbanks.

Government of the company

The governing body of RBS includes a board, council, steering committee, owners extended clans. The bank is being governed on the basis of its performance, how much target is being achieved and how many customers they are able to attract and retain. The governance system includes the managerial process that is delivered on the basis of performance objectives. The governing system of the RBS starts with the basic stakeholders, then prioritizing their goals, the process is designed, the committees are created and then communication with the consumer and campaign is done.

Overview of the chosen company including its history.

The Royal Bank of Scotland is a major commercial and retail bank in Scotland. It is one of the subsidiaries of NatWest Group. It is headquartered in Edinburgh, United Kingdom. Its parent organization is NatWest Holdings Inc. There is a total of 79,099 employees working as of 2020. The other subsidiaries are The One account, Drummonds Bank, MORE. NatWest group today and its subsidiaries bank collaborated with other banking sectors. All are different from one another – small, large, city and country. RBS was founded in Edinburgh in 1727 and become one of the biggest banks in Scotland (rbs.co.uk, 2021). The bank’s origin can be traced to the Society of the Subscribed Equivalent Debt. This was set up by the stakeholders especially the investors in order to protect the compensation they received as a 1707 Acts of union’s part.

Describe the organisational structure of your chosen company.

RBS’s organisational structure is based on hierarchical structure and functional structure. They follow a hybrid of both these structure o function efficiently. In the hybrid structure, the chain of commands goes from the top to down and the low-level and then to each employee. It defines the authority level and responsibility. It encourages employees with clear paths and gives opportunities for promotion(Needle, 2015). The functional structure of RBS organises the employees on the basis of specific skills. This allows the employees to focus more on their roles. It motivates the bank with specialization. This structure is easily scalable in a sized company like RBS. The mixture of these two structures is preferred by RBS as it encourages less supervision and more employee involvement. It also helps the bank employees to feel self-determined.

How many directors are on the Board?

RBS has a total of 12 directors on the Board. The board and director include –Chairman, Group Chief Executive, OfficerGroup, Chief Financial Officer,Non-executive Director, Senior Independent Director, Chief Governance Officer and Company Secretary (rbs.co.uk, 2021).

The Board of Committee is the fundamental decision-making forum for RBS. For the leadership to be effective, the Board of Committee has established a number of member each assigned with a particular responsibility. They are responsible for the promotion of the long-term sustainable success of RBS. It drives the shareholder's value and NatWest's contribution to the society within which it operates.

How many of these are executive and non-executive directors?

Out of these, there are a total of 7 non-executive directors and 5 directors.

The most influential people of a company are the senior executive as he or she has the highest legal authorities. A supervisory board exist in the organisation that is responsible for daily management of the firm. They oversee the major decision of the organisation and perform duties towards the best interest of the firm (Morrison, 2017).

The non-executives are independents of company’s management though the interdependence is questionable in mane aspects. These personnel carry out the board duties on a part time basis and exert judgement on the firms’ activities. The non executive directors are equally responsible and liable for any wrongdoing in the company.

Who is the Chairperson of the company, and who is the CEO?

The chairperson of RBS is Howard Davies and the CEO is Alison Rose (rbs.co.uk, 2021).

The role of the CEO of RBS is to implement the decision of the Board and the committees. It is her duty to manage the overall operation and the resource of the bank. She acts the mediator between the board of the director and the corporate (Kanadl? et al., 2020). The CEO heads the body of executive directors and occupies an important role in the management and in the activities of decision making of the organisation. He or she is at the pinnacle of the firm’s management that involves the procedure of planning, controlling and organising the business activities of the organisation (Morrison, 2017).

The chairperson’s role is to supervise and run all the meetings in a way to motivate the decisions. The chairperson must ensure that the discussion should be fair and open. And it is his duty to stick to the agenda so that the right decisions can be taken.

When were they elected and appointed?

Alison Rose was appointed as a member of RBS executive committee on 27 February 2014 and she became the CEO of The Royal Bank of Scotland on 1 November 2019(rbs.co.uk, 2021).

Howard Davis was appointed as the chairperson on February 2015.

Task 2

Evaluation of the importance of PESTLE analysis for a business organisation

PESTLE analysis is the concept of marketing that evaluates the external environment of the organisation (Li et al., 2018). PESTLE gives birds' eye view of the whole organisational environment from various aspects. This analysis is flexible thus, organisation can use it to evaluate the situation of the organisation. It is a simplified framework. It helps to understand the wider business environment. The PESTLE analysis is tool to evaluate the key dimension of the business environment. This dimension of the firm is interrelated to each other. It also ensures that an organisation can forecast the future business threats and that will benefit them to take action to minimise the impact. It also benefits the organisation to view the opportunities of the business and exploit them fully.

It is a useful tool to use when someone is starting their own business or have an existing business. It gives a strong indication that on what condition the business is depending on and how one should start a business and what strategies he should adopt to set up the organisation. the polecat factors include all the governmental policies, political stability, foreign market, labour law and so on. The economic factor revolves around the concepts of economic growth, exchange rates, disposable income, inflation rate, GBP and interest rate (Morrison, 2017). The social factor includes demographic elements, population growth, age, and so on. The T in the Pestle includes the digital age, social media platforms, app development, new ways of good production, distribution of the goods and new ways of communication with the target audience. The environmental factors involve pollution target, sustainable company, carbon footprint targets and so on. Last, the legal factor of the analysis is health and safety, laws, consumer rights, product labelling, and equal opportunities.

It is crucial for a company to have a look at these factors so as to see what effect allthese factors have on the organisation. it helps to identify the customer's need and want to have more knowledge about customer orientation(Boddy, 2016). PESTLE analysis is cost-effective and can be completed with a simple piece of paper and pen. It is a straightforward approach. Team analysis can help to achieve better results. It gives a deeper understanding of the macro environment. It will assist the company to view the factors that will influence the success of the products. It will lead to exposure of the potential threats so that organisation could be aware of. It benefits the organisation to know its existing competitors, the upcoming ones and so on. Pestle helps to study the new social and technological trend. Seeing the market moving towards the new trend will help the organisation take the advantage of the opportunity before the competitor does.

Though the Pestle analysis has many advantages at the same time it has many disadvantages. Some PESTLE analysis oversimplifies the data used for the decision. A situation of paralysis by analysis may occur due to the risk of capturing too much data (Bismark et al., 2018). The data which was found on the basis of the assumption maybe later identifying as unfound. The rapid change in the market makes it difficult to anticipate development in the future. For the analysis to be effective the process needs to be done frequently. Pestle analysis can never offer a full picture. Unfortunately, this analysis only gives a one-sided story. The data needed for the analysis is not easily found.

Task 3

PESTLE Analysis of the Royal Bank of Scotland

Table 1: PESTLE

Analysis

Political factor plays a crucial role in identifying the will has an impact on The Royal Bank Of Scotland group. The bank is operating in the foreign money centre bank in multiple countries and thus exposing itself to the different political situation in the countries. Then are achieving success in as such dynamic market across the globe and reducing the risk of the political environment. The Macro environment of RBS is the inflation rate, saving rate, economic cycle that determines the aggregated demand and investment(Tsitsilonis et al., 2018). The growth trajectory can be forecasted by indicators like GDP rate, consumer spending, and growth rate and so on. The culture of the organisation gets affected by society's way of doing things. The shared beliefs, culture, norms and attitude of the population influence the market of RBS and will help the customer of the given market. So the organisation will design the market message accordingly. Technology has been affecting the various industries across the globe. Innovation is not about just technology but also inclused marketing and company’s innovation. The technological advancement take place at shorter interval and the product life cycle gets reduced (Morrison, 2017).A firm should not analyse the technological factor but also at the pace of technological progress (Xue, 2017). The RBS can be affected by different market and their different norm. Every country has different environmental law that influences organisational laws. For instance, many European countries has health tax to break the companies operating in the renewable sectors. The legal framework is not capable enough to protect the intellectual property rights of RBS. A firm like RBS should evaluate carefully before entering the market.

The RBS ability to compete gets threatened bythe Bank of England (BOE), BOE’s Monetary Policy Committee, Chancellor of the Exchequer, Financial Services Authority (FSA), HM Treasury, HM Treasury’s UK Debt Management Office, UK Financial Services and Markets Tribunal (which provides judicial review of the FSA), and Treasury Select Committee (which reviews HM Treasury’s activities). The clients of RBS’ wealth management realise the long term gainswhether the market is in the bottom or grows in the future (Pulignano et al., 2018). Having a low-interest rateis flooding the banking sector so RBS may capitalize on the lost cost capital. The attitude toward career will likely to improve if the RNS campaign oriented towards the unemployed workers take the chance to start their start-up. The technological variable like software based on data recording, neutral network. Risk analysis and scanning financial criteria will offer RBS the necessary tool to optimize their network. RBS is compelled to capitalize on the Scottish framework may enhance innovation and facilitate the invention of a new tool (Li et al., 2018). The technological innovation is seen as the key to economic development bu the process gets more complex with time. The concept of technology and economic growth is closely interlinked. FDI did bring about the globalisation of production but the technological diffusion was not necessarily followed. Industrialization influenced by FDI can boost the economic growth and development (Morrison, 2017). Every countries government recognises technological advancement that contributes to the improvement of the society.

Conclusion

It can be concluded from the above study that business environment has a great influence on the operations of the business. It may either lead to failure or success. PESTLE is a useful tool to forecast the factors that will have an impact of the organisation. These factors are generally internal or external. Therefore, analysis of these factors is necessary to understand the micro and macro environment. Looking ahead it can be assumed that the changing political, economic and social factor will affect the growth of the Royal Bank of Scotland both positively and negatively. The firm's ability to face the dynamic environment will decide its failure or success. Pestle analysis determines the long term effect on the performances, review the strategies adopted and outlines a new direction for the business.

Reference list

Bismark, Okyere, O. A. Kofi, A. G. Frank, and Hope Eric. "Utilizing Mckinsey 7s model, SWOT analysis, PESTLE and Balanced Scorecard to foster the efficient implementation of organizational strategy. Evidence from the community hospital group-Ghana Limited." International Journal of Research in Business, Economics and Management 2, no. 3 (2018): 94-113.

Boddy, D. (2016) Management An Introduction, (7th edition), Pearson Press

Christodoulou, A. and Cullinane, K., 2019. Identifying the main opportunities and challenges from the implementation of a port energy management system: A SWOT/PESTLE analysis. Sustainability, 11(21), p.6046.

Georgieva, M. and Abdelazim, A., 2020. Strategic Mergers and Acquisitions in Higher Education: A Case Study from the UK.

Islam, F.R. and Mamun, K.A., 2017. Possibilities and challenges of implementing renewable energy in the light of PESTLE & SWOT analyses for island countries. In Smart Energy Grid Design for Island Countries (pp. 1-19). Springer, Cham.

Kanadl?, S.B., Zhang, P. and Kakabadse, N.K., 2020. How job-related diversity affects boards’ strategic tasks performance: the role of chairperson. Corporate Governance: The International Journal of Business in Society.

Li, Y., Gong, M., Zhang, X.Y. and Koh, L., 2018. The impact of environmental, social, and governance disclosure on firm value: The role of CEO power. The British Accounting Review, 50(1), pp.60-75.

Morrison, J. (2017) The Global Business Environment, (5th edition), Palgrave.

Montoya, A. and Sudiarno, A., 2019, August. Integrating House of Risk Method with PESTLE and CIMOSA for Risk Assessment of Java-Bali I Power Plant Construction Project. In IOP Conference Series: Materials Science and Engineering (Vol. 598, No. 1, p. 012044). IOP Publishing.

Nandonde, F.A., 2019. A PESTLE analysis of international retailing in the East African Community. Global Business and Organizational Excellence, 38(4), pp.54-61.

Needle, D. (2015) Business in Context, An Introduction to Business and Its Environment, (6th edition), Cengage Learning.

Polignano, V. and Doerflinger, N., 2018. Expanding social actor-based explanations in labour market dualisation research: A combined macro-micro and micro-macro approach. Employee Relations. V. and Doerflinger, N., 2018. Expanding social actor-based explanations in labour market dualisation research: A combined macro-micro and micro-macro approach. Employee Relations.

rbs.co.uk , 2021 About Us [Online] Available at: https://personal.rbs.co.uk/ [ accessed on 30.1.21]

Tsitsilonis, K., Mavrelos, C., Stefanidis, F., Gad, A. and Timmerman, M., 2018, June. Concept Design Considerations for the next generation of Mega-Ships. In Proceedings of the 13th International Marine Design Conference (IMDC 2018); Taylor & Francis: Boca Raton, FL, Poland (pp. 579-588).

Xue, C.T.S., 2017. A literature review on knowledge management in organizations. Research in Business and Management, 4(1), pp.30-41.