Is COVID-19 The Blame for Business Failure?
[Quick Notes] → Unlike Porter’s Five Forces/SWOT, the PESTEL framework only considers external (macro) economic factors when assessing organizational output within the existent area of operations or areas considered for market penetration. (The assignments question has been appended to this page → it's on the PESTEL framework )
The PESTEL frameworks factors are:
- Macro-Economic growth
- Exchange rates
- Inflation rates
- Interest rates
- Per capita GDP (disposable consumer income)
- Current political environment
More specifically, the aforenoted output is defined by a decrease in revenues or an increase in the cost of delivering goods — wherein an industry’s economic constrictions are determined by external factors defined within the PASTEL framework. These factors serve as a pseudo comptroller, oftentimes defining organizational decisions and an organization’s financial trajectory.
Therefore, all external factors within the framework directly influence the long-term trajectory of an organization — too much of one element could affect supply and demand, thus affecting net organizational output. Accordingly, one can postulate that any external interference will result in a net negative output for the organization, including workplace mandates such as the aforementioned COVID-19 restrictions.
COVID-19 mandates are more-or-less affected by the deterministic nature and policy set forth by legal and environmental mandates, such as laws pertaining to workplace health and safety. Moreover, when considering the scale of the pandemics’ global impact, it’s fair to conjecture domestically owned trans / multi-national organizations are additionally affected by the deterministic nature of foreign economic conditions thereafter. Additionally, the inequitable disbursement of commercial economic stimulus and the subsequent bankruptcies for underserved SBEs, furthermore serves as an attestment affirming COVID-19s identity within the PASTEL framework.
COVID-19 has been an unfair mistress, affecting industries to varying degrees. With the breakdown in global supply chains and the varying subsequent economic shortfalls of the pandemic, the procurement of critical raw materials, specifically silicon, has affected the technology industry as a whole — with technology manufacturers bearing the most significant burden.
However, cash-rich industries, such as banking, have seemed to ‘weather the storm’, despite varying political and economic forces. Though the net output of the financial sector bears similar PASTEL constricts to other industries, financial organizations benefit from the absence of having the need to deliver physical goods. By sidestepping the supply chain, financial organizations circumvent many disruptions imparted by COVID-19, thereby mitigating the nuances imparted by supply-chain disruption. Having a strong liquidity profile (a commonality amongst financial intuitions) during economic hogwash seems to be the accepted norm’s antithesis.
When an organization has a healthy cash flow and balance sheet, then its gravest consideration would be financial leverage: How can the current economic situation protect shareholder value, and if possible, increase organizational inflows. Binary logic, delivered as an ultimatum defines the eventuality of every business:
‘Can the organization in question survive the economic windfall, yes or no?’
The burden of proof for an organization’s insolvency is not necessarily skewed towards external factors. For instance, other internal considerations, such as the effective curation of goods/services that meet market demand, or the nuances of industry-wide over-leverage, could prevail as deterministic factors for an organization’s current liquidity position.
The airline industry has been affected by Covid-19 disproportionally too. However, airliners were hemorrhaging cash a priori, thus affirming my previous conjecture, with the exception being Southwest airlines.
If you thought the pastel framework was cool, I recommend researching Porter’s Five Forces and the BCG /McKenzie-GE matrix (three separate yet similar frameworks.)
Question: In the current COVID-19 pandemic many state governments are putting laws and regulations for wearing mask, make vaccination and COVID testing mandatory in some places. Under what PESTEL segment do you think this issue pertains to? Why you think so?
With the COVID-19 pandemic, economies, businesses, and welfare has been impacted. For which industries/businesses do you think this pandemic created an opportunity, and for which industries/businesses it became a threat? Why?