Introduction
Environment analysis is an important element of strategic management. An appropriate analysis of environment can provide useful insights and contribute to the company’s competitive advantage. The following paper provides a partial PESTEL analysis of the UK as a viable direction for entry by the Dubai-based Eniverse Technologies.
PESTEL analysis is one of the most popular analytical tools used in the field of strategic management. The term is an abbreviation that is most commonly interpreted as “political, economic, social, technological, environmental, legal.” The political analysis covers government interventions, the economic analysis includes macroeconomic conditions of the external environment, the social factors include cultural and demographic aspects of the involved population, the technological analysis deals with the technological activities and infrastructures, the legal factors include relevant laws and regulations, and the environmental analysis assesses the environmental considerations (Ho, 2014). PESTEL is commonly used for the analysis of the market environment and is thus considered a component of the environmental scanning process.
The tool was first introduced in the second half of the twentieth century as ETPS and, as can be seen from the abbreviation, included only the economic, technical, political, and social components (Ho, 2014). The technique was not developed by a single party – instead, it was gradually modified by different scholars with respect to specific goals. For instance, the modification in the 1980s resulted in the emergence of STEPE, adding ecological factors in response to the growing concern and a respective increase in the number of regulations (Yuksel, 2012).
As can be seen, PESTEL is not grounded in solid definitions and prioritises flexibility and adaptability over accuracy and precision. The PESTEL analysis framework is used to better understand the macroeconomic (external) environment by providing asummaryof the areas of interest in relation to market growth or market decline, the position the business will have with respect to those areas on interest and the potential and direction for business operations within the market (Yuksel, 2012). Its primary goal is to provide an approximation of the most relevant areas and issues that will likely enhance or impede business performance and are to be prioritised in the strategic management process. The tool has several advantages in terms of strategic analysis. First, the framework behind PESTLE is fundamentally simple and intuitive, which makes it easy to implement without specialised training (Ho, 2014). In addition, the data necessary for PESTEL analysis can usually be obtained from readily available sources and rarely requires the use of proprietary databases. For this reason, the resources necessary for the procedure are relatively modest. Third, as was mentioned above, the approach is adjustable and scalable, making it easy to adopt in numerous areas (Yuksel, 2012). However, several limitations of the tool need to be recognised in order to avoidcomplications. First, the inherent simplicity of PESTEL creates a false impression of reliability, which may prompt certain companies to use it as a sole or primary source of the decision-making. In other words, the tool has to be used in combination with other market environment scanning techniques to gain complete understanding of the situation (Ho, 2014). Furthermore, the dynamic nature of the environment under analysis compromises the longevity of the findings and requires recurring assessment in order to mitigate this weakness; a requirement that is often ignored by the companies (Levenfeld, 2016). Also, the factors included in the analysis need to be interpreted by the analysts, which introduces a certain amount of subjectivity and thus reduces the applicability of the information. In other words, it would be appropriate to consider PESTEL a general outline of the strategic direction recommended for the company rather than a set of highly accurate recommendations.
PESTEL Analysis
The current paper provides an analysis of three areas of inquiry that are the most relevant for the drone industry. The analysis in question is based on political, legal, and environmental factors.
Political Factors
Drones have become the center of attention and topic of discussion in many areas due to the multitude of innovative possibilities they offer as a technology. However, they also raise a number of questions pertinent mostly to the political field. The most important one is the issue of privacy. The key players in the political field have already recognized drones’ potential as a tool for surveillance, investigation, and intelligence, which immediately prompted a public outcry regarding the possible violation of privacy (Gallagher, 2012). In addition, the increasing affordability of drones for private purposes, including recreational use, has raised concerns about their safety for the population. The UK government has responded to these concerns with the decision to develop and implement a drone registration procedure that would make the entire concept more in line with the expectations of the public. The key factor for the newly proposed regulation is the introduction of the new category of drones that pose no feasible harm to people. The mass of the drones will serve as a primary determinant of their safety, with drones below 8 oz. (250 g.) being considered equivalent to manned aviation in terms of the expected fatality rate (La Cour-Harbo, 2017). This move will make an important exemption for lightweight principle, the personal drones used for recreation are operated illegally, mostly due to the fact that the regulations for them are unreasonably complex and restrictive (Kleinman, 2017). The current stance of the UK Ministry of Defence treats all drones below 2 kg as “micro” which is evidently unfavorable for non-professionals. Therefore, it is expected that the introduction of newer, friendlier regulations, will promote the emergence and development of the drone industry in the UK.
Another important development observed in the political field is the announced intention of the government to increase the safety of drone use by creating safety awareness courses to educate users, accompanied by tests intended to assess the comprehension of the safety rules and privacy regulations in the UK by the hobbyists and other non-professional users. Such a move is expected to have a two-pronged effect. On one hand, it will increase awareness and understanding among the individuals directly involved with the technology, thus improving public safety. On the other hand, the strategy will contribute to the perceived safety and increase the overall acceptance of the technology by the general public. In all, the observed trends will significantly expand the industry-specific target audience and can thus be considered a favorable development.
Legal Factors
The current legal framework for the regulation of drones in the UK is relatively strict. The main body responsible for the regulations in this field is the UK Civil Aviation Authority which currently treats all drones less than 2 kg as “micro” and demands compliance with a range of requirements. Specifically, the drone operator is expected to maintain a direct line of sight with the hardware at all times in order to ensure that the drone does not collide with other objects such as on-road vehicles, airplanes and helicopters. Such a rule significantly limits the use of drones as it basically relies on the operator’s visual capabilities that are hardly sufficient for anything beyond recreational flights. For instance, the rule makes the small-scale commercial use of drones virtually impossible due to the modest range of flight. In addition, the weather can have a significant influence on the operability of drones since the time of day and atmospheric conditions will decrease the distance at which visual contact can be maintained. Importantly, a growing number of drones use cameras that feed video footage to the operator, which should, in theory, eliminate the necessity of visual contact or decrease the strictness of the condition. Nevertheless, the availability of a first-person view is not currently considered a reason for exemption from the rule(CAA, 2015).
Another restrictive condition is the demand for drones to maintain a distance of at least 50 meters with humans, vehicles, and structures, with the exception of take-off and landing procedures. This limitation is expected to be almost impossible to comply with within the densely populated urban setting of most cities in the UK. For the drone industry, this means that small-scale drones are rendered nearly useless for commercial use. For instance, delivery of goods, which is currently among the most feasible applications of the technology in business, will only be possible after the construction of dedicated landing zones for drones, which will significantly decrease the usability of the technology and, in most cases, nullify its advantages such as the speed of delivery and the flexibility of the process.
The identified issues however can be addressed by developing uniform usage techniques that exclude the violation of the laws. However, such an approach requires the significant allocation of time and resources and will eventually increase the cost of the end service. Considering that affordability is among the key advantages of drones, it would be reasonable to describe the current legal environment as unfavorable to the drone industry.
Environmental Factors
The growing concern with the global state of the environment has triggered a response of some sort from the majority of the key players, including governments. In the UK, the government allocates 0.8% of its GDP on environmental protection, which comprises 1.8% of its total expenditures(Eurostat, 2017). While the recent trends suggest that these numbers may slightly decrease in the short-term due to the observed decline in the areas of renewable energy, it would be reasonable to expect a gradual increase in the financial support of the area in the long run due to the increasing global awareness on the importance of the issue apparent in the latest decade.
At this point, it should be acknowledged that drones as a technology demonstrate the significant contributory potential to the field. Drones are sufficiently friendlier for the environment in terms of carbon emissions and waste production. The operational limitations create a high-efficiency barrier of entry at the R&D stage. As a result, the units that enter the market are highly optimized in terms of performance and energy consumption (Langston, 2017). This factor has a positive net effect which leads to the overall decrease in carbon emissions by the delivery, transportation, and surveillance industries and makes drones a preferred choice for the stakeholders. In addition, drones can be directly applied to handling specific tasks aimed at environmental protection. These tasks range from currently known roles, such as monitoring of the high-risk areas and enhancing the research conducted in the environmental area to the novel applications that tackle the issues more directly. For instance, a recently proposed project utilizes a prototype drone that helps to restore the decimated global forests by planting and fertilizing trees. By current estimates, the technology is several times more efficient than traditional planting techniques, which reduces expenses and eliminates unnecessary waste(Allegri, 2015). Since forestation is one of the prioritized areas identified by the UK government, it is reasonable to expect the adoption of the described technology along with numerous others for the environmental needs.
Considering the information above, it would be reasonable to recommend Eniverse Technologies’ entry into the UK market. There are several reasons for this. Firstly, the recent developments in the political domain indicate a strong determination of the government to address the most apparent limitations of the regulations relevant to the drone industry. It is also notable that the regulatory bodies recognize the current inadequacies in terms of the safety of users of the technology and are ready to address them by introducing a category that would simplify the compliance for personal and small business use. In addition, the environmental considerations are prominent in the country’s policies and it is reasonable to expect this trend to continue in the long run despite a recent minor setback. Since drones are playing an increasingly important role in the field, Eniverse Technologies will be able to offer its products once the demand arises.
Admittedly, the current legal environment cannot be considered supportive of providing drones for transportation purposes on an industrial scale. However, the displayed trends towards the review of the legal framework make it possible to expect significant improvements in the nearest future, at which point the established presence in the market will play a decisive role in gaining a competitive advantage.
Technological Factors
The single biggest factor relevant for the drone market is the widespread adoption of the advancements of information technology in the process of interaction with consumers. Initially, the complexity and high cost of the required equipment have restricted the use of drone technology to the B2B sector. In the UK, the segment responsible for at least 75% of commercial drone activity was the television and film industries (Tighe, 2017). However, as more businesses recognize the feasibility of the technology, it becomes adopted in a wider range of services. The most prominent areas include construction and property industries where the technology is used largely for surveillance and inspection purposes and without the involvement of customers. However, a relatively small proportion of the technology is also tested in the target market of food delivery. Amazon has conducted its first successful test food delivery in the UK in early 2017, which serves an indication of its intention to roll out a new service (Tighe, 2017). A more substantial attempt was made by the London-based company Starship Technologies that specializes in robotics. As a result of a partnership with DoorDash, an on-demand delivery company, Starship Robotics has introduced wheeled drones that provide safe and fast delivery (Robinson, 2017). While the service is currently unavailable in the UK, it is notable that the country’s private sector already demonstrates both the technical proficiency and experience necessary for its introduction in the country. Finally, it is important to point out an overall shift towards high-tech third-party delivery options. The most notable example of such a shift is UberEATS, a delivery service that utilizes the Uber network (Yeung, 2017). While it does not use drones, the service uses every other aspect of the technology available to Uber users to attain a competitive advantage. In other words, the technological environment in the country is both sufficient and favorable for the use of drones in the target market of food delivery.
Social Factors
Two aspects of the social environment related to drones should be considered. First, the introduction of high-tech elements into familiar consumer segments has increased the demand for similar features throughout the industry. For instance, the emergence of Uber has redefined the perception of transportation services by introducing a host of convenient and attractive options such as tracking, leaving and receiving feedback, a transparent ordering system, and a simplified payment process. Uber’s entry into the food delivery market has signified a similar shift in demand in the sector by introducing faster delivery times and greatly increasing the transparency of the process (Yeung, 2017). It is, therefore, reasonable to expect that drones, which are currently associated with both technological advancement and increased convenience, are a desirable direction for development in the sector.
The second aspect is the privacy concerns briefly mentioned in the previous sections. It should be pointed out that these concerns are mostly related to the uncontrolled and unregulated use of both commercial and personal drones and are sometimes caused by insufficient understanding of the subject (Millman, 2016). Thus, it is reasonable to expect that with the development of the legal framework this factor will eventually decrease insignificance.
Conclusion
The business environment plays an important role in business performance and when acknowledged may provide a competitive advantage during market entry. The political, legal, and environmental factors in the UK display a strong trend towards embracing technology in the near future. The technological environment in the country is both sufficient and favorable for the use of drones. Finally, the social trends increase the demand for drones in the target market. Therefore, it can be considered an attractive destination for Eniverse Technologies to enter in order to ensure success in the field however this would need to be monitored regularly due to the dynamic nature of the business environment.
References
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