Orange PEST Analysis
Orange PEST Analysis
Political, economical, social, and technological factors effecting Orange are summarised on the table below, followed by a detailed explanation of each of them:
1 Political Factors
A) Stronger Consumer Rights Within Europe
Stronger consumer rights within Europe compared to most of the other parts of the world can be considered to be the most important political factor for Orange due to the fact that the largest number of company’s client base is situated in Europe. This fact makes it compulsory for Orange to follow all the rules and regulations in any European country it operates, including rules and regulations concerning the rights of consumers.
B) Roaming Regulation.
EU Roaming Regulation proposed by European Commission in 2006 aims to reduce charges for mobile phones usage abroad by 70% from June 2007 (Saplista, 2008). The implications of the current regulation for Orange are direct, due to the fact that the company obtains a specific percentage of its revenues through Europeans using their mobile phones abroad.
C) EU Regulatory Framework for the Communications Sector.
Most of the European Union member states have implemented European Union Regulatory Framework for communications sector adopted in 2002 (Dimireva, 2010). The aim of the framework is to encourage the competition in telecommunications sector, and Orange is one of the main players in this market, therefore the framework has direct implications for Orange
D) Strategic Collaborations
Orange announced a new everything everywhere initiative in 2009, according to which company was staring collaborating with one of its main rivals T-Mobile in UK. This agreement gave two companies the possibility of pursuing two different strategies of marketing that allowed both companies to increase the position in the marketplace, but at the same time minimised the possibility of direct competition with each other.
2 Economic Factors
A) Fluctuations of GBP Exchange Rate
Fluctuations of GBP exchange rate have a strong impact on the profitability of orange in UK regardless of the amount of sales of the company during a given period. As a result of the recent global economic crisis, UK economy was among the worst hit. It reflected negatively on GBP exchange rate against other currencies and Orange was greatly disadvantaged as well. Specifically, during 2009 unfavourable GBP exchange rate resulted in 19% decline in voice roaming (Orange Financial Statement, Q3, 2009)
B) Global economic crisis of 2007-2010
Global economic crises of 2007-2010 negatively affected the economy of European countries, and their population, and resulted in population cutting expenses for most of their purchases. Along with many other industries this negatively affected mobile telecommunications industry in general and Orange in particular in terms of their revenue.
Although the level of inflation within a country Orange operates in does not effect the company directly, nevertheless, is still considered to be an economic factor affecting the company in a way that it affects the well-being of existing and potential customers of Orange within a country. Specifically, if the inflation rate is exceptionally high within a country, people would try to save money on their bills, including the expenses for mobile telecommunication services.
D) France – biggest contributor to the revenue
The biggest part of company’s revenues come from its home country – France (44%), followed by UK 10%. This fact is can be considered an economic an important economic factor for Orange, because being an international company trading in 32 countries, and at the same time, being depended on one country for most of its revenue, makes Orange highly vulnerable to the economic situation in France.
A) The Emergence of Green Issues
Today the awareness and sensitivity of people about the issues related to the environment are increasing. This is happening as a result of broad media coverage of these issues, as well as, because of activities of various non-profit ‘green’ groups. Nevertheless, a specific percentage of great numbers of people sensitive about ‘green’ issues are existing and potential customers of Orange. Therefore, ‘green’ issues can be considered as an important social factors affecting Orange. Accordingly, the company has in-store phone recycling initiative in place, as well as specialist phones in order to attract customers belonging to above group.
B) Ageing Population
Nowadays it is a well established fact that the population of Europe is ageing and this social factor has a range of implication for many businesses including Orange. Along with other measures Orange would have to devise specific service packages that would meet the unique requirement of old people. This package might include more minutes and less text messages due to the fact that texting might be challenging for aged people.
C) Changing Work Patterns
Another social factor that affects Orange is changing work patterns in organisations. Nowadays, new working patterns are becoming increasingly popular that include working from home, job sharing and job rotating, and working from home among them is the most popular. It is a favourable social trend and a good opportunity for Orange due to the fact that people working home would have to use mobile phone and internet in order to connect with their offices.
4. Technological Factors
A) Technological Innovations
Technological innovations are one of the main important technological factors that have an impact on Orange. However, Orange has chosen the strategy that prefers to be proactive in order to make the impact of technological innovations factors more positive for the company. Specifically, a range of Orange initiatives including TV on mobile via Wi-Fi, Orange SoftPhone, LivePhone, ON, and closer communications are all the examples of the company being proactive in terms of new technology development.
Moreover, Orange has won Green Power Innovation Award 2010 for its solar base station program in Senegal.
B) 3G Generation
Orange has completed its 3G rollout strategy in 2005. However, all the potential of 3G has not been used by Orange or any of its competitors due to the fact that 3G technology is a relatively new and has not been studied thoroughly. Therefore the emergence of 3G generation is an important technological factor that has its impact on Orange.
C) Emergence of Alternative Technology
Emergence of alternative technology that present indirect competition for Orange is another technological factor the company has to deal with. Most of them are internet based and include Skype, Yahoo! Messenger and others.
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