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PESTEL Model and Its Relevance to HRM - Coursework Example

3 pages
819 words
George Washington University
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Course work
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PESTEL falls under the external environment scans. It helps human resource management to discover the factors that greatly impact the business operations in the industry. HRM embraces the use of PESTEL to figure out the potential challenges that may affect management before they hurt the business and its operations. The external environment sources are very crucial in the daily operations of the management; it's, therefore, prudent for HRM to take them into consideration in decision-making processes. One popular method of external environmental scanning used by the HRM is PESTEL, representing political, economic, social, technological, environmental and legal factors. HRM uses the PESTEL framework as a generic tool for analyzing its position or that of its services in the market place. The PESTEL model incorporates various factors in the changing external environment and how such factors affect the operations of the company (Onoren et al., 2017, p.519).

Political Factors

The political factors controlling the operations of human resource management include the instituted federal, state, or local laws and regulations that control the provision of services and other related products. Governments control the services that HRM provides to the market such as prices of the products from the company. According to Spulber (2016, p.201), the government regulation provides remedies to the price of services and salaries of employees. Additionally, there are various political debates, such as those revolving around the effects of the services on the environment and how it helps the economy.

Economic Factors

Disposal income, tax rates, inflation, and depreciation affect HRM. Countries undergo rising levels of inflation with most of them having middle-class citizens with huge amounts of disposable incomes, except for such developed parts as the USA and other Western economies (Dumez & Jeunemaitre 2000, p.111). These processes affect employees directly, and therefore HRM has to handle them rationally to ensure their services don't hurt the employees and the economy.

Social Factors

Various social factors affect the operations of the HRM; they are dependent on the people's way of life that can either promote or diminish the services offered (Ahlstrom & Bruton 2010, p.142). Employment directly affects the well-being of people in the society. Being employed or not can dictate the kind of life individual lives. Human resource is therefore tasked to ensure that employees are not subjected to any exploitation. The shelter is a basic need in every society implying that there has to be employment and good service provision in societies to enable people affords proper housing. Nonetheless, the difference in class would be determined by the type of shelter an individual possesses, thus creating the difference in the social status.

Technological Factors

Today, technology is running the world. Technological advancements optimize internal efficiency and prevent the services offered by HRM from being obsolete. Recognizing evolving technology is crucial in management, in fact, it's a very big asset for HRM (Richardson 2017, p.67). However, management should take caution of disruptive innovations that are a threat to quality service delivery. For instance, Netflix greatly affects business for the CD players. HRM should, therefore, adopt strategies that sidestep threats and embrace opportunities.

Environment Factors

Governments and consumers do penalize companies for adverse environmental pollution. Governments do levy fines on firms that are polluting the environment. Consumers, on the other hand, are always ready to either switch brands or boycott goods and services if the companies do not care about the environment they operate in. HRM must, therefore, ensure that waste disposal is done properly and that environmental protection laws are followed to the letter. This will help provide clean products and services that are appealing and welcomed in the society (Lawrence 2009, p.191).

Legal Issues

Human resource management must operate within the legal frameworks and the applicable laws of the land. There are employment regulations that they must adhere to and ensure no employee is discriminated or underpaid contrary to the set regulations. Managers should take into consideration the legal issues to avoid unnecessary legal costs that may be enforced by the relevant agencies or the government. HRM must, therefore, act responsibly and always remain within the legal confines of established laws.



Ahlstrom, D., & Bruton, G. D. (2010). International management: Strategy and culture in the Emerging World. Australia: South-Western Cengage Learning.

Dumez, H., & Jeunemaitre, A. (2000). The cement industry as a model Case. Understanding and Regulating the Market at a Time of Globalization, 5-22. doi:10.1057/9780230288751_1

Lawrence P. Carr; Alfred J. Nanni Jr. (28 July 2009). Delivering Results: Managing What Matters. Springer Science & Business Media. p. 44. ISBN 978-1-4419-0621-2.

Onoren, M., Arar, T., & Yurdakul, G. (2017). Developing Competitive Strategies Based on SWOT Analysis in Porter s Five Forces Model by DANP. Journal of Business Research - Turk, 9(2), 511-528.

Richardson, J. A Brief Intellectual History of the STEPE Model or Framework (i.e., the Social,Technical, Economic, Political, and Ecological), accessed 18 October 2017

Spulber, D. F. (2016). Cemex: making global markets. Global Competitive Strategy, 196-219.\doi:10.1017/cbo9780511841651.010


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