The PESTEL framework consists of various factors that can affect companies and how well they are competing in the marketplace. Some of these factors allow a company to gain a competitive advantage while others may be indicators that there are issues the business needs to resolve. This model encompasses the following factors: Political, Economic, Sociocultural, Technological, Ecological, and Legal.
All of these factors deal with external components that could affect a company much like an outside influence.Whirlpool Corporation is headquartered in Bent Harbor, Michigan and subject to the laws and regulations that the United States government implements. This political influence affects the decisions that the company makes and the behaviors that it has.
In the case of Whirlpool, they are one of the largest, leading manufacturer of home appliances in the world. Since their homebase is in the US, the risk of a political factor such as war is low whereas tariffs and taxes could potentially be a high risk factor for Whirlpool with the introduction of new laws. With the introduction of President Donald Trump’s new tax cut for businesses, the corporate tax rate was cut from 35%-21% beginning in the year 2018 (Amadeo, 2018). This new act would allow Whirlpool to not pay out as much taxes, therefore increasing their net income on the books. Overall in 2017, Whirlpool’s net global sales was 21 billion US dollars. This total has the possibility of increasing due to Trump’s new law and the fact that 54% of sales take place within North America (Bitzer, 2018).The economy also plays a lead role in the development of a company.
Considering Whirlpool’s global presence, some of these economic factors expand beyond the five that Frank Rothaermel explain in his book, Strategic Management. According to Rothaermel, growth rates, levels of employment, interest rates, price stability (inflation and deflation), and currency exchange rates are key economic factors in affecting a firm’s external environment (Rothaermel, 2019). Each of these carry their own weight in affecting a company, and Whirlpool is no exception.Whirlpool Corporation is a global company, as stated before, and has four sales market segments in which they sell a wide array of products–North America, EMEA (Europe, Middle East, and Africa), Latin America, and Asia (Bitzer, 2018).
As for growth rates, the top market segment for Whirlpool would be North America. Although the population is not as high as Asia’s and the goods and services produced there is barely considered a rival, this economy continues to dominate with 54% of sales being made here (Bitzer, 2018). The economy will continue to grow and thrive here and eventually develop into a much more mature marketplace for Whirlpool. Another important factor of these five is the currency exchange rate. Due to Whirlpool being a global company, this is a factor that could easily affect many aspects of the company’s overall portfolio. Brexit is one new political move that has the potential to negatively affect Whirlpool’s presence in their EMEA market segment. If Britain actually leaves this market, then this move has the potential to decrease the power of the Euro and cause great economic unrest among the European Union. The British Pound is such a key economic factor for the EU that Brexit could cause the European market to have a slight collapse (Ross, 2016).
Twenty-three percent of Whirlpool’s sales come from their EMEA market, and to say that the currency exchange factor will not be impacted and to not look at what needs to be done in order to sustain sales in the EMEA market once this change goes into effect would be a very wrong move on Whirlpool’s end. The next level in the PESTEL framework model is the sociocultural aspect. This level attempts to understand the culture and values within a society. Considering the market segments Whirlpool already finds themselves in, it is not surprising that they have had to look at this level from every angle possible. The world is an ever-developing country, and technology is always quickly changing and becoming new and better.
Whirlpool has combined these next two levels in the framework for a new idea they are releasing. In 2017, Whirlpool acquired Yummly, an app that “recommends recipes based on ingredients consumers have on hand” (Bitzer, 2018). With understanding that consumers in all of their markets are present and experiencing these new technological changes, it was a smart move by Whirlpool.
According to Rothaermel, U.S. consumers are beginning to have more health conscious minds that should drive the want for this new Whirlpool concept where shopping, preparing, and cooking can all be done with ease (Rothaermel, 2019).
Most of today’s society is also on a large upward trend of “going green,” especially companies that have a lot of influence in the market. With confidence, it is easy to say that Whirlpool thrives on being environmentally sustainable. In fact, they met their goal of energy and water usage three years prior to what they had it set for. Originally supposed to be completed by 2020, they were able to achieve this goal by 2017 instead and have now set their sights on a new one (cite). According to their sustainability report from 2017, they also managed to reach zero waste to landfill in several facilities throughout Latin America, Europe, and India while maintaining that 95% of their overall waste is recycled (Whirlpool Corporation Sustainability Report, 2017). Whirlpool Corporation is a prime example of a company going beyond its call to produce and is able to capture an even larger audience given these achievements.
The final piece of the PESTEL framework is the legal aspect. Although similar to the political factor, it varies slightly in being the actual laws that are legally in place that Whirlpool has to follow. Since the company was founded in 1911, the greenhouse gas emission regulations that were introduced later in the U.S. greatly affected Whirlpool Corporation. Any manufacturing plants they had in the U.S.
during this time period had to be regulated according to the new laws being implemented. In 2003, Whirlpool became the first appliance manufacturer to begin the path towards reducing greenhouse gas emissions (Whirlpool Corporation Making Green Make Sense, 2009). Instead of sitting back and doing nothing, Whirlpool Corporation took charge and began making changes for the better.