Chapter 2: Pestel analysis (II) - Technological, ecological and legal environment Page 14

Ch # 2 Pestel analysis (II) - Technological, ecological

and legal environment (TEL)

IMPACT OF TECHNOLOGICAL CHANGE ON WORKING METHODS

Over the years, machines have replaced man for mechanical tasks. Computers have replaced
man for many mental and intellectual jobs.

Impact of technological change on products and services

 Technological change has a huge impact on the nature of products and services
 Companies need to maintain technological developments in the design and manufacture of
products, and in the provision of services, in order to remain competitive.

Impact of technological change on organisation structure etc

Computerisation, communications technology and other aspects of technological change have

led to major developments such as:

1) Downsizing

 Means the reduction in size of a business organisation. Its business activities are conducted
by a smaller number of people.
 Technological change makes downsizing possible

2) De‐layering

 Means removing one or more levels of management in the organisation structure.

 De-layering is made possible by high-quality communications and that is now quiet
possible through technological developments.

3) Restructuring

 Restructuring may be vertical and horizontal both.

 Different organizations merge functions, sections and departments according to the
technological advancement and continuously restructure the organizational structure.
 Like real time, online data availability has shifted regional decision making into centralized.

4) Outsourcing & Virtual Company

 An entity does not need to carry out many operations itself.

 Instead, it can outsource (delegate) work to a sub-contractor.
 Outsourcing is made much easier by high-quality telecommunications & computer systems
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Reasons for outsourcing

 Entity would focus activities within the entity on core competencies, with aim of gaining
more competitive advantage in these core areas.
 Entity would outsource work to entities that have core competencies in these areas of work.
 Outsourced work might require specialist skills that the entity cannot employ internally

Problems with outsourcing

 Loss of control over the outsourced activities.

 Something may go wrong, and action performance does not meet expectations.
 Affect on relationships with the suppliers

Virtual organisation

 Virtual organisation does not have an identi iable physical existence.

 It does not have a head of ice or operational premises.
 It might not have any employees.
 A virtual organisation is operated by means of:
- IT systems and communications networks (e.g. telephone and e-mail)
- Business contacts for outsourcing all operations.
 These organisations use their brand name as major core competence.
 One person, or a small number of individuals, can operate a virtual organisation.

Other modern concepts

Online Social Media

 Social media has changed the business models.

 Personal and business entities now have become the digital identities.

Big Data

 Extremely large data sets are being gathered, analysed computationally to reveal patterns,
fashions, trends, associations and preferences, especially relating to human behaviour
 These big data sets are being used to take business decisions.

Arti icial Intelligence

 Different business segments are using arti icial intelligence, various services are being
provided with the help of arti icial intelligence (like frequently asked questions)
Chapter 2: Pestel analysis (II) - Technological, ecological and legal environment Page 16

TECHNOLOGICAL DISRUPTION AND BUSINESS ENVIRONMENT

Technology and disruption

 Disruptive technology is an innovation that signi icantly

- Alters the way consumers, industries, or businesses operate.
- Sweeps away the systems or habits it replaces (being latest)
 In their own times, automobile, electricity service, and TV were disruptive technologies.
 Risk-taking companies may recognize the potential of disruptive technology in their own
operations and target new markets using their business processes.
 These are the "innovators" of the technology adoption lifecycle.
 Other companies may follow them only after seeing how it performs for others.
 Companies that fail to account for effects of disruption may ind themselves losing market.

Disruptive Technologies of the digital age

 Human mind normally realize linear and not exponential possibilities (unlike technology).
 Disruptions are always irst resisted by humans, but then they adopt it when see that useful
 These days IT is moving faster than ever, driven by developments in 3 basic areas;
- Processing power,
- Communication speed
- Storage capacity.
 IT is combining with improvements in speci ic industry technology in almost every sector
 A big gap opens up between current organisations and capability which technology can do.

The Internet
 More people have more access to technology (devices etc) than ever before.
 Today’s, nearly every manager has a desktop or laptop, fax, voice mail, mobile phone etc
 One of the most visible technological innovations over past decade has been the Internet.
 New ways of going online are contributing to the growing use of the Internet.
 Cell phones have access of internet connectivity and Wi i with faster data transfer speeds
 Now internet has changed the direction of businesses to create new dimensions

E‐Business
 Electronic business exchanges between businesses have emerged.
 E-business has grown dramatically and become a way of life for all type of businesses
 As technology became more affordable and easier, small and medium businesses have
invested in e-business and technology systems
 It gave the businesses a competitive edge over rivals by enabling them to add new services
 All businesses are more open to modify their business models to include technology
infrastructure and create online channels for alternative sales.

M‐Commerce
 Initially cell phones were clumsy analog devices but today’s digital “smartphones” provide a
range of applications, including e-mail and Internet access as well
 Initially, cell phones were used mainly as a communications tool.
 But now users all over the world have taken mobile phone as way of conducting commerce.
 M‐commerce (commerce conducted via mobile), provides consumers with an electronic
wallet when using their mobile phones.
 People can trade stocks or make purchases of everything using that E-Wallet
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Social networking
 A system using technology to connect, explore interests and share activities around world
 Many businesses use social media tools to reach out to their customers.
 It has now become a major marketing channel (replacing Paper and TV advertising).
 Major online advertising tools include:
- Search Engine Optimization (SEO)
- Facebook Ads
- Google Ads and clicks
- Website banners

Blogs and Vlogs.

 A blog is a web-based journal or log maintained by an individual with regular entries of
commentary, descriptions, or accounts of events or other graphics or video etc.
 A problem is differentiation between what is honest opinion or what is paid advertisement
 Many businesses use the medium of bloggers to push their products in the market
 This is done through free products, invitations to brand launch events etc.
 Vlogs (or video web logs) is a new type of blogs appeared in irst decade of 21st century
 All that needed is access to a digital camera and high-speed Internet access.

Blockchain Technology

A block is a digital record that contains a group of transactions, data, or information.

The chain refers to a continuous sequence of transactions, data or information that are linked
together. This ensures a secure, unalterable history of all transactions.
Blockchain is a decentralized, distributed ledger that records transactions in a secure,
transparent, and tamper-proof manner. It is maintained by a network of computers (nodes)
without needing a central authority.

Features
 Decentralization – No single entity controls the data, information or transactions.
 Transparency – Transactions are visible to every participant and veri iable by all
 Security – Data is encrypted and cannot be altered by anyone once approved
 Immutability – Once a block is added, it cannot be changed.
 Smart Contracts – Automated agreements that execute when conditions are met.

Application of blockchain technology

 It is foundation of digital currencies like Bitcoin and other stable coins. It eliminates need
for intermediaries like banks, allowing direct transfers with lower fees and fast processing.
 It has transformed banking and inance industry by enabling them secure, instant, and
transparent transactions.
 In education and training, it ensures the authenticity of academic records and degrees.
Universities may issue blockchain-based diplomas, degrees, transcripts that cannot be
forged, making veri ication easier for employers
 Supply chain industry bene its by enabling real-time tracking of goods and reducing fraud.
 In healthcare sector, it secures patient records and ensures drug authenticity. With
blockchain-based medical records, patients gain control over their data
 Governments may utilise it for issuing national identity cards and can manage secure voting
 Accounting and auditing have been revolutionised, providing real-time inancial record-
keeping and automated audits.
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ECOLOGICAL (ENVIRONMENTAL) FACTORS

 Ecological or environmental factors represent natural-world elements shaping the macro-

environment of industries and organizations.
 Rising concerns about climate change, resource depletion, pollution, waste, and
sustainability have made these factors vital in strategy.
 They affect business operations, product offerings, and market positioning as focus shifts
toward green growth.
 Understanding them is now essential for long-term competitiveness and compliance.
 Businesses analyze these to avoid penalties, supply chain issues, and reputation loss.
 Eco-friendly practices and sustainable products enhance customer trust, market share, and
brand loyalty.

Key Ecological Factors affecting Businesses

Pollution Levels
 Pollution levels (air, water, noise, soil) vary by region; in highly polluted countries like
Pakistan, businesses face higher operating costs, stricter regulations, and health- risks.
 Companies must often install pollution-control systems (air ilters, water puri iers) and
adjust production to meet environmental standards.
 Industrial hubs like Lahore and Karachi face Environmental Protection Agency (EPA)
pressure due to smog and waste issues.
 Environmental challenges also create business opportunities— irms can produce or market
eco-products (air puri iers, sustainable materials, iltration systems like PEL’s).
 Promoting environmentally safe products attracts eco-conscious customers, while polluting
businesses risk reputational damage and higher compliance costs

Environmental Awareness among Customers

 Environmentally aware customers now prefer eco-friendly and low-emission products.
 Businesses can bene it through green products & sustainable packaging justifying price.
 Environmental negligence leads to boycotts, market loss, and negative publicity.
 For example; Packages Limited earned goodwill via sustainable paper and packaging, Nestlé
Pakistan’s water stewardship initiatives reduced usage, and strengthened community trust.

Environmental Laws
 Pakistan Government enforces various laws to control environmental damage
 Businesses must adhere to these environmental regulations to avoid the risk of legal actions
 Some times, government offers incentives to businesses e.g. Alternate Energy Development
Board (AEDB) in Pakistan provides incentives to businesses that adopt solar energy
systems, helping them reduce carbon footprint while bene iting from inancial support.

Environmental Protection Initiatives by Existing Players

 New players must adopt eco-friendly practices to stay competitive with established players.
 Existing irms often engage in CSR drives, sustainability reporting, water conservation,
green inancing, and ethical sourcing.
 New entrants should benchmark industry best practices, pursue green partnerships, and
obtain environmental certi ications.
 Examples: Engro invests in wind and solar projects; Unilever focuses on emission reduction
Chapter 2: Pestel analysis (II) - Technological, ecological and legal environment Page 19

LEGAL ENVIRONMENT AFFECTING BUSINESS

The Role of Legislation in Business

 Legal system of a country is very important to businesses.

 Law regulates business practices, de ines business policies, rights and obligations involved in
business transactions. For example, business laws may:
- Make a business or a transaction illegal
- Impose conditions on certain businesses
- Regulate the rights and duties of people carrying out business to ensure fairness
- Protect people dealing with business from harm caused by defective services
- Ensure the treatment of employees is fair and un-discriminatory
- Protect investors, creditors and consumers
- Regulate dealings between business and its suppliers
- Ensure a level playing ield for competing business
 Government can change the rules and regulations concerning businesses from time to time.
 Managers should ensure that they are up to date with laws.

Different types of Laws affecting businesses

Companies law
 In Pakistan, the requirements for incorporation, management, operations and winding up of
companies are provided in the Companies Act, 2017, issued by SECP.
 Companies Act regulates companies for protecting interests of shareholders, creditors, other
stakeholders and general public and inculcate principles of good governance.
 Companies are required to comply with the requirements of the Act
 Companies which do non-compliance will be subject to relevant penalties imposed by law

Partnership law
 Law relating to partnership businesses in Pakistan is Partnership Act, 1932.
 It includes process of registration and dissolution of irms, rights and duties of partners etc.
 Partnership irms have ease of doing business as they don’t have to follow those strict requirements
as imposed by Companies Act on the companies

Employment law
 To provide protection to employees, against unfair treatment or exploitation by employers.
 Business organisations are directly affected by employment laws.
 Some of the aspects of employment law are given in the table below:
Minimum wage  Minimum hourly / monthly rate of pay that may be paid to any employee
Working  Maximum hours of work per week or month.
conditions  Maximum retirement age etc
Unfair dismissal  Rights against unfair dismissal by an employer.
 Employer must demonstrate that dismissal was not for a reason that law would
consider ‘unfair’.
 Otherwise, it might be required to re-employ the individual or pay him/her huge
compensation.
Redundancy  Law may require transferring an employee to another job before opting for
redundancy.
Discrimination  Against various categories of employee
(On grounds of physical disability, gender, race, religion and age)
Gender Equality  Countries including Pakistan have laws for anti-harassment to eliminate gender
biasness, women protection at workplace and gender equality
Chapter 2: Pestel analysis (II) - Technological, ecological and legal environment Page 20

Health and safety law

 Provides rules and regulations about minimum health and safety requirements that must be
provided in the place of business
 Employers are sometimes required by law to provide a safe workplace (where employees are not
exposed to unreasonable physical dangers or unreasonable risks to health).
 There should also be detailed regulations for particular types of industry/business or type of
business premises (e.g. transport, food, construction and chemical processing)
 There might also be voluntary health and safety codes that the government encourages but does not
enforce as legal requirement
 Specialist health & safety of icers might be employed by company.

Data protection law

 It might be considered illegal that organisation should be able to:
- Gather and hold personal data about individuals without a justi iable reason, and
- Make use of that data without individual’s permission.
 Someone holding and using personal data about individuals should also be under a legal obligation
to:
- Make sure that the personal data is accurate, and
- Ensure its security (not be accessed by any irrelevant person)

Cyber laws
 It applies to internet and internet related transactions.
 To safeguard individual’s information and con identiality of clients where transactions are made
over some network, collecting, storing, retrieving and disseminating of data.

Competition laws
Monopolies
 When a company has a monopoly of a market, it might engage in unfair business practices
(e.g. charging higher prices than a competitive market)
 There might be laws to prevent a company from acquiring monopoly control over a market.
 When a company grows to that level Government might take measures to protect public.
 Similarly restriction or additional conditions can be imposed on a proposed merger to avoid /
resist monopolies
Anti-collusion regulations
 Collusion occurs when some business entities secretly agree to do something for their mutual
bene it that is against public interest.
(e.g. a secret agreement to raise prices, and avoid competition etc)
 In many countries, collusion is a criminal offence.
Price controls
 Government might impose price controls on certain key products or services (e.g water,
electricity or gas).
 Of icial approval might also be required for any increase in prices.

Sale of goods legislation

Usually speci ies there are certain terms in the contract that a consumer may rely on. For example
buyer is entitled to assume:
 Title
That the seller of goods actually owns them (i.e. has title to them).
 Description of goods
That those goods correspond to the seller’s description.
 Quality
That the goods supplied in the course of a business must be of satisfactory quality for the purpose
intended.
Chapter 2: Pestel analysis (II) - Technological, ecological and legal environment Page 21

Copyrights, Patents and Licenses

 To prevent the intellectual property of individuals
 Copyrights safeguard “original creations” such as writings, art, architecture and music from being
copied or reproduced. Owner has exclusive right to display and share that work
 A Patent is a registered right that gives the owner exclusive right to features and processes of
inventions (including its formula)
 A License is a permission to carry out certain business activities or practice under speci ic
government regulation or certi ication body.

Banking, Insurance and Other Financial Laws

 Banking laws play a vital role in maintaining the stability of a country's banking system.
 These laws regulate banking and non-banking inancial institutions that serve as intermediaries
between lenders (depositors) and borrowers, facilitating the low of funds
 These laws help to prevent inancial scams, ensure transparency, and enhance public trust.
 State Bank of Pakistan Act 1956 empowers central bank to supervise and regulate inancial sector.
 Banking Companies Ordinance 1962 governs operations of commercial banks etc.
 Insurance laws protect them against potential losses arising from unforeseen events such as ire,
theft, accidents, or natural disasters.
 Other laws may include Anti-Money Laundering Act 2010 & Foreign exchange Regulation Act 1947.

Legal Environment and Ease of World Banks’s B‐Ready Ranking

 Economic activity requires sensible legal system that encourages growth in marketplace.
 These laws include rules that establish and clarify property rights, minimize the cost of resolving
disputes and provide contractual partners with core protections against abuse.
 Businesses get strategic analysis to understand the dynamics of the business environment.
 A business manager examines many factors, like overall quality of an economy’s business
environment, inancial system, market size, rule of law, and the quality of the labour force.

World Bank’s Business Ready (B‐ready) Ranking 2024

 B-READY ranking was introduced by World Bank as successor to discontinued Ease of Doing
Business (EODB) index 2003.
 First B-READY report covered 50 economies as part of its pilot phase. It aims to offer a more
comprehensive, transparent, and objective assessment of the business environment globally.
 The data is collected on 10 topics. Each topic is assigned weight based on its economic impact.
 B-READY uses 21 questionnaires and data is collected from businesses, government of icials, legal
experts, and inancial institutions in the participating countries.
 The B-READY ranking evaluates following 10 key topics affecting businesses:
- Business Entry – Ease of starting a new business.
- Business Location – Access to commercial property and infrastructure.
- Utility Services – Availability and reliability of electricity, water, and telecom services.
- Labour Regulations – Hiring, wages, working hours, and worker protections.
- Financial Services – Access to credit, inancial inclusion, and banking regulations.
- International Trade – Ef iciency of cross-border trade, including customs and logistics.
- Taxation – Corporate tax burden, ease of tax compliance, and transparency.
- Dispute Resolution – Ef iciency of legal systems in enforcing contracts and resolving disputes.
- Market Competition – Anti-monopoly policies and regulatory support for fair competition.
- Business Insolvency – Ef iciency of bankruptcy laws and restructuring mechanisms

Note: Ch # 3 only contain 4 questions and solutions on Ch 1 & 2, therefore is not

included in notes portion; however questions and solutions related to said
portion can be found in the area of Volume II (2nd half of this book)