Free Essay. McKinsey and Company Consulting Firm PESTEL Analysis

PESTEL analysis is one of the fundamental tools that critically analyze the overall performance of an organization to help determine the potential performance of the firm. McKinsey and Company consulting firm is an American firm that offers planning services that allow other organizations across the globe, both privet, and public sector, to adopt changes that matter in the overall performance of the firm. The firm uses dynamic changes through observing current and future changes in the field of business, to help gain a better understanding of the current trends before they advise their clients. The firm operates in more than 65 countries across the world, to help diversify its market in foreign nations. Like many global organizations, the McKinsey consulting firm has maintained the need to expand its practices to the outside world. Thus, the essay will critically analyze McKinsey's PESTEL analysis to determine its performance in the market.

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Political Factor

According to Aithal (2017) assessment, political factors play a vital role in the performance of a business and its future growth. Political factors not only impact the performance of the company, but also takes a more significant effect on the overall performance of the business, and possible opportunities in the domain. Ellis, (2018) affirms that, regular practices in the United States' politics have played a massive role in reshaping McKinsey consultant firm and the customers in the United States. On the contrary, the McKinsey firm has developed a vibrant relationship with the increasingly vast civil society. In this case, Civil society groups have played a massive role in formulating policies, as well as building community. McKinsey firm is benefiting from the adherence of the US government to the World Trade Organization norms, where the government has maintained consistency in policymaking, and implementation, minimizing possible effects that may harm the business performance. As Zemmel, (2018) noted, the transition of government and policy changes is a consistent process that helps steady transitioning of policies from one government to the other. More so, governments in the US firmly adhere to the treaties made the previous regime, making it suitable for McKinsey firm to have sustainable planning. Despite the benefits obtained from policymaking and transitioning, the US has not suffered from political and social unrest, a concept that may affect the strategic planning of the firm.

Economic Factors

The workforce growth in the US has grown by 25% in the last few decades, increasing employment levels (Song et al., 2017). However, despite the workforce growth, the salaries are growing at a foot-dragging pace, reducing the overall economic growth. The slow rates of salary growth are among the significant benefits the McKinsey firm is enjoying. According to Aithal (2017), the performance of any organization is determined by the talent of its employees. A firm with skilled employees benefits from the skills of its employees. However, the downside of this concept is that skilled workers are expensive to outsource, and maintain, making it cumbersome for an organization to acquire as many skilled workers as possible. However, the lower salary growth rates have benefited the overall performance of the McKinsey firm. The Company can hire a skilled workforce at a competitive salary, making it possible for the firm to have workers with different levels of skills.

According to Ellis, (2018), the consumer disposable income in the United States has not consistently increased since 2007. As a result, McKinsey firm, stands a chance of leveraging this trend, especially considering that the household income has not increased in real terms since the mid-1980s. Additionally, the financial market structure and the availability of capital at an affordable rate has increased the liquidity of money. The quantitative easing structure policies by the Federal Reserve has played a significant role in the global financial market. McKinsey firm enjoys the benefits of borrowing cheaply, to help expand the firm across different markets globally. The availability of cheap borrowing, helps McKinsey firm to target a new market, as the economy grows.

The level of household income and saving rates has significantly changed in the united states, as increased consumption of household income is rising. As a result, this concept decimates the culture of saving since people do not have enough to save. Based on this trend, the McKinsey firm needs to be extremely cautious, especially when building a market strategy that is propelled by purchase on credit, to help draw more customers. Through this, failure of the customers to repay may result in the Company facing higher levels of losses, that may threaten the firm to become bankrupt. However, McKinsey's firm should take great advantage of the current demand shift from a "goods economy" to the increasing growth in the "service economy." The share of services in the economy is widely increasing with many giant companies seeking for service firms to help them better their performance. McKinsey consultancy firm should critically take advantage of this concept to increase dominance in the consultancy industry.

Social Factor

According to Ellis, (2018) observations, social factors includes the current factors that influence the relationship between business and social life. Social factors such as power structure in society, demography trends, and women's participation in the workforce have an immense impact on workforce availability and the degree of consumer demand. Organizations are profoundly affected by the trend of social factors and how they interact to influence the performance of the organization.

McKinsey consultancy firm can use the gender composition in the current labor market to help understand the liberal nature levels of the society. Through this, women's say and women's rights in social status can be assessed to help bring about gender balance and an increase in household income. McKinsey consultancy firm should consider the power structure in the society, through analyzing how power affects the demand in the economy. For instance, the power structure concentration in the US economy has been widely associated with the older generation, as opposed to the younger generation, due to disposable income levels.

McKinsey consultancy firm should take more significant advantages on the level of education in the nation, as it is one of the deriving factors that have always impacted the growth and performance of many organizations. Education levels in the US society have improved significantly, transforming society. More so, this has changed the quality of jobs and levels of income in the region. Through this, the McKinsey consultancy firm should familiarize itself with the current employment requirement, which included explicit observation of gender equality rule. However, with the increased experienced society, McKinsey firm has highly benefited from an educated and skilled workforce, that has helped to transform the organization.

Technological Factors

Technology is profoundly disrupting different business models across various industries. The development of artificial intelligence is one of the concepts that is transforming the business world. Artificial intelligence is positively impacting the performance of organizations through studying consumer's behaviors.

Among the common factors that influence the performance of businesses is the increased corruption level that affects the performance of many enterprises. McKinsey consultancy firm uses transparency and digital drive to help conduct various legal searches to reduce the potential possibilities of corruption in the local economy. According to Zemmel, (2018), the use of technology can be used by McKinsey firm to help maintain a positive culture of licensing of the IPR as well as other digital assets, to reduce the possibilities of intellectual property.

McKinsey consultancy firm should take greater emphasis on pushing through the mobile phone market, and the benefits associated with the practice. Nearly 96% of the American population owns a digital smartphone, an opportunity if well exploited may benefit the firm in numerous ways (Ellis, 2018). Through local advertisement, McKinsey firm can use this opportunity to increase awareness of the firm to the consumers.

Environmental Factors

Environmental factors are among the aspects that are gaining traction in the 21st century. More than 20% of the world species are extinct, due to poor ecological conservation (Song et al., 2017). In this case, environmental factors, and the need to conserve the environment has dictated on how many businesses operate. Environmental agencies play a vital role in ensuring that standards of operation are adhered to by every firm. However, in emerging countries, McKinsey firm should be aware that these agencies have turned the role of the agency by deliberately delaying the results or analysis to pave ways for bribery. McKinsey consultancy firm should be mindful of these concepts when venturing to global markets.

Legal Factors

As Ellis, (2018) observed, legal factors play a vital role in governing the required conditions for market entry. Legal factors include the procedure to resolve disputes with other relevant stakeholders and laws to operate in the market. For an organization to survive in this market, proper adherence to this legislation is required. McKinsey consultancy firm may face several challenges operating in such a market. The firm needs to assess the legal requirement concerning data laws under the Data Protection Law. For instance, many EU nation wants the data collected from their citizens in any business to be stored in EU countries, rather than duplicating the data to numerous countries. McKinsey consultancy firm should take more significant consideration, especially when venturing into the European market.

References

Aithal, P. S. (2017). ABCD Analysis as Research Methodology in Company Case Studies. International Journal of Management, Technology, and Social Sciences (IJMTS), 2(2), 40-54.https://ssrn.com/abstract=3037309

Ellis, T. (2018). Leading and Managing Professional Services Firms in the Infrastructure Sector. Routledge.doi.10.1201/9781351216623

Song, J., Sun, Y., & Jin, L. (2017). PESTEL analysis of the development of the waste-to-energy incineration industry in China. Renewable and Sustainable Energy Reviews, 80, 276-289.doi.10.1016/j.rser.2017.05.066

Zemmel, R. W. (2018). A Career for Life Scientists in Management Consulting. Cold Spring Harbor perspectives in biology, 10(11), a032946. doi.10/11/a032946.short