-75%
Solution
(Solution) 5CO01 AC1.3) Analyse external factors and trends impacting organisations to identify current organisational priorities
Interest Rates
This factor is identified in Bauer and Rudebusch (2020) as the extra costs incurred or earned from loans or deposits respectively. The impact of this factor is either increasing costs of the loans (money given) or increase earned intertest rates from deposits. For example, in Saudi Aramco (My employer organisation), this has an impact on their ability to get financing used for their operations in oil and gas industry. Post COVID-19, in Saudi Arabia, the interest rates have increased with 7.54% (Khan et al., 2021). This has impacted on ability of organisations to access affordable credit and being competitive in their business environment. With the rates of interests fluctuating, the overall profitability of an organisation also fluctuate.
Priority– In light of the growth interest rates, the priority would be to restructure their operations. According to CIPD (2024a), through a successful restructuring, the organisation would reduce the incurred costs which reduce the resources available for their expansion and operations. Also, by engaging the KSA government, the organisation would gain in terms of availability of resources for their active operations. This is while ensuring they transition from a fully oil and gas organisation to other sectors which would generate them alternative revenues.
Inflation Rates
According to Eldomiaty et al. (2020), the inflation rates represent the overall increase of costs of products and services as an indicator of economic growth. The inflation rates are noted to have a direct influence on the customers purchasing power either being a challenge to source the products and services or good purchase power. For Saudi Aramco (my employer), inflation rates which have increased in Saudi Arabia post COVID-19 with 1.68% influence their ability of employees remuneration, utilising their available resources and administration costs. Hence, this directly influence the organisation ability to accrue profits while leveraging on competitive advantage.
Priority– For an organisation such as Saudi Aramco, the priority would entail improving costs management and operation efficiencies for managing increasing inflation rates. According to CIPD (2021), this positively ensure that the organisation has sufficient resources for their operations in oil and gas industry. The priority outcome would include enhanced cost saving strategies, optimisation of resources provision and embracing innovativeness in their operations. According to Eldomiaty et al. (2020), through a reduction of operation costs and improved efficiencies, an organisation is able to manage the implications of inflations maintaining their profits and being stable financially.
Social Factors
This is defined from the PESTLE Analysis as including the lifestyle aspects, cultural norms, and expectations including career attitudes and work-life balances (CIPD, 2024b). For Saudi Aramco, they are majorly impacted by factors of culture expectation and clients based engagement. The scope of influence is for Saudi Aramco to enhance oil and gas clients satisfaction and being loyal. Further, considering demographical change in Saudi Arabia which is increased Generation Z and Millennials representing 40% of the labour market impact on the organisation resourcing strategies in place. With this group having their preference on non-financial rewards, organisations are investing on total rewards (CIPD, 2024c).
Priority– To respond to the identified social factors, the priority for Saudi Aramco need to include customising their rewards to align with the expectations of Generation Z and Millennials. This is while as noted in CIPD (2024b) investing in modern technologies for recruitment of the changing cultural and social dynamics in the modern society. The outcome of this would be attracting and retaining loyal clients and making sure sustainable growth and development in their markets is attained.
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