Schroders PLC: A Global Asset Manager

Introduction

Schroders PLC is a multinational company focusing on asset management and has its headquarters in London, UK. With net revenue of £504.7 million in 2018, the company is among the world's leading companies in asset management. The firm operations are undertaken in 32 different locations worldwide. Plausibly, the company has a clear understanding of its external business. Therefore, this assignment will discuss its PESTEL analysis which is a tool to understand the external environment of business.

Task 1

Schroders Plc.

Task 1 is what this heading is called.

History of the Company

Schroders Plc. is a British multinational asset management company that was founded in 1804. By 2018, the company has over 5,000 people in 32 different countries. The company is currently in operation in various regions- Europe, America, Asia, Africa, and Middle ("Schroders global," 2019). The public limited company that operates in the investment and management sector has its headquarters located in London, UK. It recorded a net income of £504.7 million in 2018. While Schroder's company is one of the world-leading asset management banking groups, it has a long and intriguing history that runs over two hundred years. Since its conception in 1804, the business has undergone massive changes that have led to today’s giant that we know of. The company was started when Johann Heinrich Schroder from Germany moved to London to join his brother in the merchant business ("History of Schroders," 2019). In 1818, Schroder found his firm, which was known as J. Henry Schroder & Co- the current Schroder PLC. Since then, the company has had diverse milestones that show it rise to its current status. Currently, the company can be characterized by business acquisitions, partnerships, and expansion to new markets. It is in this century the organization decided to solely focus on asset management hence sold its companies dealing with other areas. ("History of Schroders," 2019) Some of the notable acquisitions and partnerships achieved include acquisition of New Finance Capital in 2006, Aarel Asset Management GMBH in 2007, and 11.4% stake in Nutmeg Saving and investment Ltd among others. It is this rich history of the company that has led to the current status of the operation.

Corporate Governance of the Company

The governance of a business is a fundamental aspect of the success of the business operation. While there various frameworks of the corporate governance that is utilized by multiple companies, each of the business has unique aspects, which are critical determinants of its profitability and survival of the organization ("Schroders global," 2019). The organizational structure of the company is set in that it has executive and non-executive directors at the helm of the organization. The company has a CEO, Peter Harrison, who heads the administrative part of the operations. Additionally, the business has a chairman, Michael Dobson, who heads a team of eight directors. An overview of the company organization chart is, as illustrated in the figure below.

Notably, Schroders is located in various regions, and each of its locations has operating principles and organizational structures that could slightly differ from each other. For instance, the following figure shows a summary of Schroders Indonesia.

The company is seen to operate under strict core values that have led to its notable success in the asset management industry. Business integrity, high ethical values, and professionalism across all its operations are the primary values of the organization ("Corporate governance - Investor Relations - Schroders," 2019). Further, the business requires strict compliance with the UK corporate governance code. In 2018, the company employees were operating in compliance with the governance code. In efforts to strengthen its governance, the board has corporate governance guidelines for the organization with well-articulated information of how each group or individual linked to the business should act as they discharge the duties. A unique approach of the governance evident in the company is its emphasis on the value and importance of diversity across all levels of management and employees. In fact, according to the company CEO, the entity does not set prescriptive targets based on gender or nationalities in their levels of management ("Corporate governance - Investor Relations - Schroders," 2019). Instead, the employment of individuals in all levels of operation primarily focuses on the diversity of vast factors. For instance, the appointment of directors consider experience, nationality, gender, and balance of skills, among other selection criteria.

TASK 2

PESTEL Analysis

As aforementioned, PESTEL is an acronym for Political, economic, social, technological, environmental, and legal factors that affect the external environment of the business. It’s a tool used by an organization to know how each of the external affects their activities and performance. Importantly, PESTEL analysis is fundamental for any business regardless of its size, location, or extent of its operation (Needle, 2010). The need for PESTEL analysis for a business is justified for various reasons. As per Shatskaya et al., (2016), PESTEL analysis has a very important in the growth of businesses. The analysis assists every organization owner in identifying important changes in the political, technological, economic and legal factors. Secondly, it assists businesses to do thus strategic analysis to expand their businesses and gain more market share. Nevertheless, the analysis helps the organization to identify opportunities and threats. Gathering information businesses are able to will be able to identify the opportunities and threats caused by external factors. Therefore enabling the organization to address the most crucial opportunities and take advantage of them.

TASK 3

Schroders PESTEL Analysis

The following is a summary of the PESTEL analysis for Schroders PLC.

Political Factors

UK decision to leave the EU: happened when the UK took part in a vote in 2016 to exist the European Union in what is popularly known as the ‘BREXIT,’ which will affect their global relationship with other nations in terms of how it operates (Dorling, 2016). Political uncertainty: political uncertainty has occurred in the UK mainly because of the BREXIT concerning the nation’s intentions to leave the EU which has made it challenging for retailers to plan effectively beyond the exit (Hove and Wakeford, 2016) London ULEZ zone: this concerns the ultra-low emission zone which will help the UK improve its air quality where most motorists are required to meet the set emission standards in London (Laybourn-Langton and 2016) Increase in the income tax threshold: this is the income level that a person starts to pay his or her income tax as imposed by the government, increasing it puts heavier burden on the tax payers (Yao, 2019)

To start with, political uncertainty is crucial for the operation of the company. Many of the Schroders are in countries that have an unstable political environment. For instance, the UK is currently very polarized, especially from parties. This polarization came about when the UK decided to leave the European Unions, what is being popularly referred to as the ‘BREXIT.’ As a result, there has been an increased uncertainty about the UK’s government's ability to govern and legislate. This uncertainty has put the UK’s utility stocks and banking under threat, thereby damaging investors’ trust in different companies, including Schroders Plc. (Dhingra et al., 2016). Moreover, the income tax threshold is another challenge that influences Schroders Plc. Income tax refers to the tax imposed on taxpayers which varies with respective taxable income. In most cases, taxation rates vary by type of taxpayer. Scholes et al., (2014), suggest that taxation policy influences business costs. Therefore, Schroders Plc being a taxpayer has been affected by taxation in different states which affects their profitability.

Economic factors

Economic factors are concerned with how and to what level the government intervenes in the economy.

Interest rates: this is the amount expressed or charged by lenders for asset (for instance, large assets, consumer goods and cash) used usually stated as a percentage (Cairns, 2018). UK inflation rate: this is the general increase in prices where a state’s unit currency now buys less items that it previously did (Breinlich ET AL., 2017). Exchange rate: this is the value of a country’s currency in relation to a different state’s or economy zone’s currency (De Grauwe and Grimaldi, 2018). Unemployment levels: this is the fraction of a country’s labor force which does not have jobs usually expressed in percentage form (Buffel, Missinne and Bracke, 2017).

According to Needle (2010), economic factors such as high rate of inflation, economic growth, and inflation have a direct impact on the potential opportunities and threats of a particular market. Foremost, the UK inflation rate and those of the international markets are critical in the Schroders operations. The high inflation in the UK has caused business uncertainty in the company. This high inflation impacts business confidence partly and results in a lower level of capital investment spending. This affects the organization development, growth and profitability. Moreover, Hall (2009), suggest that inflation affects an organization's competitiveness. In case one state is faced with a higher rate of inflation compared to the others for quite some time, companies will export less price competitive in the global markets. This creates lower profits, reduced export orders as well as reduced jobs creation and if the condition worsens creates an imbalance in a country’s trade balance. Moreover, export reduction decreases national income and accelerates unemployment. Therefore due to the globalization of the company, with the different inflation rate, inflation in the UK can result in the negative impact on the organization. Nevertheless, Interest rates affect the profitability of the company, especially in the UK. Dehejia et al., (2012), suggest that interest rates affect customers’ ability to pay/purchase. As it is known, customers have loans. Therefore, the higher the interest in an economy, the less money possible clients have in their pockets. Hence this reduces the ability to buy products and services, therefore, organization suffering from decreased sales. Besides, with the high-interest rates in the UK and other places in the world, the organization sales are severely decreased. Exchange rate. A devaluation of currencies makes exports cheaper and exporting firms will benefit. Though, imports become expensive. On the other hand, appreciation makes exports expensive and reduces the competitiveness of exporting firms. Therefore with the issue of BREXIT, the UK currency is depreciating, therefore, making export cheaper which is an advantage though affected by the import of materials (Campos & Coricelli, 2015). Besides, the high unemployment levels affect the ability of citizens to purchase the company's products therefore negatively affecting the profit of the state. Increase in the minimum wage stimulates consumer spending, and grow the economy and help businesses' bottom lines (Savitz, 2013). Hence, the company has of late achieved more income from increased customer behaviour.

Social Factors.

Increasing health consciousness: today people prefer vegetarian diets to junk foods containing beef (Shimoda et al., 2019). Ageing population: the number of old people is increasing both in the UK and globally while the younger population is decreasing (Pinedo-Villanueva et al., 2019). Increase use of internet shopping for food: today, many people buy things online through the internet using their mobile phones at the comfort of their homes (Rokicki, 2019) Rate of Immigration: this is the frequency at which foreign people arrive in a country form their countries thereby increasing the visited state’s population and changing the population demography (Porteus, Reynolds and McAllister, 2018).

Various social factors impact Schroders PLC. For instance, these factors are very crucial for marketers when targeting specific customers. Moreover, it reveals much about the local workforce as well as their willingness to work under certain circumstances. For instance, the rate of immigration to a country implies a need for more houses to settle in hence a market for a company. In recent years, the level of immigrating to the UK has increased whereas the number of emigrating is decreasing drastically. Kerr (2013), claims that immigration has significant effects on business and the government. For instance, most scholars have revealed that immigration has resulted in a positive impact on the U.S. economy. Immigration provides a market to the company's products, avails skilled labour among other benefits which positively affect the profitability of every company. Most immigration provides companies with the best talent which enable the company to achieve a competitive advantage compared to other countries. Therefore, with immigration to the UK, the company has been able to benefit from skilled labour and market hence increasing profitability and competitiveness. On the other hand, increasing health consciousness has created a positive impact on Schroders PLC. The UK and the world, in general, has a growing satisfying the health-conscious. This has greatly impacted consumers, employees and stakeholders in the company. For instance, if consumers are in good health, money that would otherwise be used in health can be channelled to the company's products and services, therefore, increasing the productivity of the organization.

Technological Factors

These are factors which are concerning technological innovations.

Automation of Warehouse processes: which can be achieved using automated technologies to increase productivity through bounds and lead especially with the use of automated processes and robots (Atieh et al., 2016). Smartphone wallet application: this is a smartphone application which is taking the place of the need to physically carry grift cards, debit cards, credit cards and loyalty cards as well as identification and boarding passes (Kohli, 2018). Increased use of electric cars: are automobiles which are propelled with the help of electric motors and use store energy in their rechargeable batteries thereby reducing the need or demand of fossil fuels (Wilberforce et al., 2017) Tag and trace technology: these are state-of-the-art devices which can help track real locations and time of lost items or other products by also communicating real-time data about the status of such products (Choi et al., 2015).

According to Boddy (2008), technology-related factors are fast-changing and have caused a fundamental impact on the business environment globally. The company should, therefore, position itself to leverage the opportunities brought by technological advancement. Development of artificial intelligence is key to the operation of the Schroders PLC in their asset management. Therefore, the company needs to be up to date with trends in these areas to gain a competitive advantage in the market. Leveraging on technological advancement is an opportunity that can facilitate the company expansion regardless of the geographical barriers. Moreover, advertisement to all organization is very vital to achieve competitiveness in the market. Therefore, the tag and trace technology which is available in the market today is very important to monitor and generate customers data which can be used in the advertisement. This technology is used about distribution and logistics which is very crucial to the company. As a result, Schroder Plc. Making an effort to keep itself up to date and relevant in the market is crucial (Dereli, 2015). Automation of warehouse processes. This has increased the company's productivity, has enabled the company to safe space, reduced number of employees, more efficient material flow, and created safer operations which have greatly reduced operational costs (Fang et al., 2013) Smartphone wallet application. The wallet is convenient and provides people wanting to process cashless payments. This indicates that the company has enjoyed more purchase from the mobile payment systems. Since the company does not deal with cars, increased use of electric cars has less impact on the company (Kalmykova et al., 2016).

Environmental Factors

Increase concern about food waste: this is considered an economic, social and environmental issue in the world when it is eliminated from the supply chain even when it can still be consumed and when the food expires due to neglect, erratic or poor economic behavior and mismanagement (Dou et al., 2016). Concerns about deforestation: there are concerns all over the world of trees being cut down without new ones being planted thereby impacting the climate, biodiversity as well as human life (Lawrence and Vandecar, 2015). The pressure to increase the use of renewable energy: especially because of climate change and increased pollution for instance in some of the world’s largest cities. Renewable energy such as wind and solar energy target to reduce the impact that fossil fuels have on the climate (Radhakrishnan, 2016). Climate change and changing the ecosystem: has mainly occurred due to human activities which are carried out to care for human well-being and which has had a lot of impact on the environment where many animals and plants have already become extinct (Pecl et al., 2017).

In the emergency of global warming and greenhouse effects, some countries have enacted stringent environmental regulations which could inhibit various investment and development of infrastructures. These would impact the business operation of Schroders hence the need to comply with the environmental requirements. Qualification of the company to various environmental legislation around the world is time-consuming and expensive hence affecting the profitability of the company. On the other hand, concerns about deforestation are affecting the company. The EU being among the heavy consumers of agricultural commodities deforestation has become significant. Therefore, to ensure that deforestation is reduced, many states in the EU have come up with legislation which affects all organizations. Therefore, Schroder PLC operating the EU has been adversely affected by the legislation. To comply takes time and its time consuming, therefore, affecting the profitability of the company. Moreover, customers are going green and most people around the world also prefer to conduct business with companies that are embracing the green economy. As a result, Schroder Plc. is affected and as such, is making plans to adopt the circular economy or sustainable development (Svensson & Wagner, 2011). The pressure to increase the use of renewable energy. Today, there are increasing pressure for companies to use renewable energy to replace carbon-intensive energy sources (Lee, 2012). Due to this increased pressure, the company is negatively affected while trying to comply with this pressure, therefore, reducing its profit level. On the other hand, the increased concern about food waste is negatively affecting the purchase level. Consumers are spending more on food, therefore leaving little money to spend on other things, therefore, affecting the consumer purchase power on Schroder PLC products. Reduced reusable or recycled packaging. This strategy increases company spending to adopt reusably, and reduce waste products resulting from packages (Lai, 2011). Therefore, due to increased cost, the company is negatively affected.

Legal Factors

Responsible marketing: is a marketing policy or philosophy where the marketing strategies used are created by first thinking about the society’s best interest and ensuring accountability and sustainability (Bhattacharya, 2016). Natasha LAW: which requires that all food businesses include the full ingredients labelled on all food packages and it changes things because the prior laws did not need allergen information to be written on packages (Gove to introduce 'Natasha's Law', 2019). Settled status of EU nationals: a settled status is an official immigration grant given to people to allow them to continue living, studying and working in the United Kingdom for as long as they like. It provides them with access to public funds such as state pensions and benefits where eligible and access to quality healthcare (Hunt and Wheeler, 2017). Employment Laws: is responsible for regulating the relationship between employees and employers by controlling what the two parties should expect from each other and their rights at the workplace (Taylor and Emir, 2015).

A major concern in the legal factors is the employment laws for a particular country. Due to its international nature of the operation, the company’s business laws and requirements are critical for the company. In the recent, business-friendly employment law have been developed therefore increasing the company ability to hire talented employees and retain talents hence competitive advantage in the market. Various states advocates for socially responsible elements in the company's marketing strategies (Charter, 2017). Therefore the legislation on marketing protects companies against discrimination and unfair advertisement environment hence benefiting the company. Other laws related to this legislation are the safety and health laws, which affects organization’s operations especially the working conditions for everyone and developing safe products for its clients as part of their social and ethical responsibility towards all human beings (Windrum & De Berranger, 2003). Moreover, the gender gap has forced companies to pay higher salaries to achieve equity (Cha & Weeden, 2014). Therefore, with this impact, the company is negatively affected economically. Natasha LAW. This specifically impacts organizations specializing in freshly-prepared foods (Zinzi, 2017), hence little effects to this organization.

Conclusion

Evidently, understanding both internal and external business environment is crucial for a business in today’s world. While there exist several frameworks that aid in the evaluation of the business environment, PESTEL analysis is commonly utilized for the external business environment. The analysis tool is crucial in facilitating effective strategic management and ensuring the business remains competitive in the current dynamic business world. Schroders PLC, a multinational asset management company, has its operation in 32 different locations. A PESTEL analysis conducted on the company shows potential opportunities that the company can leverage to increase its profits and expand its operations. Further, the analysis insights on probable threats that could negatively impact the profitability of the company if not looked into and mitigated.

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