Corporate MOTing: Hints and Tips on Interpreting Business Reportage Part Three: SWOTS, PESTS, and CSR by Doreen Soutar
So welcome to part three. A quick recap on the first two parts: if you get a hold of the annual accounts of any given company, it can tell you a fair bit about what the company is like. We can make a stab at telling how the senior executive team wants the reader to view the company, and how the company makes their money.
We have also made a start on appreciating that the apparent ‘rationality’ and ‘quantitative definitiveness’ of numbers is an illusion. In short, regardless of how straightforward or definitive the information appears to be, we can be pretty certain that we are being played one way or another.
Why are we played?
Because we don’t all just want to throw our money away on stuff that has no value to us.
We’re not idiots.
But the more cynical we get, the more companies need to play us to keep our cash flowing their way. It’s like a high jump competition: the higher we put the bar to getting our hard-earned folding stuff, the higher the companies are forced to jump to reach it.
Now don’t imagine that I am suggesting that you go back to being gullible.
What I am suggesting is that we train companies to jump for our cash in a way that suits us rather than in the way that suits them. We play them right back at their own game, and tempt them with our money like a small terrier with a Scooby snack.
Being led by the markets
In business parlance, making what the customer wants to buy is known as a ‘market-led’ strategy. It gets a bit complicated when talking about innovation and technology, but in principle, the customers are deciding what the company makes.
Now market-led strategies have taken off not because companies actually want to make their customers happy.
Market-led strategies have taken off because of the development in information technologies. Companies have more information on their customers than ever before, and they now have the computing power to get some useful information out of the data.
Take loyalty cards, for example.
What does your loyalty card say about you?
Who you are, where you live, what type of person you are, and what you are buying.
Need I say more?
All right then: the money you get back on your loyalty scheme is paid for by the company not having to employ market researchers. Plus, the information they get on your shopping habits are way more accurate than any human market researcher could get out of you. Your loyalty card operator KNOWS you.
I mean, really knows who you are. So does your bank card operator, your credit card operator, and so on.
So how do we go about flipping the power and control?
We start getting to know the companies and what they are like.
One of the ways to do this is to understand how they analyse themselves.
Now there are a lot of analysis tools, but we are going to look at two: the SWOT and the PEST or PESTEL. One looks inside the company and one looks at the environment the company works in.
SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats.
For example, if we looked at Shell, we could say that one of the strengths of the company is that it has good brand recognition: everybody knows the logo and what the company does. A weakness of the company could be that it has been implicated in dodgy dealings in the past, and it has caused some environmental crap to happen. An opportunity for them could be to use their drilling expertise to develop geothermal systems they could sell in the future, and a threat is the fall in prices in solar panels and/or electric cars.
You get the idea?
If you look at the annual accounts of Shell, you will find a section starting on page 11 called Business Overview. This is the strengths and opportunities section for Shell for the next year as they see it. From page 13 there is a section entitled ‘Risk Factors’. You guessed it – this is where the company look at the threats and weaknesses. The strategy and outlook (p.17) tell you how the company plans to deal with the SWOT elements. Yes, it is a bit more complicated than that. But this is a fundamental principle of business life that balancing SWOT elements are what businesses do.
Now for our purposes as people who want to take control of how businesses play the game, we need to re-define the SWOT a bit. What we need to be clear on is that companies are looking at:
a) What they are good at when trying to extract your cash from you (Strength)
b) What they are not so good at when trying to extract your cash from you (Weakness)
c) What new ways they find of extracting more of your cash from you (Opportunities)
d) How they might fail to hoover up the maximum amount of your cash from your wallet (Threats).
In other words, a company’s strengths and opportunities will result on an assault on your bank balance. They are your threats and weaknesses. The strength of your control over your purse strings is their weakness.
Feel me, bro?
You are the target.
Now the PEST stands for Political, Economic, Social, and Technological. The extra EL stands for Environmental and Legal. They are two forms of the same basic exercise: looking at the situation the company has to work in, divided into either four or six basic areas. As with the SWOT, conducting a PEST test just means thinking up problems or opportunities for the company with regard to these particular situations. This might seem simplistic, and to a certain extent it is not rocket science. However, trying to focus on particular areas is often trickier than it first appears.
For example, political implications are often legal ones as well – after all, the government makes the law. Environmental and social issues often overlap, such as in fossil fuel production. So the PEST encourages the company to hone in on what is important to them about exterior circumstances, rather than the simple circumstances themselves. For example, decreasing the quantities of fossil fuel we use might be good for the environment but it would be bad for Shell’s profits.
Of course, as we saw, Shell’s assets are largely intangible, and they may be able to survive without fossil fuel production in the long term. In the case of Capital City Partnership Limited their business lies in spending council grants helping unemployed people back into work. Their business would be adversely impacted if there were fewer unemployed people, if jobs were easier to come by, or the local government decided that the work of Capital City Partnership Limited was better spent with another provider.
As you can see from these two examples, what is good for communities is not necessarily good for companies, and conducting a PEST of your own tends to throw up these clashes between the company and their social structure. In our two examples, there is some evidence to suggest that a charitable organisation dedicated to assisting the unemployed get back into work would suffer from their own success. The company relies on a ready supply of unemployed people in order to survive.
On the other hand, a fossil fuel company such as Shell, however, may be on its way to developing systems that will allow it to survive in a cleaner, greener world of renewable energies.
CSR: Corporate Social Responsibility
Corporate Social Responsibility (CSR) is essentially a publicity exercise carried out by companies in an attempt to demonstrate that they are part of the community and that they care about it. It is the way companies respond to individuals who have conducted their own SWOTs and PESTs and have decided that they don’t like what the company is doing and want them to stop it. Several companies have taken to providing what is known as a Sustainability Report.
Why a separate report? Well, if you are me, you would suggest that sustainability has very little to do with business in the vast majority of cases, and shareholders aren’t interested in it. So there is no damn point in boring the lovely, rich potential investors with all that green, ethical stuff. There is also no point in boring all those hippy protesty-type people with all the boring financial stuff investors are interested in, so let’s give them a report of their own. There you go, fuck off and play with that while the grown-ups talk money. Look at all the pretty pictures.
You can look at all the pretty pictures here.
And while you are doing that, and thinking, ‘well, the company are actually doing some good. They are trying at least’, bear in mind that the expertise that makes up that the huge intangible asset number in Shell’s financial data (one hundred and ninety one thousand million pounds) can legitimately include expertise in marketing and advertising.
Then you might like to go back to the financial data and see if you can find out just exactly how much the company is paying on marketing, advertising, and public relations.
Then you might like to ask yourself – PEST style – whether fabulous ‘madmen’ who are good at almost lying to you to make the company look good would be a good thing for a company to be doing.
Then when you have decided that it would be good for them, but bad for you, go back and have a look at the percentage spend on good causes. That is, take the total spent on good causes, multiply it by 100 and divide it by the gross equity figure.
Does the word “pittance” spring to mind?
Welcome to the wonderful world of CSR: making companies look like social saints since 1953.
And talking of social saints, surely organisations such as Capital City Partnership Limited are different. Surely they are trying to make people’s lives better. They are a charity, so they must be the good guys, right?
We could apply some simple financial ratios, such as dividing the grants they get by the number of people they have helped into a job. Then we could find out how much each job creation project costs.
We can’t do that?
It’s a quality of life thing?
Oh, right, so they are in the business of making people feel good about themselves, and you can’t account for that with figures.
Actually you can.
Give me the number of people who will confirm that they are happy that they have been helped into a job by Capital City Partnership Limited and we can divide the grant by that number. That will tell you exactly how much the happiness induced by an individual’s experience of being assisted into employment is worth.
Do not be fooled by this notion that somehow wellbeing cannot be measured but profitability can. Companies are going about measuring intangibles all the time. We can make a pretty good stab at it, and there are organisations out there who will do it for you.
Hell, I can do it for you.
And you can do it for yourself.
What companies are saying is that they don’t want you starting to think you can measure your unhappiness with your interference in your world. They don’t want you to even consider that you might be less unhappy without their products, that you might not need their products or get any lasting value from their products.
They need you to need them.
Thank you and good night. And that, I think is probably as good a take-home message as any: they need you to need them. As I write it is both Black Friday and Buy Nothing Friday. Guess which one I am supporting.
Purchases are for Christmas, not for life.
Thanks for listening.
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