Business means a set of human activities performed for the profit or non-profit motive with an organizational objectives and goals. Environment means the factors that are affecting the organization externally and it is uncontrollable. 'In other words, business environments may be defined as the set of external factors such as the economic factors, social-economic factors, government and legal factors, demographic factors, geophysical factors, which are uncontrollable in nature and affects the business decisions of a firm (ASDA) or company.' (Prakash & Raj, 2005).
According to Jobber and Fahy (2003) Business environment can be divided into two types, they are:
Internal environment (Micro)
External environment (Macro)
External environment (Macro)
Macro environment is the environment which is very much indirect to the firm as it is uncontrollable and can't be avoided by the business enterprise. It is also called general environment so it is the external factors that affects whole the organization from administrative level to management to operating, etc. These factors are Political, Economical, Social, Technical and Legal which can be said as PESTLE analysis.
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Generally, PESTLE stands for:
P - Political
E - Economical
S - Social
T - Technological
L - Legal
E - Environmental
A PESTLE analysis is a useful tool or strategic tool that guides the organization to make strategic decision. It gives the clear picture of the organization operating in the environment and finding out the future possible risks that are associated with the market. It is related to the opportunities and threats of the organization.
In regarding to the assignment I have chosen ASDA Plc.
ASDA is a British supermarket chain which retails food, clothing, toys and general merchandise, and also has a mobile telephone network. It has its head office on the ASDA House in Leeds, West Yorkshire. At first it was founded as Associated Dairies and Farm Stores Limited in 1949 in Leeds. ASDA marketing promotions have usually been based solely on price, with ASDA promoting itself under the slogan Britain's Lowest Priced Supermarket (corporatewatch.org). Being the big organization it is also affected by the different factors.
Economical Factors affecting on ASDA
By considering the whole world the growth rate varies, some may have high growth rate and some may have low. Therefore, the organisation's growth rate may vary from country to country. As high growth rate leads to high demand of goods and services and low growth rate reflect low demand of goods and service. So we can say the economic factor as growth rate has major role in determining the ASDA strategy of present and also in future (Kotler. P and Armstrong. G, 2010)
Basically it means increases in price of goods and services because of surplus amount of money and high cost of living with the limited resources. When there are limited resources then the produced goods will be few and the price is high which decreases the buying capacity of people so ASDA will suffer because of inflation rate and also ASDA have to pay high salary to their employees which are very much costly for them.
Interest rate means the certain amount of money (interest) that is calculated from the whole sum of money that is borrowed or used so that it is paid in weekly, monthly or annually. So like if ASDA borrowed money from certain banks or company then their interest rate will be according to the amount they used i.e. higher the amount of money higher will be the interest rate. Higher interest rate is considered to be negative aspects for business (ASDA) because due to high interest rate ASDA will have higher repayment and reduce in their profit.
It means the number of people being hired or employed by the organization. Employment rate helps in finding the country's economic factors. Higher the employment rates the nation or business will be benefited from it.
Globalization means the world of global market that is the product being introduced globally in exchange of money and services through communication which links to other countries or businesses and breaks the border lines. It simply means the technology that has influenced in every life's and aspects of people and organization (ASDA) (Milward. B, 2003).
Social Factors affects on ASDA
Always on Time
Marked to Standard
It is a norm and values which people tend to follow and practice it. Like if a people have a habit of buying the expensive product only then there is huge cash generated from the people through which the business will be profited.
Birth and death rate
Birth and death rate are the determinant factors for the country's economy. If there are more people then the demand also increases resulting into maximum production of goods and services and profit also. Nowadays in UK because of non EU migrants there are higher demands and ASDA the leading supermarket is capitalizing from it by producing many quality products at low prices to increase their profit. If the death rate rises up then there is less demand and decreases the production and economy of ASDA.
Changing Attitudes and behavior
It has also a great influence over deciding the ASDA economy aspects. As we know nowadays everybody wants quality product at low price and if they don't get it from one shop then they move to another shop so this changing attitude and behavior is very much natural and can't be controlled by the ASDA.
Generally it is the distribution of people according to places, age, sex, etc. For example if ASDA wants to open a new firm then they have to analyze on certain things like where there is larger population located that is in town centre and if they open it there then there is higher demand which they can achieve more profit via people.
Johnson et. al (2009) defines strategy as follows: 'Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations'. Business strategy is very much holistic in nature, broad and long-term. Strategy constitutes of vision and mission statement, goals and objectives, core values, critical success factors, positioning and brand. As we know the economic and social factors are uncontrollable in nature so in order to tackle these kinds of factors in current or in future the organization need to change its business strategy. In contrast with the above ASDA's economic and social factors, the strategy that ASDA will develop in order to respond effectively is as follows:
As we know growth rate means increasing number of people that demands goods, services and jobs and if ASDA doesn't produce more goods and services according to the demands then they lack behind and fall apart. So ASDA need to develop a strategy that is maximum production of goods and services in large quantity to satisfy the people and compete in the market. For the maximum production of their products they need the larger number of manpower perform the operation and jobs hence ASDA has to recruit more staffs. For e.g. on October 2010 ASDA revealed a plan to create some 7,500 jobs next year through store openings and its recent takeover of Danish supermarket Netto in the UK (money.uk.msn.com). About the inflation rate it is very much destructive in sense as it affects both the party producers and consumers. Since if there is rise in the inflation rate then ASDA has to suffer quite a lot because there will be decrease in the profit and production due to limited resources and price being high. This makes the ASDA strategy to change so in order to respond to it ASDA has lowered its price as much as possible below than their rivals TESCO, SAINSBURY's, MORRISSIONS, etc and developed a SMART price strategy and gives guarantee to their customers that if they find any low price product in other supermarkets then they will pay back the money and they (ASDA) have created flexibility in their employees to be cost effective. According to ASDA Income Tracker, it is said that the rate of inflation of ASDA in February 2010 has dropped but still at high range which can be little advantage for them. Higher the interest rate the more obstacles that ASDA has to tackle in its day to day operation as it affects directly in its financial sector and they will out run with the cash flow of money. So to lower their interest rate ASDA has welcomed the move by the Bank of England (BoE) and it drops to 3%. This has made the consumer to take benefit of it because of the financial support ASDA have lowered their price of product to satisfy their customer and increase their sales growth (talkingretail.com). Since ASDA runs with the help of lots of manpower i.e. employees, managers, cleaners, etc so if there is less employment rate in the country then it has adverse effect on operational activities of ASDA because there will be less people to perform all works which is very much impossible. As mentioned above ASDA have developed a plan to create 7,500 jobs next year to overcome the employment crisis and also opening of many stores around the country to create jobs, the newly opened ASDA stores in Pillgwenlly in October 2009 which is one example that shows they are decreasing the employment rate along with the development and growth of their stores (retail-development.asda.com). ASDA being a part of Wal-Mart (an American Company) which is the world's largest global retailer, well known all around the world and their all the products are globally found. We know that everyday the world is getting smaller because of the technology so if the ASDA is not up to date with the technology or global products then they lacks behind. Hence, they have developed an online shopping from which we can shop staying at home with the latest products that are in the market
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ASDA being a big organization if a manager or staffs keep on doing things wrongly then the other might follow the same culture of doing it same and in the end ASDA get exploited internally. So in order to face these things ASDA has a strategy to work as a team, they has a culture of sharing each other's successes, wearing name batch at work by all the staffs from top to lower level, 10 foot rule that is saying hello to whoever if someone within 10 feet, etc that leads to customer and employee satisfaction and rise in the customer of it (asda.jobs). When birth rate rises there are more people side by side demand also increases and if ASDA is not able to provide all the products and services according to the increasing demand of the people then they will not be able to run their business along with the people they have to keep in mind that more people means more customer and more profits. ASDA being the UK's fastest growing retailers they are able to meet the demands of the people by opening new stores in different areas approximately 293 stores and this has created a employment opportunities also reducing the effects of high birth rate. About the death rate ASDA has the pension payment scheme or plan that benefits both the people and them with capital bringing in their hands and the pension for the people (asda.jobs). The attitude and behavior of people are natural and uncontrollable once they are not satisfied with the product they leave that organization. In this competitive edge of marketing, ASDA have many rivals like Tesco, Sainsbury's, etc that provide quality products and services so ASDA must be aware of them in keeping their customers, one loss of customers means many losses in ASDA profits and income. To satisfy their customer ASDA has develop a low price on all their product and money back guarantee and also trained their staffs to welcomed the customers that brings positive attitude and awareness towards them. The places, age groups, religions, income, etc also plays a vital role in process, operations, growth and developments of ASDA. For example if ASDA opens its stores in a remote areas without doing some analysis (PEST) where there are few people then they definitely shutdown no later because of less sales and profit in that areas or store. Basically ASDA stores are opened in town centers where there are more people that generate cash, increases sales growth and development. If according to the age group, there is increasing birth rate in the UK so they must be able to provide child products and services in bulk so that they will be benefited and also there are many old people residing in the UK as for them ASDA has an strategy of providing pension payment which helps them to attract more customers towards them and increase their economy.
BIBLOGRAPHY AND REFRENCES
Prakash, V and Raj, M.G. (2005) Business Environment. New Delhi: Anmol Publication Pvt. Ltd.
Jobber, D and Fahy, J. (2003) Foundation of Marketing. Maidenhead: McGraw-Hill Education.
Kotler, P and Armstrong, G. (2010) Principle of Marketing. New Jersey: Pearson Education Ltd.
Milward, B. (2003) Globalisation? Internationalisation and Monopoly Capitalism. Cheltenham: Edward Elgar Publishing Ltd.
Johnson et. al. (2009) Fundamentals of Strategy. Essex: Pearson Education Ltd.
http://money.uk.msn.com/your-financial-life/work/articles.aspx?cp-documentid=155260242 Accessed on: 01/03/11
http://www.corporatewatch.org/?lid=800 Accessed on: 03/03/11
http://your.asda.com/assets/2010/3/30/asdaincometrackerFeb2010.pdf Accessed on: 03/03/11
http://www.talkingretail.com/news/industry-news/asda-welcomes-interest-rate-cut-move Accessed on: 03/03/11
http://retail-development.asda.com/recently-opened-stores.html Accessed on: 03/03/11
http://www.asda.jobs/why-join/culture.html Accessed on: 03/03/11
http://www.asda.jobs/why-join/benefits_and_rewards.html Accessed on: 03/03/11