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Pestle analysis helps in better understanding the macro environment where the business operates. These are mainly the factors which are beyond the control of the business. But it is important to be aware about these factors when planning a business strategy. These factors provide a better understanding of the opportunities and threats in a way that one can take advantages of the opportunities to overcome the threats. Pestle can provide a better understanding of the risks associated with a particular business as per the market
(PESTLE analysis history and application, CIPD. Retrieved 2009-10-21.)
Political factor is the most important one to be considered while starting a business. Retail business can be influenced in different ways by the existing political issues of the government of different countries.
Carphone Warehouse has a very little political effect on its operations. There can be certain law and regulations regarding the leasing policies. But still it has managed to grow within the country. The political factor cannot hinder its business operations. (Richard Davenport-Hines, 'Clore, Sir Charles (1904-1979)'Â Oxford Dictionary of National Biography, Oxford University Press, 2004)
These factors include the monetary policies and Interest rates, Inflation rates, Exchange rates, Economic growth, Government Spending, Taxation changes, Unemployment policy and Consumer confidence. Changes in the above mentioned factors will have a substantial impact on the firm's competitive stand, its profit margin and the firm's overall growth.
Interest Rates: Interest rates dictate the cost of capital, i.e. the expense at which the capital is obtained or borrowed. The rise in interest rate could result in firms being reluctant to invest; this could impact the overall growth potential of the firm.
Exchange Rates: A strong home currency would make exporting difficult as it will increase the price of the goods and services in terms of foreign currency.
Inflation Rates: Rise in inflation rates could make the employees demand higher wages and eventually raise the costs.
Economic Growth: The demand for a firm's product may be boosted by an increase in the Economic growth of the country, i.e. higher GDP could simulate demand and thus make the firm's operations more profitable.
Its sales and profit are directly linked to its economic environment. New store openings and inventories will be in direct link with the economic conditions.
To avoid heavy rental costs Carphone warehouse has its retail outlets at the edge of the main shopping area of the town and not inside the main shopping area. It also has a particular tradition of signing up for the lease period in order to avoid heavy rental costs. As far as the economic factor is concerned the company has been able to grow its business by funding for its new shops. The tech market has resisted to the present economic conditions.
But as far as the mobile business is concerned it is slowing down due to intense competition in the market. And so the company needs to find an innovative path in order to survive in the ever competitive market.
Social factors deal with the living conditions, health consciousness, welfare, labour and social mobility, lifestyle changes, income distribution, education, fashion, work/career attitudes, entrepreneurial spirit, population, age distribution, growth rates etc of the people in the country or region where the firm operates. For example; if the employees of a particular firm are aging that would imply that the cost of payments incurred due to pension payments would increase, resulting in the increased cost of operations for the firm. If for a particular region the firm is not able to recruit skilled work force, which could be one of the factors affecting the firm's competitive stand.
The effect of development of social networking and other related websites there is going to be an increase in demands of technologically advanced handsets.
The advancement of technology will act as a motivation to the company to develop more and more technologically advanced ways to meet the customer requirements. This will help them boost up the sales of their products by utilising the advancement in the technology. This will have a great impact on society.
New processes are created through new technology, thus creating new market segments through the development of new products. The products that U-Link deals with are a result of innovation through technological advancements. Faster the rate of technological development in a country faster is the development of new market segments that can keep the consumers interested in the company's products. Technology is one of the major factors that dictate a firm's competitive stand. New technological developments enable a firm to stay ahead of the curve by using patents and copyrights to limit the use of its developed technology by its competitors.
One of the factors that can be undertaken is the fact that the employees are paid a considerably low basic salary. This can turn out to be a demoralising factor until the company is on its growth stage.
Once it passes the initial stage due to intense amount of competition it becomes difficult selling the same number of mobile insurance as the existing competitors might offer a better deal. And this might utilise more amount of working hour's convincing the customers.( Cope, Nigel (1996-12-07).Â "HYPERLINK "http://www.independent.co.uk/news/business/exgoldcrest-director-jailed-over-coverup-1313384.html"Ex-Goldcrest director jailed over cover-upHYPERLINK "http://www.independent.co.uk/news/business/exgoldcrest-director-jailed-over-coverup-1313384.html"". London: The Independent. Retrieved 2010-04-13)
There might be a need of changing the payment pattern at the same time making the working pattern suitable for the employees. This can lead to improvement in the services.
It includes environmental factors such as environmental regulations and protection, energy use, attitude of people towards environment, i.e. the impact of pressure groups, government policies towards pollution, laws enforcing pollution control, laws governing movement of traffic through a particular region at a particular interval of times, weather conditions and climate changes.
c) Value of strategic intervention
The strategy for any organisation is the basis for a change usually for a long term. A long term or a short term strategy rightly directs the company in a right direction.Also gives a sustainability measure for the company againsy rivalry in the market. The management attitudes also reflect the working of an organisation.
The necessary steps that are to be taken to introduce change in an organisation are as under:
When the firm reaches an intense competitive stage, it can either raise or lower down the prices of its products in order to gain a temporary advantage. In order to increase the sales of its products Carphone warehouse can either lower down or even raise the price of its products as per the requirement. This might help in gaining advantage over its rivals.On the other hand a firm can either bring a differentiation in its products by innovating and using latest technology which might give the company the edge that it needs to gain advantage over its rivals. And so investing heavily on R&D might be one of the ways where a firm can constantly hold on to the market share.Trying to find innovative ways to market its product can also help a firm gain the advantage.
Specific drivers that motivated for change.
The major factor for change in the organisation is due to increasing rivalry among the major network providers and to bring in something new into the market, it is inevitable to bring in changes in the environment.The mobile business is a competitive market where intense competition can lead to zero percent profit. As the firms constantly try and improve in order to gain maximum amount of market share. Due to intense amount of competition the industry becomes highly concentrated. In order to gain a competitive advantage over its competitors a firm might take up the necessary steps to change.
Resources for the company
Improvised distribution channels which can help a firm reach out to the customers in a better way and finding different ways of promoting its products are some of the ways through which a firm can constantly keep up with the competitive market.These are few of the steps by which Carphone warehouse can maintain its position in the market. By bringing about differentiation in its products by using latest available technology and using certain novel distribution channels in order to reach out to the customers.
Identification of key stakeholders
The major stakeholders involved in this change are the chief directors ,non-executives and major investors in the company. In June 2008 fifty percent of the stake of Carphone warehouse was acquired by best buy. And it was renamed as best buy Europe.
Advantages and disadvantages of systems
The retail industry concentrates much on the customer and consumer satisfaction .So any system that is thought of to be changed should focus on the impact of the consumers over the proposed system..The advantage of this systems is that it describes the powerful effect that the customers have on the industry. There can be either of the two situations. The first is where the buyer has a strong purchasing power. If this situation occurs then it can be said that the buyer controls the price. And if there are many producers producing similar type of products then the buyer can select the best amongst all of them. The one which best suits his requirements. And so in such situation the buyer dictates the price.Also at the same time the disadvantage is that where the buyer is weak and cannot easily adapt to a new product. In a way the buyer is entangled to the product. And so here the industry can dictate the price of its products irrespective of the buyers needs. This situation occurs when there is only a single major supplier and the demand for the product is high.
Development of a change management strategy
The situation with the present mobile industry as far as the Carphone warehouse retail sector is concerned is where the buyers have the control over the prices of the products. And so Carphone warehouse has to innovate and constantly improvise in every aspect starting from manufacturing to distributing its products. And has to juggle between the prices by either raising it or lowering it.A firm requires raw materials for the production of the goods and delivering services. And if the supplier is in power then he can dictate the terms and conditions in order to supply the goods and services. And in a way can control the price of the raw materials in order to capture some of the profits. But if it's other way round then the firm can dictate the terms and conditions.So in a way Carphone warehouse has to maintain a good relationship with the mobile phone manufactures in order to carry out with their business. And formulate their strategy accordingly.
Managing resistance to change in an organization
The major resistance to a change in an organisation can be either internal or external.The internal resistance to change is by the inside people.Whereas the external resistance is due to the environment which can include the threat of the substitutes of the entry of new barriers which has to be thought of before building a strategy.
The threat of substitutes mainly arises from the products available outside the industry. These might act as substituents for the existing products of the firm. This can affect the way the firm operates its business. For instance due to the growth of the internet there is a threat of it replacing the retail sector completely.This might become a major issue for Carephone warehouse and its operations. As similar products are available online. And this has forced the company to make its products available through its online division. The firm might even have to lower down the prices of its products in order to avoid the possible threat from its competitors. The company's CEO has been engaged in promoting its company's products through different mediums such as television, charity work and sports. This might help in eradicating the possible threats.In theory a firm can enter an industry and exit free of cost without any entrance fee. But practically the firms with higher profit margins impose certain barriers to the entrance of the new firm and at the same time impose certain exit penalties. These can either be barriers imposed by the government, patents and trademarks, economies of scale etc. For eg when Carphone warehouse entered the market as it was new to the market it could experience growth after a huge amount of investment overcoming the barriers set by its competitors. But as the profit margin starts declining some necessary measures should be taken in order to survive in the competition. And this might prove to be the exit penalty as the firm will have to do whatever it takes to promote itself. (Mullins L prentice hall 2004,book on Organisational strategy)
Models for implementing change
As far as the retail business is concerned Carphone warehouse Company should try to strategise new plans to support its business. In a highly competitive environment one has to constantly keep up with the competition by continuously innovating and bringing new ideas to support its business.One of such strategies can be customer retention. Customer retention is a strategy that an organisation undertakes in order to nullify the defects in its products. Carphone warehouse should constantly try to retain its customers. And this can only be possible by improving their customer service skills and by providing exceptional services. When it comes to mobile phones customers constantly keep on changing their network providers in order to gain the best out of what they pay. And due to the competitive prices within the network providers and other mobile companies' one has to constantly keep a track on their competitors. There can be several means through which one can increase and improvise their relationship with customers. (Gummesson, 1991) A good customer service requires courtesy, professionalism and effective response. Carphone warehouse should constantly develop courses to improve their staff and their employees and involve different training courses to train them in order to produce exceptional customer service. There are many retailers who constantly keep a track on their employees and the number of successful sales produced by them. (Goles and Chin, 2002, p. 227)
They should even keep a track on the customers who might be in need of a better plan or improved service as and when available and notifying them by sending text messages or inviting them to join in. Taking appropriate feedback is very important so that one has a proper idea about the requirements of the customers.
At the same time the team handling the customers should be highly motivated by providing them with bonuses and appropriate commission. And so Carphone warehouse should improve their salary pattern and provide higher basic salary. This might strengthen the morale of its employees.There should be a change in the rewarding system within the company. This might improve the performance of the people working within the company. In order to successfully achieve the targets and goals there has to be a motivating factor. And this can be in the form of appropriate reward system. This can encourage the employees to achieve the targets. Due to the present situation the employees might not feel that their contributions make much difference on the overall company's performance. A reward system such that the entire team works together in a coordinated manner and contributes to the over all profitability of the organisation should be designed.
Improvements achieved after the implementation of change model
The statistics show that the profits gained by implementation of this system have raised the profits of this company from 80% to 98%. It has increased its market share by lowering the operational costs in terms of its retail division. Carphone warehouse will have to focus more on its online division as a part of its new change. And this would require them to educate their customers about their online presence which would require intense marketing in a way that the customers would ignore the other online shops and would continue visiting them. Carphone warehouse is the first one to introduce the concept of having a retail business with all the different brands of mobile phones available with a choice of network providers. And this might help in deciding the areas where it might be strong and recognising the areas where it can be placed. This should be accompanied by strong marketing and advertising campaigns.( Michael E. Porter. "The Five Competitive Forces that Shape Strategy",Â Harvard Business Review, January, 2008, p.86.)
Conclusions and recommendations
The following are some of the factors to be considered while strategising and formulating their business plans.
Firstly they need to prioritise the market in terms of the areas which are more important and focus in those areas. The firm should first recognise their primary competitors and then carry out a systematic SWOT analysis of its competitors and arrive at the points where the competitors are operating strongly and the areas where they are weak. This might help in gaining competitive advantage. They will have to re structure the entire management by cutting down the staff and the employees working within their retail division.
Secondly they need to attack the competitor's weakness. This can only be possible by knowing Carphone warehouse's strengths. As it was the first who introduced the concept of retail mobile business it has an advantage of providing high levels of education to its employees. Using the reputation that the company has built along the years U- Link can respond to its competitor's attacks by mentioning it in its marketing and advertising campaigns. Carphone warehouse should closely monitor its competitors in all aspects of gaining competitive edge.