How is pestle affecting the company?
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Published: Mon, 5 Dec 2016
Today in the 21st century there are so many small and big companies out there to perform their best and they are the market leader. And to become the market leader in the system they are trying to implement their company structure day by day.
To achieve that, they are spending time and money to find out the way how they are going to implement the application in the company. But for doing that they have to consider so many factors in consideration. For example political factor, social factor, environmental factor, economic factor, technology factor, etc. To find out such factor they have to take help of the resource of like market research, government statistics, specialist research, newspapers and magazine and consulting agencies, market research. After looking at the each and every factor they can go ahead of their decision to make the suitable decision for the company.
This is not only enough to make the decision because of the major trends of the globalization, information technology, and social demographic trends. This is very crucial factor which is more affecting small or big organisation. I will explain you in brief that,
First, ‘Globalization is the trend of countries and cultures becoming more connected through business, governmental cooperation, mass media and other sector.'(Qandas-year is not shown). So, we can say that while anyone running the business at the international level they have to come across the different countries and their cultures and they have to understand it as well to make their service available to those countries.
Second, Information technology is the most important factor which is changing the whole definition of the business in the market. With use of that business are available at the each and every corner on the earth. With the use of that it is easy to make any decision for the company. But at the same time there are disadvantage of that as well. (Example, unemployment)
Last, social/demographic trend is the social trends are the different countries have the different culture. And that make the different strategy and the product for different culture and also the demographics trend is the population of the country and which kind of product and the services they are looking for that also affect the business. (Example China, India)
1.1 PESTLE analysis
This analysis is used to find out which opportunity and threats lies in environment in which business operating. (RapidBI 2000-2009) With the use of the PESTLE analysis we can find the solution from which we can take the advantages of the opportunities and minimise the threats for our business. In the name PESTLE each of the letters stands for the one factor which affects the business.
P for POLITICAL FACTOR:
It is very important factor which affect the business because political leaders are changed in short time period. Every new leader is changing the policies regarding the current taxation polices and future taxation polices. They are changing employment laws and also the tread restriction( example tier 5 students cannot work while they are studying), sometimes war and worsening relation to other countries makes the problem for the company (example between USA and Afghanistan).so from this we can say it very important factor which affect the business.
E for ECONOMIC FACTOR:
This is the another factor which also effect the business like overall economy of the country(example Afghanistan, some part of Africa), what is minimum wage, how much unemployment is there(example unemployment due to recession), what is the customers spending limit, so thus this kind of factor also we have to consider for the business.
S for SOCIAL FACTOR:
It affects in the sense of what is the demographic position that means what is the population growth rate(example India and China), if business is international than the ethnic and religious differences(example middle east women cannot drive the car), attitudes towards the education and environment(example kids are not going to school because of money problem).
T for TACHNOLOGY
Technology is changing day by day. Everyday there is new innovation in technology in the market so you have up to date all time with the new technology to run your business. That contains current and future technology (example assembling the car), which way customer is purchasing (example online purchasing), how much money is invested to find new technology for the business.
L for LEGAL
That is changes to the legalisation. That means legalisation in the areas like the employment and competition between two companies. It also affects the changes in the European law. And it also covers the regulating bodies and also the trading policies.
E for ENVIRONMENTAL
Today this is the one of the most crucial factor in account of the any small or big business. Due to some business there is global warming that is the big major issue. That is happening due to the pollution created by the company’s product and services (example cloth manufacturing dropping dirty water in river or sea).also different attitude towards the environment from the customer, media and also from government. Last one is the recycling the product once it has been used. (Model answers, 2009, Marketing Minefield, 2007)
At the end thus there are so many factors which can affect the any small or big business and for any new business this all factor has to take in the consideration before they go ahead for their business.
2. Company’s profile
In a market there are so many big and small businesses. Among all of them I am going to take one of the businesses which I am familiar with. I am going to take one of the best company in retail business ‘JD SPORTS FASHION PLC’ in UNITED KINGDOM.
First store was open in bury in 1980.and than during 1980s they expanded the stores in the north and midlands in UK. The first London store was open in the 1989 in Oxford Street. And the group grew onwards and by 2002 they had almost 200 stores in the UK. In the 2005 they purchased almost 70 more store from the ALLSPORT and then it becomes the leading UK retailer of fashionable sports and casual wear. The group acquisition of SCOTTS in December 2004 and bank fashion in December 2007.Now there are more than about 400 stores operated in the UK and REPUBLIC OF IRELAND.
This company is selling branded product like NIKE, REEBOK, ADIDAS, PUMA, FRED PERRY, SCOTT, LECOSTE, DC, BENCH, etc as the well known brand and they launch their own brand as well like MACKENZIE, CARBRINI, BROOKHAVEN, PURE, K-SWISS, etc. In those entire brands they get the both clothing and footwear.
2.1 How is PESTLE affecting the company?
To this company there are so many business factors affect as business environment has been change. Firstly if you take the because of the political factor if I give example is the tax laws. Tax laws is change due to the changing the government and because of that they have to change the product price related to the new tax laws. Economic factor which are like unemployment level within the area they have to hired people who are living nearby that means they will have the first preference. Also the wages of the employee that means every year the minimum wage is increases so they have to increases as well. Example last year it was £5.75 this year £5.90.
Social-cultural that stands for this company is more concentrate on the youth customer. And also they buy on exclusive product to the company. Thus they try to make their loyal customer. Technology factorthis company is using the best technology for every expect like banking from the store, scanners (HHT system) in the stores, up to date IT infrastructure, transporting the stock from warehouse to store and store to store, etc. Example use of HHT scanners, if the store do not have the customer size in the store than any team member can find out where the stock available without calling to the different branch with help of the scanners.
Environmental factorthat means the environmental protection laws before they trough the cardboards and the plastic in the bin but due to strict law of the recycling the recycle product they are keeping that within the store and they are sending the both to the company warehouse to recycle again. Legal factorthat means the trading slandered example like pricing of the product. Whatever price is marked down on the product it is the price they can charge to the customer even if it is mistake.
There are so many other factor come in the account to this company that means day by day market there is competition going on due to that there are threats as well. There is merging of the smaller two companies to stand up with this company. Low price than this company example, SPORTS DIRECT having low price compare to the JD SPORTS. But on the other hand this company has the competitive advantage as well. That means this company have the good IT infrastructure, good work force. And thus the opportunities within the company overcome the threats.
So from above we can say that in the business environment any business affected by so many factor. For this company there is a one weakness is there as well. That is the tall hierarchy for the management. Because of that sometime misunderstanding or not good enough communication between the management that creates problem and to overcome I suggest the flat hierarchy in the management. But on other side company have the competitive advantages which make this company’s strength, which is the product which they sold in the stores. Example about 60% of branded products is exclusive to the company. So you will not find the same product anywhere. That is more like monopoly of the company.
There are so many other factor affect the business that are porter five forces. Those are shown in the figure.
On the given company or any company in the business there are factor is forcing to change the strategy of the company and there is porter five forces comes in the picture.
That is shown in the figure.
(Porter’s five forces) (Source: Dagmar Recklies, June 2001)
Ø Competitive rivalry within the industry
Ø Bargaining power of the suppliers
Ø Bargaining power of the customers
Ø Threat of the substitutes
Ø Threat of the new entrance.
These all affect the business like for example, Competitive within the industry that means there is the competition is going on in between the employee and that affect the company. Bargaining power of the suppliers, that means if more than one supplier than company can bargain with the supplier. Bargaining of the customer that means if there is more than one company making the same product that customer can do bargaining as well. Threats of the substitutes if the product is in the market but there is a substitute of the product is there and that is cheaper than the actual product that make the difference to the company. Threats of the new entrance there is always new company comes in the market and to try to get the place. For that they use the different offer to sell the product like bye one get one free or half price, etc.
Thus, to stand in the market and at the top of the market every single market has to change the policies, company’s structure, rules and everything as the business affecting factor changes. And then and then they can run the business.
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