The word environment means the encompassing atmosphere and conditions for life. It is vital for organisational market leaders to know and understand the environment before they start conducting business.
The external factors of the surroundings are factors that aren't under the control of an company. These factors include interpersonal environment, political conditions, technological environment, government regulations and procedures, accounting organizations like accounting standard panel, resources in overall economy and social environment and demographics of men and women (Finance Dialogue Form 2010).
The external environment consists of all the outside factors that may impact on the workings associated with an organisation. The external environment is divided into 2 parts: straight interactive and indirectly interactive. A directly interactive type of environment comes with an immediate and firsthand impact upon an organisation. An indirectly interactive type of environment has a secondary and more faraway effect on an organisation (Global Business Environment online Journal).
The category of straight interactive environmental pushes includes owners, customers, suppliers, competition, employees and employee unions (The External Environment online Article).
Conversely, the group of indirectly interactive environmental makes includes social-cultural, political and legal, technical, economical and global affects. Indirectly interactive makes may impact one company more than another simply as a result of nature of a specific business (Global Strategy online Article).
External factors that make a difference a business are: interpersonal factors: how consumer, homes and communities behave and their values e. g. changes in attitude towards health or a lot more pensioners in a inhabitants. Legal factors: how legislation in culture affects the business e. g. changes in employment regulations on working time. Economic factors: the way the economy affects an enterprise in terms of taxation, federal spending, basic demand, interest rates, exchange rates and Western european and global monetary factors. Politics factors: how changes in federal government policy might influence the business enterprise e. g. a conclusion to subsidise building new residences could be best for local brick works.
Technological factors: how the rapid tempo of change in creation techniques and product innovation affect a small business. And ethical factors: what's regarded as morally right or wrong for a small business to do e. g. trading with countries that have a poor record on human being rights would be observed as unethical (External factors that have an effect on retail industry online Article).
Knowledge and knowledge of the surroundings is vital for an company to know in order to be successful.
Outline of the company I have chosen for the purposes of my article: PRIMARK
Primark Stores Limited is an Irish clothing retailer, operating over 200 stores in Ireland, the United Kingdom, the Netherlands, Germany, Spain, Portugal and Belgium. Within this part of responsibility, Primark stores outnumbered other clothing retailer business, with 161 stores overall sent out in three major parts: 125 in britain, 34 in Ireland and 8 in Spain. Primark is known for selling clothes at the budget end of the marketplace. The company's success is dependant on sourcing source cheaply, making clothes with simple designs and textiles, only making them in typically the most popular sizes, buying stock in huge bulks and kinds and not advertising. The company positions itself as marketing fashionable at cutthroat prices.
The original clothing store was proven by Arthur Ryan and his collaborator Micaela Mitchell in Dublin Ireland in 1969. After various success in clothing business, great gains and gross income led these to open up stores in local and local areas. It obtained various premises in various business centres within its local and regional areas which eventually make more earnings and income.
Hence, these successes brought significant changes on Primark's retail business. The relevance of global tendencies and consumers' demands on lifestyle made Primark Store Limited reinvent its business design and management structure (The research on the exterior and inside environment of Primark retailing industry).
In the modern times Primark has received many honours because of its products like the prestigious 'Shop of the 12 months' honor for 2 years in a row now (Primark website 2010).
Whilst the company's main headquarters are based in Ireland, the chain is a subsidiary of Associated English Foods plc (ABF), and is ultimately manipulated by the Weston family through Wittington Assets (Primark Stores Ltd 2010).
The analytical framework I have preferred for the company
The key environmental issue I have chosen for the foundation of my research of Primark is PESTEL.
The term PESTEL stands for - Politics, Economic, Sociological, Technological, Environmental & Legal. This term has been used regularly in the past 10 years and its true background is difficult to establish. Many other similar acronyms which have been used include ETPS, STEP, Infestations and STEEPLE (PESTLE analysis 2010).
I choose the PESTEL examination tool as it is utilized by companies for business and strategic planning, marketing planning, business and product development and research reviews. Hence, by using tool, companies can gain an understanding of the environment they operate in and take good thing about the opportunities and minimize the possible dangers (Market Orientated Strategic Planning 2010).
PESTEL evaluation is in effect an audit associated with an organisations environmental impact with the purpose of using these details to guide proper decision-making. The assumption is the fact if the company is able to audit its current environment and asses potential changes, it will be better located than its opponents to respond to changes. The PESTEL examination is reported to be a useful tool for understanding the 'big picture' of the environment where an company is operating as well as for understanding risks associated with market expansion or decrease, potential and directing for an individual business or organisation.
A PESTEL analysis is also used as a generic 'orientation' tool, finding out where an organisation or product is in the context of what's occurring outside that will at some point affect what's happening in a organisation. The six elements form a construction for reviewing a predicament, and may also be used to examine a strategy or position, course of an company, a marketing proposition or idea (Infestations Analysis is concerned With environmentally friendly Influences on the Business).
Description & discourse of PESTEL
Political Factors: These make reference to government insurance policies such as amount of intervention in the economy. Politics decisions can impact on many vital areas for business including the education of the labor force, the health of the country and the grade of the infrastructure of the market including the highway and rail system. This category also includes areas such as duty policy, employment laws and regulations, environmental polices, trade limitations and reform tariffs and politics stability (Oxford University Press. (2007).
Economic factors: These refer to what is occurring within the overall economy e. g. economical growth/decline, interest levels, exchange rates, inflation rate, taxation changes, wage rates, working time, unemployment level, and just lately recovered recession and market meltdown.
Sociological factors: These make reference to the ever changing social styles in the marketplaces, where the company performs, culture norms, and anticipations, health consciousness, populace growth rate, time distribution, career behaviour, emphasis on safeness and global warming. Change in interpersonal developments can also impact on the demand for a firm's products and the supply and willingness of individuals to work (The Infestation or Pestle Analysis).
Technological factors: These refer to the fast growing and improving world of technology. Change in technology can impact the task and dealings of any organisation. New technology create new functions and techniques. Things which were not possible a couple of years back are actually main stream. Online shopping, club coding and computer aided design are improvements to the way companies conduct business now because of this of better technology. Technology can also reduce costs over time, improve quality, and business lead to technology. These developments can benefit customers as well as organisations processing the merchandise.
Environmental factors: These make reference to what is going on regarding ecological and environmental issues i. e. local climate and weather. Changes in the weather can effect on many sectors including farming, travel and leisure and insurance. With major climate changes occurring anticipated to global warming and with better environmental awareness this external factor is now a significant issue for companies to consider (PESTEL examination of the macro-environment).
Legal Factors: These make reference to the legal environment in which an organisation operates. Changes in legislation may have an impact on employment, access to materials, quotas, resources, imports/exports and taxation. Lately in the united kingdom there have been many significant legal changes which have affected companies' behaviour. The introduction of age discrimination and impairment discrimination legislation, an increase in the least wage and higher requirements for organizations to recycle are exemplory case of relatively recent laws that affect an organisation's work and activities (PESTLE evaluation 2010).
Applying the PESTEL platform to PRIMARK
In examining the political, social, and monetary factors external to the surroundings of Primark, we should consider different issues. Primark's business procedures are at the mercy of government guidelines and regulations. The business firm should comply with the group of policies and legislation stipulated and enforced by the federal government and policy making body while conforming to the group of regulations and guidelines, the company should assume social responsibility as demanded by the global consciousness. Nowadays, business sectors no more busied themselves to produce bonds of earnings and income but deeply involved in social programs to market social recognition and equality. Cultural and communal behaviours of different consumers are important to consider when establishing or venturing business in the global landscape (The analysis on the exterior and internal environment of Primark retailing industry).
Furthermore, economic, environment, laws, and technology are inseparable entities in which influence the business operations. The economical balance of certain region can contribute allot to the business enterprise condition of certain firm, like Primark. Technology on the other side, brought a tremendous effect to the position and development of business operations and marketing programs. It creates new styles in a rapid activity, which if organizations are unaware will impede growth and development (Infestations Research 2010).
Political factors: Primark's business businesses are the help of government guidelines and regulation for example providing proper working environment for staff. For working with workers and then for increasing their working conditions, the company is part of the Ethical trading Effort (ETI). Primark's energy use in the UK is sourced up against the green power produced and sold in to the grid by English sugar (Article on Primark PESTEL Evaluation online).
However, as different politics parties come into power they could change existing procedures, regulations so Primark would regularly have to assess its strategies with consideration to the political climate to comply with them e. g. if a law is handed raising the lowest wage rate for employees. The government can also pass a restriction law on transfer and export trade with other countries scheduled to politics circumstances and relations with the trading country. This may also have a direct effect in
Primark if they are getting their items manufactured for the reason that country.
Economic Factors: In 2008, Primark opened over 12 stores and has now changed its business to Europe. This shows indications of extension and success Although Primark has largely low priced items, an increase in duty and VAT in an unstable current economic climate can have a significant have an impact on on its sales making them go down. The sole Primark can prepare itself for such a situation is by having upgrade knowledge about the existing economic talk about using the PESTEL research tool. The recent global downturn and market meltdown left a whole lot of businesses helpless leading those to individual bankruptcy as the public's spending electricity was suprisingly low because of the circumstances with also led organisations to let people go increasing unemployment. Each one of these factors might well have a great impact on Primark's business. Hence, Primark must constantly examine its strategy with consideration to its PESTEL to ensure protection and safety against such situations.
Sociological factors: Primark has received several accolades for being store of the entire year. It has additionally won awards for being the best retailer of the entire year in britain. However, social fads nowadays change swiftly. A product that is in demand today might not be so popular tomorrow. Primark must keep up thus far with all these changes and tendencies. It must try to cater to and deliver in respect to the change. Ageing and society level are 2 other factors that can have an impact of Primark's sale as the company mainly focuses on the young consumers aged between 16 to 35 years of age. Hence, Primark must constantly determine its strategy with concern to its PESTEL to ensure its sociable balance and quick capacity to deliver.
Technological factors: Due to the rapid progression and development in the technology world things which were not possible a couple of years ago are actually very easy and consumer. Technology has made a great deal of complicated responsibilities very user friendly. THE WEB is one perfect example of this. It is now possible to look online in the comfort of their home. Primark has a whole lot of online customers on the website and benefits from this technological development.
Also in Primark's bid for top notch, leading edge management of its ethical auditing programme, it includes signed a package with BSE management systems for the provision of Entropy Software. The investment in Entropy software is an integral part of Primark's moral trade strategy, allowing all suppliers audits, non-conformances and remedial actions to be handled through the Entropy software system, with much greater global visibility and management control.
Environmental factors: As a result of global warming and the unfavorable weather conditions in the recent times many companies and organisations are doing their part for the surroundings. Primark facilitates this marketing campaign by using recycled paper bags rather than plastic totes. Even consumers are incredibly conscience about these factors in conserving the surroundings and support this. One of Primark's anxieties can be delayed delivery of goods from other countries due to inclement weather conditions.
Legal factors: The neighborhood laws of any country can have an impact on all the organisations that operate there. If new laws and regulations are passed with regards to employment, national least wage or health and safety in the workplace then Primark must comply will most of them. To become up to date with all legislation and accommodate all changes Primark really needs knowledge and understanding of these laws and plan in advance. Hence, Primark must constantly evaluate its strategy with concern to its PESTEL to ensure that their work is reasonable and safe for its employees.
Primark can without difficulty diversify, giving its rivals a competitive environment with substantial financial vitality. Primark's offer to its customer is one of high quality products, value for money, back again by Primark's service assurance. A strong consumer proposition has been developed by Primark brand and embodied in the line "Look Good, Pay Less". I conclude this debate by talking about that the united kingdom clothing retail industry is facing high competitors between various players but the end result implies that the consumers are most benefitted from it (Article on Primark PESTEL Research online).
Given this analysis we can say that every organization has its own external and inside problems to handle. The process in which we enable to identify and assess such problems is to apply proper management approach to analysis PESTEL or STEEPLE. The importance of these methods is squared to the importance of the business itself.
Primark must constantly determine its strategy with thought to its PESTEL research tool. External factors can also to some extent affect its interior and business procedure. Hence, these methods are ideal for us to understand and underline the negative and positive factors affecting the exterior environment of an organization like Primark.
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