Factors affecting industry (PESTLE)
- Uncertainty due to shortages, rising costs, and fluctuating business cycles (Yuvarani 2009).
- Robust economy => high purchasing power due to high disposable incomes (Treadwell 2013)
- Effects of Sluggish economy after recession:
- Preferences for liquidity and capital preservation => low spending in retail (Pomoni 2013)
- Recovery, but not to pre-recession levels (Plunkett Research Ltd 2013).
- Survey à consumers preference for savings and debt reduction to expenditure (Farfan 2013).
- Persistent high unemployment => low retail spending in 2013 (Plunkett Research Ltd 2013).
- Price sensitive customers due to persisting effects of recession (Plunkett Research Ltd 2013).
- Trends to ‘Right-size’ for cost reduction & better quality (Farfan 2013)
- Social responsibility to remove recalled products (Treadwell 2013)
- Apparel demand affected by cultural norms, and fashion trends (Suttle 2013).
- Social factors that influence retailers’ pricing, product and promotion strategies (Bruce 2012):
- Age – e.g. media for promotion
- Family size – larger families will seek cost-effective products and services
- Income – decisions on whether to offer a premium product or focus on low-margin, higher volume products.
- Trends/fashion/ preferences – e.g. demand for healthier food alternatives, ethical sourcing and fair trade practices.
- Favorable versus unfavorable policies & regulations:
- Government-backed loans & subsidies enhance growth of retailers or keep prices low for customers (Treadwell 2013)
- Stable governance creating infrastructural developments that enable customers to access retailers’ physical establishments (Treadwell 2013).Favorable versus unfavorable policies & regulations:
- Unfavorable regulations such as minimum wages and high taxes – increase cost for retailers (Treadwell 2013).
- Increased Legislation affecting the retail business (Yuvarani 2009).
- Legislation on unfair competition = good for industry (Yuvarani 2009).
- Legislation protecting consumers from unfair retail practices => increased costs (Yuvarani 2009).
- Labor laws and legislation on employee unions => costs implications for retailers and loss of production during employee strikes (Suttle 2013)
- Embargo against imports may affect sales for companies (Suttle 2013)
- Activism against goods produced externally could lead to retailers’ reduced sales (Suttle 2013)
Determinants of political and legislative environment:
- Government’s social responsibility to protect entry of harmful products
- Lobbying by interest groups – e.g. Labor unions and Employers
- Economic situations – e.g. unemployment reduced taxation to encourage enterprise growth
- Negative aspects:
- Disruptive technology – e.g. e-commerce vs. brick and mortar establishment
- Cost of adopting new technology may be prohibitive (Yuarani 2009).
- Information age – customer’s have access to product information and pricing from the Internet – shift in resources that offer competitive advantages (Treadwell 2013).
- Online shopping alternatives – convenience (Prasad 2013)
- Positive aspects:
- Enhanced Ability to track customer preferences thus better capacity to meet their preferences (Prasad 2013).
- Increased efficiency e.g. barcoding and near field communication allow easier processing and tracking of inventory and orders (Treadwell 2013)
- Improved productivity, cost saving and better integration of supply chain stakeholders leading to enhanced efficiency (Negi 2013)
- Global warming and climate change concerns:
- Reduce the industry’s contribution to emissions – ‘Go-green’ initiatives
- Level of environmental responsibility influences retailers’ reputation (Environmental Leader 2009)
- Retailer’s waste-disposal practices, use of plastic packing, recycling, energy-efficient retail buildings => effect on the environment (Environmental Leader 2009)
Go to part three here.