The Effect of Externalities on UK's Retailers
1. Introduction
“In business the one thing you can be sure of is change” – (Peter Drucker)
In the recent years the development of the retail market has been greatly changed by external factors such as; political, economical, social, technology and legal (PESTL). This is also known as external macro environment, which concerns all businesses. This report will show what impact it has caused the retail business in the last forty years through these factors.
The retailing business has always existed, however it has been changing through external factors external factors. The retail industry is a huge business; an example of a highly profitable retail company would be Tesco. Last year they had total revenue of £38,259 million in Great Britain alone and there Net income was £1,576 million (Wikipedia, 2006). However, when it is bombarded with new laws, technology and other changes it needs to change as well, otherwise they may have huge consequences.
Only recently has the television had become popular, forty years in the past, only a few had a television. In this day and age people can go on the internet through their television sets and shop on their TV.
2. Methodology
In order to carry out this report, this includes, reading through academic materials such as: Omar (1999), McGoldrick (2002), Bromley & Thomas (1993) and also other academic materials from journals, internet and other materials. These writings develop the key issues with the macro environment and highlight: Political, Economic, Social and Technology. The table Fig 1.1 below from Omar (1999) summarises the key points:
External (macro) environment factors are those influencing factors that retailers are not directly able to control but which they will have to bear in mind during operation. It is usually the uncontrollable factors in the external macro environment that are the most important sources of both opportunities and threats to the retail organisation. The term macro environment, as used here, denotes all forces and agencies external to the retail organisation itself. (Omar, 1999; Berman and Evans, 1995)
The external forces are separate forces; nonetheless, these forces can combine together also. For example; when the government decreases the retirement age, this was affected politically, socially and economically.
In this section there will be an analysis of the key points from the external factors. However, due to the lack word limit, there will only be a selection of examples shown.
In recent years there has been major growth in the wider business world surrounding the overall influence that the retailing industry holds and because of which, retailing and the issues that surround it have become a vital influence in today’s global economy. (Fisher & Raman, 2001)
For a retail manager determining location for an organisation, it must be decided whether the business holds ‘’competitive advantage’’ and whether there is opportunity to outperform competitors and capture a share an existing market. (Kim, W. C., Mauborgne. R. 2005) If a retail manager was to determine that little to no existing competitors in a location it could prove massively influential on where to base a business. (Kim, W. C., Mauborgne, R. 2005)
In retail industry, the barriers to entry are always high. As we know it need high investment, research and development of the production and innovation is essential. There will also be fixed cost by existing industries so there is preventive economic of scale for new comers. They also buy large volume of product in cheap price and sell it. Thus, any new industry coming as new entrant should be aware of this fact.
This part of the report will highlight the problems within the external environment that affect Marks and Spencer. Before planning and decision making can take place an organisation must be aware of these issues. The key factors that impact upon all organisations are Political, Economic, Social and Technological. These factors are commonly referred to as PEST factors. Political changes like change of government could affect the minimum wage that M&S workers are paid. Economic factors such as inflation could affect the pricing of garments. The Social factors that would need to be taken into account are lifestyle changes and demographics, M&S would need to consider where their target market stood. Technological advances could also affect M&S sales just recently their website has been updated from a corporate site to a new website offering online buying. Globalisation is a huge environmental factor affecting M&S. Globalisation is the increase in cross-border economic, social and technological exchange. For organisations it increases competition and the search for cost advantages.
The key macroeconomic variable which affect the retail industry are: Economic output, productivity, unemployment/employment, inflation, and budget balances and finance. Economic output is used in terms of short run business fluctuations and long term growth. The Oxford English dictionary defines economic output as “relating to the science of economics; relating to the development and regulation of the material resources of a community or nation” and “that which is produced in an industry or process” (OED Online, 2007)...
India traditionally been a country where most of retailing is done by the unorganised sector. But in the past few years the scenario is changing rapidly with organised retail growing rapidly. Retail as an industry includes department Stores, discount Stores, clothing Stores, specialty retailers, convenience stores, grocery stores, drug stores, home furnishing retailers, auto Retailers, Direct sales catalog and mail order companies.
The growth in retail sector also comes through innovative ideas. As retailers are providing the innovative buying options at different store like as cash & Carry, lowest price day (Sabse Sasta din) which help to increase the customer base. Initially organize retail was involve in the apparels and footwear. Now retail has included the food chains, book & CD store (landmark) and electronics (CROMA store a Tata retail chain). These all changes occurred at a passage of time so; it is an evolution rather than revolution. This paper help to give information about the journey of retail in India, different formats of retails chains, drivers of the retail industry, and finally the barrier in the growth of Indian retail.
The competitive environment of Metro Holdings Ltd would be evaluated based on Michael Porter’s 5 forces Model. The factors affecting each force would be critically analysed to determine the competition faced by the business. As the nature of department stores and specialty “accessorize” stores is vastly different, the report would focus on the analysis of department stores which accounts for a bigger portion of the company’s income and presence in the industry.
Even the slowdown in current global economies could not bring retail sector down as retailers keep seeking for opportunities overseas to avoid challenging economic condition, which make this sector becoming more globalised and competitive. As an heir of an industrial components retailer, I also believe there are bountiful opportunities to grow in this emerging industry. But without deeply and truly understanding in every aspect of retailing, one could not survive in the battle. For this reason, I would like to pursue my education further by studying Master in retail management to obtain knowledge in retailing and hopefully become successful in the field.
Clarke, I. and Rimmer, P. (1997), "The anatomy of retail internationalisation: Daimaru's decision to invest in Melbourne, Australia", The Service Industries Journal, Vol. 17 No. 3, pp. 361-82.
The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around 8 per cent of the employment. India is the world’s fifth-largest global destination in the retail space.
At the present time, shopper in India wants the right price, ambience and good quality all under one roof. With the speedily altering everyday life and rising earnings of customers, the retail industry has shown good growth rates in India. According to a report on Indian grocery and personal care Retail Industry, it is estimated at $680-billion score by 2021[20].
In today’s era retail domain is growing on a large scale. Lot of analytics are done in Retail Industry to enhance the revenue out of it . Retailing means selling merchandise in small proportions to the consumers for their end use. According to retailing, the individual reaches a nearby retail store and purchase products as per his need and pocket in small units for his own consumption.
The Indian retail industry is the fifth largest in the world. Consisting of organized and unorganized sectors, India retail industry is one of the fastest growing industries in India, especially over the last few years. The retail industry in India was mostly un-organized, however with the change of tastes and preferences of the consumers, the industry is getting more popular these days and getting organized as well. With growing market demand, the industry is expected to grow at a pace of 28-33% annually. The India retail industry is expected to grow from 350 billion rupees in 2009-05 to 1090 billion rupees by the year 2016.
Consequently, the most important object to learn is that external factors, coupled with the internal environment factors have a decisive impact on the functioning of the organization. All factors are closely twisted and affect each other. The manager should be able to analyze all these factors together and without losing any of the mind and make the right