Industry and External Environment - Research Paper Example

? Industry and External Environment Analysis Table of Contents ment of Problem 3 Introduction 4 Methodology 5 Quantitative and Qualitative Research Method 5 Rationalization of Research Design and Data Collection Process 6 Data Use and Analysis 7 PEST Analysis 8 Porter’s Five Force analysis and Profitability of UK Retail Industry 9 Data Analysis 11 Conclusion and Recommendation 12 References 14 Appendix: Questions asked during Interview 16 Statement of Problem Global business environment is constantly changing due to the volatile nature of several external environmental factors. It is true that intensive competition within the industry is forcing the organizations within the industry to undertake several unique and aggressive competitive strategies. Recent financial crisis and global economic recession have several effects both on the buying power of consumers and business practices of the organizations within a particular industry. Competitive pricing strategy is an example of the effect of intensive industry rivalry. UK retail industry has been selected for this assignment. UK retail industry is quite complex and saturated. The major players within this industry are trying to back or support the purchasing power of people in order to achieve potential competitive advantages and significant market share. Hike in fuel price, troubled housing and mortgage market influenced the retail industry in UK to change the overall business strategy. The organizations within the industry are trying to provide discounted budget and value-added commodities to the people. Several interesting aspects behind the topic motivated to conduct a research work (Ellis-Chadwick, Doherty and Hart, 2002, pp.9-11). This assignment will reveal some interesting facts that will enhance the knowledge about global business environment and impact of external environment factors on it. The topic and the nature of the study encouraged to implement macro environmental theory and model to understand the impact. However, possible outcome of this research will help to draw some valuable recommendations for future business practices in order to overcome the present external issues. Introduction Global business environment has become highly competitive due to the presence of several leading organizations within a specific industry. The leading organizations within the similar industry are trying to capitalize on the potential competitive advantages that have been developed due to several favorable external environment factors. It is known to all that globalization, implementation of advanced technology, favorable economic and political business environment are the major growth drivers of several global industries. The assignment will try to reveal the impact of several external environment factors on the business performance of a specific industry. It will discuss about the current profitability situation of the industry and the major factors behind this profitability. Moreover, the assignment will try to discuss about the impact of these factors in future business perspective of that particular industry. UK retail industry has been selected for this assignment. Several leading organizations, such as Tesco, ASDA, Morrison’s and Sainsbury’s are competing with each other within this potential growing industry. These organizations are implementing several competitive strategies in order to secure their existing market share within the UK retail industry (Lewis and Thomas, 1990, p.22). It is true that several industrial and external environmental factors are controlling the business growth of this industry. Political situation, economic growth, technological revolution and social trend are deciding the growth of current UK retail industry. Several theories have been applied in order to meet the objective of the study. The study will analyze the impact of these factors on the business performance of Tesco. In addition, the study will design the future effect of these factors on the organization. Methodology A proper and effective research is needed in order to identify the basic principles of several positive incidents. During the research of impact of external environment factors on the profitability of UK retail industry, several valuable information and data are effectively collected, recorded, utilized, evaluated and analyzed in a systematic matter in order to apprehend and foresee the thinking, attitude and behavior of people towards the topic. Basically, there are two different types of research methods, such as qualitative and quantitative research method. These two methods usually encompass various research approaches in order to determine the behavior and nature of the collected data. Quantitative and Qualitative Research Method Generally, research method can be classified in a dichotomy between quantitative and qualitative research method. Quantitative research method generally focuses on the evaluation and analysis of several collected numerical data. On the other hand, qualitative research method deals with the motivation, meanings, emotions, feelings, attitudes, behaviors and several internal quotients of human beings. Qualitative research method is generally applied in the research work based on the exploratory nature of the study. However, this specific research topic and associated works are exploratory in nature. Exploratory research helps to reveal a problem that has not been defined clearly. It helps to determine the best possible research design, methods of data collection and subject selection. Based on the exploratory nature of this study, qualitative research method has been implemented in this study (Patton, 2005, p.13). The research work will gather data based on the in-depth knowledge and feelings of several industry related individuals. They can provide valuable information and data according the needs of the study. Rationalization of Research Design and Data Collection Process Several research methods can be applied based on the behavior and nature of the study. This report will determine the impact of external environment factors on the profitability of UK retail industry. The behavior, attitude and inner feelings of industry related individuals will be investigated in order to achieve successful research outcome. There are near about 35 different qualitative research approaches in three key research orientations, such as theory building approach, interpretative approach and language oriented orientation. Theory building orientation generally evaluates the links between various important social phenomena. In interpretative research orientation, detailed interpretation of various important social phenomena provides centrally focused research outcomes. On the other hand, language oriented approach helps to evaluate the language and meaning of the words within the research work. However, based on the interpretative orientation, interview process has been undertaken as major data collection process. Qualitative research method is considered as the interaction between an interviewer and interviewee. The interviewer will investigate each and every answer of the interviewee in order to attain effective and successful research outcome. Collecting large number data through primary data collection method can be complicated as it is very much difficult to control and analyze the data within a quick period of time. Therefore, interview process has been selected as it is more controllable and flexible comparing to any other primary data collection process. Interview structure can be categorized into three parts, such as fully structured, semi-structured and unstructured interview process. Semi-structured interview process has been selected for the purpose of data collection. This format will improve the sensitive and emphatic facets of this interview process. In addition, the researcher can effectively summarize the unexpected and interesting answers gathered during the specific interview process. However, this semi-structured interview process can enrich the whole data collection and interview process (Wengraf, 2001, p.27). Marketing manager of Tesco, ASDA, Sainsbury and Morrison in London has been selected for the interview process. The interview questions have been provided in appendix. On the other hand, secondary data collection process also has been selected for this study. This data collection process will help the researcher to gather effective and valuable data within a quick period of time. Online journals, periodic journals, company website of the retail chain organization within the UK retail industry are major secondary data sources for this research. Primary data collection process has been implemented in order to gather real time data from industry related people. On the other hand, objective of the implementation of secondary data collection process is to gather large amount of relevant data and information within a quick period of time. It will help to draw an effective and successful research outcome within the specific time frame. Data Use and Analysis It has been mentioned earlier that marketing manager of the leading retail chain firms within UK retail industry have been selected for the interview process. This part of the report will conduct a PEST analysis of UK retail industry with respect to Tesco Plc. It is one of the leading retail chains in UK. This analysis will help the readers to understand the effect of several external environment factors on the profitability of the organization. Moreover, porters’ five force analysis has been selected in this study in order to know the impact of several external competitive factors on the profitability of UK retail industry. PEST Analysis Political UK is politically stable country. UK retail industry is one of the major economic growth drivers of UK. Therefore, the government is trying to motivate the organizations within this industry to achieve significant growth rate. On the other hand, organization like Tesco is following all the legal regulations that are developed by government. Tesco is known as one of the leading employer in UK. Therefore, the government is trying to support the organization to overcome several political issues within the country. Economical Recent financial crisis and global economic recession reduced the purchasing power of people. Low disposable income and limited purchasing power are major consequences of economic slowdown. This economic situation forced Tesco to implement competitive pricing strategy. Social Bulk purchasing process has become one of the significant trends of the people of UK. The organizations prefer large retail chains as their destination due to several factors. People can shop various required and necessary things within a quick period of time with low price comparing to other small stores. Therefore, Tesco has implemented product differentiation strategy to meet the demand of customers. Technology Technological revolution helped the organization to implement several key strategies, such as online order placing, purchasing, billing and delivery process for the target customers (Harris, 2001, p.2). The implementation of advanced technology in business process helped the organization to achieve potential competitive advantages within the UK retail industry. Porter’s Five Force analysis and Profitability of UK Retail Industry This external environmental analytical tool will help to determine the impact of external factors on the profitability of the UK retail industry. Buyer’s Power UK retail industry is highly competitive due to presence of several leading retail chains. All of the organizations within the industry are trying to provide customer centric products due to intense competition within the industry (Burton, Knights, Leyshon, and Alferoff, 2004, p.4). Moreover, the organizations within UK retail industry are trying to attract price sensitive customers through competitive pricing strategy in order to support the low purchasing power of customers. However, high foot fall in the outlets, superior sales growth rate and high bargaining power of customers have increased the profitability of the UK retail industry. The organizations within the industry are constantly providing differentiated products with reasonable price. This strategy encouraged the customers to purchase the products. Supplier’s Power Suppliers have superior impact on this industry due to less competition and limited presence of giant retail chains. All of the organizations within the UK retail industry have their own existing suppliers (Hall, 2000, pp.10-12). The organizations set the price level of the products after reduction of all operating cost including supplier cost. This strategy helps them to implement reasonable and cost based pricing strategy. Therefore, it can be stated that the threat of suppliers’ bargaining power is moderate. Availability of limited suppliers slightly affected the profitability of the UK retail industry. There is no other option for the organizations within the UK retail industry to switch on other suppliers due to limited presence. Threat of New Entrants Threat of new entrants is limited for the UK retail industry’s organizations due to high legal entry barriers and entry cost. This favorable aspect helps the organizations within the industry to increase their profitability. The organizations already have developed a significant client base through effective pricing and product strategy (Dolan and Humphrey, 2000, p.17). Therefore, it is difficult for the new comers to take away potential clients and market share. Threat of Substitute Threat of substitute is quite low as the customers can find and purchase all kind of required products from these giant retail chains. Low threat of substitute increased the profitability of the industry. It is true that, organizations within UK retail industry provides all the goods and services according to the customers’ need and market demand (Greenley and Foxall, 1997, p.9). Therefore, high customer preference and brand loyalty are the major reasons behind the profitability of the industry. Industry Rivalry UK retail industry is highly competitive as the organizations within the industry are trying to achieve significant market growth rate through the implementation of several competitive strategies. This intense competition has increased the growth rate of the industry. Intense rivalry within the UK retail industry, high sales growth rate and large potential customer base increased the profitability of the industry (Piercy and Morgan, 1991, p.13). Data Analysis All the respondents replied that favorable social trend is the major growth driver of the UK retail industry as the customers can avail variety of products within a one place. It reduces the consumption time of customers. Moreover, low competitive pricing strategy motivates the people to visit the stores. In terms of second interview question, marketing managers of Tesco, ASDA and Morrison’s believe that high supplier cost is the major concern. On the other hand, manager of Sainsbury believes that the role of government and economic instability of the country are the major reasons behind the recent affected profitability. All of the respondents believe that social trends, competition within the industry and economic, political and technological aspects are influencing the profitability of the industry. The above mentioned issues are reducing the purchasing activity of the consumers. Price of a product is major concern in recent economic scenario. Therefore, high supplier cost, low disposable income of middle class people and limited purchasing power reduced is affecting the profitability of the firm. In terms of last interview question, all the respondents shared that the organizations within the industry need to understand the changes in these factors. In addition, the organization should track the current demand and reposition their strategies accordingly to survive in this competitive market place. Conclusion and Recommendation Global business environment has become highly complex and competitive due to the presence of several potential competitors and continuous change in external environmental factors. UK retail industry has been discussed in this study. It is clear from above analysis that the industry achieved significant profitability due to favorable social trends, technological environment and political stability of country. However, recent financial crisis and several government policies are affecting the profitability of the organizations within the industry. Now-a-days, people are avoiding the consumption high priced products due to the economic slowdown of country and limited purchasing power of people. These issues have forced the industry to implement low pricing strategy to support the purchasing power of people. At the end of the day, this strategy is affecting the profitability of the industry. Following recommendation plans will help to overcome the issue and maintain the significant profitability of the industry in near future. First of all the organizations within the industry should control the operating cost. They need to invent their own supply chain and distribution network to reduce the suppliers cost. This strategy will justify organizations’ economic pricing strategy within UK retail industry. Moreover, it will help to increase the profitability of the industry in future. Stakeholders of all the organizations within the industry should organize a conference regarding this matter. This general meeting can provide some effective way outs for the organizations. The organizations should introduce manufacturing plants in low cost countries where the low cost resources are easily available (Vida and Fairhurst, 1998, p.12). References Greenley, G., and Foxall, G., 1997. Multiple stakeholder orientation in UK companies and the implications for company performance. Journal of management Studies, 12(2), p.9. Hall, J., 2000. Environmental Supply Chain Dynamics. Journal of Cleaner Production, 17(3), pp. 10-12. Piercy, N., and Morgan, N., 1991. Internal Marketing. Long Range Planning, 31(2), p.13. Vida, I., and Fairhurst, A., 1998. International Expansion of Retail Firms. Journal of Retailing and Consumer Services, 17(4), p.12. Lewis, P., and Thomas, H., 1990. The linkage between strategy, strategic groups, and performance in the UK retail grocery industry. Strategic Management Journal, 9(1), p.22. Dolan, C., and Humphrey, J., 2000. Governance and Trade in Fresh vegetables. Journal of Development Studies, 12(4), p.17. Burton, D., Knights, D., Leyshon, A., and Alferoff, C., 2004. Making a Market. Journal of Brand Management, 11(3), p.4. Harris, L., 2001. The IT Productivity. Work and Employment, 8(1), p.2. Ellis-Chadwick, F., Doherty, N., and Hart, C., 2002. Signs of Change? Journal of Retailing and consumer service, 21(5), pp.9-11. Wengraf, T., 2001. Qualitative Research Interviewing. International Journal of Research Methodology, 12(2), p. 27. Patton, M., 2005. Qualitative Research. Journal of Marketing Research, 8(3), p.13. Appendix: Questions asked during Interview Name: Age: Organization: Location: 1. What is the major growth driver of UK retail Industry? 2. What are the impacts of external environment factors on the profitability of the firms within the UK retail industry? 3. What are the external issues that are associated with this industry? 4. Ate these issues limiting the purchasing activities of the consumers? 5. Is it necessary for the firms to implement new strategies to overcome the negative effects of changed external factors on industry profitability? Read More