PESTEL Model of Sainsbury - Case Study Example

Introduction The analysis of the environment in which an organisation is operating is very important to marketing managers as it allows them to focuson key strategic issues based on the notion that an effective strategy fully utilises the strengths and opportunities of a business and strives to minimise the weaknesses and threats. Thus according to Strydom (2004), the success of every organisation is based on its ability to scan the environment in which it is operating so as to ensure viability. It is against this backdrop that this report seeks to discuss the strengths and weaknesses of using and applying the PESTLE model using appropriate industry models. This report would be based on the case study of Sainsbury which is a retail supermarket based in UK. Case analysis using PESTEL model Information obtained online posits to the effect that Sainsbury is UK’s third largest grocery chain supermarket with a market share of about 16% and with about 823 stores. However, it is said that this chain supermarket lost its number one spot in the UK grocery market to Tesco around 1995 and has since been trying by all means necessary to claw back market share. Whilst other efforts have been failing, it is until recently when they decided to embark on marketing communications strategy meant to appeal to the customers once more again. This report would attempt therefore to analyse the various factors in the macro environment that have been affecting the organisations operations. It should always be borne in mind that each organisation does not exist in a vacuum where it would enjoy the monopoly of service provision but there would also be other actors who can pose a challenge to it and there would also be other inevitable forces as going to be discussed below using the PESTEL model. Basically, one viable method which can be used to analyse the environment of an organisation is PESTEL analysis which tries to give an in-depth understanding of the operations of an organisation, vis-a-vis the external factors that may affect its operations. Basically, PESTEL stands for factors which may affect the operations of business such as political, economic, social, technological, environmental and legal. The table below illustrates these factors. Political factors -The government policy of UK affects all facets of business since all they would be expected to comply with the stipulated regulations. Bad policies can cause a decline in business. Economic Factors -Global economic recession has negatively impacted on various facets of the economy. The organisation is not spared from this crisis which may negatively impact on its performance since many clients will have little disposable income to spend on shopping. -Competition from other actors such as Tesco and ASDA is a challenge to Sainsbury. Social factors -The need to take into consideration different cultural values of people from different backgrounds is very essential as a way of ensuring satisfaction among all the clients. -Need to be socially responsible by giving to the needy and under privileged. Technological factors -The computerised system through the use of specially designed websites allows a two way communication between the organisation and the clients in a bid to improve the services offered. - The advent of satellite broadcasting has made it possible to reach large audiences from a diverse geographical background. Environmental factors -Climatic change in the form of global warming has become topical such that all the organisations are revising their policies towards the reduction of greenhouse gas emissions. Legal factors -All organisations operate within a legal framework which ought to guide their operations. Every business is affected in one way or the other by changes that take place everyday in the environment and each organisation should always be on the lookout for these inevitable changes in order to entrench its position as a force to reckon with in the market. Strategically, the organisation should be better positioned such that it would be able to enjoy competitive advantage over other competitors which may exist in the industry. Inorder to ensure unperturbed operation, Sainsbury ought to maintain its stance with regards to respecting the political framework of the UK. Violation of some of the policies drawn by the politicians may be costly to the organisation as it would risk to be discredited by the supposed customers. The economic factors which may affect the operations of Sainsbury include recession and competition. Global economic recession has negatively impacted on various facets of the economy. Sainsbury is not spared from this crisis which may negatively impact on its performance since many clients will have little disposable income to spend on shopping.According to an IMF research document published in 2008, “the world economy is decelerating quickly, buffeted by an extraordinary financial shock and by still-high energy and commodity prices and many advanced economies are close to or moving into recession.” The global economic recession has seen many economies world wide slumping resulting in loss of jobs in some instances as well as a reduction in disposable income. Instead of growing, the economies across the world are instead declining and these have negative impacts across the spectrum. Generally, the majority of people have little disposable as the crisis tightens. Another equally important economic factor to consider is the aspect of competition. As noted from the case study, Sainsbury is operating in an environment which is characterised by stiff competition from rival competitors such as Tesco, ASDA and Morrison’s. It is always important for an organisation to have information about the operations of the other competitors so as to gain a competitive advantage over them. Socially, it is every company’s obligation to know that it is operating within a certain social set up with its own norms and values that play a vital role in maintaining the fabric of that society. Information obtained online posits to the effect that Sainsbury’s business is built on a commitment to quality and services that date back to 1869 and its desire to give customers the “best butter in the world” at prices they could afford. The organisation’s operations should incorporate the social need of the members of the community it would be operating in. Their activities should be designed in such a way that the organisation would be able to incorporate all the stakeholder needs in a transparent manner and these include the community, customers, shareholders as well as the environment. This can also be achieved through embarking on social responsibility programmes. One good example of social responsibility includes the occasion when the website profiled Sainsbury’s Food Donation scheme which was primarily concerned with distributing food that is past its sell-by date but not its use-by date, to charities such as Crisis Fareshare and the Salvation Army. Indeed this is an act of being socially responsible where an organisation gives back especially to the less privileged members of the community in which it operates. Through engaging the community in some of its operations, the organisation stands better chances of building mutual understanding with its customers which in turn yields trust. It can thus be noted that the organisation is able to communicate and manage its relationships with its key stakeholders who include: colleagues, consumers, suppliers, environment, community and shareholders. It aims to retain talented staff as well as maintaining good reputation through doing good things for the community at large. Indeed, like any other organisation, Sainsbury operates in a digital world that is characterised by digital technology that characterises the new dispensation in the dissemination of information about a particular brand or product to targeted end users. The computerised system through the use of specially designed websites allows a two way communication between the organisation and the clients in a bid to improve the services offered and to communicate relevant information about a particular brand. The internet for instance is the most cost effective medium which can positively impact on marketing communication of the above organisation since it would allow the customers to give their feedback or perceptions about a product. It is relatively cheaper and easier to reach a large number of targeted end users of the product and the internet is instantaneous. One big advantage of internet use is that it allows a two way communication process to take place between the marketer and the consumer. The advent of satellite broadcasting has also brought about sweeping changes to the way businesses operate in the contemporary period. With satellite broadcasting it would be easier to reach a large number of targeted consumers across the board and advertisements can be flighted using satellite broadcasting to reach them. Environmental factors include things like the weather and climatic change which can impact on many industries. As a result of various climatic changes characterising the contemporary period such as global warming, the need for greater environmental awareness has since become a topical issue especially during the contemporary period where various firms are increasingly taking it into consideration. In the case of Sainsbury, the company has more recently in 1996 started formal reporting on its environmental impact. Thus, in response to greater demand for socially responsible operations from its stakeholders, Sainsbury embarked on publishing its information online in 2001. Legally, all the organisations operating in the UK are bound to adhere to certain legal provisions enshrined in the constitution of the country as a way of safeguarding the interests of the UK citizens and the whole country at large. Laws are promulgated as a measure to safeguard the interests of the country’s citizens hence the need for Sainsbury too to abide by these laws. Conclusion Over and above, it can be noted that, PESTEL stands for the macro environmental factors that can affect the operations of any given company hence the need for various organisations to analyse these factors. As noted in the case of Sainsbury, the organisation does not operate in isolation hence the need to have information about the environment it would be operating in. References Bates B. et al (2005), Business Management, fresh perspectives, Pearson SA Kotler P. (1999), Kotler on Marketing: How to create, win and dominate Markets, Free Press, London. Robinson W (1997), Strategic Management and Information Systems, 2nd Edition, Prentice Hall, UK McCarthy J.E & Perreault W.D (1990), Basic Marketing, International student Edition, 10th Edition, Irwin, Boston Strydom J. (2004), Marketing, 3rd Edition, Juta & Co Ltd, SA IMF magazine WEO, Retrieved on 12 August 2009, From:http://www.imf.org/external/pubs/ft/survey/so/2008/res100808a.htm Pestel Analysis of the macro environment, Accessed on 12.08.09, From: http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm Sainsbury case study, retrieved on 12 August 2009, from: http://www.article13.com/A13_ContentList.asp?strAction=GetPublication&PNID=1353 Sainsbury’s Marketing communication plan 2008-2009, Retrieved on 11 May 2009, from: http://www.oppapers.com/essays/Sainsburys-Marketing-Communications-Plan-2008-209/178779 Sainsbury, retrieved on 12 August 2009, from: http://www.article13.com/A13_ContentList.asp?strAction=GetPublication&PNID=1353 Read More