Business Environment of Bianchi Company - Case Study Example

Running head: business environment 25th November Introduction In order to be successful in foreign countries, it is imperative for companies to appropriately analyse the environment of the new market in order to provide quality brands that meet the needs of the foreign consumers. In order for Bianchi Company to make it brands including Roadbikes, Mountainbikes (MTB), City Trekking bikes and a’Junior’ range for kids to be successful in the UK market, there is need to identify the political, environment, social, and technology factors that affect their businesses. This is done by adopting the PEST model. This paper aims at undertaking a PEST analysis, which will help Bianchi Company to make its decision of entering the UK market. Section 1 External environment External environment refers to the conditions and factors that surround an organization which influence its choices and activities as well as to determine the risks and opportunities available. There are two notable parts of an external environment. The first one is directly interactive. This part of environment has instant and first hand impact on the performance of an organization. A good example is that of new competitor entering the market. The second part is the indirectly interactive. This type of environment has a distant impact on the organization. For example if a new legislation is put in place, employers need some time to update their facilities. Other examples of external environment include competitors, government, creditors, suppliers, and debtors among others. Business should regularly analyse their external environment due to various factors. First it determines the success of the business. This is done by showing how effective the enterprises have effectively addressed the available opportunities. Secondly, it helps in the selection of the best alternative. Thirdly, it creates the measure for competitive advantage in the industry. PEST’ analysis PEST analysis refers to the framework of macro-environmental factors that are applied in scanning of the environment during the strategic management. The key aspects that are involved in the analysis are political, economic, social and technological factors. With the current changes in the political as well as technology sectors, there is need for Bianchi to undertake the PEST analysis not only during its entry to the U K market but on a day to day basis. PEST analysis makes a company such as Bianchi to identify the implication of the external environment on its operations. For example, the company will be in a position to identify how changes in the social behaviours of consumers will affect the demand and the activities of Bianchi in the UK market (Hochbaum et al, 2011). In addition, by regularly using the PEST analysis, the company will be in a position to come up with sustainable strategies to face off the threats that may arise during its activities. PEST analysis also makes firm to identify the opportunities and the risks that are available. In this way, such a firm will establish the collect resources to utilize the opportunity. Explanation of the 4 dimensions in the PEST analysis Political dimension Political factors involve the extent to which the government intervenes in the economy. During the performance of their activities, firms must be in line with the requirements of the government (Kerin, 2012). Some of the notable political factors include labor law, trade restrictions, tax policies, tariffs, and environmental law among others. When a change is done of the political factors, a business must adjust itself in order to accommodate the change. For example, if a trade restriction is established by a government, a firm must look for other trading partners in order to avoid reduction of sales and profit. Economic dimension Economic dimension refers to the interest rates, inflation, economic growth, and exchange rates among other aspects. Economic factors have a significant implication on the way firms operate. For example, changes in exchange rate affects the prices of imported goods as well as the cost of exporting goods. Similarly, during inflation, prices increases resulting to low national demand. This may result to lowering of prices by a company as a way of reducing the stock but this will lead to further losses. Social dimension Social factors refers to the cultural aspects that includes population growth rate, career altitudes, health consciousness, eating and clothing lifestyles, age distribution, and emphasis on safety. With the current trends in social factors, the demand for firm’s products and how companies operate are affected. For instance, an aging population may imply that there is less opportunities to get a willing workforce thus resulting to an increase in the cost of labor. Technological dimension Technological factors refer to the aspects such as Research and Development RD, technology incentives, automation as well as rate of technological change (Panis et al 2010). One of the major effects of technological factors is that they result to innovation leading to quality brands. Similarly, they can act as barriers to entry in addition to influencing outsourcing decisions. Section 2 PEST analysis of UK market for Bicycle Business Bianchi expansion in the UK market will be significantly determined with the 4 dimensions as outlined by the PEST analysis. Thus, proper analysis of the market based on the 4 factors should be done as indicated in this section Political factors UK, whose legislature includes a Parliament, House of Lords and House of Commons, has introduced various policies that will support the cycle commuting which has been identified not only as a way to fit exercises into daily routines but also in easing congestion as well as conserving the environment. The government has now introduced a cycle mileage. According to the incentive, workers who use their own cycle for work will benefit from a 20% per mile, tax free. In case the employers pay less than this, employees can still claim tax relief. This indicates that through these initiatives, Bianchi brands will enjoy a ready demand which is a benefit to the company. Since most of the employees will take this as a motivation, it will positively impact on the Bianchi opportunities in the UK market. The company will use the cycling mileage legislation to increase its sales in the market thus improving its profits. Economic factors According to The Resolution Foundation, household incomes will increase in 2015. This was after the income earners have waited for 5 years due to the increased rate of inflation (Phillip, 2014). However, the foundation indicates that the living standard will be 3.5% in 2018 which will be lower than in 2008. One of the major economic issues that affected the performance of the UK economy was the exclusion of tax credits and benefits for the wage earners. However, the UK GDP is forecasted to rise from 2.4% in 2013 to 2.6% in 2014. The turnaround in business investment from -3.7% in 2013 to 6.6% in 2014 is a major issue that will make positive impact on the UK GDP. Improvement of economy in 2015 implies that employment opportunities will increase, resulting to higher household income and higher customer purchasing power leading to an increased demand for Bianchi brands. Improved economy will thus act as an opportunity for Bianchi that will see its operation grow in the UK market. Social factors With the increased household income, the living standards of most of the UK residents will improve. Most of the consumers will aim at getting modern bikes that Bianchi Company will introduce in the market. This will ultimately lead to an increase in the consumer’s demand (Kotler and Philip, 2013). Another notable social aspect that will positively impact on Bianchi products is the increase in the UK population. By 2028, UK population is deemed to increase to over 70 million. This will further increase to 73 million in 2037. Similarly, the number of older people is expected to contribute to much larger proportion of the population in UK. The number of individuals with more than 80 years will likely to reach 6.1 million in 2037 from 3 million in 2012. Despite the high demand that Bianchi will enjoy as the UK population increase in the future, the increment in the older population may affect the company operations. This is based on the fact that apart from reduction in demand by the older consumers, older workers may not be willing to work in the company resulting to high cost of labor an aspect that may negatively affect Bianchi profitability level. Technological factors Being one the developed region in the world, UK has adopted modern technology in its production processes. Within the bicycle market, 5 innovations will positively change the sector resulting to a strong positive consumer-brand relationship. These includes production of a card board bicycle, that is healthy, cheap and convenient, capital bike share program, laser bike lane, folding bike helmet, and production of bike co-ops in order to educate communities about safe cycling (Alison, 2012). Improved cycling technology will have a positive impact on Bianchi activities in UK. This will be based on the improved demand for the new bike brands that Bianchi will provide based on the improved cycle technology in UK. Section 3 Conclusion Politically, UK has a stable government that ensures proper regulations are implemented in order to attract investors. As discussed in the political dimension of PEST analysis, the government introduction of the cycling cycle will be supported by majority of the employees. I recommend that Bianchi to use this opportunity to push for more businesses in UK in order to capture this ready demand before the competitors take charge. Additionally, few months remains for the UK economy to experience an improvement. This implies that Bianchi should by this time contemplate on how to enter the market before the year end. This will provide it with an opportunity to establish outlets throughout the country prior to the economic recovery. Based on the improved economy, UK residents will experience changes in their social lives mostly due to the improved household incomes. In their efforts to change the living styles, majority of the consumers will choose to use modern bikes that offer them new experience. Thus, I recommend Bianchi to invest in research and development so as to provide quality brands that will be demanded by the UK potential consumers in 2015 once the economy improves. As indicated on the social dimension of the PEST analysis, UK population will significantly expand in future. This is an opportunity that Bianchi should utilize and enter the UK market whose demand for bikes will upwardly surge in the future. Technological improvements in UK cannot be overlooked. I recommend Bianchi to utilize the innovation that UK cycling sector has initiated which is in line with the consumer’s needs and government policies. In this way, the company will attain a competitive edge and be in a position to face off the competitors. In order to be competitive in the UK market, I suggest that Bianchi undertakes extensive marketing strategies to face off the established competitors. In a country where bicycling is highly valued, the competition among the producers of the bikes is stiff (Better by Bike, 2014). Bianchi should therefore establish avenues of promoting its brads for example by sponsoring international cycling races, cultural UK events, and roadside shows among others. In addition, the company should advertise its brands through social media such as face book, YouTube and twitter prior to its entry in UK market (Flew, 2008). Taking into consideration that Bianchi uses Euro during its local transactions, the company should hire economic analysts who will analyse the implication of the UK currency on the performance of the Bianchi activities. This will also ensure that the company does not suffer losses due to the changes in the exchange rates. The company will also need to allocate more financial resources to research and development. In this way, it will produce brands that are competitive internationally. The company should also seek an opportunity to merge with one its established competitors so as to effectively penetrate the expansive UK market. Notable companies that Bianchi can merge with includes Booties, Derby Cycle, A-bike, British eagle, and Boardman Bikes among others. References Alison, F.2012. Bike Technology: 5 Innovations That Could Change Bicycling Forever. Available from http://www.takepart.com/photos/bicycle-innovations-could-change-world/bike-co-ops. Better by Bike. 2014. UKs cycle industry worth £2.9bn. Available from http://www.betterbybike.info/uks-cycle-industry-worth-%C2%A329bn Flew, T. 2008.New Media: an introduction. Melbourne: Oxford University Press. Hochbaum, S et al. 2011. Rating Customers According to Their Promptness to Adopt New Products, Operations Research 59(5): 171-183. Kerin, A. 2012. Marketing: The Core. New York: McGraw-Hill Ryerson. Kotler, A and Philip, G. 2013. Principles of Marketing. New York: Pearson education. Panis et al. 2010. Exposure to particulate matter in traffic: A comparison of cyclists and car passengers. Atmospheric Environment, Volume 44, Issue 19, June 2010, Pages 2263-2270. Phillip, I. 2014. Disposable incomes will not rise for average family until 2015. The Guardian, http://www.theguardian.com/business/2014/feb/11/disposable-incomes-average-family-resolution-foundation Read More