Management Team of Bianchi - Case Study Example

PEST analysis of UK market for Bicycle Business Introduction Bianchi is an Italian company which specialises in the manufacturing of bicycles. It designs, develops and produces cycles for people of all ages (Bianchi. 2014). The company was functioning well until recently. However, the recent financial problems have caused major problems to the company. As in the case of many other European countries, Italy also faced huge financial problems recently. Italy’s economic growth has been slowed down considerably recently. The problems started to occur in Italy from 2008 onwards. Many Italian companies including Bianchi have reported decrease in sales recently. Therefore, the Management Team of Bianchi likes to know how cycle sales can be improved in overseas market. They heard that the UK market is good for cycle sales. Even though UK is a European country, it is different from Italy in terms of culture, politics, economy, technology and social systems. Therefore, Bianchi wanted to know the business climate in UK as much as possible before entering this country for doing business. I am working for an international management consultancy firm based in London. I sent a project to Bianchi to help the management team to make this decision. In my opinion, a good way to analyse the situation is to prepare a PEST analysis about the UK market. However, the managers in Bianchi do not know what a PEST analysis is! In this paper I explain what PEST analysis is all about to the managers in Bianchi. Moreover, I will make recommendations to them about the strategies necessary to conquer UK’s cycle market based on the PEST analysis being conducted. What is PEST analysis? PEST analysis is usually conducted to know the external environment of an organization. Many internal and external factors may affect the business of a modern organization. Globalization has caused many changes in the business world. It is necessary for an organization to watch the changes in the market constantly to adjust its business strategies. The changes in the external market can affect an organization in many ways. “All outside factors that may affect an organization make up the external environment” (Cliff Notes, 2014). Politics, economics, customers, suppliers, competitors, employees and employee unions, demographics, environment, legal frame works and social systems are some of the external factors that can affect a business. It is important for business groups to analyse the external business environment properly in order to develop suitable business strategies. For example, an Italian company trying to invest in China should know more about Chinese politics, economics, and culture in order to make suitable changes in its business strategies. It should be noted that China is a communist country whereas Italy is a democratic country. Same way, it is necessary for an Italian company like Bianchi to know the trends in UK market before developing strategies for UK market. PEST analysis helps Bianchi to know the UK market very well before its entry to UK market. Even though Italy and UK are two of the major democratic countries in the Europe, the political systems in these two countries are not the same. For example, political parties operating in these two countries may have different views and ideologies. The laws related to tax policies, and consumer laws could be different (PEST analysis, 2014) in Italy and Britain. Moreover, the foreign policies and trade policies of Italy and UK could be different. It is necessary for Bianchi to learn more about all these things before making a decision to invest in the UK. Economy is another important factor in the PEST analysis. Companies always like to invest in rich countries. No company will invest in poor countries. For example, companies all over the world are currently investing heavily in countries such as China and India. China and India are developing faster than any other countries in the world now. “Economical factors including the inflation rate, exchange rate, interest rate, and employment/ unemployment rate (PEST analysis, 2014) can cause significant influence upon business prospects. Bianchi should learn more about the economic growth prospects of Britain before taking a decision to enter British market. Social factors such as language, culture, and religion can also affect the business (PEST analysis, 2014). Doing business in the mother country and in a foreign country is entirely different. While doing business in a foreign country, a company should consider the culture of that country seriously. Italy and UK are culturally similar countries. However, there are many differences. For example, the national languages in these countries are different. English is the national language of Britain. Italian is the national language of Italy. It is necessary for Bianchi to consider all these things seriously before taking a decision to enter the UK market. Technologically, UK is believed to be a superior country compared to Italy. In other words, UK technologies are better than that of Italy. Therefore, Bianchi may get more opportunities in British market. Findings of PEST analysis of UK market for Bicycle Business UK governmental policies towards cycling are highly favorable. “UK government wants more people to cycle to work. Government insists that the employers should promote cycling in the workplace. It provides advice on cycle safety and security – 2 often cited barriers to cycling – and highlights cycle safety tips, training, good locking practice and bike registration (GOV.UK, 2013). Perhaps no other governments in the Europe are giving as much encouragement as that given by the British government for cyclists. The government promotes cycling as a measure to avoid obesity and overweight related health problems. It should not be forgotten that cycling is a good physical exercise that helps people to burn out the extra calories they consume. To encourage cycling in the UK, “the Government has introduced a range of cycle-friendly tax incentives for employers and employees”(Millward, 2012). Local governments in Manchester, Leeds, Birmingham, Newcastle, Bristol, Cambridge, Oxford and Norwich are also contributing heavily for the development of cycling in the UK. Apart from these cities, “a number of English cities and national parks are to share a £94m cash injection to promote cycling” (Cycling gets £94m push in England, 2013). In short, political situations in the UK are good for cycle business. Therefore, Bianchi need not worry too much about it. Economic growth in the UK is not good at the moment. UK’s economic growth is less compared to that in many other European countries. Because of the slow economic growth UK is facing many problems. According to Inman (2009) “the unemployment in UK may cross more than 3 million in near future itself. Moreover, the people in the UK are struggling because of the price increase for essential goods. The following graph gives a picture about the UK consumer spending habits before and after recession. (Williams, 2008) It is evident from the above graph that British customers have reduced their spending considerably in the recent past. The recent financial problems in the country forced them to reduce their spending on unnecessary goods. However, British people are not ready to reduce their spending on cycle purchases. Cycle sales in the country have increased over the last ten years. The following illustration provides a rough idea about the cycle sales in the UK in recent years. (CTC, 2014) From the above graph, it is evident that cycle sales in the UK have been increased gradually over the last 10 year period. In 2008, the sales have been decreased a bit which is understandable. It should not be forgotten that 2008 was the beginning year of the recent financial problems. That is why cycle sales have been decreased in 2008. At the same time, the sales started increase thereafter. Even though British people have reduced their expenditure considerably in recent years, it is evident from the above illustration that they have not reduced their expenditure significantly on cycle purchase. According to a study conducted by CTC (2014); 43% of the UK population owns or has access to a bicycle; around 8% of the population (3 million people) cycle 3 times a week or more and 34% of the population (20 million people) use cycles once a year or more. From the above statistics, it is evident that a substantial portion of the UK population is interested in cycling. In other words, social situations in the UK are highly favourable for cycle companies such as Bianchi. The government of UK is keen on improving the conditions of the roads for the safe travelling of cyclists. The government has introduced many technical changes in the roads to prevent cycling accidents. Cycle proofing is an innovative technology introduced by the UK government recently to reduce road accidents related to cycling. As part of this program, local authorities in the UK should design roads as per the needs of the cyclists. Moreover, the government is ready to provide enough training to cyclists about how to ride their cycles safely on British roads (Department of transport, 2013). David Cameron has recently announced a £77m of public money for the innovation of the roads in the UK to suit the needs of the cyclists (Siddique and Walter, 2013). The construction of modern roads or advanced roads with the help of advanced technologies would encourage more people in the UK towards cycling. In other words, technological advancements in the UK would definitely help cycle companies such as Bianchi. Conclusions The popularity of cycling is growing in most of the countries at the moment. Statistics clearly revealed that the interests of the UK people in cycling are growing day by day. Therefore, it is easy to conclude that this might be a good time for Bianchi to push more business in the UK. UK government is doing everything possible to encourage cycling in the country. The government is constructing advanced roads and providing tax incentives to cyclists in the UK. Moreover, the demand for cycles is growing day by day in the UK despite of the unfavourable economic climate. Even though the UK people have reduced their expenditure on many items because of the ongoing recession, they were not ready to reduce their expenditure on cycle purchases. In other words, cycling is considered as an essential activity not only by the government but also by the public because of its ability to help the people in keeping their health in good condition. A substantial portion of the UK population is struggling because of obesity and overweight. They found a new alternative in cycling, to reduce their overweight. In short, the political, economic, social and technological factors in the UK are highly favourable for an Italian company like Bianchi. Bianchi can definitely consider expanding their business to UK, without a second thought. References Allen, C. 2012. Tax incentives. [Online] Available at: http://www.ctc.org.uk/article/campaigns-guide/tax-incentives [Accessed 26 November 2014] Bianchi. 2014. Dama Bianca. [Online] Available at: http://www.bianchi.com/It/Home/Home.aspx [Accessed 26 November 2014] Cycling gets £94m push in England. BBC News 12 August 2013. [Online] Available at: http://www.bbc.com/news/uk-23657010 [Accessed 26 November 2014] Cliff Notes, 2014. The External Environment. [Online] Available at: http://www.cliffsnotes.com/more-subjects/principles-of-management/managerial-environments/the-external-environment [Accessed 26 November 2014] CTC, 2014. CTC Cycling statistics. . [Online] Available at: http://www.ctc.org.uk/resources/ctc-cycling-statistics [Accessed 26 November 2014] Department of transport, 2013. Briefing on the Governments ambition for cycling. [Online] Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/229473/briefing-governments-ambition-cycling.pdf [Accessed 26 November 2014] GOV.UK, 2013. Improving local transport. [Online] Available at: https://www.gov.uk/government/policies/improving-local-transport/supporting-pages/encouraging-people-to-cycle [Accessed 26 November 2014] Inman P. 2009. Unemployment will soar above 3 million in 2009, say chambers of Commerce, The Guardian. January 1, 2009. Millward, D. 2012. Biggest investment in cycling announced by Government. The telegraph. 28 November 2012. PEST analysis, 2014. What Is PEST Analysis and Why it’s Useful. [Online] Available at: http://pestleanalysis.com/what-is-pest-analysis/ [Accessed 26 November 2014] Siddique H and Walter, P. 2013. Cycling groups welcome announcement of £77m government fund. The Guardian. Monday 12 August 2013 Williams T. 2008, Scenarios highlight risk of UK recession, Economics Weekly , July 1, 2008. Read More