Bianchis External Environment Analysis of UKs Cycling Market - Example

Report on Bianchi’s External Environment Analysis of UK’s Cycling Market Name: Subject: Instructor: Institution: Date: Table of Contents Introduction 3 Section 1 3 General Information on the PESTEL Framework of Analysis 3 Political factors 4 Economic Factors 4 Social factors 5 Technological Factors 5 Section 2 5 Report Findings of PEST Analysis of UK Market for Bicycle Business 5 How PEST Analysis Could Impact Bianchi’s Business Opportunities in the UK 9 Section 3 12 Recommendations 12 Conclusion 13 References 13 Introduction This report aims to conduct a PEST analysis of the external environment in UK with respect to the bicycle business. The report shall analyze the political, economic, social and technological factors that will impact a company such as Bianchi which intends to invest in the bicycle business in the UK. The report shall further provide recommendations on what the company requires to exploit the opportunities and respond to threats posed by the external or macro-environment in the UK. Section 1 General Information on the PESTEL Framework of Analysis A PESTEL analysis refers to a tool or framework that is used by organizations to monitor and analyze the macro-environmental, or external marketing environment, factors that have an effect on a company. The results of the PESTEL analysis are often used to conduct a SWOT analysis with the main aim of identifying the organization’s weaknesses and threats, and the opportunities and threats in the marketing environment. PESTEL, stands for political, economic, social, technological, environmental, and legal factors (Hill & Jones, 2012). These macro-environmental factors or external environmental factors are further discussed below. Political factors Political factors relate to how, and to what extent, the government intervenes in an economy. It includes government policies on issues such as foreign trade policy, labor laws, trade restrictions, environmental laws, tax policy, and political stability in foreign markets. Political factors have an impact on how organizations do business. A company should be able to respond to prevailing and anticipated future legislation and align its organization’s policy accordingly (Hill & Jones, 2012). Economic Factors Economic factors significantly impact the way an organization conducts business as well as its profitability. Economic factors involve issues like interest and exchange rates, inflation and economic growth, and disposable incomes of businesses and consumers (Hill & Jones, 2012). Economic factors can be further divided into micro-economic factors and macro-economic factors. Macro-economic factors are associated with how demand is managed in the economy. Interest rates control, government spending, and taxation policy are some of the methods or mechanism used by the government to manage demand in any economy (Hill & Jones, 2012). Micro-economic factors relate to how people generally spend their incomes. These factors have a significant impact especially on business to consumer firms (Hill & Jones, 2012). Social factors These are also referred to as cultural factors. These are issues involving the attitudes and shared beliefs of the people. They include things like population growth, career attitudes, age distribution, and health consciousness. These factors are particularly interesting as they directly impact how firms understand customers, as well as what drives customers (Hill & Jones, 2012). Technological Factors The technological is distinct in the sense that it is always changing at a fast rate. Technological factors impact an organization’s management and marketing operations in three different ways. Technological changes lead to new techniques of producing goods and services, distributing goods and services, and communicating with the target market (Hill & Jones, 2012). Section 2 Report Findings of PEST Analysis of UK Market for Bicycle Business Political Factors Overall, the political stability of the UK government is okay. The UK government is actively engaged in the cycling business. Due to the government’s concerns with regard to tackling congestion, it invests considerably in the cycling business. In a bid to promote cycling in the UK, the government has formulated policy commitments and laws to encourage more people to cycle. The government also provides tax incentives that are cycle friendly. According to london.gov.uk (n.d), the mayor of London has a vision for cycling to become an integral element of the city’s transport system. The city government will thus invest heavily in setting up infrastructure that will promote the use of cycles. Policy Commitments The UK government is committed to tackling congestion and reducing pollution. In order to realize this, it is investing significantly in cycling. According to the Department for Transport (2013), the government acknowledges that cycling forms an important strand in the greater program to ensure the country’s transport system/network allows the UK to effectively compete in the global economy. It is therefore government policy to finance the cycling industry through various funds associated with sustainable travel. Such funds are engaged in activities such as developing cycling friendly infrastructure. Laws The UK government has enacted legislation to encourage more people to use bicycles. For instance, it recently introduced a variety of cycle-friendly tax incentives for employees and employers. For instance, employees who use their personal bicycle to commute to work are entitled to cycle mileage. According to Allan (2012) employees who use their personal cycles to commute to work qualify for 20p per mile, tax free. Employees who work for employers who pay less than this amount, or those do not offer any cycle mileage can claim for tax relief (Allan, 2012). The Infrastructure Bill that is sponsored by Lord Berkley and Lord Teverson is aimed at aligning cycling with the road and rail networks (Harker, 2014). Economic Factors The main economic factors to analyze in the UK market are the country’s Gross Domestic Product (GDP), inflation, unemployment, and disposable incomes. These are important factors to consider in the sense that they indicate the economic health or performance of the country. These factors are also useful indicators for analyzing consumer’s purchasing power, and the cost of doing business in a country. Gross Domestic Product The UK is the 6th largest economy worldwide. According to Trading Economics (2014), the GDP in the UK grew by 0.07% in the third quarter of 2014. The GDP growth rate has averaged 0.61% from 1955 to 2014. It is expected to average 0.9% by the end of the year. The service industry account for 75% of the country’s GDP, and transport services form a key sector of the service industry (Trading Economics, 2014). Inflation The rate of inflation in the UK slightly increased from 1.2% in September 2014, to 1.3% in October. The subsequent rise in the consumer price index moved the rate above its five-year low. On the other hand, the rate of retail price index inflation (RPI) stood at 2.3% (bbc.com, 2014). Unemployment Unemployment in the UK fell by 115,000 toward the end of September. The total for the unemployed stood at 1.96 million at the end of September, which is the first time unemployment has fallen below 2 million since 2008. Similarly, the number of individuals claiming for jobseeker’s allowance from the UK government has fallen by 20,400 in October 2014 (bbc.com, 2014). Disposable Income Although the UK treasury recently claimed that disposable incomes rose in the financial year 2013/2014, recent findings indicate that disposable incomes are not expected to rise for the average household until 2015 (Inman, 2014). Inman (2014) further notes that the Resolution Foundation established in a recent review of household incomes that they will start to increase above the rate of inflation in 2015. However, the think-tank anticipates that the living standards of average UK households in 2018 will be 3.5% lower than in 2008 (Inman, 2014). Social Factors The main social factors to analyze in the UK market include the country’s population, and healthier lifestyles, and environmental concerns. The main factors to consider under population include the population size and projected growth, and the age of the population. the main factor under healthier lifestyles relates to the idea that people in UK are becoming more conscious about their health and exercising is a major lifestyle trend in the country. Population According to the 2011 census, UK’s overall population stood at approximately 63 million people. The population is set to increase to 73 million people by the year 2037. The number above the age of 80 is set to double over the same period. This means that older people are set to constitute a larger proportion of the country’s population. However, a larger number of the population is aged between 4 years and 69 years. The average population age is currently at 40.6 years, and it is expected to increase to 42.8 years by 2037 (The Guardian, 2014). Healthier Lifestyles and Environmental Concerns More people in the UK are becoming more conscious about their health. A significant proportion of the population is increasingly concerned with regular exercise to maintain body fitness. People are also increasingly becoming concerned about the effects of their lifestyles on the environment. More people are seeking ways to reduce their carbon footprints in their daily activities. Technological Factors The major technological factors to analyze in the UK market include new ways of product and service development. The fast rate of technological evolution is geared towards enhancing the usability of the end product. Technological developments are also aimed at improving safety, comfort and performance. How PEST Analysis Could Impact Bianchi’s Business Opportunities in the UK Political Factors Political factors such as the government’s policy commitments and legislation aimed at encouraging the use of cycles in the UK present a favorable environment for Bianchi to invest in the UK. Government initiatives such as improving infrastructure to make it more cycling-friendly go a long way in driving the demand for bicycles. According to The Guardian (2014), cycling groups in the UK have welcomed the government’s pledge of £ 77 million to get more people in the UK on bikes, a scheme the government refers to as “a cycling revolution”. The city of London, under the Mayor’s leadership, has formulated a vision that seeks to make cycling an integral element of the city’s transportation network (london.gov.uk, n.d). The city seeks to achieve this by establishing a tube network for bicycles that runs parallel with major rail, underground, and bus routes. The city also plans to make streets safer for cycling and normalize cycling to make it something anyone will feel comfortable doing. These government initiatives across several parts of the country, along with other tax incentives for people who use bicycles to go to work, make the political environment in UK favorable for investing in the bicycle business. Moreover, the government’s efforts to tackle congestion and pollution by encouraging the use of bicycles instead of gasoline powered vehicles present a favorable political climate for investing in the bicycle business. Economic Factors The economic environment in the UK also presents Bianchi with significant opportunities for investing in the bicycle business. The improving economy, low rate of inflation, prospects for an increase in people’s disposable incomes, and decreasing rate of unemployment all work in favor of Bianchi’s efforts to penetrate UK’s bicycle business market. The fact that UK has the 6th largest economy worldwide is good news for Bianchi because this implies that the purchasing power of consumers is high, thus they will be able to easily afford to buy bicycles. Additionally, the fact that transport form a key sector in the service industry in UK means that investing in the sector is guaranteed to generate profits. Social Factors With regard to social factors, social indicators relating to the use of bicycles in the UK demonstrate that the social environment is ripe with opportunities for investment in the bicycle business. More individuals in the UK are using bicycles to commute to school, work, for sport, and as leisure or exercise. According to a recent survey, over 200,000 more people are using bicycles at least once every week than were in October 2011. As at 2012, more than 2 million people were cycling at least once in a week following unprecedented cycling success in the sport (britishcycling.org, 2012). These factors present immense opportunities for Bianchi to invest in the bicycle business in the UK. Additionally, the fact that more individuals in the UK are increasingly becoming aware of the benefits of cycling on the environment means that more people are willing to replace driving with cycling. Technological Factors Technological factors may negatively or positively affect Bianchi’s efforts to penetrate the bicycle business/market in the UK. The technological landscape in UK’s bicycle business is marked by rapidly changing technologies and innovations with respect to techniques of production, complementary products, and service augmentation. According to roadcyclinguk.com (n.d.), technological evolutions in bicycle manufacturing are geared towards increasing the usability of the end product, improving comfort and safety, as well as improving performance. The main challenge for Bianchi is to keep up with such technological changes and innovations. Section 3 Recommendations In light of the PEST analysis, it is recommended that Bianchi should exploit the opportunities that abound with regard to UK’s economic environment, political environment, and social environment. Bianchi should take advantage of the numerous incentives extended by the government in a bid to increase cycling in UK to invest in the country and complement the government’s efforts. Firstly, Bianchi should exploit the opportunities presented by the political environment in UK by taking advantage of government incentives and policies to promote the use of cycles all over the UK. Secondly, Bianchi should exploit the economic opportunities available in the sixth largest economy in the world. With such a large economy, UK residents have significant disposable incomes and thus they can easily afford bicycles. Additionally, the stability of the country’s economy is a good sign for Bianchi because it reduces uncertainties associated with economic shocks. Thirdly, the socio-cultural landscape in the UK is ripe for investment in the bicycle business. Bianchi should take advantage of the people’s need to lead healthier lifestyles and minimize their environmental impact by making bikes more available and affordable. Lastly, Bianchi should consider the emerging technological advancements and innovations in bicycle manufacturing in order to better meet customer needs and maintain the company’s competitiveness in the bicycle business. Conclusion In conclusion, the PEST analysis is a useful tool for monitoring and analyzing the macro-environmental, or external marketing environment, factors that will have an impact on a company. PEST analysis has revealed that the bicycle business in the UK presents numerous opportunities for Bianchi. However, the company should consider the implications of technological evolution with respect to manufacturing bicycles in order to remain relevant & competitive in the UK market. References Allan, C. (2012) “Tax Incentives-Cycle Mileage”. The national Cycling Charity. Retrieved from: Bbc.com (2014) “Economy Tracker: Inflation”. BBC News Business. Retrieved from: Bbc.com (2014) “Economy Tracker: Unemployment”. BBC News Business. Retrieved from: < http://www.bbc.com/news/10604117> Britishcycling.org (2012) “After the Gold Rush: 200,000 Rise in Regular Cyclists”. British Cycling. Retrieved from: Department for Transport (2013) Briefing on the Government’s Ambition for Cycling. London: Crown. Harker, J. (2014) “Will the House of Lords Step in to Halt Cycle Investment Decline”? BikeBiz. Retrieved from: Hill, C. & Jones, G. (2012) Strategic Management: An Integrated Approach. 10th Ed. Cengage Learning. Inman, P. (2014) “Disposable Incomes will not Rise for Average family until 2015”. The Guardian. Retrieved from: London.go.uk (n.d). “Mayor’s Vision for Cycling”. Retrieved from Roadcyclinguk.com (n.d) “Roll with it: Embracing New Bicycle Technology.” Retrieved from: Trading Economics (2014) “United Kingdom GDP Growth Rate”. Retrieved from: The Guardian (2014) “UK Population: How it will Change over the Next Few Decades”. Data Blog. Retrieved from: < http://www.theguardian.com/news/datablog/2013/nov/06/uk-population-increase-births-migration> Read More