STEEPLE Analysis for the UK Supermarket Sector - Case Study Example

STEEPLE ANALYSIS FOR THE UK SUPER MARKET SECTOR INTRODUCTION STEEPLE analysis is an important strategic management tool (Hitt, Ireland, & Hoskisson, 2012), and this tool is available to the businesses enabling them to assess the future trends in the environment , which are to impact business operations in future (Kew & Stredwick, 2005). This report aims to assess the STEEPLE factors affecting the UK super market. The size of the UK grocery market reported an increase of 3.7% as compared to 2012 and reached the total size of £169.7 billion in 2013 (IGD, 2013). The sales generated from the various super store formats are as follows: This huge size of the industry makes it critical for the organisations operating in the industry to explore the potential impact that it receives from the environment (Henry, 2008). STEEPLE ANALYSIS Each of the STEEPLE factors is assessed; followed by drawing its impact on the operations of the super market organisations as follows: SOCIO-CULTURAL: Socio-cultural is one of the most important external factors that influence the firms in the industry (Thompson & Martin, 2010; David, 2013). The population in UK is expected to increase to 67.2 million by the 2020 at the rate of 4.9% from 2010 (ONS, 2011a). 56% is natural growth (higher births than death and 44% constitutes of migrants (ONS, 2011a). The demographics will be as follows: (ONS, 2011b) The rising ethnic groups due to migration and aging population require retailers to adapt to the specific tastes. For example, the aging population enjoys considering themselves as young and their share in shopping is expected to increase from £1 in every £5 to £1 in every £4 in next two decades. The younger generation is increasing at 12% rate which in turn is increasing the challenge to manage the needs of the baby boomers (KPMG, 2013). Alongside, increase in the old age dependency will affect the customer’s purchase patterns as shown below: (Deloitte, 2011) The overall spending pattern is projected to be as follows: (Which, 2013) Retailers use shopping trends of the customers mainly from the loyalty cards and make customized offer to related customers. A customer who only spends little on the particular store’s online portal will be attracted by giving discounts of even £50 to increase online purchase trend (Ferguson, 2013). TECHNOLOGICAL: Technological factors also influence the firms (Hussey, 2012; Keller, Parameswaran, & Jacob, 2011). Smart phones and other devices offering mobility have significantly influenced consumer buying behaviour (Wilson & Gilligan, 2012). It is important to notice that despite overwhelming impact, over reliance on technology will result in alienating customers (usually old aged) who are unable to quickly embrace technological development (KPMG, 2013). The technological development and research in UK has seen a changing trend where government’s direct investment is reducing while support of the government to business for the research and development is increasing and highest contribution is made by the pharmaceuticals sector (NAO, 2013). For example, online food sales of supermarket has reported growth of 126% and it is expected to double in coming five years; this in turn offer growth potential for online super stores (Poulter, 2013). Additionally, adoption of RFID (Radio Frequency Identification Device) for end to end tracking of ingredients has also become a challenge for the retail sectors (PWC, 2013). Waterless washing machine and rechargeable kids system will be used by system to recharge their gadgets are some of the projected technological developments for 2030 (Which, 2013). Online sales have increased pressure on the super stores as the customers are available with the various options just be changing window and have increased the power of customers. ECONOMIC Economic factor is another important external factor that influences the firms operating in the society (David, 2007). Economic condition also impacts the buying behaviour of the consumers (Schiffman, and Kanuk, 2010; Peter, and Olson, 2008). Downturn and revival efforts are seeing its impact on super stores both positively and negatively. Tesco, Asda and Sainsbury are not only the leading players in UK but also in entire Europe (Rigby, 2013). Leading stores are enjoy more around 76% of the total market share of UK which makes the market oligopoly and gives immense economic powers to the players due to bulk orders (Winterman, 2013; BBC, 2012).This has also led to the industry towards consolidation and increased competitive pressures. UK has incrementally increased import of goods, as compared to services and exports, over years as shown below: (BIS, 2012) This in turn has negatively affected the current account balance as follows: (BIS, 2012) According to BBC (2014a), CPI fell by 0.1% while the retail price index is comparatively higher. The growth of GDP in the fourth quarter is slightly less than third quarter; however, is in positive zone as shown below: (BBC, 2014b) This positive growth has contributed in reducing the unemployment rate that fell to 7.1% as additional 167,000 people got the job (BBC, 2014c). On the other hand, overall 59 businesses of super store in UK employee 966,500 people; thus making considerable share in generating employment (IBIS, 2013). This increase in the number of people getting jobs increases the purchasing power. The role of inflation is also dominant as the price inflation reported to be 1.1% as compared to the 0.7% of the growth in volumes (SAS, 2013).The rising cost of living will take greater share of customers’ income spent on the necessary products which in turn benefit the necessary products business more as compared to leisure business: (Which, 2013) Hence, the economic growth will be more driven by the necessary and value providing products. For example, the growth of clothing range of supermarket reported rise twice the size of overall clothing as shown below: (Gye, 2013) Hence, the economic variables considerably impact the superstores sectors as they bring changes in consumer spending pattern. ENVIRONMENTAL: In the past few years, environment factors have also started to influence the firms in the industry (Kachru, 2009). Various organisations such as Ethical Consumer provide rating to the super market while considering the various factors with one of them being environmental aspects. Supermarkets in order to endorse their attraction to increasingly aware customers are be more influenced by the measures that lead to saving environment (Ethical Consumer, n.d.). Also the government has required the super stores to reduce the impact on environment generating from packaging, food waste and other plastic bags. Department for Environment Food and Rural Affairs states that government has set an objective to recover waste by 2020 up to 70% mainly by recycling. Similarly WRAP (acronym) program is another pressure on controlling environment pollution and waste resulting from the super store business (ATS, 2011). POLITICAL: Different public interest organisations are making efforts to safeguard the environment and consumer, which is raising political pressures. Political pressure and stability influence the environment (Cadle, Paul, & Turner, 2010). For example, Vertical Relationships in the Food Supply Chain: Principles of Good Practice developed in 2011 and other such public interest forums are being developed for the controlling the exploitation in the organisation (Consumers International, 2012). All such policy measures pose pressure on the super stores to align and abide by the regulations which often end up charging business with their profit. LEGAL The rising consolidation of the industry has led the retailer to develop investment contracts with the private equity houses (PWC, 2013). The constant development in IFRS for providing more concrete information to the stakeholders is also increasing pressure on the retailers on the whole as well as super markets such as Sarbanes-Oxley played critical role (PWC, 2013). Importantly, the ability and the availability of the super markets even to offer legal services is taken as a serious threat to the legal procession such as example of Tesco Law (Chambers Student, n.d.). Hence, such overarching of the super stores in other areas may any time face retaliation from such industries. ETHICAL Organisations have started to make sure that they operate ethically in the society (Weiss, 2009). According to the report only four major supermarkets (with 76% market share) serves the buyer to more than 7000 supplies while serving the consumer market of more than 25 million household. This has affected the power of the suppliers who are being faced with many abuses in the name of different fees. Hence, across the value chain of super stores, the income distribution is as follows: (Consumers International, 2012) Alongside, supermarkets enjoy expanded control over the market as depicted in the image below: (Consumers International, 2012) Overall systems of the super markets are considered to have negative impact mainly on employees as presented in the given below flow of activities: (Consumers International, 2012) Furthermore, the pressure is on the rise for reducing the food wastage (Smithers, 2013), ethical and due contribution in global supply chain etc. (Ethical Consumer, n.d.). Companies like Tesco and others now publish their sustainability report to provide complete information towards the ethical responsibilities and measures taken for it. Hence, pressures to control strategies that are negatively impacting the people in the society as well as supply chain will continue to rise as the markets explore unethical measures for exploiting higher profits. Ethical considerations towards employees are given immense importance. The UK government has clearly defined policy for the ethical attention towards the employees in recruitment and during the employment (Gov.UK, 2013).  EVALUATION OF THE ROLE OF STEEPLE FACTORS The assessment of the market implies that superstores will be under constant evolution in their product and service mix in order to successfully serve the customers. The greater technological development has enabled businesses to constantly review the changing trends and patterns of customers under the socio-cultural impact. The change in tastes and preferences is also pressured by the economic conditions of the economy. Economic also pressures the business to divert towards the efficiency measures taking more machines on board than human labour. Extensive use of technology for the economic efficiencies has created environmental concerns and superstores are now required to provide complete sustainability reports defining set and achieved objectives for the betterment of environment. Hence, all factors have an interlinked impact while the most important factors to affect are socio-culture and economic factors that constantly forces UK retailers to shuffle the product and service mix in order to retain customers profitably. IMPACT OF STEEPLE FACTORS ON HRM STRATEGY HRM function of the organisation is based on collecting the most suitable set of employees for the organisation. As a matter of fact, the role of HRM is considerably important as it provides the organization with the capital asset to achieve long term success. All the micro and macro factors require HRM to adapt to the changing needs of the organization. IMPACT OF DEMOGRAPHICS Owing to the fact that organisations are required to either adapt to the changing macros environmental factors or change the external environmental according to their preferences, demographics also requires organisation to adapt accordingly. Hence, retailers develop HRM programs accordingly. The impact of the aging and immigrants is high in the retail sector, according to the report from the British Retail Consortium. The paper presented by the consortium highlighted three main problems related to the socio-cultural factor. The challenges affect from recruitment to the compensation package required by diverse pool of employees. Another challenge is faced in terms of skill set of the available population. For example, aged population has longer experience but limited qualification. Similarly, the diverse set of migrants with different backgrounds of culture and ethnicity affect the ability of the retailer to exploit the full potential of the recruit. The third challenge faced by the retailers due to the changing demographics mix is related to the flexibility factors. All these impact their work lifestyles. For instance, the impact of religious events such as Eid for Muslims, Dewali for Hindus and Easter for Christian requires flexibilities. Hence, the role of diversity has increased has increased not only in the customers’ set but also in the human resource section. All these pressure retailer to adapt the human resources plan accordingly. Tesco which is a leading player in the UK supermarket sectors gives considerable attention to the diversity factors. Currently, there is a greater emphasis to bring women to the leadership role. Since 2007, Tesco noted 70% increase in the number of female directors to 42. Also Tesco has 19% female in the board and plans to increase it by 25% to 2015 (Tesco, 2013a). Tesco also measures its strength in HRM as being great employer. For the purpose, Tesco constantly assess the percentage of colleagues enrolled in developing programs as well as increasing diversity among employees base (Tesco, 2013b). Also the Option Management Development Program is 50 year old program which provides employees tailor made program suiting to the need of the employees for developing leadership and other skills (Tesco, 2009; O’Reily, 2009).Additionally, changing external environment which is affecting its customer base, Tesco has announced that it will establish an external advisory panel for the assessment of performance in duly serving the customers, business and society (Tesco, 2013d) . Also the local and group compliance committees are developed for the regular reporting in order to ensure the ethical dealing with the suppliers and operations (Tesco, 2013d) . Different aspects of ethical considerations are to affect the human resource management of the retails sectors of the organisations. For instance, Arnold et al. (2009) and Broadbridge (2009) reported for the high pressure environment affecting the life-balances of the human resources to have an impact. Esbjerg, Buck, & Grunert (2010) studied that high turnover in the retail sector in due the employees’ consideration with respect to low career and compensation development. Lynch (2005) established that in retail sector of UK, the part time workers are discriminated in comparison to the full time workers. Hence, ethical considerations in the HRM departments of retail sector of UK remain a constant challenge. Therefore, HRM department of retails sectors remain under constant challenge of providing best personnel resource while at price which is favourable for the organisation while at the same time is considered ethical viable by the employees. Leading store Tesco has also given attention to provide health working environment to its people. HRM department of Tesco has developed Human Rights Policy for the safeguards of the human rights of employees. The policy is developed in complete consideration of the UN’s Universal Declaration of Human Rights and the International Labour Organisation Core Conventions (Tesco, 2007). This mandates the employees within the umbrella of the Tesco care to be cared for their rights as well as promoting their welfare. Also the ethical conduct is also mandated across the value chain with the program Ethical Trading Initiative (ETI). Hence, the ethical viability of the human resources connections has been developed for effective dealing and managing the human resources directly and indirectly in connection with Tesco (Tesco, 2007). For the ethical In addition to this broader initiative for the ethical support of the human rights of the employees, Tesco also takes measures for the supporting the causes for its employees by offering them greater career growth opportunities (Tesco, 2013c). Tesco in order to attract the young people and best talent to its organisation initiated the program entitled Debut Along with the objective of attracting young people to benefit the business, the program encouraged students to work for Tesco during their education tenure. The Tesco supported the development of students being their employees by arranging for their transfer from home store to local stores in the states or closed by location of university. The programme also offers career and development with online courses, financial management recommendations and goes on to an inch with the career advice to employees. Within a year of program initiation, number enrolments in program rose to 21,071 members (BRC, n.d.). Hence, HRM of Tesco is to play an effective role in bringing to the company best potential human resources while being constraint by macro environmental factors as well as organisational requirement. CONCLUSION STEEPLE analysis shed considerable light on the constraints build by the external environmental factors that have an important on every business. Studied in context of the retails sector of UK, the evidences collected reported wide array of pressures from the components of STEEPLE. Micro and Macros environment collectively affect such as increased economic pressures increases the competitiveness of the customers bucks etc. Successful organisations are those who proactively assess the future market trends that will evolve as a result of external environment. The HRM function also requires responding to the changing micro and macros environment to retain and get best performing employees. Also the ethically viable environment is also important for the big superstores like Tesco in order to remain successful. List of References Arnold, T., Flaherty, K. E., Voss, K. E., & Mowen, J. C. (2009). 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