The SWOT and the PESTLE Analysis of Morrison Plc - Essay Example

The SWOT and the PESTLE Analysis of Morrison Plc Abstract The report purpose is to evaluate the current strategic marketing of Morrison. For this purpose, the SWOT and the PESTLE analysis have been carried out. The results reflect that more than 500 stores of Morrison is its strength and weak discount policy has been the biggest weakness for the company. However, expanding the network of new stores is a unique opportunity for Morrison and the current discount policy and other incentives from competitors to the retail customers are the biggest threat for the company. In the PESTLE analysis, tax imbalance puts unfavourable effect on Morrison’s performance. Inflation offers similar challenges. Socially, Morrison has signed ethical audit agreement and technologically it has replaced manual system with machines. Legally, it may face litigation cost whereas environmentally it has received an award for reducing carbon footprint. Table of Contents Content Page Introduction 4 Background 4 SWOT Analysis 4 Strengths 5 Weaknesses 6 Opportunities 6 Threats 7 The PESTLE Analysis 8 Political Factors 8 Economic Factors 8 Social Factors 9 Technological Factors 10 Legal Factors 10 Environmental Factors 10 Conclusion and Recommendations 11 References 13 Introduction Organisations face numerous internal and external threats. For assessing and understanding the type and level of their impact on their financial performance, different macro analysis tools are used including the SWOT and the PESTLE analysis. The SWOT analysis is mostly used for assessing both internal and external capabilities and challenges in which strengths and weaknesses evaluate the internal capabilities whereas the opportunities and threats are used for investigating the external factors which directly or indirectly affect financial and operational performance of organisations. Similarly, the PESTLE analysis is a typical external environment tool which is fundamentally used to highlight those factors which have capability to affect the organisations. in this regard, it is important to point out that the PESTLE analysis reflects only those factors which are beyond the control of organisations and they are only required to adjust their strategic marketing for avoiding or gaining advantage from the effects of external factors. In this regard, Morrison has different internal strengths and weaknesses and there are some threats along with opportunities for the organisations. In the following parts of this report, first Morrison’s background is provided in which some basic information for the company has been given. It is followed by the SWOT analysis in which Morrison’s existing competence level has been evaluated. Subsequently, before the conclusion and recommendations part, the PESTLE analysis has been carried out. Company background: Wm Morrison Plc In 1899, William Morrison opened a stall in Bradford (Company History, 2014). Subsequently, a small town-centre shop was opened in the year 1958; and first supermarket was inaugurated in 1961 in which fresh meat, green grocery and other daily food items were provided to customers (Company History, 2014). In 1967 and 1971, Morrison became a public company and opened a new Head office in Bradford respectively (Company History, 2014). In 2001, Morrison joined FTSE 100 and in June 2005, it acquired and expanded abattoir in Turriff (Company History, 2014). The SWOT Analysis SWOT stands for strengths, weaknesses, opportunities and threats (Lussiner, 2009). Each has its own types and effects on the internal and external factors related to an organisation. However, both strengths and weaknesses are a part of internal analysis in which the analysis highlights the internal factors which can be strengths or weaknesses for the organisation. On the other hand, opportunities and threats are the external measures useful for highlighting such factors which have both aspects for the organisation. And it also provides an opportunity to collect a systematic information about the environment as well (Oldroyd, 2003). And this tool also conducts a detailed internal and external analysis of an organisation (Ferrell and Hartline, 2012). Strengths Strength plays a very important role for any organisation. A distinctive competence is a unique strength retained by organisations (Griffin, 2014). Similarly, Stapleton and Thomas (1998) identify strength as any resource, skill or specific capability relating to the competition reflects an organisation’s strength. For example, a technology company may have advanced and most up to date technological application which is rare in the entire industry and only this technology company has unique and only rights to use that application for fulfilling the expectations of the customers and clients. This unique access to the advanced technological application can be termed as strength for the organisation because it is providing competitive edge to the organisation in which the competitors have no choice but to experience the rising sales and performance of the company. Morrison has more than 500 stores in the United Kingdom (About Us, 2014). This network of stores across the United Kingdom gives a competitive edge to Morrison through which it can access to a wide range of customers and meet their expectations as well. Keeping in view the existing level of competition in the UK retail market, it is highly essential for Morrison to have vast network of convenience stores and this strategic presence is highly significant as this network will directly put positive effect on the strategic marketing and sales as well. In addition to that, Morrison is the fourth biggest supermarket (Armitstead and Ruddick, 2013). In other words, Morrison has a considerable market share in the United Kingdom which again provides a strong support to its competitive edge as well. Weaknesses Organisations also face certain internal weaknesses. In this regard, Henry (2011) defines weaknesses are those areas where the organisation remains at a comparative disadvantage. And they are part of the organisation’s internal structure (Morrill, 2007). Based on this statement, it can be highlighted that this comparative disadvantage will not allow organisation to utilise its possible and probable potential for attracting and retaining performance. For example, it is an established fact that an interrupted supply chain is a key strategic tool for almost all organisations. In this situation, if an organisation faces interruptions and has been unable to receive steady supply of raw material, it can be clearly uttered that the interrupted supply chain has remained a comparative disadvantage. Thereby, it can be termed as weakness for the organisation. Morrison has a weak discount marketing strategy (Godbold, 2014). Based on this assessment, it can be argued that the management of Morrison has failed to realise the level of industry competition and the strategies of competitors for gaining more market share by providing an attractive discounts and other incentives to their customers. Although Morrison has a large number of customers, yet it has not focused on them. Within this context, it can also be argued that Morrison has not made a significant investment for retaining its customer base through using technological means. Consequently, the competitors are using this weakness by providing more attractive options and offers to their customers. Opportunities Opportunities are external to organisations. Sahaf (2008) describes opportunity represents a situation which is provided by the external environment and if this opportunity is availed it would considerably improve the position of the organisation within its industry. And the opportunities are those important external factors that have capability to substantially influence on the competitive position of the organisations (Bamford and West, 2010). In this regard, it is important to understand the concept of competitive position; which has been elaborated as a competitive capability through which organisations attain most of the sale. In other words, it can be highlighted that the competitive position is primarily supported by the factors, such as market share, customer loyalty, sales growth rate, profit growth rate and technological advancement. Morrison has chances to expand its network of convenience stores across the Whole of England, Scotland and Wales (About Us, 2014). Physically, Morrison intends to increase its presence through expanding its number of stores throughout the UK; this expansion will enable it to access to new customers and these customers will directly increase the sales if they continue purchasing the services. However, despite the fact that the company is facing stiff competition from the local retail competitors, it has no plans for making the international investment particularly in the developing countries, such as China. Consequently, it has not been able to increase its sales performance and it has been experiencing a decline in its profit for last many years. Threats Threats are those external factors that are unfavourable for the organisation existing within a particular industry (Davis, 2008; Kotler et al., 2010). Also, Lee and Lee (2006) highlight that the threats are those factors that pose serious threat to the existing position of the organisation and they are such conditions which may severely affect the future existence and competitive edge as well. In this regard, it can be highlighted that threats can appear from different directions and channels. For example, a beer selling company has been asked to pay more taxes through the enactment of new legislation. Consequently, the effect of this legislation will directly affect the sales performance and the company will experience a drastic decrease in its sales and consequently this will reduce its overall financial and operational performance which may lead to the closure of the company. Morrison faces the threat from the discount policy of competitors and effect of the migration to online business (Peston, 2014). And this threat is mainly posed by Morrison’s competitors (Lidl and Aldi) (Neville, 2014). From the macro environment analysis, Morison has not been taking into account the marketing policies of its competitors in the retail industry and due to this strategy, Morrison faces the serious threat from the German competitors (Lidl and Aldi) (Neville, 2014). If the current strategic marketing policy is pursued for the future, then there are chances that the organisation would lose customers particularly loyal customers and this would further decrease its sales in future as well. The PESTLE Analysis The PESTLE stands for political, economic, social, technological, legal and environmental factors. This marketing tool is mainly used for assessing the external environment in which all these factors and their influence on the organisation is evaluated. Each factor has its own and distinctive ramifications for the organisation. Thereby, they either provide benefit or increase the level of competition among the competitors working in a particular industry. Political Factors Political factors considerably influence on organisations. Through introducing and implementing new legislation relating to corporate organisations, the companies will not have any choice but to follow and satisfy the conditions and requirements attached with the enforcement of new legislation. Morrison contends that the tax imbalance between street retailers and the Internet retailers is not logical and it creates problems for the companies like Morrison (Armitstead and Ruddick, 2013). This reflects that Morrison feels the negative effects of the current tax policy operational in the United Kingdom and due to this existing policy, Morrison faces the tax payment and recording issues and it may find it hard to appropriately account for the dual effect of the current fiscal policy of the government. Based on this information, it can also be argued that Morrison is either paying double taxes in the online and offline retail operations. Economic Factors Inflation, rising cost of living, unemployment and certain economic indicators also heavily affect the financial and operational performance of organisations. Inflation has been defined as a rise in a particular basket of food items and this phenomenon is growing in many countries; consequently, it has severely affected the purchasing power and living standard of customers. If the customers do not have a reasonable purchasing power, there are more chances that they would not be able to purchase basic human needs and other purchases as well. At the same time, the effect of unemployment also cause decrease in the buying trend of customers and consequently, the organisations would not be able to experience rise in their sales performance. Morrison faces sales decline as the customers avoid spending due to the falling inflation (Thompson, 2010; The Telegraph, 2009). This effect has serious ramifications for the overall sales and profit growth of Morrison. Within this context, it is relevant to highlight that the effect of falling inflation has been so severe that Morrison’s sales did not remain the same but has experienced decrease. If this trend is continued, then there are chances that a further sales decline for Morrison would be unavoidable. As a result, this interaction between economic factors and sales of Morrison has validated the fact that external factors largely affect overall financial and marketing performance of the organisations. Social Factors Culture, customers, traditions and other social events have direct effect on the sales performance of organisations. For example, the Christmas Eve and the Easter festival are religious activities which are celebrated across the globe and people are more inclined to buy as special discounts and other incentives are given by organisations for increasing the sales. Recently, it has been seen that the substantial rise of sales particularly on the eve of Christmas has already validated the effect of such events on the sales. Morrison has signed an agreement of ethical audit allowing the employees to talk about their employment issues such as poor pay and working conditions as well (McDonald, 2008). Consequently, this agreement would enable the affected employees to express their concerns about the working conditions and pay related issues within Morrison. Subsequently, the management will be in a position to consider the reality and practical effect of the existing workplace conditions and employment offers given to the employees. Considering the type and effect of this agreement on overall image of the company, Morrison has enabled its employees by allowing the implementation of social audit. Technological Factors Electronic commerce, up-to-date gadgets and other technological applications have considerably affected the business performance and sales as well. Through the use of social media and other applications, the organisations have tried to increase the number of customers and subsequently they have attempted to increase their sale as well. Replacing manual cash counting with machines will cut 700 jobs at Morrison (BBC News, 2013). This technological change has both dimensions. From the perspective of Morrison, its payroll cost will decrease. Hence, profit will be improved. On the other hand, this change will increase unemployment because more than 700 employees will be terminated as their services will be no more required to the company. Legal Factors Compliance with the regulatory requirements has been a part of legal factor. For example, the organisations are required to follow certain rules pertaining to consumer law, antitrust law and employment law. For organisations, it is highly important to comply with the requirements of the relevant law because any violation may bring a severe penalty for the organisation. The payroll data of Morrison’s employee has been stolen and criminal investigation has been underway (Simpson, 2014; Thomas, 2014). This poses a serious threat to the information integrity within Morrison. In other words, it is possible that some employee may lodge complaint against Morrison as the employees’ private and confidential information has been stolen and this stolen information can be used against them. As a result, the possibility of litigation and legal cost for Morrison cannot be ruled out and that will further increase cost for the company. Environmental Factors Global warming is a growing reality and problem for everyone living on this planet. Many do not disagree with the notion that the industries have mainly contributed to the growing global warming as they release dangerous gases which are harmful for the ozone layer. Since such gases have been released for a longer period of time and there has been no strong environmental legislation, the threat of global warming has become so real that even some countries are deciding to impose new carbon tax on the companies producing carbon on a substantial scale. ‘Anti-greenwash’ accolade for diminishing carbon footprint has been implemented (Morrison, 2014). This environmental responsibility clearly proves that Morrison is a responsible company as it has been awarded due to its current environmental policy. And there are various benefits of this policy. As the environmental awareness is spreading across the world including in the United Kingdom, the customers have also attached significance to this issue by purchasing food items only from those organisation who have environment-friendly policy and they contribute lesser quantity of carbon to the environment. Conclusion and Recommendations Both the SWOT and the PESTLE analysis are strategic marketing models to assess the organisations. In this regard, the SWOT analysis of Morrison reflects that more than 500 stores only in the United Kingdom remains the strength for the company as this chain of stores enables the company to access to the customers and generate sales. However, weak investment and discount strategy has been identified as the biggest weakness of the company and due to this marketing strategy, it has not been able to compete effectively in the market and only the competitors are availing benefit from this strategy by providing attractive discounts and incentives to the retail customers. However, expanding the network of convenience stores offers an opportunity to Morrison to access new customers and subsequently increase its sales and this expansion is largely possible and seen in the United Kingdom. On the other hand, currently, Lidl and Aldi are posing a biggest threat to Morrison because they provide attractive discount to the retail customers in the United Kingdom. Tax imbalance remains the biggest political threat for Morrison as this fiscal policy creates problem for the company. On the economic side, diminishing inflation has severely affected the sales of Morrison and consequently the sale is decreasing for Morrison. Socially, Morrison has signed the agreement of ethical audit in which it has allowed the employees to express their concerns for the workplace conditions and pay-related issues. On the technology side, Morrison has introduced machines in place of manual cash counting and this mechanisation strategy has reduced the payroll cost which will reduce the overall cost and increase profit for the company. Legally, the possibility of litigation cost may occur because the payroll data has been stolen in which confidential employees information has also been taken away. Environmentally, Morrison has been very responsible as it has obtained ‘Anti-greenwash’ accolade for reducing carbon footprint. As a result, such customers who prefer environment-friendly companies may divert toward Morrison. Recommendations Discount Policy Morrison should introduce and offer more attractive incentives and bulk discounts to the customers. Currently, the competitors have already given a tough time to Morrison as they are adding more incentives to their discount policy. Keeping in view the competitors’ policy, Morrison must retain the customers and this retention is only possible through offering the attractive discounts. Digitalisation Morrison must use different channels for increasing its sale. For this purpose, it can use the social media websites and other online channels available on the land of the Internet. By increasing its virtual presence, Morrison will be in a position to experience a rise in its sales and profit. Revamping Strategic Marketing Morrison needs to revisit its strategic marketing. If the sale is falling along with profits and the number of customers is also going down, it means the current strategic marketing policy is not delivering the expected results. As a result, it is necessary to revamp its strategic marketing strategy by looking new markets and offering attractive incentives to current customers. References About us, (2014), Store Expansion-Morrison, Available: http://www.morrisons-corporate.com/About-us/Our-Stores/Store-Expansion/ Accessed: 2 June, 2014 Armitstead, L, & Ruddick, G (2013), Morrisons’ boss in call for online sales tax, The Telegraph, Available: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10179094/Morrisons-boss-in-call-for-online-sales-tax.html, Accessed: 2 June, 2014 Bamford, CE, West, GP (2010), Strategic Management: Value Creation, Sustainability, and Performance, Ohio: South-Western Cengage BBC News, (2013), Hundreds of Morrisons jobs at risk as new technology introduced, BBC News, Available: http://www.bbc.com/news/uk-england-leeds-22093818 Accessed: 2 June, 2014 Company History, (2014), Morrison Company History, Available: http://www.morrisons-corporate.com/About-us/Company-history/ Accessed: 2 June, 2014 Davis, JR (2008), Does Environmental Scanning by Systems Integration Firms Improve Their Business Development Performance?, Miami: Proquest Ferrell, OC, & Hartline, MD, (2012), Marketing Strategy, 6th edn., Ohio: Cengage Learning Godbold, K (2014), Wm Morrison Supermarkets plc’s Greatest Weaknesses, Available: https://uk.finance.yahoo.com/news/wm-morrison-supermarkets-plc-greatest-131534976.html Accessed: 2 June, 2014 Griffin, RW (2014), Fundamentals of Management, 7th edn, Ohio: South-Western Henry, AE (2011), Understanding Strategic Management, 2nd edn, Oxford: Oxford University Press. Kotler, P, Berger, R, & Bickhoff, N (2010), The Quintessence of Strategic Management: What You Really Need to Know to Survive in Business, New York: Springer Lee, CF, Lee, AC (Eds.) (2006), Encyclopaedia of Finance, New York: Springer Lussier, RN (2009), Management Fundamentals: Concepts, Applications, Skill Development, 4th edn, Ohio: South-Western McDonald, H (2008), Supermarket signs up to ethical audit, The Guardian, Available: http://www.theguardian.com/world/2008/sep/07/fairtrade.morrisons Accessed: 2 June 2014 Morrill, RL (2007), Strategic Leadership: Integrating Strategy and Leadership in Colleges and Universities, Connecticut: Praeger Publisher Morrison, (2014), Morrisons sets standard for Carbon Footprint Award, Available: http://www.morrisons-corporate.com/media-centre/Corporate-news/Morrisons-sets-standard-for-carbon-footprint-award/, Accessed: 2 June, 2014 Neville, S (2014), Lidl and Aldi pose biggest supermarket threat ever, The Independent, Available: http://www.independent.co.uk/news/business/news/morrisons-launches-price-war-after-second-profit-warning-9188818.html Accessed: 2 June, 2014 Oldroyd, M (2003), Marketing Environment 2003-2004, Oxford: Butterworth-Heinemann Peston, R(2014), Morrisons and the threat to mainstream supermarkets, BBC News Business, Available: http://www.bbc.com/news/business-26558110 Accessed: 2 June 2014 Sahaf, MA (2008), Strategic Marketing: Making Decisions for Strategic Advantage, New Delhi: Prentice-Hall. Simpson, E (2014), Wm Morrison supermarket suffers payroll data theft, BBC New Business, Available: http://www.bbc.com/news/business-26574161 Accessed: 2 June, 2014 Stapleton, J, & Thomas, M (1998), How to Prepare a Marketing Plan: A Guide to Reaching the Consumer Market, Hampshire: Gower Publishing The Telegraph, (2009), Morrisons’ sales growth slows as food inflation falls in third quarter, The Telegraph, Available: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/6603598/Morrisons-sales-growth-slows-as-food-inflation-falls-in-third-quarter.html Accessed: 2 June, 2014 Thomas, N (2014), Morrisons employee arrested over payroll data theft, The Telegraph, Available: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10702889/Morrisons-employee-arrested-over-payroll-data-theft.html, Accessed: 2 June, 2014 Thompson, J (2010), Morrisons blames falling inflation as sales falter, The Independent, Available: http://www.independent.co.uk/news/business/news/morrisons-blames-falling-inflation-as-sales-falter-1965527.html Accessed: 2 June, 2014 Read More