Environmental Analysis - Supermarket Industry

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Business Environment

Business Environment

Environmental Analysis on the Supermarket Retailing Industry

1. Introduction:

     An understanding of the business market structure and the ability to analyse the business environment are essential tools for any organisation. Given that firms rarely operate in a stable environment it is vital that the owners and managers continually monitor and assess the performance of competition in the external environment but most importantly their own organisation. The firm should aim to develop their mission and objectives to aid in the process of an environmental analysis to achieve the formulation of strategy, planning and operations. The purpose of this report is to identify the principle and influential elements when conducting an environmental analysis; the scenario involves being employed as a business analyst who advises clients on emerging business opportunities and threats. The analysis will be conveyed on the supermarket retailing industry and will comment on the attractiveness of business expansion in that sector.

2. Operational Environment:

     The status of the supermarkets is that of a dynamic one as it requires consideration of the future, not just the past. The retailers will have to adjust and adapt to the changes in the market, not only to ensure survival but to take hold of any rising challenges or opportunities within the sector. The majority of the supermarkets will face a simple situation. The criteria which supports this derives from the financial position and market position.  The top supermarkets in the economy possess a financial clout that enables them to drive their purchasing costs down and when buying products in mass. The greater proportion of firms exhibit diversified products which enables them to achieve a more reformed future than a complex one. Tesco, for example, along with many other leading supermarkets offer an extensive scope of diversified services ranging from loans, insurance and mobile phone tariffs.  3. PESTEL (PEST) Analysis:

     The structure and functioning of an organisation is not only determined by internal factors but is also strongly influenced by a range of external environmental factors. In order for any supermarket to maintain survival and growth within the market they must respond to any opportunities, challenges or risks. The most common method of analyzing the environment is to identify and explain the key external factors that are likely to affect the performance of a business. This is known as a PESTEL Analysis. It stands for Political, Economic, Socio-Cultural, Technological, Environmental and Legal influences. In 2005, Mullins dictated that, “it is necessary to consider how a firm can achieve an internal and external balance and how they are able to adapt to changes in their environment and the demands place upon them (pg 126).” Establishing the ‘balance’ between the factors will help any supermarket in the long run, hence the analysis being so significant. Appendix 1 presents the main issues that might be considered when undertaking a PESTEL analysis.

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3.1 Political Factors:

      Any environmental or government issues need to be addressed. Factors including monopolies legislation or environmental protection laws are important. The legislation stands that any of the supermarkets are not allowed to build on ‘brown belt’ land, as this is prohibited to protect the environment. Regarding this, thought also has to be given to where to new buildings are situated as noise, pollution, residential areas etc have to be considered. Foreign trade laws could affect the retailers in the near future as import and export laws could produce problems regarding purchasing stock and services internationally. Consideration ...

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