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Environmental Analysis - Supermarket Industry

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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. ...read more.


Not all groups have the same attitudes - and this impacts how they view products and services. Demographic changes also have a major role as these can affect the number of customers a supermarket receives each day. New builds need to consider where people are living regarding motorway links, local residential areas and how accessible the store is. 3.4 Technological Factors: Advances in technology can have a major impact on business success. As well as advances in the supermarket industry, the likely impact of new technologies - the Internet, mobile phones, and the increasing advances in computing and computers will affect how businesses are run in the future. Taking advantage of any technology that could make producing their products easier and that could make the firms products obsolete will benefit any supermarket. Government spending on research could lead to a change as a result of study in fast-food, obesity, additives etc. This already has lead to change within businesses including new labeling policies. 4. Porter's Five Forces Model: The PESTEL analysis is of limited value unless accompanied by a detailed understanding and analysis of the factors involved and the interactions between these factors. This is where Porter's Five Forces Model is applied. Worthington, Britton and Rees (2001) define the analysis to be the structure of an industry and the ability of firms to act strategically depend on the strengths of five forces: 4.1 Bargaining Power of Suppliers: The structure of the industry can relate to the business if the firm can get the same supplies from elsewhere. ...read more.


Can it continue to pursue its current business- or corporate-level strategy profitably? What can the company do to turn weaknesses into strengths and threats into opportunities? If the firm is able to generate the correct response to these questions then expansion within the industry is highly likely. To be successful the company needs to hold a sustainable competitive advantage over its competitors. This will help them to enable market survival. The recommendations are directed at solving whatever strategic problem the company is facing and at increasing its future profitability. To be in a strong position the firm needs to be able to withstand the full force of the treats from the business environment. They should be able to change their business-level strategy to counter them. For the Supermarkets who hold the top 5 market positions in the UK, they already hold a stable financial standing. The attractiveness of expansion for said companies is high as it will help to maintain their growth. It may not be straight forward as they have to consider the factors of the PEST analysis and also what corporate strategy their competitors are taking. The smaller chains such as Aldi, Netto and the Co-op will have to take more consideration as they do not dominate the market. More research time will have to be dedicated into what their opponents are doing. This will help to give them the edge. Appendix 1 Checklist for a PESTEL analysis: Factors Checklist Political Future * Political parties and alignments at local, national and European or regional trade-blocking level * Legislation, e.g. ...read more.

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