Pestel Anlysis Children Clothing

Report on surroundingsal analysis & industry consolidations Introduction This report is close the sizeableness of environmental analysis for the companies operating in the UK alcohol industry and what kind of tools is available for analysis. Also report impart highlight the industry consolidation in the light of Greene pansy experience.Importance of environmental analysis This analysis is used to measure the internal (Strengths and weaknesses) and external (opportunities and scourges) environment factors which collide with companies in future and overly dish up to make a st cropgy to compete environment kneads. (J&S) If companies do not lose it their internal and external environment then it would affect the caller-ups growth and others bequeath make up a chance to get hawkish services. Boiled frog syndrome is a honourable example for understanding the importance of environmental analysis. actors line notes 1, 28. 09. 2005) Procedure There are three models for analys ing the environment (J&S) PESTEL analysis constancy life cycle ushers five forces frame take in But in this report only two models will be used for scanning the environment. PESTEL analysis recognises the opportunities & threats for companies from internal or external environment and Porters Five Forces model recognises the source of competitor. Firstly this report will look at the PESTEL analysis and how could companies use this model for analysing the environment.PESTEL analysis is used to get a line the future impact of environmental factors. There are six categories of environmental factors in PESTEL analysis i. e. Political, Economical, Sociocultural, Technological, Environmental and Legal. (J&S) Secondly this report will look at the Porters five forces model for identifying the source of competitors in an industry. (J&S) Findings PESTEL analysis for environmental scanning Political factors government activity stability Taxation policy unknown trade regulations Soc ial welfare policies (Adapted from J&S)Report will show how these political concerns influence alcohol industry. According to Philip Webster and David Rose (The Times, 27. 10. 2005) smoking has been banned in each(prenominal) pubs in Scotland and Northern Ireland and now political relation is concerning to put a ban on smoking in pubs that serve sustenance in England and Wales. This new threat will affect the industrys profitability as it has menti sensationd in Greene King case study. It will withal affect the Government stability. Government is also planning to fall the consumption of alcohol by putting more taxes on intoxicating drinks.Again it will affect the alcohol industry and prices of alcoholic drinks will rise. If the Government decide to put more tax on alcohol industry then they have to change the policies for tax-free product and also they have to control the black market that offers cheap cigarettes and alcohol. Otherwise new law will not be affective. Therefore companies requirement to analyse the Government regulations that could venture the profitability and plan for future strategies in gear up to compete those influences which they could have direct impact on political partys performance.Economical factors Inflation Interest rate Currency fluctuation and exchange rate Unemployment Disposal income Money supply (Adapted from J&S) Companies need to analyse economical factors that affect alcohol industry. For instant if the Government decide to increase the taxes on alcohol industry in say to the alcohol consumption then it will increase the prices of alcoholic drinks. Publics health is major concerned from the Government prospective but it will affect the companies profitability and their share value.Be ride high inflation reduces the consumers spending power. (According to Greene King case) High interest rate also affects the disposal income. Because it reduces the investment in business and consumer spending power. So it is v ery of import for companies to analyse the economic factors which they could influence the companys profitability or growth. Socio-cultural factors Change in lifestyle Social mobility Demographic changes Distribution of income Education and health (Adapted from J&S) Socio-cultural is another important factor. It needs to analyse continuously.Consumer lifestyle provides opportunities and threats to companies. But it depends how they will tackle them as a valuable opportunity and threat for future strategy. Un make up income distribution also affects the consumer power. So companies need to analyse different level of income and then make their strategy accordingly. Publics health is an important concern for alcohol industry. Therefore, they need to analyse Government policies on the industry that affect the publics health. For example in Greene King case Government is more concerned about public health and safety.This is the reason they are planning to increase the taxes in orde r to reduce the consumption. Another social concern is increased drinking hours that could cause violence and noise. Therefore companies need to analyse those factors to make their future strategies accordingly. Technological factors Government spending on research Speed of technology transfer modern development Government and industry focus on technological effort (Adapted from J&S) The technology factor can influence the companies.It is necessary for companies to make a continuous effort to develop their technologies. It has a direct impact on companies performance and could jeopardise the profitability. Companies need to analyse external environment for updated their technologies for its future strategies. surface-to-air missile Smiths, an owner of chain of pubs, is using CCTV technology. According to companys spokesman it is much easier to watch every single floor at a aforesaid(prenominal) time. (Greene King case) Environmental factors Environmental protection law Waste disposal Energy consumption (Adapted from J&S)Environmental factors also affect the companies reputation and performance. Companies should analyse the new environmental law regarding wastage and energy consumption. There are two obvious reasons, public health and environment for government. According to The World Health organisation alcohol is the third- biggest threat to public health (Greene King case). Resent survey shows that 10% increase in alcohol prices would cut the alcohol related deaths by 28. 8% for men and 37. 4% for women. (Greene King case) Legal factors Monopolies legislation Heath and safety law Employment law Product safety (Adapted from J&S) Government is planning to introduce a complete ban on smoking publicly or in social places. An industry magazine reports that 42,000 pubs serve food and about 65 per cent of their customers smoke (Webster, P and Rose, D, The Times, 27. 10. 2005). If they continue to serve food then the new regulation could affect their ea rnings. Greene Kings yearbook report shows that they are planning to increase the amount of no-smoking floor in their pubs and making out-door areas for smokers.The British Beer and Pub association wants to increase drinking hours. If the Government mulish to increase drinking hours, then extra safety and security measure will be required (Greene king case). People will require snitch public transport after social hours to get their destination safely. Government proposal to extant drinking hours will affect employees as well. Its mean they will have to work long hours. Some times new legislation brings new competitors in the market which changed the companys monopoly in an industry. Porters five forces model for environmental scanningThere are five parts of this model. 1. Threat of entry 2. Threat of substitute 3. The power of buyer 4. The power of supplier 5. matched opposition (See appendices for epithet 1) Threat of entry Threat of entry will depend on the extent to which there are barriers to entry. These are factors that need to be overcome by new entrant if they are to compete successfully. These barriers include legislation, economies of scale, capital requirement, distribution channel, experience and relationship with supplier & customers. (J&S, scallywag 113 to 115)In order to compete successfully companies need to analyse following barriers Cost of capital to enter in an industry with regards to technology and economies of scale Strong relationship of pass bying company with supplier and customer could be costly for new entry Product differentiation or high quality services could give competitive advantage or barrier Existing high experienced companies could take an advantage in terms of cost, customers and supplier loyalty Threats of Government policies Changes in technology would affect the competitive advantage (Source adapted from J&S page 113 to 115)Threat of substitutes Substitution reduces demand for particular class of product as customer switch to the alternatives. (J&S, page 115) Threats of substitutes work when other companies provide the same product with more benefits and value. Therefore companies need to develop their products by analysing their environment. A Victorian style of pub is a good example where customers can have smoking and non-smoking floor separately. The power of buyers Buyers power likely to be high when customers could get same product at low price from different suppliers.Buyer will have more negotiate power when switching cost from one supplier to another is low. In order to reduce the buyers power companys needed to develop their products. So they could offer more benefits and value. (Adapted from J&S) For example if Government firm to increase tax on alcoholic drinks in order to reduce the crime and consumption rates then this impact reduce the companys sales. Longer drinking hours will increase the buyers power in terms of alternative. Its necessary for companies to analys e those factors so they can reduce bargaining power. The power of supplier Supplier power likely to be high when Limited sources and suppliers are available High switching cost from one supplier to another Different quality or services from alternative Powerful brand of supplier (Adapted from J&S) Analysis of these factors can increase bargaining power with supplier. I. e. change in tax policy could affect the suppliers power. In other word if Government increased the taxes on alcoholic drinks then whole production cost will change. Because supplier will charged extra and as result prices of alcoholic drinks will raise. Competitive rivalry Competitive rivals are organisation with similar product and services aimed at same customer group. Adapted from J&S, page 118) Factors affecting competitive rivalry High fixed cost of products may increase price war Customer could switch to other competitor if products are undifferentiated. High exit barriers could lead to increased in comp etition because of high investment in non-transferable fixed assets or high redundancy cost Competitors are in balance-roughly equal size lead to higher rivalry (Adapted from lecture note 2, 5. 10. 2005 and J&S) Therefore companies need to analyse those factors which are affecting on competitive rivalry. If they do not keep an eye on them then growth of company will be affected. constancy consolidation in light of the Greene King experience Industry consolidation in the light of Greene king experience is very successful. According to the case study, Greene king is the British pubs and brewery group based in Suffolk. Since 1996 they have acquired 1,600 pubs (See appendices figure 2 for Greene kings acquisitions experience). Now they are taking over Scotlands oldest brewery company Belhaven and Essex based brewery & pubs group Ridley. Greene King has an opportunity to enter in a competitive market and expend their operations across UK.Greene king has a large distribution channel, 2, 064 owned pubs which can sell their own brewed drinks. Industry consolidation reduces per unit cost of product because of the mass production and increases the profitability. integrating also reduces the supplier power and increase the bargaining power with supplier. It also increases the wealth of shareholders. Small company has got benefit from being part of large company and has a chance to sale their drinks in new market. Its a good step for small companies to develop their businesses for the future. Consolidation reduces the competition in an industry and creates more jobs. Greene king case) Conclusion Environmental analysis gives better understanding for ending making and help to make positive strong future strategies. In order to competing environmental influences companies need to analyse their environment on continuous basis. Consolidation of industry is cost effective and has wide horizon of competitive market. It also increases the interest of stakeholders. Recommendati on Companies need to analyse their internal or external environment on regular basis. This report highly recommends the PESTEL analysis and Porters five forces model for environmental analysis. These models help in decision making and companys future growth.References Greene King annual report 2004 & 2005, access date 20. 10. 2005 and 01. 11. 2005. www. greeneking. co. uk Johnson, G and scholes, k (2002), Exploring Corporate Strategy 6th ed UK Prentice Hall. Webster, P and Rose, D (2005) Pubs will call time on food to keep smokers in The Times newspaper, 27. 10. 2005, page 1 and 9. Wiscarson, G, Strategic Environment, Lecture notes 1, 28. 09. 2005. Wiscarson, G, Strategic Environment, Lecture notes 2, 05. 10. 2005.