STRATEGY: CHOICES AND IMPACT: ASSIGNMENT OF WEEK 6

1. What is meant by the term “External Analysis”? What is the purpose of “PESTLE” analysis?

External Analysis

The external analysis is a tool to identify opportunities and threats existing in an environment. It is the way of examining external environment, which cannot be controlled by the firm. The way by which we look for new opportunities and the way we have competitive advantage over others. Opportunities are that condition when an organization can get maximum benefits by utilizing their resources properly. Under, External analysis there is two factors, one is called General Environment and another is called Industry Environment. General Environment examines factors such as Government regulations, Demographics, Economic Indicators, etc. Industry Environment examines factors like, The Industry, The New Entrants, Market and Consumers, Substitute products, etc.

PESTLE analysis

PESTLE analysis is a strategic management tool which helps managers and strategists to examine external factors that affect business and assess the identified risk. The PESTLE analysis categories environmental impact into six major types: Political, Economic, Social, Technological, Environmental and Legal.

Purposes of PESTLE analysis

· PESTLE analysis is used to identify all the external factors that affect a business.

· Strategists can assess the identified risk and use their ideas to inform knowledge.

For example, as a result of PESTLE analysis, a new restaurant in Nepal may discover that there is a high penalty on business that gives alcohols to minors. Hence, the new restaurant can come with the policy to check identity card of customers who order alcohol.

· All the factors identified as PESTLE factors can be used to recognize opportunities and minimizing threats.

· To make the best strategic decisions.

· It can be used to look after the future impact, which might be different from the past impact of environmental factors.

· It is a useful tool to understand the present condition of a business.

Hence, PESTLE analysis is a very important tool for a business to tackle with the external factors.

2. Read the article about Big Mart Super Store – what external issues are the Super Markets would have to consider at this time to have competitive advantage over others?

(http://www.ekantipur.com/2012/08/01/business/big-mart-to-open-seven-stores-in-kathmandu-by-2012/358057.html )

Supermarkets purchase goods for resale, and goods and services for conducting their operations .Supermarkets have to decide what product assortment to carry, what vendors to buy from and what prices and terms to negotiate with their suppliers (Kotler, 1984). To stand as a competitive supermarket in the retail market, innovative changes are required from time to time. Innovation change can be technological, organizational and managerial, which should be undertake to remain competitive in the market (Reardon et al., 2004a)

In order to remain competitive Super Markets should consider following external issues to remain competitive over others:

· Level of demand and supply

Retailers of super market need to consider the level of demand supply. Products and services should be delivered after considering demand for that item. If supply become higher that the demand then a these retailers have to store the excess goods in inventory which will be costly to them. So, to remain competitive there needs to have a proper balance in between demand and supply.

· Economic outlook

Super market needs to look after the economic background or the living standard of the people in that location or country. If purchasing power is lower then it will be beneficial for super market to sell products and services, which can be afforded by the people of that location or a country. So, to have a competitive position, super market should look after the living standard of people.

· Competition from other retailers

Competition from other retailers can be a great challenge for a retailer of super market. When other retailers sell products at a lower price than the one who is selling those products at higher price can get effected. So, super market needs to closely monitor the activities and strategies of competitors.

· Political and regulatory policies

Political policies can affect a lot. When political condition of a country is favorable, then business may have a positive impact. Political stability means you have a higher standard of living, which increases the purchasing power of people and hence increases the sales.

So, Super Market business needs to focus on the above factors in order to remain competitive over others in the market.

3. Discuss your preparations for the Activity Week field work. Have you arranged to meet your group? Have you been to the Big Mart before? How are you planning to record your data?

At first, we have formed a group of 5 members.We went to Big Mart and observe the behavior of the customers. Big Mart is very famous for grocery products, bakery items, liquors and other foods. We found that they were selling quality products but the price of the goods was not reasonable. We concluded to do a PESTLE analysis of Big Mart. So we are working on it.
But due to the brand consciousness most of the consumer were loyal.
So, researched many factors that drives customers to visit Big Mart.

References:

E.H. Bowman and C.E. Helfat, ‘Does corporate strategy matter?’, Strategic management Journal, vol. 22, no.1 (2001), pp.1-14.
Doherty, J. and Skahill, B., 2006. An advanced regularization methodology for use in watershed model calibration. Journal of Hydrology. 327 (3-4), 564-577.