Tuesday, December 18, 2012

ASSIGNMENT OF WEEK 7


 PESTLE Analysis of Big-Mart
Introduction of Big Mart
Big Mart has been a valuable brand in the superstore in Nepal. It has two outlets in Kathmandu located in Kamalpokhari and Lazimpat. The first store was launched in 10th July, 2009 in the most renowned mall - City Centre Mall located in Kamalpokhari. It has been given credit for its innovation in the introduction of Super market in Nepal. In July, 2011 another outlet was opened in Lazimpat.
Political
The political condition of Nepal can affect a lot to any business. Due to the unstable political condition there is a high risk to Big Mart and other retail business. The consequences of the twelve years long internal war has yet unclear. The most important thing is that there is no constitution of Nepal. The Constitutional Assembly failed to issue the constitution of Nepal. The government is being changed in every six month by which the policies are hardly implemented in favor of retail industries. Due to such consequences Big Mart is stepping back to open outlets in different sectors. As their objective was to open their outlets in every locality, the political factors have affected them a lot. Also the retailers like Big Mart are not getting any type of support from the government.
Also, due to the education consumers rights and other agendas are also rising. There are some pressure groups who are giving pressure to Big Mart to provide quality goods and services with a low price. So, they are compelled to minimize the price hence reducing the profit.
Big Mart has to pay higher tax but they are not getting any kind of facilities from the government. So, it has not got any type of attention from the government. In addition, Big Mart can also affected by their shareholders. The management may get pressure from the stockholders to give high rate of return.
So, management needs to be very careful and should be responsible to their consumer, shareholders and society.
Economic
An opportunity available to Big Mart is that it has got a lot of customer from middle level to high level class. Big Mart has been able to make a lot of loyal customers in a short span of time. On the other hand, the people nearer to Big Mart are the loyal customers. Individual buy the products from the local departmental; store rather than from the Big Mart as it will save both time and money. Also, Big Mart is criticized for taking high price from the customer. The competitors of Big Mart are attracting customers by offering discounts and lowering the price.
As a retail store, it has to pay high amount of tax to the government. Also, due to the low number of outlets it has losing opportunities, hence resulting lower profit. Also the inflation rate is 18% which has pressured them to increase the wages of their staffs which increase the cost.
So, in order to increase the demand from the customers it should open its outlets in different localities. Also, higher national income growth may help to increase the demand for Big Mart’s products.
Social
In Nepal the concept of buying grocery in departmental store is slowly increasing. So, Big Mart business is really affected by the perception and life style of people. Big Mart stores were geared to the higher level people in the beginning. Changes in the social trends can really impact the on the demand for the products in Big Mart. With the social acceptance, it has become the attraction place for middle class level too. Today Big Mart has become a social place to hang out to meet with friends. Big Mart has helped to show the social status of people as they will choose products that match their taste and preferences. Also changes in the education system people are slowly attracted to such retail stores,
Hence, Big Mart should have a clear positioning policies and strategies and provide better facilities to meet the target needs.
Technological
Information technology has become the most important inputs in the retail stores today. As Big Mart has got separate IT Departments it can store consumers’ data and millions of transactions into their database and in order to automate their operations. It has also helped Big Mart to analyze the customer data to lunch a right strategy to a right customer group. This has enabled Big mart to lead an effective CRM program. Also it has been used to share the ideas and thoughts of their customers. It has really helped them to add value to the services they are providing to the customer.
Also by using products like affordable organic produce, fair trade coffee, and compact fluorescent light bulbs within the reach of one million of customers, it believes that it can play a powerful role in protecting the environment and in shifting the behavior and trends of marketplace.
Legal
This includes the factors which are related with the legal environment in which the firm operates. In recent years in Nepal there has been a significant change in legal system that has affected retailers business. the introduction of age discrimination, an increase in the minimum wage and other facilities and incentives has affected retailers like Big mart to increase the cost. Changes in the law can affect Big Mart in terms of cost if new systems and procedure has to be developed. Also changes in law may affect the demand for goods and services if the law affects the likelihood of customers buying the goods or using the services.
There are different types of laws that may affect the business of Big Mart. The first one is consumer laws which are designed to protect the rights of customers against the unfair and misleading practices. Another category of law is competition law where they are designed to protect small departmental stores and to make sure that there is no existence of monopoly in the retail industry and customers are not exploited by the monopoly power of a single retail store. Another category of law includes employment law. They are mainly aimed at protecting the rights of employee covering the areas such as minimum salaries and incentives, facilities and minimum working hours.  They are also designed to protect workers against the abuse of power by managers. Another category of law is health and safety legislation. This law is designed to provide a safe working environment to the employees and use of safety products.
Environmental
The weather and climate changes and its impacts on the retail industry are the environmental factors. Changes in the weather may positively or negatively impact the business of Big Mart. For example, in winter season, the demand for ice cream is low whereas in summer season the demand for the same products is high. This shows that there is a seasonal impact on the business of Big Mart. Also environmentalist has pressured Big Mart to use paper hand bags instead of plastic bags. So, Big Mart needs to focus on saving the environment. Also, it needs to launch various environmental programs like plantation. It also needs to use modern technologies, user friendly machines so that it can play a vital role to save the environment. It can add value to their products and services which can increase their brand value.
Factors to be considered to be competitive in Retail industry
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, a Super Market needs to focus on the above factors in order to remain competitive over other market.










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.
 
  • http://www.ekantipur.com/2012/08/01/business/big-mart-to-open-seven-stores-in-kathmandu-by-2012/358057.html 
          [ekantipur, Accessed on 20th December, 2012]
  • R.P. Rumelt, ‘How much does industry matter?’ Strategic management Journal’, vol. 12, no. 2 (1991), pp. 167-185.
  • http://www.bigmart.com.np/
        [Bigmart- official website of big mart, accessed on 15th Decemebr, 2012]
         [MSDN, Accessed on 15th December, 2012]

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