The 7-Eleven company and Indian industry based on PEST analysis - Essay Example

?Running head: PEST ANALYSIS The 7-Eleven Company And Indian Industry Based On PEST Analysis Number: Due: The 7-Eleven Company And Indian Industry Based On PEST Analysis The retail industry is India’s main source of income and it is thought that it would be the future of India in the coming years because of the improvement that are being done to it. Most of the urban middle class citizens rely hugely on this industry for their income. However, food and grocery are too contributing greatly to the country’s economy and it is a big part of the retail industry in India. According to research, the food retail industry is growing at a vast rate thought to be approximately 30% and it is believed that the food retail industry would be the driving force in India’s economy. This has been brought about by the pest analysis that is duly understood and used by the retail industries in India (Byars 1999) . The success of any market industry hugely depends on the environment in which the business organization is situated. The study of the environment clearly shows the factors that would affect the demand and supply patterns of a commodity, as well as the cost of the commodity. This is the criteria behind pest analysis that incorporates the idea of understanding the business environment, identifying the factors that would affect the the important variables in an organization that would in turn affect the organization’s demand and supply patterns and the cost of the commodity. The small changes that occur in society affects the operation of an organization in one way or the other and moreover they create an uncertain business environment that affects the functioning of the whole organization (Cooper 2000). Therefore the development of the pest analysis was mainly as a result of the business organizations wanting to know the number of possible issues that affect the business industry and how they would take advantage of their competitors (Porter 1985). This is aimed at enabling the organization to deliver quality services and attract more customers in the industry. Pest analysis therefore groups the environmental factors that affect the functioning of the organization into political, social, economical and technological factors. In addition, PEST analysis examines the effect of these factors and how they interplay each other in the business. Clearly using PEST analysis enables a business organization to take advantage of market opportunities and know how to deal with the competitive threats in the business and the strategic plans of the organization. It is important for an organization to look at the environment before deciding on investing in the new area. The environment dictates the people and other factors that affect the business and thus understanding them is vital to the business success. Environmental analysis should be continuous and it is a show of how the company would plan for the future including coming up with new strategies for the business. An organization’s marketing environment is made up of an internal environment, the micro-environment and the macro-environment. Internal environment includes the technology being used in the office, the internal customers, or how employees are paid. The micro-environment include customers from other parts outside the country, agents and distributors, suppliers of raw materials and the competitors. While the macro-environment include factors such as political and legal factors, economic forces in a given religion. The understanding of these factors and how they affected the Indian industries was a major driving force to the interest and success of the 7-Eleven company in India. PEST analysis has brought about the rapid rise of the food industry in India especially in the 7-Eleven retail giant founded in Texas where it has developed large food stores. Kottler (1998) believes that PEST analysis is a nice business tool that can be used to identify the market growth or the decline of the market and the future directions of the operation of the industry. PEST can be of importance in reviewing the business situation as well as in strategic planning of the business. PEST analysis more so has been helpful to the 7-Eleven business organization and her strategic planning, market planning, business and product development including research reports. The 7-Eleven company has increased her performance through understanding of the forces that are affecting her business operations. 7-Eleven used the PEST analysis in deciding to open up new branches in China for her business expansion. This helped her to break assumptions that they might not be aware of and effectively know the kind of business environment that exists in China. 7-Eleven was mainly concerned with the delivery of quality services to her clients with fair prices and the transactions were speedy. With the need to expand her business to different countries where it offers storage of foods and delivering of items that are baked there is need for convenience services to her customers. In deciding to open food stores in India to take advantage of the flourishing food industry 7-Eleven understood the main aspects of a PEST analysis. The economic conditions of a country affect the profit that is to be realized by given business organizations. Retail food is one of the most promising food industries in India. Food retailing has changed greatly because of the PEST analysis that was used by the 7-Eleven company. Before food used to be sold in small quantities in shops by vendors. But the increase in food production brought a need for storage of food items and the selling of the food in large quantities in various points in India. Since this created a good economic background in India and from the aspect of PEST analysis if the demand is high for a given product and that the cost of capital investment is low it would attract more firms to invest in the given area to get the high demand that would bring more capital. In the economic aspect of PEST analysis firms wanting to invest in a given area always expect profits to be higher with time (Jan 2002). This made the 7-Eleven company to be more interested in the growing population demand for the food in India that needed storage since not all that would be consumed at the same time. In contrast firms may find that the expectation of profit throughout the industry is low at certain times. This can be brought about by wrong timing and that particular business strategy that have not been taken into consideration thus influencing the economic conditions of the given business environment. Thompson (2002) asserts that show on whether certain sectors of the economy are growing or the economy as a whole implies that there would be high demand would not exist in case of depressed circumstances. Despite a depressed economy is a clear indication of the threat for certain companies going about business it would be an opportunity for some. Any business environment consists of both traditional market and nonmarket. The traditional market includes the economic resources, the market competition and the consumers while the nonmarket include the government influence in business industry and other interested groups. The government comes with various policies to protect the industries and her customers to ensure that their business practices favor both parties. The knowledge of a 7-Eleven company of India’s government and other agencies in their influence in the trade industry facilitated their attraction to India’s most promising food industry. The company was aware of the state laws in India with regard to consumer protection and the industry. Nevertheless, the economic conditions of a country are influenced by both the government policies and politics. Government can have policies in place that promotes her currency thus have a high exchange rate. Both the government policies and economic conditions affect the decisions made by organizations in trying to open new business opportunities. In addition, capital markets tend to be in control of the government and they are the determining conditions for alternative funding by other organizations. Thus India’s government policies were favorable to even the outside investors and this made the 7-Eleven company have an interest with the food industry that was growing at a high rate in India. Moreover, India’s political system was stable at the time when the 7-Eleven company wanted to find markets in the country and the India’s government’s policy had well defined laws that regulated the taxation system of the country and those of business. India was also involved in trading agreements with the European Union and other trade organizations that made the 7-Eleven company feel more comfortable opening new markets in the country. However, with the rapid increase in the production of food in India there was no show that in case of any depression the demand would go down. The food consumption patterns were changing drastically and that consumers would visit retail shops to buy food stuff (Jan 2002). According to research at the time before the entry of large food stores in India courtesy of 7-Eleven consumers would visit eight to ten shops daily in the purchase of foodstuffs, thus the need for convenience, choice and value for money was an important point so that consumers would then plan to purchase of food from a retail shop. It is believed that before the entry of a 7-Eleven company in India there were small outlets that included Kirana stores, bakeries, fruit and vegetable outlets, dairy booths and small flour mills that were very time consuming and ineffective way of shopping. With the growth of the retail industry in India the changing of lifestyle was a common feature that meant the growing scarcity of time for shopping, and the need for convenience food shopping was emerging as an important factor. Therefore the emergence of retail stores would offer the consumers “value for time” and in addition the “value for their money”. The labor market was also an influencing factor that attracted the 7-Eleven company to the food retail industry in India. According to Cooper (2000), the labor market is an indication of the skills available in a given market area. Thus this is the market where workers are able to find well paying jobs, employers are able to find employees whom are willing to work a free market where wage rates are determined. Labor market provides exchange of information among employers and employees about wage rates, conditions of employment, level of competition and the location of the job. He continues to assert that however labor markets are affected by training that are further determined by the government and various agencies within a given country. Moreover, the costs of labor are determined by the inflation level in the given country and the general business trends in various industries and the roles and power of trade unions of the given countries. The food retail industry in India had a free labor market where demand and supply would be determined by the market interraction. The government had no interference with the industry and this attracted the 7-Eleven company to invest in retail stores in the country. The social culture of a country defines the demand and tastes for a given product, that usually vary depending on the income of given population, and the fashion. Social-culture moreover encompasses areas of given activities and the interest of the group. It can be defined as the the practice of human behavior that includes the thoughts by given individuals, communications, actions, their customs, beliefs, values and groups that include race, religional or the social group. The social-culture thus differs from country to country and thus understanding the dominant religion and getting to know their practices is important to a new company’s entry into the market in the given religion. Most businesses fail because of ignorance of the cultural setting in different religions. The 7-Eleven company often stressed on the importance of understanding and respecting the social-culture setting of different regions and nationals a reason behind their growth and success in investment. Social culture could provide both the opportunities and the threats for particular companies ( Thompson, 2002). Therefore a global business that operates all over the world must understand the culture of the region they wish to invest as it is important for their success. He continues to state that in regions where “balance between consistence and adaptation is essential” it needs to be addressed in depth so that the business would succeed. The different countries of the world bring together different cultures that have a common set of beliefs. There comes a time when strategies of promotion and the price of given commodities have to change in case of market saturation of given products. In rare cases, some products would sell around the world with little variation while others would need many variances since the cultures of different people in the different countries vary. A clear understanding of the characteristics of human beings by age, gender, price, interests, location or region, income, household, or numbers working , can have a significant impact on the demand for certain types of products and this was clearly understood by the 7-Eleven company before. The company clearly classified the Indian food industry into market segments in order to identify groups of customers that had similar needs and demand for the retail stores. They well knew that there had been no threats to the already existed food industry in India and thus the need for differentiation and market segmentation had to play a great role. In market segmentation the following criteria are fulfilled for it to be successful: The idea of market segmentation must take into consideration that customers within the same area or region prefer the same service or product, customers that do not lie in the same region have different preferences for given services and the quality might also differ. India at the time of rapid change in the food industry had young and energetic people who would work long hours and only the older generations were wealthy a show that the retail industry would be in demand for jobs for the young. This was of great interest to the 7-Eleven company. Technology can have a great impact on strategic management of any organization. It is recognized as an important tool in strategic management. Companies must have visions and missions that they wish to accomplish and these are much dictated by changes in technology. The technology could be used to create a competitive advantage. Information technology has thus become an important aspect to the organizational performance in any business setting. It is believed that an effective strategy of any business is not one that promises to use least total cost or one with maximum efficiency but rather one that is in line with the technology in use at that time. Strategic management that was in line with technology was one of the key elements that 7-Eleven company implemented in their business. Strategic management is concerned proper utilization of resources that enhance the performance of firms in a given business environment. It moreover, entails promoting and letting others know about the organization’s objectives, mission, vision, while developing clear guidelines on how they are to be accomplished. Finally allocating resources to implement the policies and plans. Therefore with this in mind there were opportunities for retail advancement in India as a result of the rapid changes that were seen in the consumer purchasing patterns, availability of real estate and supply chain development. As the 7-Eleven company wanted to diversify it was a unique opportunity for her to move abroad and sell her ideas. The technology was important in supply chain management to allow advertising of their services so that consumers would get to know more about the services. Technology would assist an organization to have an advantage over their competition. This technology is a major driver for globalization especially in India where the food industry was growing at a high rate the technology was at its best. India encouraged the use of technology that allowed the production of quality products that were in demand in the country and and outside the country. The technology offered consumers and the food industry business more innovative products and services such as internet marketing. This made the 7-Eleven company increase their interest in India’s retail food industry. PEST analysis usually looks at the external environment in which a business operates or where the business would like to open branches. It is an important tool in business strategic management as it helps a company to realize her goals through a careful analysis of the business environment and assist in knowing the threats available as the business works towards taking an advantage over her competitors. Planning is necessary in any business as it builds a firm foundation for future growth of any company. Companies involved in strategic planning is able to look far ahead of their competitors taking advantage of their opportunities while identifying the threats that the organization is facing. By looking outside the environment, the company would work towards potential strategies of change that would be beneficial to the organization. However, some may misunderstand what PEST analysis really is they would think it is a platform where the business ideas are sorted but rather a PEST analysis is a better way of how things should be done in any organization. References Byars, L. (1991) Strategic Management, Formulation and Implementation – Concepts and Cases, New York: HarperCollins. Cooper, L. (2000) Strategic marketing planning for radically new products, Journal of Marketing, Vol. 64 Issue 1, pp. 1-15. Jan, Y. (2002) A three-step matrix method for strategic marketing management, Marketing Intelligence and Planning, Vol. 20 Issue 5, pp. 269-272. Kotler, P. (1998) Marketing Management – Analysis, Planning, Implementation, and Control, 9th Edition, Englewood Cliffs: Prentice-Hall. Porter, M. (1985) Competitive Advantage, New York: Free Press. Thompson, J. (2002) Strategic Management, 4th Edition, London: Thomson. Read More