Steeple Analysis for the UK Super Market Sector - Case Study Example

STEEPLE ANALYSIS FOR THE UK SUPER MARKET SECTOR INTRODUCTION It is critical for the organisations in the industry to explore the potential impact to be received from the environment in which it operates (Henry, 2008). STEEPLE analysis is an important strategic management tool (Hitt, Ireland, & Hoskisson, 2012) and this tool is available to the businesses enabling them to assess the future trends in the environment that are to impact business operations in future (Kew & Stredwick, 2005). This report aims to assess the STEEPLE factors affecting the UK super market factors. STEEPLE ANALYSIS Each of the STEEPLE factors is assessed followed by drawing its impact on the operations of the super market organisations as follows: SOCIO-CULTURAL: Socio-culture is one of the most important external factor that influence the firms in the industry (Thompson & Martin, 2010; David, 2013). The population in UK is expected to increase to 67.2 million by the 2020 at the rate of 4.9% from 2010 (ONS, 2011a). Of the growth, 56% is natural growth (higher births than death and 44% constitutes of migrants (ONS, 2011a). The demographics will be as follows: (ONS, 2011b) The rising ethnic groups due to migration and aging population requires retailers to adapt to the specific tastes such as aging population enjoy considering themselves as young and their share in shopping is expected to increase from £1 in every £5 to £1 in every £4 in next two decades. The younger generation is increasing at 12% rate and challenge is faced to manage the demands of the baby boomers and younger lot while also generating impact from 15% population which are not UK born (KPMG, 2013). Alongside increase in the old age dependency will affect the customers purchase patterns accordingly as follows: (Deloitte, 2011) The overall spending pattern is projected to be as follows: (Which, 2013) TECHNOLOGICAL: Technological factors also influence the firms (Hussey, 2012; Keller, Parameswaran, & Jacob, 2011). The influence of smart phones and other devices offering mobility have significantly influenced consumer buying behavior (Wilson, & Gilligan, 2012). It is important to notice that despite overwhelming impact, over reliance on technology will result in alienating customer (usually old aged) who are unable to quickly embrace technological development (KPMG, 2013). The technological development and research in UK has seen a changing trend where government’s direct investment is reducing while support of the government to business for the research and development is increasing and highest contribution is made by the pharmaceuticals sector (NAO, 2013). This has considerable impact as the potential demand for the food supplement can rise in future. Similarly, online food sales of supermarket has reported growth of 126% and growth is expected to double in coming five years offering the online potential of growth for super stores (Poulter, 2013). Additionally, adoption of RFID (Radio Frequency Identification Device) for tracking end to end tracking of ingredients has also become a challenge for the retail sectors (PWC, 2013). Waterless washing machine and rechargeable kids system will be used by system to recharge their gadgets are some of the projected technological developments for 2030 (Which, 2013). ECONOMIC Economic factor is another important external factor that influences the firms operating in the society (David, 2007). Economic condition also impacts the buying behaviour of the consumers (Schiffman, and Kanuk, 2010; Peter, and Olson, 2008). Down-turn and revival efforts are seeing its impact on super stores both positively as well as negatively. Leading stores are enjoying their economic powers due to bulk orders (Winterman, 2013). For example, the growth of clothing range of super market reported rise due to economic pressures as shown below: (Gye, 2013) UK has incrementally increased import of goods as compared to services and exports over years as follows: (BIS, 2012) This in turn has negatively affected the current account balance as follows: (BIS, 2012) According to BBC, CPI fell by 0.1% while the retail price index is comparatively higher (BBC, 2014a). The growth of GDP in the fourth quarter is slightly less than third quarter; however, is in positive zone as shown below: (BBC, 2014b) This positive growth has contributed in reducing the unemployment rate that fell to 7.1% as additional 167,000 people got the job (BBC, 2014c). This increase in the number of people getting jobs will increase the purchasing power. The rising cost of living will take greater share of customers’ income spent on the necessary products which in turn benefit the necessary products business more as compared to leisure business: (Which, 2013) Hence, the economic growth will be more driven by the necessary and value providing products. ENVIRONMENTAL: In the past few years, environment factors have also started to influence the firms in the idnsutry (Kachru, 2009). Various organisations such as Ethical Consumer provide rating to the super market while considering the various factors with one of them being environmental aspects. Supermarkets in order to endorse their attraction to increasingly aware customers are be more influenced by the measures that lead to saving environment (Ethical Consumer, n.d.). Also the government has required the super stores to reduce the impact on environment generating from packaging, food waste and other plastic bags. Department for Environment Food and Rural Affairs states that government has set an objective to recover waste by 2020 up to 70% mainly by recycling. Similarly WRAP (acronym) program is another pressure on controlling environment pollution and waste resulting from the super store business (ATS, 2011). POLITICAL: Different public interest organisations are making efforts to safeguard the environment and consumer which is raising the political pressures. Political pressure and stability influence the environment (Cadle, Paul, & Turner, 2010). For example, Vertical Relationships in the Food Supply Chain: Principles of Good Practice developed in 2011 and other such public interest forums are being developed for the controlling the exploitation in the organisation (Consumers International, 2012). All such policy measures pose pressure on the super stores to align and abide by the regulations which often end up charging business with their profit. LEGAL The rising consolidation of the industry has led the retailer to develop investment contracts with the private equity houses (PWC, 2013). The constant development in IFRS for providing more concrete information to the stakeholders is also increasing pressure on the retailers on the whole as well as super markets such as Sarbanes-Oxley played critical role (PWC, 2013). Importantly, the ability and the availability of the super markets even to offer legal services is taken as a serious threat to the legal procession such as example of Tesco Law (Chambers Student, n.d.). Hence, such over arching of the super stores in other areas may any time face retaliation from such industries. ETHICAL Organisations have started to make sure that they operate ethically in the society (Weiss, 2009). According to the report only four major supermarkets (with 76% market share) serves the buyer to more than 7000 supplies while serving the consumer market of more than 25 million household. This has affected the power of the suppliers who are being faced with many abuses in the name of different fees. Hence, across the value chain of super stores, the income distribution is as follows: (Consumers International, 2012) Alongside, super market enjoys expanded control over the market plays as depicted in the image below: (Consumers International, 2012) Overall systems of the super markets are considered to have negative impact mainly on labors as presented in the given below flow of activities: (Consumers International, 2012) Furthermore, the pressure is on the rise for reducing the food wastage (Smithers, 2013), ethical and due contribution in global supply chain etc (Ethical Consumer, n.d.). Hence, pressures to control strategies that are negatively impacting the people in the society as well as supply chain will continue to rise as the markets explore unethical measures for exploiting higher profits. EVALUATION OF ROLE OF STEEPLE FACTORS The assessment of the market implies that superstores will be under constant evolution in their product and service mix in order to successfully serve the customers. The demographics will lead to a greater technological and value based products. The pressure of improved environmental sustainable systems will continue increasing pressure on business to strike the right balance of strategy for effectiveness as well as efficiency to generate greater profitability. IMPACT OF STEEPLE FACTORS ON HRM STRATEGY HRM function of the organisation is based on collecting the most suitable set of employees for the organisation. This responsibility is also affected by the STEEPLE factors. IMPACT OF DEMOGRAPHICS Owing to the fact that organisations are required to either adapt to the changing macros environmental factors or change the external environmental according to their preferences, demographics also requires organisation to adapt accordingly. Hence, retailers develop HRM programs accordingly. The impact of the aging and immigrants is high in the retail sector, according to the report from the British Retail Consortium. The paper presented by the consortium highlighted three main problems arising from the aging population and rising multiple culture influence. In addition to the impact in terms of competitiveness, the challenges are also faced with challenge in terms of recruitment. Components of the compensation package required by diverse recruitment pool poses a significant challenge to the retailers. Another challenge in faced in terms of skill set of the available population. For example, aged population with longer experience still has limited qualification. Similarly, the diverse set of migrants with different backgrounds of culture and ethnicity affect the ability of the retailer to exploit the full potential of the recruit. The third challenge faced by the retailers due to the changing demographics mix is related to the flexibility factors. Different age groups, ethnics and social background prefer different lifestyle which also has an impact on their work-style preferences. For instance, the impact of religious events such as Eid for Muslims, Dewali for Hindus and Easter for Christian requires flexibilities. All these pressure retailer to adapt the human resources plan accordingly. For example, B&Q in 1980 initiated a program to recruit aged population for exploiting the advantage offered by their DIY experience and life skills. As a result of this initiative, the organisation not only gained the profitability increase by 18% while at the same time managed to reduce the turnover by six times with 39% reduced absenteeism. Staff of increased skill based also benefitted the customers with improved services (BRC, n.d.). IMPACT OF ETHICAL FACTORS ON HRM According to the working paper published by Martinuzzi et al. (2011), the UK has the highest number of employees in the highest value added sectors with 16.9% ( in 2006). Different aspects of ethical considerations are to affect the human resource management of the retails sectors of the organisations. For instance, Arnold et al. (2009) and Broadbridge (2009) reported for the high pressure environment affecting the life-balances of the human resources to have an impact. Esbjerg, Buck, & Grunert (2010) studied that high turnover in the retail sector in due the employees’ consideration with respect to low career and compensation development. Lynch (2005) established that in retail sector of UK, the part time workers are discriminated in comparison to the full time workers. Hence, ethical considerations in the HRM departments of retail sector of UK remain a constant challenge. Therefore, HRM department of retails sectors remain under constant challenge of providing best personnel resource while at price which is favorable for the organisation while at the same time is considered ethical viable by the employees. For example, HRM department of Tesco has developed Human Rights Policy for the safeguards of the human rights of employees. The policy is developed in complete consideration of the UN’s Universal Declaration of Human Rights and the International Labor Organisation Core Conventions (Tesco, 2007). This mandates the employees within the umbrella of the Tesco care to be cared for their rights as well as promoting their welfare. Also the ethical conduct is also mandated across the value chain with the program Ethical Trading Initiative (ETI). Hence, the ethical viability of the human resources connections has been developed for effective dealing and managing the human resources directly and indirectly in connection with Tesco (Tesco, 2007). In addition to this broader initiative for the ethical support of the human rights of the employees, Tesco also takes measures for the supporting the causes for its employees. Tesco in order to attract the young people and best talent to its organisation initiated the program entitled Debut, a program to attract graduates and young people. Along with the objective of attracting young people to benefit the business, the program encouraged students to work for Tesco during their education tenure. The Tesco supported the development of students being their employees by arranging for their transfer from home store to local stores in the states or closed by location of university. The program also offers career and development with online courses, financial management recommendations and goes on to an inch with the career advice to employees. Within a year of program initiation, number enrolments in program rose to 21,071 members (BRC, n.d.). Hence, HR is to play an effective role in bringing to the company best potential human resources while being constraint by macro environmental factors as well as organisational requirement. CONCLUSION STEEPLE analysis shed considerable light on the constraints build by the external environmental factors that have an important on every business. Studied in context of the retails sector of UK, the evidences collected reported wide array of pressures from the components of STEEPLE. Successful organisations are those who proactively assess the future market trends that will evolve as a result of external environment. The report also provided initiatives by the human resources management function of the retail organisations that develops strategic initiative for the effective management of the human resources asset while being limited by the changing dynamics of the environment. List of References Arnold, T., Flaherty, K. E., Voss, K. E., & Mowen, J. C. (2009). 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