PESTLE Analysis Report of Big-Mart
Introduction:
Big Mart is considered one of the most valuable brands in Nepalese super market store industry. The first store was launched on 10th July, 2009 in the largest mall of the country - City Centre,Kamalpokhari, Kathmandu. It currently operates a chain of 3 supermarkets in the capital city , and has ambitious plans to establish a market leader position in the country in the next three years .
Pestle Analysis: Pestle analysis report will look at the macro environmental factors (Political, Economic, Social, Technological, Legal and Environmental) and its impact on big mart store .
1.
PESTLE Analysis:
Political Factors
The
political factors focuses on government policy and meticulously takes into
account items such as government intervention in the economy, taxation policy,
interest rate and monetary policy, consumer protection right, competition
regulation, political stability etc. As in our country political stability is
very poor and government changes within short period, this has adversely
affected the economy and retail industry sectors like big mart. There is lack
of government inspection and government regulation which has increases the
inflation in country. High inflation decreases the purchasing power of people
which in turn affects the sales of store.
The political situation 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 affected the political scenario. The most important thing is
that there is no constitution of Nepal. 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
Economic Factors
The
economic factors focus on the economic growth, government spending,
unemployment rate and policy, taxation, tariffs and subsidiaries, production
level etc. The economic growth of our country is very less about 2.98%comparing
the neighboring country India about 5.8%. The government spending on the
development of infrastructure of country is very poor and this has affected the
overall industrial sector. Big mart stores are mainly affected by government
taxation policy, unemployment and low production level.
The
unemployment rate of country is very high and people consumption capacity is
very low. There is lack of skilled labor and due to the lack of skilled labor
the industries are closed. The country is importing more finished goods than
exporting due to this domestic products are less competitive in market. Due to
poor economic condition, stores like big mart have not capitalized the
resources like labor, capital and technology in full gear which has reduces the
potential market value and competences in the market.
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.
.
Socio- Cultural Factors
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 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 and for shopping goods. Big Mart has helped to show the social status
of people as they will choose products that match their tastes and preferences.
The
demographics, living standard, lifestyle, fashion consciousness, occupation
have direct impact on the business of
store. Without the help of society it is impossible to run the business because
the society not only provides the customer but also provides labor work force,
supplier and market.
Technological Factors
Technological
factors influence a business of big mart in a major way. It affects the
business ability to produce, to sell, expand and to maintain demand. The
technological factors include the government spending on technology research,
new inventions and development, life cycle and speed of technological
obsolescence, global communications, and manufacturing advances, internet etc.
With
technological advances system the operating cost and inventory cost of big mart
store has been reduced which also help in reducing the cost of product but big
machines used in stores like wet umbrella dispenser, store equipment have to be
imported from India which is very costly.
The government spending on technology is very low and due to limited
MNC`s technology advances is poor.
Legal Factors
Legal
factors include rules and regulation of governing bodies and this factor try to
understand the impact of rules, regulation and laws on the businesses. It
mainly includes the regulatory bodies and processes, employment law, consumer
protection, industry specific regulation etc. Sound legal system is basic
requirements for running of the business operating but at present our country`s
legal system is worse, the political parties are unable to make constitution
which has affected the business environment of country. There has not been a
regular regulation and inspection of consumer protection and employment law
which have created problem between employee and employers.
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.
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. This law is designed to
provide a safe working environment to the employees and use of safety products.
Environmental Factors
Environmental
factors include ecology and geographical factor areas such as, natural
resources endowments, weather, climate conditions, and also include the
environmental issues. Big mart should implement the environment friendly
policies and their business activities should not degrade the environment.
Changes in the weather may
positively or negatively impact the business of Big Mart. For example, in
winter season, the demand for soft drinks like Coca Cola 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. The
potential impact of environmental factor on big mart store is low.
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:
Right
amount of Supply and Demand
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.
Level of Competition
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.
SWOT
Analysis
The
basic component to remain competitive in the retail industry is to identify
your Strengths, Weakness, Opportunities and Threats. Retailers of supermarkets
must know their strengths and weakness and implement its strategies
accordingly.
Economic background
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.
Above shown are the pictures of the Big mart store of Lazimpat branch located in capital city of Kathmandu . .
References:
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Bowman and C.E. Helfat, ‘Does corporate strategy matter?’, Strategic
management Journal, vol. 22, no.1 (2001), pp.1-14.
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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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