Pestel Analysis on Retail Industry

Industry:  Retail

PESTEL

Political: The factors in host countries sometimes dictates with how much ease business can be carried out by organizations. Government regulations can either break or make the organization’s future in the country. E.g. Indian government wanted retailers to source 30% from small and medium suppliers which Wal-Mart was not able to meet and this was considered one of the major reasons for its failure in India. Competing regulations can also affect a company’s existence. In Germany, Wal-Mart had to compete with the local merchandise, it could not give discount whenever it wanted rather it had to give on special occasions only. Eased restrictions on foreign ownership of retail as was done by India in 2012, was considered as a big opportunity for Wal-Mart to expand in Indian market. Sometimes even political pressure for higher wages may hamper operational efficiency.

Economic:

Economic factors are the ones that are the macro and micro economic factors that decides whether an organization should enter a market or not. Government benefits like when USA decided to have cuts in its Food Stamps Programme, led to less spending among the consumers thus hurting Wal-Mart’s profits. Likewise, lower tax rate may help consumers to spend freely, thus in a way increasing revenues for the organization. If the economy follows a tighter credit policy then it becomes difficult for the organization to easily create networks with many vendors. Off Late, many emerging countries are showing promising market opportunities in terms of tapping into new areas and increasing revenues. Consumer confidence should be factorized while entering into a new country. Low government spending, weak export demands and sluggish consumption led to low consumer confidence thus marring the Walmart’s revenues. How much disposable income the consumer is having should also be considered, like in China the disposable income among the people is rising, this shows the buying power among the consumers increasing, so Walmart has a better prospect there.

Social:

These vary in great deal from country to country as these factor the diversity in culture, mind-set of the consumers of a particular market. It is often said that Wal-Mart’s failure in Germany is majorly because of the non-acceptance of culture in Germany into its business model. Germans do not like people handling their groceries in the check-out lines. Similarly, in South Korea, people do not prefer buying food and beverages from large superstores. Change in consumer mind-set is also important. People these days are adopting healthy lifestyle. So Europeans prefer to buy from local markets where they can get fresh organic foods. Understanding these factors are hence importance. Organizations should also understand that buying decisions are not always price dependent. In China for example, “Every day Low Price” strategy is considered unsafe and cheap by the quality conscious Chinese consumers. South –East Asian countries like India, Singapore, etc. have high population growth. So demographics can be considered thinking of presence of high untapped market. Age distribution, as statistics show that, India mainly consists of 35% youth, so targeting them, who have a tendency for cash and carry mechanism, one stop shop and brand consciousness, might be a viable option for Wal-Mart.