Competitve Environment Evaluation - Sample Essay
The purpose of this report is to evaluate the competitive environment of River Island, one of the UK’s leading young fashion retailers. This will be achieved by discussing a variety of factors, for example, legal and social factors that influence its day to day operation. Some factors can are controllable by the company yet many are beyond their control and can have a significant impact on them as an organisation, these will be looked at throughout the report. Business measurement tools, namely the PESTLE and SWOT analyses will be used to aid evaluation of the company.
The Macroenvironment The Macroenvironment is the external forces that can affect a company’s marketing strategy, “Major external and uncontrollable factors that influence an organisations decision making and affect its performance and strategies” (businessdictionary. com, 2008). These factors cannot be controlled by the company, and should be monitored and understood constantly as they are ever – changing, and can determine a company’s stance in the market if they are overlooked.
Political influences can be both national and global; decisions must be adhered to by all organisations. A recent political effect was the government’s recent national minimum wage increase “The rate of National Minimum Wage from 1 October 2008 is i?? 5. 73 for workers aged 22 and over” (hmrc. gov. uk, 2008). To allow for this River Island will have had to cut back on expenses, likely the marketing budget, which can be viewed as a luxury by some organisations. Other relevant influences on River Island include government trading policies and European Union directives.
Economic Living in a globalised economy means that occurrences in economies of other countries usually in turn have a ‘knock-on’ effect on the UK’s economic cycle, thus affecting consumer wealth and spending habits, recently the ‘credit crunch’ has been seen in action significantly impacting the UK, “The global credit crunch was sparked in the sub-prime mortgage sector in the United States, and made its way across to the UK late last summer. ” (Anon, 2008).
River Island suffered a decrease in profits late 2007 as a result of this. (drapersonline.com, 2008) stated that “pre-tax profits at River Island Clothing Co Ltd fell from 137. 8m during the year to the end 2007”. This is because UK consumers were, and still are struggling to fulfil day-to-day living costs such as utility bills, for example, and fashion is becoming lower priority expenditure. Social Social factors influencing organisations include consumer behaviour, trends and attitudes all of which can affect organisational activities at different times. a factor relevant to River Island is the rise of ‘fast fashion’, in the UK and worldwide.
Today clothes are bought to keep up with current trends rather than for functionality, for example a coat for warmth. The importance of “fashion” in clothing consumption has risen by two-fold since the 1960s, measured by purchase probability. Clothing have transformed from durable goods to consumables. (Majima, 2006). Another social influence is evident in media coverage regarding the exploitation of supply chain workers, River Island has recognised this sensitive issue and are now members of the Ethical Trading Initiative (See Appendix One) as stated on their website.
“In June 2008 River Island became a member of the Ethical Trading Initiative (ETI)… the ETI is an alliance of companies, trade union organisations and non-governmental organisations committed to working together to identify and promote good practice in the implementation of codes of labour practice” (riverisland. com, 2008). 2. 4 Technological Technology is crucial to an organisation’s marketing success, it is essential be up-to-speed with the fast-paced industry, as competitors may be exposing themselves to customers using more advanced methods that another company has not yet discovered.
“Many technological breakthroughs change the rules of the competitive game” (Jobber, 2004, p151. ) River Island, rapidly identified that it’s direct competitor Topshop were emailing weekly ‘style notes’ to their customers following this they adopted a similar technique. They have also ‘raised the bar’ with a mini- site incorporating their designer’s profiles and style tips, as well as blogs and competitions. (See Appendix Two)
Legislation such as codes of practice enforced locally nationally and internationally results in consequences for all organisations. An industry- specific legal obligation River Island encountered in 2005 was the introduction of chip and pin machines into all of it’s stores (logisticsit. com, 2008). Compliance to this requirement protected it’s customers from identity theft and fraud. As a result a training need emerged and costs for this were incurred, affecting disposable income and cash flow.
Organisations are challenged with environmental implications at all levels of the supply chain from distribution to packaging, if found to be irresponsible in this area negative media coverage is attracted and public pressure groups are aggravated. According to River Island’s Corporate Responsibility statement they are actively involved in measures to reduce their energy consumption and levels of packaging “In our stores, our offices and our warehouses we are committed to operating in a way that is mindful of the demand on our planet’s limited resources. (riverisland.
com, 2008) This evidenced on their website represents them as environmentally aware and responsible; a credential that many consumers value. 3. 0 The Microenvironment The Microenvironment consists of various influences in a company’s immediate environment such as. (see fig. 2 for examples). One definition stated “The Macro Environment can be described as the environment that is most closely linked to the organisation. ” (Groucutt, 2005. p. 42).
The company has a degree of control over some of the influences, but has little over others such as more local influences, known as publics e.g. local government and community. See Table 1 for a SWOT analysis of River Island as a company. If a company slashes it’s prices, customers will respond to this, but in turn, its competitors also will. If a price war begins the prices can decrease too much, and profitability an the industry as a whole suffers, meaning that it would have been better for a company to remain in it’s previous position, actually making a profit, alongside healthy competition within the industry.
Companies can finish up financially unstable if they are not cautious with their competitive tactics. 5. 0 Internal Environment The internal environment is the departments within an organisation such, as production, purchasing, research and development, and finance. All impact on marketing one way or another. Interdepartmental conflict can arise; finance can set strict marketing budgets, which may constrain a marketing from reaching it’s full potential.
A production department may be testing products for quality for control before releasing, whereas marketing are eager for it to be ready for sale so they can develop a campaign or promotion to attract custom. 6. 0 Conclusion To conclude my research has found that River Island’s competitive environment has various influencing forces at work on a constant basis; to avoid the company’s position being threatened, its marketers need to be vigilant of these forces when formulating tactics and strategies, only then can success be guaranteed within the industry.
Page Anon. (2008) How to survive a credit crunch [online] <http://www. thriftyscot. co. uk/042008/how-to-survive-a-credit-crunch. html> Updated April 21 2008, Accessed 17 November 2008 Business Directory (2007) Macroenvironment [online] <http://www. businessdictionary. com/definition/macro-environment. html> Updated 2007, accessed 16 November 2008 Ethical Trade Why trade ethically? [online] ethicaltrade. org