Pest analysis - Sample Essay
According to Harrison (2003) the external environment can be divided into broad and operating environments involving stake holders and firms outside of the traditional boundaries of the firm. Bensoussan & Fleisher ( 2008) & Finley (2000) take this further stating that by analysing the major forces surrounding an organization a company has the ability to significantly manipulate the success levels of the products and service offered internally.
Pest analysis Williamson et al. (2004) highlights that a key method of effective strategic management is through the use of PEST analysis as it aids managers in making decisions that will enable the company’s actions to positively contribute to the business environment in which they are situated. In addition to this Johnson et al. (2008) define Porter’s Five Forces model to also be highly effective. Both these models are able to identify possible factors that would both positively and negatively affect a business’s competitive environment.
As a result both of these models will be used for Fitness First. Political Factors According to Capon (2009) political forces within organisations are among the most significant determinants of success. When interviewing Tommy Ruttler, it was identified that in 2006 the company was accused of breaching the ‘data protection act 1998’ for the trafficking of personal data to outside organisations, subsequently as a result of this the company released a personal disclosure policy for every member to cover them from further incidents.
These factors must be acknowledged, as non-conformance with legislative obligations can lead to sanctions being made such as fines and even imprisonment not to mention jeopardising company reputation (Campbell & Craig, 2005). Economical Factors Henry (2008) states that economic factors provide a snapshot and simplification of economic phenomena and highlight the cycles of growth and recession within economies.
The recession and high prices leading to rocketing over-heads in the UK have contributed to a second year of declining leisure spending (Mintel, 2009). Furthermore the government have announced a i?? 81billion cut in public spending over the next four years, this highlights that the UK’s lack of economic stability is still present and all industries will be affected. (BBC News, 2010).
Fitness First have been no exception declaring a pre-tax loss last year of 241 million (DataMonitor, 2002) as a result the company has forecasted definitive plans to float on the Asian market in an attempt to maintain a stable business and enhance profitability levels (CreditSafe, 2010). Finally this contradicts Mr Waggett’s (Chief Operating Officer of Fitness First) previous claims in 2007 that “the UK market was in the best shape for some time” and that “BC partnerships had no plans to sell or float Fitness first in the foreseeable future. ” (The Times, 2007) Socio-cultural factors
It is important that businesses respect the views and beliefs of the consumer, as it has a major influence on the demand for their product or service (Evans et al. 2003). Lovewell (2007) highlights that increased awareness into the health and well being of the UK has increased physical and recreational activities, following on from this the government’s i?? 75million anti-obesity campaign ‘change for life’ has also played a significant role within recent leisure activity (the Guardian, 2008).
Another factor is that of the ageing demographic, according to Kluge (2005) the days of the inactive ‘elder population’ are gone; this has resulted through society’s increasing demand for consumers to meet fitter, more fashionable stereotypes. This is re-enforced by organisations such as the National Institute of Health (NIH, 2006), which states that Inactive people are nearly twice as likely to develop heart disease as those who are regularly active, specifically towards the later stages of their lives.
Furthermore by having links with charities such as The British Heart Foundation, as well as offering a range of healthy lifestyle programmes such as ‘Bodyfirst,’ Fitness First have been able to maintain a competitive advantage. TechnologicalPest also ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985). Factors
Technological change creates new products, processes, services and even industries themselves according to Harrison (2003) A distinct feature within Fitness First’s operating environment is its advanced e-marketing resources; for example, when the company was originally founded in 1993 the accessibility to the chain and membership was minimal, now however through identifying the changing patterns and trends of consumers, Fitness First understand the importance of E-marketing and sourced ‘Ideology Ltd’ a leading web design company to develop an online membership format to cover a much broader market (Tommy Ruttler, 2010).
This has enhanced the company’s competitive advantage and these technological advances play an essential role in creating an increasingly global market place, which other challenging organisations have not been able to imitate (Tsai, 2003). – Pest also ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985). – Pest also ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985).
– Pest also ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985). Porter’s five forces Porter’s Five Forces looks at both the competition between established providers and the potential competition from new providers (Simon. 2009), & Hope & Muhlemann, 1997). The Five Forces are distinguishes as: Competition among existing competitors, with new competitors, threat of substitutes, bargaining power of suppliers and the bargaining power of buyers.
Porter’s model strategically allows organisations to look into and develop their product whilst also providing an analysis of potential threats so that businesses can anticipate and beat competition. (Simon, 2009) Competitive Rivalry Competitive rivalry is a key if not implicit factor within any organisation (Hoskisson et al. , 2008). Porter (1998) defines competitive rivalry to be the presence of more than one strategic group offering similar services or products within the same industry.
Fitness firsts have a number of direct competitors such as; Esporta, Bannatyne’s, David Lloyd and LA Fitness, all offer a similar service Kotler et al (2008) identifies four major routes to achieving competitive success, these are; Market development, new markets, new products and diversification, through Fitness First’s ability to offer over 7,000 fitness classes, a minimum of level 3 qualified personal trainers and securing a distinct reputation for quality service.
The company is able to meet kotler’s specifications and maintain itself as the leading health & fitness club in the world. Swot analysis.
1. BBC News (2010) Spending review (online). Available from http://www. bbc. co. uk/news/uk-politics-11579979. (Accessed 29/10/10) 2. Bensoussan, B. Craig S. Fleisher (2008) Analysis without paralysis: 10 tools to make better strategic decisions. Pearson education Ltd. USA