Principles of Marketing PESTEL ANALYSIS
MACROBUTTON DoFieldClick Type your Name Here
American Intercontinental University
Unit 1 Individual Project
MKTG 205 – Principles of Marketing
MACROBUTTON DoFieldClick Date of Submission
Abstract
The performance of different organizations and business enterprises is influenced by macro and micro-environmental factors. Some of the common external forces that influence the operations of firms in the laundry industry include societal forces, legal and regulatory forces, political factors, technological forces, economic forces, and consumer behavior forces. Although all these factors are important in external analysis, this paper will only focus on political, economic, and technological forces.
Introduction
Environmental factors impact on the profitability index and the general performance of the firm. Laundry industry is no exceptional as the operation of the firms in this industry is highly influenced by the internal and external forces. Although the firm may have full control of its micro-environmental factors and manipulate them to suit its interest, the firm has no control of the external environmental factors. These external environmental forces regulate the operations and the daily running of the firm is different industries. Otherwise, if left to operate on their own, firms would manipulate these surrounding factors to serve their objectives and interest at the expense of the consumers. External forces define the regulatory frameworks and policies under which firms operate. For instance, the political forces established the foundations that regulate the activities of all the business entities operating in the selected industry. Since firms have adequate control over their internal factors, but have limited say over the external factors, it important for the laundry firm to focus on strategies of confirming to the surrounding factors in order to realize growth and development (Miles, 2011). Although this industry is one of the promising with greater growth potential, its future success depends on the external factors that directly impact on the performance of the laundry sector. Being a perfectly competitive industry that has no entry or exit barriers, it has attracted a large number of firms with unique internal operations. However, all the firms with different competitive strategies are confronted with the same macro-environmental forces that no individual firm can control or manipulate, but has to accept such forces.
Political Factors
Politics plays a fundamental in the operations of business activities within a given environment. Politics directly and indirectly impacts on the success or failure of the economic operations. Political factors majorly entail the surrounding political attitude and environment and other factors such as political movements and parties (Werner, 2012). Political forces play a key role in the enactment and implementation of government policies and business regulation policies. Therefore, given the importance of these forces in the business environment, it is inevitable for the laundry business enterprise to operate freely without taking into account the political influence.
One of the political factors that have a massive influence on the performance of the business is political stability. The surrounding political conditions, political stability in particular, determines the pace of economic development and growth. Political stability, characterized by peace and unity create a conductive business environment that attracts more foreign investments. According to Werner (2012), political stability is essential in building investor confidence and increase the confidence of the business community at large. With their confidence in the political institutions boosted, investors will increase their financial and capital investments in many industries including the laundry sector. On the contrary, political instability is detrimental to the economy as such heated political environments discourage investment activities. It is, therefore, important for the government to maintain a stable political atmosphere that is appealing to the business community. Besides, the political forces are entwined with the legal and regulatory factors. The political authorities are charged with the mandate of enacting policies and regulations. In this respect, the political authority enacts legislations that directly impact on the performance of the laundry business. Some of such regulations are the tax compliance act, employment laws, consumer protection regulations, among others factors. Political good will is also essential in a business environment as it courage economic development policies with no selfishness of serving personal interests at the expense of the economy (Werner, 2012). Through its political influence and authorities, the government may enact trade regulation policies that may either protect infant industries like laundry from stiff competition or reduction trade restrictions, thereby, increasing the competitiveness of the industry.
Economic Forces
Since all the businesses operate within a given economic environment, there is no doubt that the surrounding economic forces significantly influence the business and economic operations of the enterprise. The economic forces include the monetary and fiscal policies, inflation rates, currency exchange rates, level of employment, economic growth capacity, and the cost of capital (Goh, 2009). The pace of economic activities dictates the growth potentials of companies and different economic sectors. These economic factors further affect the cost of doing business within such surroundings. Unfortunately, these being external forces, the business have no power over them and must accept them as given. It is, therefore, to the business to manipulate their internal economic policies to break-even. The prevailing economic conditions have a considerable influence on the success of the laundry businesses, like the rest of business enterprises.
Although economic stability is critical for economic expansion and growth, the economic conditions are never stable and keep fluctuating. For instance, economic and financial instability characterized by global financial and economic contagions lowers the productive capacity of the laundry sector. During such unfavorable economic conditions, businesses incur losses that limit their capacity to increase their investment expenditures. Inflation, on the other hand, that represents persistent rise in the prices of commodities and services in the economy, increases the operation cost associated with the productions of the laundry products and services (Goh, 2009). To break-even, companies have no choice, but to increase their charges for the services offered or products sold. High level of inflation further impacts on the consumer and government expenditures. From the customers’ point of view, inflations represent an increase in the cost of living that is accompanied by a significant fall in the consumer expenditure following a fall in the purchasing powers.
High rate of interest also affect cost of borrowing and access to financial resources. At high level of interest, the cost of acquiring financial resources and debts is relatively expensive and unaffordable to majority of risk averse business persons. Therefore, even the laundry business personalities have insufficient capital to boost their investment cannot access these financial resources since they are very costly and unsustainable in the long-run. In addition, economic growth and development is essential for growth and expansion of business operations. Economic growth is accompanied by increased level of income that increases the disposable income and the corresponding marginal propensity to consume and invest (Goh, 2009). Such economic growth will potentially improve the profitability and growth capacity of the leading sectors of the economy including the laundry industry.
Technological Factors
Following globalization and trade liberalization and the fasting changing consumer preferences and demands, technology is inevitable. Technological factors entail innovations, inventions, and technological development, advancement in mobile and business information technology, and the introduction of e-commerce and internet trading (Information Resources Management Association, & Khosrowpour, 2011). Technology goes beyond internet and digital related areas as it also covers product developments, modern manufacturing, logistics, and distribution methods. These modern technologies increase the quality and level of outputs of the firm. In this digital era and the ever becoming more competitive business environment, firms (including those operating in the laundry industry) have no alternative other than conforming to the technical and technological demands of the economy.
In order to have a competitive advantage (CA) of its competitors in the industry, products and services innovation is necessary. Firms in the laundry industry must advance new competitive strategies with the potential of increasing their competitiveness, otherwise their future is dim. Through the use of modern technology, firms have developed sustainable competitive strategies such as products and services integration purposely to match the fasting changing consumer taste and preferences. One of the methods that have gained popularity in the business industry is product branding, packing, and differentiations. Moreover, modern technology improves the quality of products and services offered by laundry firms. Technology allows for faster, effective, and efficient production of goods and service delivery. This, therefore, reduces possible wastages that would have accrued from manual operations. The reduction in wastes reduces the production and operational costs (Information Resources Management Association, & Khosrowpour, 2011). Besides, technological integration allows companies and manufacturers to design products and services that target specific needs and demand of potential customers. Through technology, product diversity is achievable, hence, the diverse needs of customers is sufficiently addressed, thereby strengthening the brand image of the company among the consumers.
Strategies of Overcoming Political Threats and Capitalizing on Opportunities
Overcoming political risks is very important to a business entity. Although challenging, sound and sustainable political and institutional policies are essential for economic growth and development. Overcoming political threats calls for the enactment and establishment of strong democratic and institution policies that gives no room for political instability. Secondly, the business entity should develop its contingency plans in case the feared political risks happen (Werner, 2012). This could be done by enlisting the possible direct and indirect political factor that would potentially affect the operations of the laundry sector. This followed by the creation of political risk assessment tool. The business should capitalized on favorable political opportunities and establish strong political links with the regulatory bodies.
Strategies of Overcoming Economic Threats and Taking advantage of Economic Conditions
Overcoming the economic threats and forces calls for establishing strong monetary and macro-economic policies aimed at protecting the business enterprise for any adverse economic or financial loss. Some of these policies include curbing inflationary pressure and establishing sound and effective monetary policies that protect the key monetary institutions. The monetary authority should ensure interest stability and also keep inflation within the manageable level (Goh, 2009). The business community should take advantage of the prevailing economic conditions by exploiting the avenue of maximizing on returns during business supportive economic circumstances.
Strategies of Overcoming Technological Threats and Taking Advantage of Opportunities
Given the role of technology in the future success and progress of the laundry business, overcoming technologically related threats is fundamental. One of method of overcoming technological threats is by investing more on technological innovation and inventions. Through increased technological investment, firms will realized technological integration and upgrade their production technologies to match the needs and demands of their clients. This would enhance their competitiveness in the industry with the rest of the firms without fear of losing out in the industry. The company or firm should devise sustainable strategies of taking advantage of the technological growth and advancements. This is achievable by use the new technologies in producing products and services at relatively lower costs and increasing their level of production together with increasing their rate of production and services delivery (Information Resources Management Association, & Khosrowpour, 2011).
Conclusion
In conclusion, the political, economic, and technological are external forces that have a significant contribution to the performance of a business entity in any industry. Economic prosperity and growth is only possible through creation of sustainable macro-economic institutions and favorable political environment that is characterized by peace and political stability. In additional, technological advancement and integration is ideal for industrial growth and development. Therefore, the three external forces must be properly managed in order to stimulate economic growth and business expansion.
References
Goh, P. L. W. (2009). Economic factors in small business performance. McGraw.
Information Resources Management Association., & Khosrowpour, M. (2011). Managing information technology in a global environment. Hershey, PA: Idea Group Publishing.
Miles, D. A. (2011). Risk factors and business models: Understanding the five forces of entrepreneurial risk and the causes of business failure. Boca Raton: Dissertation.com.
Werner, T. (2012). Public forces and private politics in American big business. Cambridge: Cambridge University Press.
