Environmental and Situational analysis

Environmental and Situational analysis

Executive Summary

Evaluating this report brief analysis in regards to Next Plc has been explained where it also descried about the purpose of this report. As the report progressed it also evaluated the PESTCOM analysis, where a brief analysis of the social class of the UK people has been described where the rising multiculturalism of UK offers growth opportunities for the Next Plc.

Similarly, the growing competition in the UK also creates challenges of sustainability for the business organisation. SWOT analysis has been explained based on the PESTCOM analysis where the rising GDP is the opportunity for the organisation whereas the weakness for Next Plc comprises of the rising taxation that fails the management in achieve revenue and maintain business operations.

Introduction

Next Plc is a UK based multinational fashion retailer whose headquarter is situated in Leicestershire. Currently, the firm operates in more than 700 stores and has earned revenue of $ 4,055.5 million(Nextplc, 2019). The market that has been considered for Next Plc is the UK where the firm is looking to expand their reach and generate a high number of profitability.

The purpose of this report is to evaluate the environment of UK business with the help of PESTCOM analysis to determine the suitability of operating Next Plc business within the competitive environment and earn higher revenue.

Moreover, it has also been noticed that this report will also evaluate the situational analysis while constructing SWOT analysis in respect of determining the strengths and weakness of the business organisation.

Section A

Environmental analysis

PESTCOM analysis helps the business organisation in understanding the external business environment based upon which they determine decisions that generate positive growth and success for the establishments(Rothaermel, 2017). PESTCOM analysis also benefits the business enterprise to remain competitive along with identifying the changing needs and demands of the customers so that it earns better brand reputation along with chances of earning higher revenues.

Political:Evaluating the political situation of the UK it has been noticed that the taxation within the country has grown to 20% which makes it difficult for Next Plc to procure raw materials for manufacturing fashion clothing’s(Mintel, 2019).

Moreover, it has also been noticed that fallout between the UK and European Union due to Brexit has infested trade restrictions that have created challenges for Next Plc to sustain their business operations in the European market.

The growing inflation rate of the UK by 2.48% is also creating challenges for Next Plc to sustain their business operations in the UK as because the rising inflation rate has decreased the purchasing capability of consumers in the UK(Statista, 2019).

Economic:Next Plc while operating in the UK business environment has positive growth factor as because the rising GDP of the country by 1.8% is offering opportunities for Next Plc to establish their business and start operating in terms of growing their business and earn profitability(Mintel, 2019).

The rising GDP of the UK also enables Next Plc to source their resources from local suppliers in terms of maintaining a relationship with them and support in the growing local economy. Furthermore, the growing FDI investment from France and Germany of $ 3.5 billion is also enabling the organisation in achieving higher growth and brand reputation.

Social: UK’s society comprises of multiculturalism as because the number of immigrants within the country has increased by 70% from the last 10 years. The rising number of immigrants reflects the change in the UK’s lifestyle where people prefers to accept change and innovative fashion clothing.

The changing lifestyle of UK people lays down growth opportunities for Next Plc. whereas, on the other hand, it has been noticed that the decreasing average annual household income creates challenges for Next Plc in the UK(Mintel, 2019).

The average annual household income of UK is £ 29,400 which has fallen by 1.4% as compared to last year(Gov, 2019). The decreasing average annual household income for the UK people indicates about the poor purchasing capability that increases the risk of business sustainability for Next Plc.

Technological:UK is considered as one of the most technologically advanced nations, due to their growth in AI and machine learning. It has been noticed that the government of the UK has invested £ 2.3 billion towards the R&D of technology so that better technological up-gradation can be generated(Bbc, 2019). The growing technology of UK is offering great opportunities for fashion retail brand like Next Plc to automate their business and achieve better brand success.

Competition:Evaluating the competitive business environment in the UK business environment it has been noticed that the rising and existing competition in the UK is increasing challenges of sustainability for Next Plc.

Tesco, ASDA and Aashni are some of the multinational and SMEs business venture that increases competition for Next Plc in the UK(Mintel, 2019).  The growing competition in the UK business environment for Next Plc also limits their revenue earning and growth capability.

Organisation factors: Evaluating the organizational factors for Next Plc it has been determined that the firm is known for its innovative fashion clothing and large product assortment.

The company has well-trained employees who are focused towards building a relationship with the customers along with understanding their taste and preferences(Nextplc, 2019). Based on the feedback from the customers the firm designs the clothing ranges accordingly so that customer’s attention and loyalty can be gained towards the organisation.

Market: Next Plc is considered as the largest clothing retailer in the United Kingdom after overtaking Marks & Spencer during early 2012. Currently, the firm holds a market share of 7.1% in the UK and is also estimated to grow by 1.3% by the end of 2022(Ft, 2019).

The target market for Next Plc comprises of people between the age group of 25-45 years old. The firm has also considered differentiated marketing strategies to gain competitive advantages along with earning higher profitability.

Section B

Situational analysis

Based on the evaluation of PESTCOM analysis the SWOT analysis for Next Plc has been constructed. SWOT-analysis helps the business organisation in identifying the strengths and weakness of the organisation based upon which decision are being taken.

Strengths:Evaluating the strengths for Next Plc it has been identified that a strong market share of the company enables them to increase their brand reputation along with expanding their market in different parts in the UK.

The differentiated marketing strategy for Next Plc has also helped them in achieving competitive advantages over other competitors by innovating clothing lines and offering different product ranges to the customers(Nextplc, 2019).

Furthermore, the strength for Next Plc also holds upon their competent employees who builds a relationship with the customers and understand their changing needs upon which clothing is being designed so that attention of the customers can be retained towards the organisation.

Weakness:The rising taxation by 20% in the UK is a serious weakness for Next Plc as because it makes it difficult for the business to source their resources and operate their business(Proactiveinvestors, 2019). Moreover, the decreasing purchasing capability of people in the UK due to the rising inflation rate also creates a weakness for the business establishment.

Opportunities:The multiculturalism in the UK creates business opportunities for Next Plc as because it helps them in innovating the product line and offer new clothing ranges to the customers that comply withlatest fashion trends(Theguardian, 2019). The growing GDP and technology of UK also offer growth opportunities for Next Plc to extend their roots and earn profitability.

Threat: The growing competition within the UK business market is a rising threat for the Next Plc because it restricts the growth of the organisation. The growing competition also limits the revenue earning capability of the business organisation(Nextplc, 2019).

Whereas, the decreasing annual average income of the UK people is also a threat to Next Plc because it decreases the purchasing capability of the People in the UK.

Conclusion

This report is based upon Next Plc which is a UK based fashion multination brand, during the introduction section a brief analysis of the company along with the purpose of this study has been described in this report.

PESTCOM analysis has been considered which evaluated about the current business situation in the UK, it has been noticed that the political situation of the country possess challenges as because the rising taxation system creates the risk of sourcing resources and carry out their business operations in the UK business environment.

The growing market share along with rising technology offers growth opportunities for the management. Whereas, based on the PESTCOM analysis SWOT analysis has been laid down which identifies the strengths and weakness of the business organisation.

References

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Ft, 2019. Market share. [Online]
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Gov, 2019. Householddisposableincomeandinequality. [Online]
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Mintel, 2019. British-lifestyles. [Online]
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Mintel, 2019. Uk-consumers-and-the-economic-outlook-quarterly-market-report. [Online]
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Nextplc, 2019. Home. [Online]
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Proactiveinvestors, 2019. Next-still-facing-uk-retail-challenges-amid-weak-consumer-demand-analysts-caution. [Online]
Available at: https://www.proactiveinvestors.co.uk/companies/news/183994/next-still-facing-uk-retail-challenges-amid-weak-consumer-demand-analysts-caution-183994.html
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Rothaermel, F., 2017. Strategic management. London: New York, NY: McGraw-Hill Education.

Statista, 2019. Inflation-rate-in-the-united-kingdom. [Online]
Available at: https://www.statista.com/statistics/270384/inflation-rate-in-the-united-kingdom/
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Theguardian, 2019. Next. [Online]
Available at: https://www.theguardian.com/business/next
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