Question

Topic: Student Questions

Pestel Analysis For Retail

Posted by Anonymous on 1/10/2010 at 2:43 AM ET 250 Points
I'm doing an assignment on "Emerging Themes" where I'm supposed to pick an industry/sector of my choice and critically asses ONE of the MACRO themes ans ONE of the MESO themes. I have to Justify my choice and inter link the two themes.

Since sustainability is HUGE in the west and just taking off in Asia - I was thinking of taking the Environment factor - as the MACRO and changing consumer Behavior as the MESO theme. I can talk a lot on how the consumers are becoming more aware and involved with the world, and because of their global knowledge they are setting higher standards for themselves and I could talk of how there is a potentially a trend for then to become "Green" consumers.

I could also talk about the steps that company's like cargills and Keels are likely to take to counter these emerging trends like implementing strategies like the triple bottom line and becoming more sustainable.

what I don't get and i cant seem to get my head around is that how the "ENVIRONMENT" factor is affecting the retail industry? :/ I just don't know how to start..... specifically climate change! - thats what I'm supposed to discuss about. and I know that practically every thing - starting from production, to packaging to distribution to storage energy - it all affects the climate and should be looked into but could you just please elaborate on how it effects the retailers?
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  • Posted by steven.alker on 1/10/2010 at 3:04 PM Member
    Wow, a student question which follows all our rules - It should be in the student category but what the heck, you deserve an answer. It's not a short one and I'm sure that some colleagues with expertise in this area will want to chuck in their bit. Please give me a day or so and then if necessary hassle me. I'm following your question with interest.

    Steve Alker
    Xspirt
  • Posted on 1/11/2010 at 2:27 AM Author
    Hi Steve - I'm new to this site. I posted this question out of shear desperation, as I have to submit my assignment on the 28th of Jan and I need some help. Next time I'll look out for the student category :)

    Thank you for your response!

    Nathalie
  • Posted by steven.alker on 1/12/2010 at 1:26 PM Member
    Dear Nathalie

    No problem – it’s the cut and paste jobs of the question followed by a one line demand for assistance that gets people’s goat – especially with 340,000 subscribers reading them and possibly wanting assistance themselves. Question, your interpretation and where you’ve got to date, then we’ll pile in and guide – not do it for someone! I need to post this in several bits as we have a word limit for answers usually to stop diatribes. In this case its just a big answer!

    There are several issues on the retail front and the Environment and a few pro and counter lobbies which you will find with vested interests in both areas. A favourite in the USA is that man-made global warming is a conspiracy and that it is playing into the hands of big business, the banks, government, Satan and so on. This is a useful counter populist view for commentators to take, and it pays them handsomely (Think what a shock-jock earns) but unless the retailer were to be certain that their target customers shared this opinion, they would be nuts to espouse it! It represents a minority opinion backed by a minority of the science but it is popular in certain areas such as gun-sports, some energy sectors and most red-neck product sectors.

    The majority opinion is therefore usually supported as a reason to favour a particular brand and a particular retailer, which as you probably accepts makes getting a marketing message over, is an obvious benefit. Minority opinion views can be catered for without alienating the minority, but the retailer has to be careful not to put off the majority of people who might buy their products. Thus Ferrari has no problem with upsetting people who can only afford a Chevette but they won’t offend them because of the bad publicity it might incur.

    Equally they can’t get away from the fact that their 190mph beauties only do 11 mpg when driven that way but they can’t alienate the Toyota Prius brigade because it includes most of Tinsel-Town and the pro-sports industry who have their own carefully crafted public images and therefore their own market position to look after.

    I.e. they want Tom Cruise to buy a Ferrari as well as the Prius but they don’t want to make him look like an environmental monster for his luxury choice. After all, he has millions of followers who read about what he gets up to in the gossip sheets etc. Prius on the other hand can boast away that stars use hybrids as there ain’t much of an argument against it and the stars don’t get hurt by having their own environmental credentials talked about by Toyotas advertising agency. Toyota’s rational is that some of the fans will buy a Prius. Ferrari’s rational is that one of Tom’s mates will buy a 430!

    The same arguments apply to retail operations, but here you are looking at the suppliers and thus the brands and the retailers themselves.

    The key aspect seems to be the acceptability of Corporate Environmental Responsibility as a reason to buy one brand over another or even to buy one brand from a particular retailer rather than from another with a lower threshold of responsible behaviour.

    The argument in the marketing plan is many fold but let’s start off with the marketing plan and some cold commercial calculations. I’m sure that directors of retail corporations get a really good feeling by “Doing the right thing” and saving the planet, but unless there is a commercial logic to it they are not serving their shareholders.

    Thankfully for those who believe in this type of corporate responsibility, there is a strong market logic. Through the media, eco-warriors, academic studies and general environmental alarmism plus some good old capitalistic opportunism, the majority of the population is on the side of environmental responsibility in terms of pollution, fair trading with third world countries and most importantly with the probability that global warming is man made and that we need to do something about it.

    So by incurring the costs needed to buy into sustainability programmes and carbon-footprint programmes, such as carbon offset along with the things which are not optional such as government levies and trading in the casino which is called carbon trading they can calculate that their customers will approve of their actions, that the media will give them publicity and that people will somewhat prefer their brand or their store over other’s who don’t do this. This produces additional sales in the marketing plan and a decent profit in the business plan. In other wise, it makes sense to shareholders, is appealing to customers and heck, it even makes the VP’s feel a bit better!

    The same type of cold financial calculation can be carried out on any environmental factor. The calculation and the justification is not trivial but it works. If you take the example of the manufacturer Unilever, they have an Operational Research department of 220 mathematicians, mostly with PhD’s who are working on just this. In the past they have optimised sales and marketing activities and logistics for other variables. Now they are doing it for environmental sale-variables.

    If they do it and boast about it (Usually about 18 months after they’ve started giving them a commercial advantage followed by fantastic publicity which boosts their brand and leaves competitors scrambling to catch up) you can bet that Wall Mart and Sears and so on are also doing it but not talking about it as much unless you read the Linear Programming and Operational research journals. If we spend so much on reducing our carbon footprint, if we invest in recycling for white goods and if we are publically a bit fairer in trading with coco producers, will the marketing benefits add to our turnover and our profit. If the answer is yes then it is a no-brainer – do it.

    You might think that this is all rather impersonal and irresponsible – what about the planet? What about the big issues. It is, but it is not the responsibility of a retailer to try to make Copenhagen work – that is the work of Government. But because their customers seem to like the idea all the board have to do is to calculate if it is likely to be profitable.

    Best wishes and more to follow

    Steve Alker
    Xspirt
  • Posted by steven.alker on 1/12/2010 at 1:28 PM Member
    Dear Nathalie

    The coda!

    You might think that all the preceding stuff rather impersonal and irresponsible – what about the planet? What about the big issues. It is, but it is not the responsibility of a retailer to try to make Copenhagen work – that is the work of Government. But because their customers seem to like the idea all the board have to do is to calculate if it is likely to be profitable.

    What about altruistic environments attitudes – shouldn’t we be encouraging corporations to do more for the sake of it. Possibly, but only if it is sustainable within the particular company. Tesco’s will do no-one any favours by being very green and going bust! Even the saintly Al Gore had at least a couple of agenda’s. Yes his environmental message is from the heart and he didn’t even attempt to sell the rights to “An Inconvenient Truth” up-front for $50 Million which he certainly could have done. Instead, he has minted it and raised his profile at the same time on the back of it. Cynics suggest that he’s made $3 Billion out of environmental industry investments. So what? Apart from being a silly figure what does the environment gain by Al Gore going bust trying to tell us something. And if as a consequence, you are more likely to buy from a store which shouts about its environmental credentials, who is the loser. The customer pays a bit more, they buy a bit more and the retailer pays out for things that only tangentially impact upon their operation but the customers like it.

    I hope that some of these ideas are of use – some are not marketing issues but are really micro and macro economic issues about the role of corporations in a market and the free market versus being told what to do but there is no need to let either politics or sentiment get in the way. As Unilever and P&G have proved time after time, you can do all the arguments through the bottom line!

    Best wishes


    Steve Alker
    Xspirt

    PS I really love it when Students over here ask me if I think that Global Warming is man made and real and if it is, can the world survive? I say that the science seems to support the argument about manmade global warming and that the counter view seems to be proposed by people with strong opinions and little ability in maths or basic science. As to “Can the world survive” I say, “Sure it can, it’s us that are potentially screwed. The planet can get on perfectly well without us. It is we who need the planet, not it that needs us.”

  • Posted by Gary Bloomer on 1/12/2010 at 10:18 PM Accepted
    Dear nshiyani,

    Might it be the other way around? Might it be how the retail industry is impacting the environment?

    One of the first "green retailers" was the Body Shop; they embraced EVERYTHING about being environmentally correct.

    Since then, all kinds of things have happened: stores are charging for plastic bags, there are more reusable bags being sold, people are more aware of their "carbon footprint", and a good deal else.

    From environmentally friendly buildings to bio diesel; from sustained crops hemp and cotton to the creation of climate friendly rooftops and self fueled, zero energy HVAC systems, little by little many companies are making the environment part of their business:

    PNC Bank is a leading green builder: https://www.pnccommunityinvolvement.com/environment.htm
    https://www2.prnewswire.com/cgi-bin/stories.pl?ACCT=109&STORY=/www/story/11...

    BP Oil: https://www.bp.com/sectionbodycopy.do?categoryId=6931&contentId=7051661

    Then there are the following links that might prove helpful for you:

    https://cbey.research.yale.edu/

    https://retailindustry.about.com/od/retailbestpractices/a/green_retailing_g...

    https://www.ssaandco.com/knowledge_image/4a0b3c784cbad.pdf

    https://www.retailasiaonline.com/magazine/archive/2009/mag2009-11_story08.h...

    https://retail-industry.blogspot.com/

    https://retailindustry.about.com/od/retailbestpractices/a/greenretailingpow...

    https://www.nashvillewrapscommunity.com/blog/?p=47

    https://www.greenforretail.com/

    https://heartofgreen.typepad.com/heart_of_green/2009/02/sf-gift-fair-green-...

    https://www.earthshare.org/greening-business.html?gclid=CMKAvOSwoJ8CFZAN5Qo...

    https://www.accenture.com/Global/Services/By_Industry/Retail/R_and_I/Retail...

    https://greenretailingnews.blogspot.com/2009/10/tesco-strikes-leed-gold-in-...

    There's more of course, but ask how business impacts the environment, ask how business gives back, how it reduces its impact and how businesses worldwide are using greener, healthier ways of improving not only their products, but people lives as well.

    So, how does all this effects retailers? It gives them social significance; it gives them a tribal connection, it implies that they care and that they understand.

    When retailers give these kinds of messages those messages connect to deeply enmeshed sensors in our DNA. Smart retailers know that the family, the clan, the tribe as CONCEPTS are vitally important.

    Lock into those feelings and convince people that your understand them and support them and they tend to become more loyal to your particular way of doing business.

    At heart, this is what branding is all about: making and then keeping
    and then reinforcing the notion of a promise of a need met or of a desire fulfilled, in essence, of searing a mark into the mind, of trapping it in long term memory.

    As a retailer, if you do this right, you're golden. But if you screw it up, it's good night Vienna!

    I hope this helps. Good luck to you.

    Gary Bloomer
    Wilmington, DE, USA
  • Posted on 1/13/2010 at 2:18 AM Author
    Thank you so much for your response Stevea. Really appreciate it! I need time to actually digest all that you've written :)
  • Posted on 1/13/2010 at 2:22 AM Author
    Hi Gary, Thank you for your Response - The thing is that I need to identify a Emerging Theme in the food retail sector and justify my choice - so as to justify my MACRO choice of "Environment" I need to explain how it affects the Food retail Industry.

    Thank you!
  • Posted on 1/14/2010 at 1:21 AM Author
    Hi Marcus - That is a very interesting emerging theme!

    I have been checking out the Marks&Spencer website and reading on the investments Tesco is making becoming more sustainable, I realized how far behind Sri Lanka is. ( I'm Sri Lankan ) and with the growing internet access and global travel I can see how consumers in the future can become more demanding for "Ethically" produced goods. How ever that is just considering around 4 - 6% of the population of Sri Lanka. ( the Urban population ) The rest of the country is still so far behind - just happy with their farming and fishing and so on. ( ...and who has not even heard of global warming)

    There are a few big Food retailers that are going "green" and are focusing on a triple bottom line strategy - how ever that being their action I'm more keen to know what is the driving force behind that action? - I'm guessing you don't have much info on Sri Lanka but would appreciate any input you have!

    Thank you so much!



  • Posted by steven.alker on 1/14/2010 at 11:43 AM Accepted
    Dear Nathalie

    I’ve got some reservations about Gary’s points on retailers changing consumer’s attitudes. Yes, The Body Shop was incredibly successful basing its initial products on not being animal tested, but they already knew it was a popular view in the UK and America as consumer’s loathed the testing of cosmetics on animals – a fact which was brought to the attention of the public by lobby groups and the media. The body shop hitched a ride as they did with many environmental causes they have espoused. Where they have set the agenda, they have been the proposers of a minority environmental proposition where the controversy and popularity generated will make sales because people like me will buy.

    I still think that the retailers set out to get us do the things you mention because they already know that we kind of want to do them and won’t mind paying for them, like buying carrier bags and that a little extra push will be good for our attitudes, their sales and their profits.

    I can’t imagine Tesco taking an environmental issue and then creating a campaign to make people like it enough to buy something from them rather than from J Sainsbury! There probably are examples which you could cite which show exactly this, but I doubt if they are in the majority and I also doubt that they apply to food.

    For example, in the UK, whilst our houses were “earning” more than we were, quite a lot of the population decided to pay twice the price for organic food because the Soil Association did a very good job in proposing good reasons for buying it. It contained less pesticide, less fungicide, was sustainable and so on. A lot of people agreed with this, but much of the marketing was based on scare-science and emotive issues such a battery farming, rather than the health benefits it started with. At one point “Organic” was promoted as “Free from Chemicals” which is amusing as all food is a chemical, as is water and as is the packaging and the air in the pack! Sales fell off a cliff when the recession set in, but not amongst people who had genuine concerns about the environment, animal welfare and harmful chemical residues (Rather than chemicals) in food. The lost sales were Yummy Mummies whose mortgage had gone up and who suddenly abandoned the socially acceptable aspects of organic food along with the statement it made about their buying power and income.

    As for the market in Sri Lanka, I think that if you look at the variables Gary and everyone else has mentioned and ask yourself the same questions of your own retailers and your own consumers, you will get many of the answers you seek. If the exact research does not exist, which in Sri Lanka, it may well not, then use other research in your market and other food retail research in other national markets and ask yourself, “Is it valid to make a comparison in my country?” If you come to a conclusion based on a comparison, either say so and hold that the opinion is your view or find some academic research on the matter and cite it as a standard reference stating that it is your view that it is applicable in your country. In business studies, how academic you get in the use of peer-reviewed citable and referenced material depends on the framework for your project. In science, I can’t quote anything which has not previously been proven by someone else if I want to use it to support a novel argument in a paper. In marketing you don’t usually have to do that kind of thing!

    What I mean, is that if the people of Sri Lanka don’t give a toss about global warming or environmentally sustainable, non polluted food made in a manner which doesn’t bugger up the water supplies, then no retailer in their right mind would try to charge them a premium in order to make them change their minds and you don’t need to carry out any primary research to know this.

    But most populations are not like that. For political, moral, health and religious reasons there are all sorts of things they disapprove of or won’t do. These feelings or predispositions and opinions are usually known through political surveys. Retailers, including those in your country need to know what those concerns are and what the lobbies for them are pushing for in the press. Then they can market to the environmental issues which consumers feel to be important.

    It’s hard to see Global Warming being terribly important to the Sri Lankan housewife but they have strong moral views and their politicians will campaign on them if they are locally relevant. It’s hard to sell food on “carbon footprint reduction” as a USP, but I guess that they don’t want their grandchildren in coastal towns to drown and that they would probably like to see those same grandchildren not living in a desert further inland. If that kind of thing is not a concern then no retailer is going to make it one.

    The environment does matter in emerging economies, but it must already be a nationally important issue to make it a food marketing issue. China must now have the most uncontaminated milk in the world with the best packaging and advertising espousing the fact. It’s a pity that 30,000 kids had to suffer by some shysters bulking up milk with a poison which made it look good whilst not having to tell their customers.

    Steve Alker
    Xspirt
  • Posted on 1/22/2010 at 8:44 PM Accepted
    hi nshiyani,

    i'm also attempting this task, ur from srilanka ryt?
    what is this jan 28th deadline?

    nywy with your question and the given answers there is nothing more for me to add but be careful when contextualizing these facts to cargills keels scenario.

    Cheers!

    P:S: if you want a conversation drop me a mail @ udana.cim@gmail.com
  • Posted by jumly.sheriff on 7/17/2010 at 11:41 AM Member
    Hi Every one

    I'm in a process of doing a journal article assignment which must analyse a emerging MACRO theme and a MESO theme (in a particular industry )

    i have selected the topic " Mobile advertising impact over telecom sector's networking revenue " as a emerging trend where keen to show that mobile advertising is booming the network revenue of telecom in the concentrated market when it acts as a value chain for mobile advertising

    1. could anyone help me on tips for me contextualize these to topics for the article

    2.what are the changes and trends likely to bring to marketing & business practices such as triple bottom line

    3. what kind of implication which can bring to the industry

    looking forward for a help on these 3 topics addressed

    cheers
    Jumly
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