PESTEL Analysis of Quick Service Restaurant
Introduction
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PART A: Undertake an analysis of the environment in which your organization (or one with which you are familiar) is operating and identify the key economic and social factors within that environment. Explain how these are likely to impact on the business strategy and operations of the organization.
There is no organization that exists in isolation without an environmental interaction[AM1] . Strategy planning in any organization will enhance competitive advantage in which the external environment needs to be well understood. To do this, there are different factors that affect business strategy and operations of an organization, though it depends on the organization and the environment they are. Since organizations are operating in a very dynamic environment, they will need to address issues relating to competitive strategy in order for them to gain competitive advantage and to maximize profit. According to Worthington et al (2004[AM2] ,) the external environment comprises of spatially diverse influences, economic, political, legal, and social, technological which affects business activity in different ways and impact on all aspects of the transformation process of the law. Worthington et al (2004) also stated that the environment of a business organization is the totality of forces, factors, or institutions which are potentially relevant in carrying out of company’s operations; hence relationship between a business organization and its surroundings is very symbolic in nature. That is, it is two way relationships – environment interacts with organisation and vice versa.
Environment analysis is an evaluation of the possible effects of an external forces and conditions on an organisation’s survival and growth strategies[AM3] . PESTEL (Political, Economic, Socio-Cultural, Technological, Environmental and Legal factors) is one of the major techniques for identifying factors which impact on business organisation; some of which p more than one element – example, a mix of economic and environment though, external forces require an organisation’s response as well.
Mr Biggs is one of the Quick Service Restaurant and a subsidiary of United African Company (UAC) Nigeria Plc; a very successful quick service restaurant business in sub region Africa, established in August 1986, provides the largest fast food restaurants retailers in West African countries that has 180 branches in Nigeria and have spread over to Accra, Ghana with many branches in 2003.
In scanning the environment in which Mr Biggs operate, the economic and social factors will be closely looked at.
Boddy (2008) highlighted economic factors as having serious effect on the business organisation, some of the key factors being interest rate, inflation, recession, corporation tax, VAT, GDP.
“Inflation is the persistent increase in the general prices of goods and services” Wyplosz and Burda, (1997). BOGOF(Buy-one-Get-One-Free) which is one of the strategies used by Mr Biggs, can be affected by inflation. Inflation aid in increasing suppliers costs, which inversely push up the prices of Mr Biggs products hence. This trend will in turn affect the general operations of Mr Biggs in sales, in that sales will drop due to the increase in prices.
Also, interest rate which is the rate at which company pays on their loans, affects the business. Generally, the higher the interest rate, the lower the company borrows.This will affect the operations and strategy of Mr Biggs in that the cash flow needed to augment the day-to-day activities like paying wages, restocking etc, will be affected to a large extent. The company strategy will alsochange to securing a low cost supplier, which normally implies compromising the quality of products supplied.
High unemployment rate can have adverse effects on Mr Biggs sales for it will affect the purchasing power of the buyers and thereby reduce the effective demands for their products. Mr Biggs strategy will be forced to switch to strategies that will encourage repeated purchases from existing customers. This will mean management absorbing the cost of most operations; hence this will have a multiplier effect of reducing profit.
These economic factors are largely outside the control of the company, but their outcome on performances and the marketing mix can be profound.
SOCIAL FACTORS
These includes population changes, aging population, differences in national culture and health issues. People are more conscious of health; their consumption attitude is changing drastically for they have freewill to choose. Mr Biggs, being a socially responsible member of the community in Africa; they support schools – both secondary and tertiary institutions in their social programs. Everyday of the year, Mr Biggs always make something exciting happening because of their creating relationships. By supporting young people in schools, it create more social intimacy between Mr Biggs and the students for younger people tends to visit the restaurants more than the aged ones because they have higher consumption power than the older ones. It is on record that Mr Biggs gives out bursary to poor students from Primary, Secondary, Polytechnic and University levels. It[AM4] is noted, that younger people have power and more access to online shopping than the older ones. The types of food demand by the consumers are constantly changing because they are more aware of health issues. Mr Biggs believes in creating relationships, they usually do something to improve the lives of their immediate communities every week or every other day even if it is just a ‘smile that we put on somebody’s face’; this start from their security officers to the top managers. The
Core purpose and values define how Mr Biggs do its business, how they value and treat their customers. Their responsibilities are well defined and perfected to meet the needs of communities where their business operates and strengthened the relationship between them and the environment in which their business strategy continues to deliver strong results. Their philosophy of “have a bigg experience” expresses these wide-ranging responsibilities. They recognise their impact on society and are trying to sustain the benefit they bring to society. Whatever they do, the principle of treating ‘customers as a king’ is highly imbibed in Mr Biggs for they put their customers at the heart of everything they do.
Conclusively, Armstrong, (2008[AM5] ) opined “companies need to be good to customers to gain sustainability which means environmental and community stewardship. It also needs permission from government to operate within the confines and the organisation would get a good status”. Beyond reasonable doubt, Mr Biggs satisfy the opinion of Armstrong school of thought as it has recorded tremendous growth and remarkable success through its total commitment to the satisfaction of its teeming customers. This is helping this organisation in no small way as it is becoming the main issue in Nigeria and Sub-Sahara Africa in Quick Service Restaurant Business. Mr Biggs has been enjoining good patronage in its environment and they have been giving back to the society that shot them to limelight in form of their welfare package. By this, it will strengthen and sustain the relationship between Mr Biggs and its environment.
Part B: Explain how the business strategy and operations might change in order to respond effectively to the factors that you have outlined in Part A.
Drucker, (1999[AM6] ) defines strategy as “…purpose is to enable an organisation to achieve its desired results in an unpredictable environment. For strategy allows an organisation to be purposefully opportunistic.” Business strategy encourages great success and develops to monitor the progress of an organisation by taking into consideration the customer’s interest as well as shareholders and employees. In the view of Burnes, (2009[AM7] ) “Strategy is an act of maintaining the position of sustainable competitive advantage in the environment where business organisation operates.” Strategic approach to be deployed by organisation is based on the managerial choice within their limit in terms of national, organisational and environmental factors. An organisation that is profit oriented can only achieved their aims when they motivate and stimulate their employees. This will help them to perform more effectively and efficiently towards achieving profitability and organisational goals and objectives. Most organisations are trying to improve and review strategy frequently as there is a rising need if organisation would want to gain competitive advantage.
In Nigeria, the environment is very unstable and in year 2003; Mr Biggs embark on franchising in order to respond effectively to the volatile environment where it is to enhance its stipulated goals. Besides they continually updated their strategy to compete with their competitors and based on their quality stuff, it makes it more outstanding among their competitors like Tantalizer Restaurant and The Chicken Restaurant. Strategy could be initiated to enhance business breakthrough in a very volatile business competitive environment. In this regard, Mr Biggs involves modern machines by the dictates of technological evolution to meet challenges that may come up as a result of change in customers taste.
It is very important for a company to have an idea of its competitors’ strengths and weaknesses together with their characteristics. This will help them in planning and updating their strategies – for instance, making their products a unique one such as differentiation in pricing and products design. Most organisations used to compare their prices with their competitors, having comparism site like “Go Compare” make it easier for customers to make their choice. Where organisations expand externally, vertical integration needs to be encouraged. Mr Biggs is planning for expansion to two different countries in 2011 including UK as per on-going discussion with UK firms (Businessday, Dec.14 2010). Rodger and Mac Culloch, (2001) opined that “firms develop through internal growth and in appropriate circumstances.” This is true because organisation is in total control of all units of production and they can do substantially without borrowing with the support and cooperation of all departments. This will bring a sustainable help during unexpected high interest rates. This will increase and controls the business profit margins, reduce cost of transportation and improve the supply channel and also creates barriers to competitors. Mr Biggs, being the biggest fast food business in Nigeria and Sub-Sahara Africa embarking on rebranding process aimed at delivery as much they spend on increased value to its customers (Businessday, 2010). Mr Biggs was voted as the most trusted fast food brand in year 2010 in Nigeria due to their excellent strategies and performances.
Strategy Reassessment – Mullins (2003) is of the view that “in today’s fast-changing world, strategy reassessment may happen much more quickly, as competitive and technological developments cause firms to quickly change their entire strategies and business models.” This is based on periodic assessment either quarterly or annually whereby companies evaluate their performances in line with the external environment. Mr Biggs used to reassess their performances in intervals, for instance, they are trying as much as possible to involve new marketing strategy that is in tune with the dynamic nature of business globally.
Additionally, Porter (1980) in Boddy, (2008) identified three types of generic strategies among which Mr Biggs adopted by focusing on corporate customers, families, adults and children by fully involve in schools social functions and every children from kindergarten to higher institutions, for example Universities. Little kids identify their big ‘B’ logo and forces their parents to the restaurant all the time. Apart from this, they utilises differentiation strategy by standardize their products and make it of higher quality than their competitors. Though some customers are not bothering about how much they spend on quality, but all they really concern about is to get quality products. Mr Biggs always produce quality foods that meet International Standard Organisation requirement for human consumption – that are hygienic and nourishing to promote good and healthy living.
In conclusion, business strategy, operations plus activities in Mr Biggs are being affected by austerity measure, government budget review – that affect the purchasing power of consumers; population change, different national culture, government budget review, change in consumers’ taste, modernisation (technological evolution). These require the business to change their strategies in order to take advantage of the opportunity and respond to the challenges within the business environment. An articulated and integrated strategy must be in continuous use and part of it be preserved as this will go a long way in providing organisation with the treasure of strategy and reserved techniques that germane to the enhancement of the organisational goals and the environment, (Emphasis mine).
REFERENCES
Armstrong, M. (2008) Strategic Human Resources Management: A Guide to Action. 4th Edition. London and Philadelphia.
Boddy, D. (2008). Management: An Introduction. 4th Edition. Harlow: Financial- Times Prentice Hall.
Burnes, B. (2009). Managing Change: A strategic Approach to organisational Dynamics. 5th Edition. Harlow: Financial Times-Prentice Hall.
Businessday (2010): How Mr Bigg’s Nigeria plans to compete in European market. Retrieved from www.businessdayonline.com/NG/index….
Drucker, P.F (1999) Management Challenges for the 21st Century. Great Britain: Elsevier Butterworth-Heinemann.
http://www.mrbiggsonline.com/
Pettinger, R. and Frith R. (2000) Mastering Organisational Behaviour. London: Macmillan Press Ltd.
Rodger B.J and Mac Culloch, A. (2001) Competition Law and Policy in the EC and UK. London and Sydney: Second Edition: Cavendish Publishing Limited.
Mullins, Walker, and Boyd. (2003) Marketing. 3rd Edition. Berkshire: McGraw-Hill.
Worthington, I., Briton, C. and Rees, A. (2004) Economics for Business: Blending Theory in Practice. UK: 2nd Edition. Prentice Hall.
Wyplosz, C. and Burda, M. (1997). Macroeconomic. 2nd Edition. Oxford University Press.
There is no organisation that exists in isolation without an environmental interaction[AM1] . Strategy planning in any organisation will enhance competitive advantage in which the external environment needs to be well understood. To do this, there are different factors that affect business strategy and operations of an organisation, though it depends on the organisation and the environment they are. Since organisations are operating in a very dynamic environment, they will need to address issues relating to competitive strategy in order for them to gain competitive advantage and to maximise profit. According to Worthington et al (2004[AM2] ,) the external environment comprises of spatially diverse influences, economic, political, legal, and social, technological which affects business activity in different ways and impact on all aspects of the transformation process of the law. Worthington et al (2004) also stated that the environment of a business organisation is the totality of forces, factors, or institutions which are potentially relevant in carrying out of company’s operations; hence relationship between a business organisation and its surroundings is very symbolic in nature. That is, it is two way relationships – environment interacts with organisation and vice versa.
Environment analysis is an evaluation of the possible effects of an external forces and conditions on an organisation’s survival and growth strategies[AM3] . PESTEL (Political, Economic, Socio-Cultural, Technological, Environmental and Legal factors) is one of the major techniques for identifying factors which impact on business organisation; some of which p more than one element – example, a mix of economic and environment though, external forces require an organisation’s response as well.
Mr Biggs is one of the Quick Service Restaurant and a subsidiary of United African Company (UAC) Nigeria Plc; a very successful quick service restaurant business in sub region Africa, established in August 1986, provides the largest fast food restaurants retailers in West African countries that has 180 branches in Nigeria and have spread over to Accra, Ghana with many branches in 2003.
In scanning the environment in which Mr Biggs operate, the economic and social factors will be closely looked at.
Boddy (2008) highlighted economic factors as having serious effect on the business organisation, some of the key factors being interest rate, inflation, recession, corporation tax, VAT, GDP.
“Inflation is the persistent increase in the general prices of goods and services” Wyplosz and Burda, (1997). BOGOF(Buy-one-Get-One-Free) which is one of the strategies used by Mr Biggs, can be affected by inflation. Inflation aid in increasing suppliers costs, which inversely push up the prices of Mr Biggs products hence. This trend will in turn affect the general operations of Mr Biggs in sales, in that sales will drop due to the increase in prices.
Also, interest rate which is the rate at which company pays on their loans, affects the business. Generally, the higher the interest rate, the lower the company borrows.This will affect the operations and strategy of Mr Biggs in that the cash flow needed to augment the day-to-day activities like paying wages, restocking etc, will be affected to a large extent. The company strategy will alsochange to securing a low cost supplier, which normally implies compromising the quality of products supplied.
High unemployment rate can have adverse effects on Mr Biggs sales for it will affect the purchasing power of the buyers and thereby reduce the effective demands for their products. Mr Biggs strategy will be forced to switch to strategies that will encourage repeated purchases from existing customers. This will mean management absorbing the cost of most operations; hence this will have a multiplier effect of reducing profit.
These economic factors are largely outside the control of the company, but their outcome on performances and the marketing mix can be profound.
SOCIAL FACTORS – These includes population changes, aging population, differences in national culture and health issues. People are more conscious of health; their consumption attitude is changing drastically for they have freewill to choose. Mr Biggs, being a socially responsible member of the community in Africa; they support schools – both secondary and tertiary institutions in their social programs. Everyday of the year, Mr Biggs always make something exciting happening because of their creating relationships. By supporting young people in schools, it create more social intimacy between Mr Biggs and the students for younger people tends to visit the restaurants more than the aged ones because they have higher consumption power than the older ones. It is on record that Mr Biggs gives out bursary to poor students from Primary, Secondary, Polytechnic and University levels. It[AM4] is noted, that younger people have power and more access to online shopping than the older ones. The types of food demand by the consumers are constantly changing because they are more aware of health issues. Mr Biggs believes in creating relationships, they usually do something to improve the lives of their immediate communities every week or every other day even if it is just a ‘smile that we put on somebody’s face’; this start from their security officers to the top managers. The
Core purpose and values define how Mr Biggs do its business, how they value and treat their customers. Their responsibilities are well defined and perfected to meet the needs of communities where their business operates and strengthened the relationship between them and the environment in which their business strategy continues to deliver strong results. Their philosophy of “have a bigg experience” expresses these wide-ranging responsibilities. They recognise their impact on society and are trying to sustain the benefit they bring to society. Whatever they do, the principle of treating ‘customers as a king’ is highly imbibed in Mr Biggs for they put their customers at the heart of everything they do.
Conclusively, Armstrong, (2008[AM5] ) opined “companies need to be good to customers to gain sustainability which means environmental and community stewardship. It also needs permission from government to operate within the confines and the organisation would get a good status”. Beyond reasonable doubt, Mr Biggs satisfy the opinion of Armstrong school of thought as it has recorded tremendous growth and remarkable success through its total commitment to the satisfaction of its teeming customers. This is helping this organisation in no small way as it is becoming the main issue in Nigeria and Sub-Sahara Africa in Quick Service Restaurant Business. Mr Biggs has been enjoining good patronage in its environment and they have been giving back to the society that shot them to limelight in form of their welfare package. By this, it will strengthen and sustain the relationship between Mr Biggs and its environment.
Part B: Explain how the business strategy and operations might change in order to respond effectively to the factors that you have outlined in Part A.
Drucker, (1999[AM6] ) defines strategy as “…purpose is to enable an organisation to achieve its desired results in an unpredictable environment. For strategy allows an organisation to be purposefully opportunistic.” Business strategy encourages great success and develops to monitor the progress of an organisation by taking into consideration the customer’s interest as well as shareholders and employees. In the view of Burnes, (2009[AM7] ) “Strategy is an act of maintaining the position of sustainable competitive advantage in the environment where business organisation operates.” Strategic approach to be deployed by organisation is based on the managerial choice within their limit in terms of national, organisational and environmental factors. An organisation that is profit oriented can only achieved their aims when they motivate and stimulate their employees. This will help them to perform more effectively and efficiently towards achieving profitability and organisational goals and objectives. Most organisations are trying to improve and review strategy frequently as there is a rising need if organisation would want to gain competitive advantage.
In Nigeria, the environment is very unstable and in year 2003; Mr Biggs embark on franchising in order to respond effectively to the volatile environment where it is to enhance its stipulated goals. Besides they continually updated their strategy to compete with their competitors and based on their quality stuff, it makes it more outstanding among their competitors like Tantalizer Restaurant and The Chicken Restaurant. Strategy could be initiated to enhance business breakthrough in a very volatile business competitive environment. In this regard, Mr Biggs involves modern machines by the dictates of technological evolution to meet challenges that may come up as a result of change in customers taste.
It is very important for a company to have an idea of its competitors’ strengths and weaknesses together with their characteristics. This will help them in planning and updating their strategies – for instance, making their products a unique one such as differentiation in pricing and products design. Most organisations used to compare their prices with their competitors, having comparism site like “Go Compare” make it easier for customers to make their choice. Where organisations expand externally, vertical integration needs to be encouraged. Mr Biggs is planning for expansion to two different countries in 2011 including UK as per on-going discussion with UK firms (Businessday, Dec.14 2010). Rodger and Mac Culloch, (2001) opined that “firms develop through internal growth and in appropriate circumstances.” This is true because organisation is in total control of all units of production and they can do substantially without borrowing with the support and cooperation of all departments. This will bring a sustainable help during unexpected high interest rates. This will increase and controls the business profit margins, reduce cost of transportation and improve the supply channel and also creates barriers to competitors. Mr Biggs, being the biggest fast food business in Nigeria and Sub-Sahara Africa embarking on rebranding process aimed at delivery as much they spend on increased value to its customers (Businessday, 2010). Mr Biggs was voted as the most trusted fast food brand in year 2010 in Nigeria due to their excellent strategies and performances.
Strategy Reassessment – Mullins (2003) is of the view that “in today’s fast-changing world, strategy reassessment may happen much more quickly, as competitive and technological developments cause firms to quickly change their entire strategies and business models.” This is based on periodic assessment either quarterly or annually whereby companies evaluate their performances in line with the external environment. Mr Biggs used to reassess their performances in intervals, for instance, they are trying as much as possible to involve new marketing strategy that is in tune with the dynamic nature of business globally.
Additionally, Porter (1980) in Boddy, (2008) identified three types of generic strategies among which Mr Biggs adopted by focusing on corporate customers, families, adults and children by fully involve in schools social functions and every children from kindergarten to higher institutions, for example Universities. Little kids identify their big ‘B’ logo and forces their parents to the restaurant all the time. Apart from this, they utilises differentiation strategy by standardize their products and make it of higher quality than their competitors. Though some customers are not bothering about how much they spend on quality, but all they really concern about is to get quality products. Mr Biggs always produce quality foods that meet International Standard Organisation requirement for human consumption – that are hygienic and nourishing to promote good and healthy living.
In conclusion, business strategy, operations plus activities in Mr Biggs are being affected by austerity measure, government budget review – that affect the purchasing power of consumers; population change, different national culture, government budget review, change in consumers’ taste, modernisation (technological evolution). These require the business to change their strategies in order to take advantage of the opportunity and respond to the challenges within the business environment. An articulated and integrated strategy must be in continuous use and part of it be preserved as this will go a long way in providing organisation with the treasure of strategy and reserved techniques that germane to the enhancement of the organisational goals and the environment, (Emphasis mine).
REFERENCES
Armstrong, M. (2008) Strategic Human Resources Management: A Guide to Action. 4th Edition. London and Philadelphia.
Boddy, D. (2008). Management: An Introduction. 4th Edition. Harlow: Financial- Times Prentice Hall.
Burnes, B. (2009). Managing Change: A strategic Approach to organisational Dynamics. 5th Edition. Harlow: Financial Times-Prentice Hall.
Businessday (2010): How Mr Bigg’s Nigeria plans to compete in European market. Retrieved from www.businessdayonline.com/NG/index….
Drucker, P.F (1999) Management Challenges for the 21st Century. Great Britain: Elsevier Butterworth-Heinemann.
http://www.mrbiggsonline.com/
Pettinger, R. and Frith R. (2000) Mastering Organisational Behaviour. London: Macmillan Press Ltd.
Rodger B.J and Mac Culloch, A. (2001) Competition Law and Policy in the EC and UK. London and Sydney: Second Edition: Cavendish Publishing Limited.
Mullins, Walker, and Boyd. (2003) Marketing. 3rd Edition. Berkshire: McGraw-Hill.
Worthington, I., Briton, C. and Rees, A. (2004) Economics for Business: Blending Theory in Practice. UK: 2nd Edition. Prentice Hall.
Wyplosz, C. and Burda, M. (1997). Macroeconomic. 2nd Edition. Oxford University Press.
[AM1]This seems to be a bold statement with no theoretical underpinning. You always need to back up your statements with what an author(s) have said.
[AM2]
[AM3]
[AM4]You will need to support your statements with evidence from an article, journal or so please
[AM5]Page no please
[AM6]Page no
[AM7]Page no????
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