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Advantages and Disadvantages of PESTEL analysis

Discuss about the Business Strategy and Marketing Channels.

Chick-fil-A has decided to set up business in UK market. As a marketing consultant, an environment study needs to be conducted to highlight the pros and cons for the same. The report does a quick analysis on three of the external environment factors to check whether the market would prove a potential to an already successful Chick-fill-A in UK. It will hence assess the current scenario and make recommendations to create a plan of action.

To check the current market potential for Chick-fil-A, external environment analysis was conducted and the factors were weighed in favour of Chick-fil-A to set up in UK. It is for this reason that a detailed PESTEL analysis was conducted. PESTEL analysis is usually the model analysis to be conducted to gauge the environment factors outside the direct control of an organization. The analysis is an audit of the factors which further assists in making strategic decisions. For the purpose of project, three factors such as sociological, technological and environmental were considered for now to research. PESTEL was conducted for UK as macro environment.

PESTEL is an acronym for Political, Economic, Social, Technological, Environmental and Legal study. It gives a snapshot view of the situations, in terms of external environment and which are out of direct control of the organization; the business might be in. Such an analysis is favourable to conduct to make sure the strategies to conduct business in a new territory by a business firm or to understand the market (Wilson, 2010). Not only that, even in changing market dimension, it is advisable to use this strategic tool periodically to help pick up new trends and make changes in strategy of conducting business. This is because, a change in environment may become a critical situation for the survival of business or may have severe consequences if modifications are not made accordingly.

Advantages

Disadvantages

Simple, easy to use framework

Users tend to simplify the already simplified information and may take important highlights lightly

Uses cross functional skills and expertise by different business heads

Organizations deter from conducting the analysis periodically and do not invest in it

Reduces threats and potential impacts from the environment

Too much information sends users to confusion, stress and ‘paralysis by analysis’ forgetting the objective of the tool

Encourages careful planning and developmental execution of strategic decisions

The process is time consuming and requires investment, organizations leave out key people, hence the analysis as well as the decisions may not turn out to be effective as there are missing perspectives

Acts as a tool to identify new opportunities and utilize them

Owing to the cost and the time required for analysis access to strategic information may be restricted

Helps understand the implications of entering new markets

Data uncovered is mostly assumptions, use is subjective

PESTEL analysis results do not prove to be fruitful in the long run. Also, only considering the macro environment to analyse the threats or barriers to setting up business is not useful or complete (Steenkamp, 2017). United Kingdom stands out to be one of the largest economies in EU. It is the strongest in social welfare and standard of living. It has a very strong democratic system, however, owing to them following a Westminster system in politics, equal distribution of power between, departments led by prime minister, their judiciary and bicameral legislature often causes friction. Then, there is the concern of rising debt of the Government. With respect to Chick-fil-A, analysis of environment was conducted for Social, Technology and Environmental factors to see the feasibility of the brand to set up business in UK.

Social, Technological, and Environmental Factors in the UK Market

Some of the social factors that were taken into consideration are:

  1. Distribution of age
  2. Population growth
  3. Employment percentage
  4. Income levels
  5. Education/career level
  6. Religious inclinations
  7. Cultural/social conventions

UK has high social standards which make it an overall all around better environment to conducting business. UK also has strong education infrastructure in place.  It has history supporting the fact and that even today it attracts students from across the globe. It has around 170 universities and higher education institutes, including 3 ranking among the world’s top 3. Its healthcare proves to be one of the most successful social welfare venture. Owing to evolving technology and private sector involvement, it has become a strong opportunity point for UK (Key et al. 2017, p. 593). UK has high public expenditure on this front and owing to that it maintains efficiency and quality as well. Some of the challenges are child poverty and high dependency ratio. Government has made a target to eliminate child poverty by 2020 and in the last decade has taken up considerable measures to reduce the percentage. Today, it stands 16th in world rankings amongst OECD countries. Owing to the recent global recession, income levels have further dropped and the dependency ratio has increased. UK is tackling the matter with managed ‘immigration’ tools (Ganguly et al. 2017, p. 1750016).

The positives of this environment are:

  1. Many Free public services such as medical etc.
  2. Densely populated
  3. Cosmopolitan environment, a good mix of migrants ensure there is cheap workforce available
  4. Standard of living is high

Negatives of this environment are:

  1. Dependency ratio is high and increasing
  2. Some migrant and ethnic groups create unrest
  3. Education costs are steep
  4. UK faces challenges though in maintaining the levels of public services it has to offer. Scarcity of funds makes it difficult for it to maintain the services


For Chick-fil-A, this means that this may be a fair to conducive environment for conducting business as:

  1. Cheap workforce would be available as staff for conducting business
  2. Since standard of living is high, people may not face issues with pricing
  3. With a mixed ethnicity in population, tastes of people drawn towards the products and services of Chick-fil-A may turn out good with may be moderation in its menu to suit the taste of UK people
  4. Population is high means there may be wide market to cater to
  5. Since the education costs are high, staff education requirements for hiring may have to be relaxed at higher positions
  6. Training exercises need to be more rigorous
  7. Dependency ratio higher could mean more children or senior in a family, there may be budget constraints when opting for the product, some product offering prices may need to be customized

In terms of technological factor, it could be divided into manufacturing and infrastructure. Some of the activities under technological factors play a big role in gaining or losing market share such as:

  1. Automation
  2. Cost savings
  3. Incentives
  4. Improved process and end product
  5. Measures to cut costs and improved flexibility

Changes in technological factors could change the way competitors conduct business, affects pricing and rate at which goods or services are being offered. It is highly capable of impacting business on a big scale (Johansson and Kask, 2017, p.331).  UK is a MEDC (More Economically Developed Country) and has access to good technology. However, a point to be noted is that there is a considerable decline in number of patent applications. This may be pointing towards declining technological competitiveness for UK in future. Currently, UK is picking up in adoption and R&D of lot of new upcoming technologies like nanotechnology, space tourism, renewable energy etc. despite being high on investment and uncertainty filled returns, persistent companies may find a breakthrough (Keegan and Rowley, 2017, p. 127). So, there is tremendous scope for new industries owing to a strong technology base prevalent in the nation.

  1. Innovation skills
  2. Good quality standards
  3. Advanced in Science and Technology
  4. Intellectual Property Rights laws are in place and effectively managed by the Govt.
  5. Internal competition stimulates growth

Potential Marketing Channels for Chick-fil-A

For Chick-fil-A the positives and the negatives point towards an advantage it has owing to its origin in US. It has access to advanced technology than UK and its quality and innovation standards are better. Owing to this, it stands a good chance for conducting business in UK (Nath and Mahajan, 2017, p.99). Also, social media has given business across the globe a new edge. With the opportunity of free communication with consumers, social media today takes the marketing to a whole new level of transparency. Chick-fil-A has a huge following on social media in US. It requires repeating the strategy, albeit with modification to UK sentiments, and could create a similar engagement with UK (Line and Wang, 2017, p. 127).


In terms of environmental factors, some of the aspects to be considered are:

  1. Environmental & Ecological Regulations
  2. Sustainability
  3. Adverse weather impacts
  4. Carbon footprint policies

It is to be noted that UK has a very strong influence towards environmental issues. UK is a global power in industrialization, with its ties with large many countries, powerful influence on Commonwealth, membership of G8 often obtains commitments from countries not so developed who do not want to forego their ambitions for growth and development in return for protection of environment. However, itself, it faces high levels of pollution, mostly affecting London, Glasgow, Manchester and Birmingham. When talking about renewable energy market, UK has been promising and has shown good CAGR unlike France and Germany, who have been meagre in their performance in this field. Also, the carbon footprint in the country is declining (Helo et al. 2017, p. 38).

Hence to sum up, UK’s current strengths are strong global influence and good track record in implementation of policies while challenge is already high air pollution. One of the future risks on this front is its ability to balance out the economic developments with environment protection policies. Hope is with evolving technological advancements happening in the nation, it may find a balancing point. Also, since the decline in industrial sector, it has already affected the environment by putting less pressure on it. What it could mean for Chick-fil-A is adhering to strict environment protection laws. US already has strict environment protection laws existent to which Chick-fil-A adheres to, moderation on some technicalities may be needed but this does not pose to be a threat to organization (Burford and Chan, 2017, p. 155).

As a management consultant, responsibility covers the thorough analysis of the environment and shed light to vital points that could impact the business of the organization. To start with, post BREXIT, UK negotiation powers are decreased. Like Canada negotiating with US. Europe is still a big part of market for UK (Benyoussef and Zaiem, 2017, p. 337). Brexit means, UK now could have its own negotiations and deals with non-EU countries. UK has a high potential as a market. With its policy of ‘managed migrations’ it is trying its level best to combat high dependency ratio of the country suffering with an aging population. It has a large consumer and B2B base, specifically strong in high technology sectors (Felix et al. 2017, p. 121). Education is fine in UK with its education levels revered across the globe despite being pricey. UK market turns out to be few of the most rewarding and interesting ones. There is high competition in UK and every global start-up has a spot in UK. Entrepreneurs are flocking to London to make best use of its every evolving market. PESTLE analysis of UK as a market seems inadequate by itself (Keegan and Rowley, 2017, p. 451).

The PESTLE analysis audits the environmental factors but the factors are so dynamic and fast changing. It is quite tricky to predict why and how the factors may affect the business. This implies that despite thorough analysis, there could still be level of uncertainty which undermines its very requirement to rule out the uncertainties. Also, it is difficult to just present a simple list of factors that could affect the project. It is necessary to evaluate the impact in detail to point out the implications appropriately. The accuracy of PESTEL analysis is mostly dependent of the details of data collected, how reliable it is and how much accurate. This is a time and cost consuming process (Harker and Bennan, 2017, p. 831).

The analysis conducted for UK turns out to be still incomplete as only three factors were evaluated. Detailed study needs to be conducted and mapped to the organizations current functions to check the value of impact. Chick-fill-A needs to have detailed reports procured even in the three contexts in which the report presents itself (French, 2017, p. 29).  In terms of social impact, UK declining working age group may be of concern however dependency ratio is not an accurate indicator of social age map. Further research requires to be done. Even in terms of environment protection policy, proper mapping requires to be done to understand the additional investment that may be required (Paladines et al. 2017, p. 215) Even in terms of technology, even though UK is far behind US in its innovation, UK has high standards of R&D in it country and it may prove to be beneficial to Chick-fil-A.

Overall, the findings point toward a good business centre potential for Chick-fil-A but whether it should set up business in the country requires further research and digging to know the complete picture and any strategic decision should be put on hold till it is clear (Line and Wang, 2017, p. 127). It is also important to point out that along with analysis of macro environment, Chick-fil-A should also invest to find out shortcomings and opportunities in its internal environment to get a complete picture of the barriers that could present itself while setting up business in UK. A thorough analysis of competitors and actions in the same industry in UK is also recommended.

Some of the recommendations that would like to present to management are:

  1. Owing to a high dependency ratio certain changes in pricing structure could be made
  2. Locations which are low on social unrest history could be picked up for safer environment to conduct business
  3. Since there is a cosmopolitan society and mostly posh lifestyle, targeting public with customized or suitably modified offering in terms of products and services for events could be a great idea
  4. Environment factors need to be checked thoroughly and suitable arrangements if needed needs to be made for lower carbon footprint as the nation is inclined towards innovation and application of renewable energy
  5. Could essentially prove to be a good halt before venturing out into further EU territories as UK is the biggest market in EU
  6. Other analysis, along with PESTEL to be conducted like Porter’s five forces model, STEEP etc.
  7. Internal environment analysis should be conducted by Chick-fil-A
  8. Competitor’s analysis should also be conducted

Conclusion

So, in the end, considering the analysis conducted on 3 factors from the macro environment i.e. technology, social factors and environment policies, the analysis points out towards the following:

Aging population, religious differences and ethic friction are a rising concern, its only advantage is the literacy rate

Amongst other EU member countries, UK, when it was a part of EU fared well and above average among most members in terms of innovation and technology. Post Brexit, effects are still to be noticed but the knowledge remain its capacity. That should act as good brace for Chick-fil-A

Since 90s, UK has fared good in terms of pollution check and handling environmental pressure. This could be one of the good indicators and may or may not pose to be a barrier to entry in market. US already has good and strong federal laws in place for environment protection. Hence, this may not be a new challenge for Chick-fil-A

Reference List

Steenkamp, J.B., 2017. Global Brand Strategy: World-wise Marketing in the Age of Branding. Springer.

Wilson, R.M., 2010. Strategic marketing planning. Routledge.

Benyoussef Zghidi, A. and Zaiem, I., 2017. Service orientation as a strategic marketing tool: The moderating effect of business sector. Competitiveness Review: An International Business Journal, 27(1), pp. 333-367

Burford, M.R. and Chan, K., 2017. Refining a strategic marketing course: Is a ‘flip’a good ‘fit’?. Journal of Strategic Marketing, 25(2), pp.152-163.

Felix, R., Rauschnabel, P.A. and Hinsch, C., 2017. Elements of strategic social media marketing: A holistic framework. Journal of Business Research, 70, pp.118-126.

French, J., 2017. The Importance of Segmentation in Social Marketing Strategy. In Segmentation in Social Marketing (pp. 25-40). Springer Singapore.

Ganguly, A., Das, N. and Farr, J.V., 2017. The Role of Marketing Strategies in Successful Disruptive Technologies. International Journal of Innovation and Technology Management, p.1750016.

Harker, M.J. and Bennan, R., 2017. The strategy and tactics of cases in marketing education. In The Customer is NOT Always Right? Marketing Orientationsin a Dynamic Business World (pp. 826-829). Springer, Cham.

Helo, P., Gunasekaran, A. and Rymaszewska, A., 2017. Improving Marketing and Operations Strategy Through Industrial Services. In Designing and Managing Industrial Product-Service Systems (pp. 37-42). Springer International Publishing.

Johansson, T. and Kask, J., 2017. Configurations of business strategy and marketing channels for e-commerce and traditional retail formats: A Qualitative Comparison Analysis (QCA) in sporting goods retailing. Journal of Retailing and Consumer Services, 34, pp.326-333.

Keegan, B.J. and Rowley, J., 2017. Evaluation and decision-making in social media marketing. Management Decision, 55(1), pp. 123-489

Key, M., Clark, T., Feng, S., Ferrell, O.C., Price, L., Stewart, D. and Rajaratnam, D., 2017. Is the Marketing Function Influential or Not? We Should Really Be the Ones to Know!. In Creating Marketing Magic and Innovative Future Marketing Trends (pp. 591-594). Springer, Cham.

Line, N.D. and Wang, Y., 2017. Market-Oriented Destination Marketing: An Operationalization. Journal of Travel Research, 56(1), pp.122-135.

Nath, P. and Mahajan, V., 2017. Shedding light on the CMO revolving door: a study of the antecedents of Chief Marketing Officer turnover. Journal of the Academy of Marketing Science, 45(1), pp.93-118.

Paladines, F., Tandazo, C.G. and Fernández, V.A.M., 2017. The Situation of Digital Strategic Communication in Ecuador and Other Countries in Latin America: The Management of the Community Manager. In Media and Metamedia Management (pp. 213-219). Springer International Publishing.

Chick-fil-A. (2017). Who We Are. Available at: https://www.chick-fil-a.com/About/Who-We-Are [Accessed 1 May 2017].

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