Analyzing External Factors Of An Organization Using PESTEL Strategies In An Essay.

Corporate Governance and CSR Strategies

A decision-maker ideally needs to implement strategic analytical tools to assess the external factors of an organization. PESTEL can be considered one of the strategic tools that help to analyze the various factors of the external environment (Çitilci and Akbal?k 2020). The government regulations and legislative framework of the national. global market regions shape the political and legal dimensions of the external environment, respectively. The analytical tool can also be leveraged to analyze the shifts in social trends and preferences of the national, global market regions. The analysis helps to ascertain the changing dynamics of consumers within a specific industry. The economic dimension helps to ascertain the future demand, purchasing power, among other factors. The technological dimension helps to ascertain the current trends and best practices in the national, global market. The decision-maker should ideally analyze the overall information obtained from the external environmental analysis to identify expansion opportunities. The entrepreneurial skill of identifying opportunities should be leveraged to create scopes of innovation, cost-efficiency, and profitability, among others. A decision-maker should ideally align the internal resources of the corporation with the identified opportunities in the external environment of an industry. The decision-maker can either choose to strengthen the existing market, develop a new market or products or diversify, based on the strategic choices offered by the external environment (Harini 2020).

Corporate governance can be defined as the range of organizational protocols and regulations that guide the strategic decisions and implementations of a firm (Al Hammadi and Nobanee 2019). CSR can be considered as the range of policies and strategies that indicate the overall accountability of an organization, towards the broader community (Agudelo, Jóhannsdóttir and Davídsdóttir 2019). Corporate governance often acts as an enabling factor of CSR strategies by devising policies that prioritize the ethical obligations of a firm towards the broader community. The example of Starbucks can be referred to in this context. The Corporate governance of the organization emphasizes on sustainability and development of the supply chain members (Al Hammadi and Nobanee 2019). The overall Corporate Governance dimensions had shaped the stakeholder management and CSR strategies of the organization (Starbucks, 2022). The C.A.F.E initiative of the organization had been designed to ensure ethical, transparent procurement of raw materials and reveal the practices to the consumer bases (Starbucks, 2022). Moreover, the C.A.F.E initiative had been designed to develop the overall quality of life of the suppliers. Therefore, in this case, corporate governance enables CSR strategies. However, Corporate Governance can also inhibit CSR strategies by prioritizing short-term profits. For instance, Sainsbury's had been criticized for the lack of concrete CSR strategies to manage plastic waste (Young, 2019). In this case, the priority on profit had limited the scope of implementing CSR strategies.

The market share of the overall national e-grocery segment had increased by more than 5% in the recent past (The National, 2021). The rising demands of the consumers had created pressure on the existing and emerging organizations to streamline pricing, operational, marketing strategies. Therefore, the bargaining power of the customers is high.

Emerging E-grocery Industry in Saudi Arabia

The increase in demand for the e-grocery segment had resulted in the emergence of new organizations with focused expertise. Mezmiz, for instance, had been one of the prominent startup organizations that have specific expertise in the e-grocery segment (Wamda, 2018). The overall threat of new entrants in this industry is quite high.

The e-grocery segment is an emerging industry that had been accommodating a range of emerging organizations. The overall e-commerce sector of Saudi Arabia had increased by 60% during 2020-21 (Arabian Business, 2021). The grocery had also been one of the evolving sectors. Therefore, the threat of substitutes in the e-grocery segment is low shortly.

The suppliers of the e-grocery segment need to have specialized technical knowledge to ensure the consistent infrastructure of the service providers. Moreover, the producers of groceries have to be selected, as per the quality specifications of the organization. Specialized expertise indicates that the overall demand and bargaining power of suppliers is high.

The competitive landscape of the e-grocery segment comprises a range of emerging and established organizations. Nana Direct is one of the prominent and established e-grocery firms that had gained market share in the recent past (Wadhwa, 2019). Emerging firms such as Mezmiz had also gained prominence, in the backdrop of pandemics (Wamda, 2018). The presence of prominent firms had resulted in high rivalry.

Porter’s framework highlights a range of factors that shape the competitive intensity within an industry. Industrial growth can be considered one of the significant factors that shape the overall intensity of competition. The overall industrial growth in the e-grocery segment can be referred to in this context. A recent and relevant survey had revealed that approximately 77% of consumers had switched to the online grocery in 2020 (Wamda, 2018). This factor had shaped the rapid growth of the e-grocery industry in Saudi Arabia in the last 2 years. The growth percentages in UAE and KSA had been 5% and 1.3% respectively during 2020 (Wamda, 2018). The overall industrial growth had accelerated the competitive intensity in the sector by accommodating a range of startups and established organizations. The steady industrial growth will continue to intensify the overall competitive environment of the e-commerce sector in the long run. Emerging organizations will seek to leverage the revenue and market share scopes.

The threat of new entrants is high due to the emerging trends of e-grocery startup organizations. The emerging e-grocery organizations with focused expertise had been supported by robust funding. For instance, Sary, one of the prominent r-grocery startup organizations had received funding of approximately $ 30.5 million through venture capitalists (Alarabiya News 2021). The financial support will further provide the platform for new entrants in the industry. E-grocery segment is an emerging trend that accommodates a range of established and emerging players. The low cost of the online alternative ensures that e-grocery is the more convenient alternative for the consumers. Therefore, the scope of substitutes is low shortly.

The e-grocery industry in Saudi Arabia had witnessed significant growth in the recent past. Statistics reveal that the overall revenue generated through e-commerce had increased by $ 35 million in 2020 (Consultancy-me 2020). The drastic growth had been attributed to the pandemic and the government imposed restrictions to prevent contagion. However, the emergence of e-commerce had shifted the perception of the shoppers as they prefer convenience over traditional bricks-and-mortar shopping. This trend is likely to be sustainable in the long run. Therefore, investment in the e-grocery segment of Saudi Arabia can prove to be lucrative for future business prospects. The consistent demand and shift in consumer perception are the key factors.

References

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The National. (2021). E-grocery shopping in Saudi Arabia thrives as pandemic changes consumer behaviour. Retrieved 7 March 2022, from https://www.thenationalnews.com/business/2021/07/19/e-grocery-shopping-in-saudi-arabia-thrives-as-pandemic-changes-consumer-behaviour/#:~:text=The%20e-grocery%20segment%20is%20expected%20to%20be%20the,that%20e-grocery%20is%20here%20to%20stay%2C%22%20Redseer%20said.

Wadhwa, P. (2019). Mobile grocery platform Nana Direct raises $6.6 million in Series A. Retrieved 7 March 2022, from https://www.sme10x.com/whats-the-deal/mobile-grocery-platform-nana-direct-raises-66-million-in-series-a

Wamda. (2018). Niche e-grocery stores are gaining momentum and this Saudi startup is taking note. Retrieved 7 March 2022, from https://www.wamda.com/2018/03/niche-e-grocery-stores-gaining-momentum-saudi-startup-taking-note#:~:text=This%20startup%20is%20in%20the%20loop%20Mezmiz%2C%20a,e-stores%2C%20it%20specializes%20in%20healthy%20and%20fresh%20products.

Young, S. (2019). Greenpeace criticises Sainsbury's for failing to reduce plastic waste. Retrieved 7 March 2022, from https://www.independent.co.uk/life-style/greenpeace-sainsburys-plastic-waste-pollution-uk-supermarkets-a8845001.html