Short “Pest” or “Pestle” analysis Essay
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This short ‘PEST’ or ‘PESTLE’ analysis will be carried out on the supermarket sector and discount retailers in Northern Ireland with the majority of the analysis being carried out specifically on Lidl. A PESTLE analysis will be ideal for Lidl in terms of effective market research and will help them come to decide how much they should expand given the fact that they have plans to do so particularly in the UK over the next 12 months. The PESTLE analysis directly and comprehensively evaluates the industry’s external environment elements in order to identify the overall available opportunities and dangers of specific procedures.
It cannot be undermined how crucial effective market research is for companies such as Lidl who are constantly looking to gain a competitive advantage in the supermarket sector. Specifically, a PESTLE analysis mainly highlights the political, economic, social, technological, legal and environmental variables of the company and, if carried out efficiently, can be instrumental in terms of helping Lidl to improve their overall profit margins through expansion and their profits in terms of their overall net income.
From the opening of its first ever store in the early 1970’s in Germany, the Lidl brand has grown a great deal to become one of Europe\’s leading food retailers, a growth beyond their wildest expectations. Lidl first opened its doors in the UK in 1994 and since then they have went from strength to strength as they now have a grand total of over 650 stores and ten distribution centres across Great Britain employing some 20,000 people. Lidl has just recently just beaten close competitor Waitrose to become the UK’s seventh largest supermarket chain, according to the latest grocery market share figures (BBC, 2017). Lidl are currently drawing on a net income of £5.8 billion for 2017 rising some £800 million thus growing their overall market share by 0.6 percentage points to 5%. Aswell as being active in the retail business, Lidl also carry out a number of services such as DVD rental (launched in 2009) and bakery services which have been an excellent addition since their introduction in 2012.
Through expansion, in what can be considered an oligopolistic market, companies like Lidl are hoping to get ever closer to the ‘big 4’ who are currently Tesco, Sainsbury’s, Asda and Morrisons. Companies such as Lidl, Aldi and Waitrose have thrived after the economic crash of 2007-08 as consumer behaviour since then has led us to believe that the trend of low prices for good quality products is a popular one and has led to a shift to the right in demand for the products and services of such companies.
The first aspect of this PESTLE analysis is the political aspect. With over 10,000 stores in Europe alone, Lidl have the tricky task of managing many unique political factors that affect their everyday business operations. One of these major political components that heavily influences the day to day running of the organisation comes in the form of natural assurance laws. These specific laws compel companies to comply with all the government requirements. Another imperative law that Lidl must abide by is the UK government vitality advance for innovative work of retail products. With the sheer political anarchy that the UK is currently going through at this moment in time Brexit negotiations and the legal trading aspects surrounding it are another external component that Lidl must carefully juggle. According to Mintel, following the Brexit vote, political and economic volatility and uncertainty are widespread across consumer markets with the BPC market which Lidl operate in no exception. While changes to laws and regulations will affect business operations and brand practices, consumers already report that they are feeling the impact of the UK’s divorce with the EU. This is likely to result in BPC companies facing challenges following the changes in legislations, while consumers are likely to feel the impact of Brexit on their disposable income. With potentially limited spending money the BPC market might note fluctuations in retail value across various segments. As a result of the instability, over 40% of Irish consumers are unsure how Brexit will affect their finances, with a quarter of NI consumers worrying about the future. Only a fifth of NI consumers believe that their personal situation may improve.
In addition Lidl uses economic internal and external factors.