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Name : Arun Rasika K

Class : 2nd MBA “A”

1. Imagine yourself as the CEO of a large firm in an industry in which you are
interested. Please (1) identify major trends in the general environment, and
(2) analyze their impact on the firm. (Use Internet resources.)

Industry : Retailing
Firm : Future Group of Kishore Biyani

Major Trends in Retailing Environment:

In essence, retail change has been driven in the past by the interaction of
consumer, retailer and government: in the 1990s the role of technology is
increasingly important as an agent of change.

To understand the retail environment it is important to glean a knowledge


of the inter-relationships between the factor. we will consider how changes in the
consumer environment – demographic, socio-economic and lifestyle trends – have
impacted upon retail change. At the same time, government has been a major
agent of change. Retailers are regulated by an array of laws and ordinances which
impinge on their operations. This can be on licences to operate, which goods to
sell, hours of operation, health and safety matters through to planning ordinances
on where to locate the business. The types of merchandise on sale and the formats
developed are a response to such interactions; however, retailers do influence
consumers and government on product choice and format development. For
example, the UK slowdown of the introduction of GM foods has been driven by
retailers’ refusal to stock these products.

The role of technology is not discussed in length here as it embraces most


chapters of the book, especially those on logistics and Internet retailing. It should
be acknowledged here, however, that technology should be seen in its widest
sense. For the consumer, technology has freed up time as capital goods replace
labour in the home. Communications in both a physical and information sense
have given access to wider geographical markets. Retailers embrace the IT
revolution through sharing data with their suppliers and communicating with their
customers, especially those with loyalty card schemes. New technologies have
been applied throughout the supply chain to ensure that products can be
designed/tested, manufactured and distributed through supply chains quicker and
at a lower cost than ever before.
Markets and companies have grown due to the links between innovation
and technology. Take the case of chilled foods in UK supermarkets. Marks &
Spencer’s links with its main supplier, Northern Foods, goes back to a chance
meeting of the current chairman, Christopher Hawkins, with an M&S executive on
a flight to Northern Ireland. Initial dairy lines were introduced into M&S stores
but a main catalyst for growth was the harnessing of BOC gases technology to
distribute chilled and frozen products from warehouse to store. In response to the
demand for ready meals, two businesses, Northern Foods and BOC Transhield ,
grew to supply M&S and latterly other supermarket chains with these product
lines. It is perhaps appropriate that we now turn to the factors which have
promoted change in the consumer environment. file from
http://www.downloadoCode=&partnerID=&content=story&storyID=381

"Today's retail enterprises are facing new challenges that are unlike those of any
other era," said Ray Wang, partner at Altimeter Group. "Businesses and
individuals are driving technology adoption, not the organization's CIO." But
while consumer technology change is accelerating, retail enterprise technology is
stuck in the mud: "Antiquated technology impedes effective organization and
process change," noted Wang. So retailers have to learn what they need to know
about using today's technology to their advantage. They need to experiment and
innovate, "even if it hurts," according to Wang. "Retail companies need to fail
faster, and then succeed from there."

Wang identified five major trends that are reshaping the retail technology
landscape:

1)Mobility
2)SocialNetworking
3) Cloud computing: SaaS offers a number of agility benefits, such as the ability
to test applications without worrying about high investment costs and the ability to
flex capacity up and down to deal with busy seasons.
4) Analytics and game theory: The popular Facebook game Farmville is really
about "a set of incentives to take care of your 'farm,'" said Wang, noting that these
types of games can serve as testing labs for what motivates people. "Gaming
theory can be applied to how retailers incent people to buy things and what offers
to present them with," he said.
5) Video and unified communications: The combination of a deluge of data and
more visual fluency (see the phenomenal growth of YouTube) means video and
other visual representations such as pictograms, heat maps and bubble maps will
become the fastest-growing way of communicating. "There's an acceleration of
unified communications convergence that can be applied to learning, selling,
employee training, etc." said Wang.

The changing consumer

At the annual ECR Europe conference in May 2001, Maureen Johnson of


The Store presented a picture of the changing consumer in the year 2015. ‘Older,
more affluent, insecure, discerning, more demanding, better educated and time
pressured’ were some of the terms used to describe the European consumer of
tomorrow. Of course some, if not all, of these attributes can be applied to many
consumers today. Translating these attributes into shopping behaviours, Johnson
went on to argue that consumers would be less likely to shop in the ‘planned’
conventional method with an increase in more remote shopping and social, special
or immediate modes for fixed store retailing.

In another session at the same conference, Alexander Littner of the Boston


Consulting Group showed that US consumers were spending less of their
disposable income on retailing and fast-moving consumer goods in general than
other categories such as healthcare, insurance, housing and utilities. This is a trend
that has been apparent in the UK for decades as consumers find other avenues for
their hard-earned cash rather than spending it on shopping. In order to discuss the
changing consumer in more depth we shall look at:
_ demographic trends
_ socio-economic trends
_ lifestyle trends

Impact of trends in Retailing Industry:

The retail industry is beginning to show modest signs of recovery.


However, consumers remain cautious. Consumer confidence is improving, yet
overall trust in companies continues to decline while the expectations all
stakeholders have of companies continue to rise. Amid this complex and ever-
changing environment, the industry needs to better understand and address the
expectations all key stakeholders have in order to protect, enhance and track
reputation over time, as well as quantify its real business impact on the industry
and its individual businesses.
The Asia Pacific Rim region offers bright prospects for retailers and
manufacturers. The large population, sound economic growth, investment in
infrastructure and rising incomes all contribute to a positive and improving trading
environment. Even in China, where the accessibility of markets was traditionally
limited by the political regime, the move towards a socialist market economy is
under way. This has led to a host of new retailing opportunities. However, while
the prospects for companies seeking to expand their horizons are encouraging,
those seeking to capitalize on these Pacific Rim opportunities must respect the
inherent diversity of the region.

Economically powerful Japan with the region's highest gross domestic


product (GDP) is, to the outside observer, an obvious contrast to China's relatively
backward but fast-growing economy. The distinctions between the newly
industrialized economies of Hong Kong, Singapore, South Korea and Taiwan
which have established a powerful trading presence within the region may appear
to be less extreme, but are nonetheless also important. The newly industrialized
economies themselves contrast with Malaysia, Thailand, Indonesia and the
Philippines, where investment in infrastructure and a move to the cities is
fundamentally altering lifestyles. The particular characteristics, both large and
small, of all these countries affect trading conditions and must be taken into
consideration by businesses and retailers wishing to operate in the region.

While the Pacific Rim is characterized by such contrasts, there are also
some important trends which apply more generally to the region. The first of these
trends is a gradual improvement in the standard of living, with consumers having
more purchasing power than before. As incomes rise, so do expectations, leading
to increasing demand for a wide range of consumer items. The second trend relates
to a change in family structure, with more women working, marrying later and
having fewer children. Extended families, which previously may have shared a
home, are increasingly splitting into more than one unit. The third trend is a move
towards urbanization, accompanied by a change in the types of jobs which people
do. Put together, these changes are resulting in massive infrastructure
development. With this development come new jobs, better incomes and greater
demands for housing, cars, consumer products, food and clothing. As families gear
up for their new urban lifestyles, even the types of products that they need and
want are changing.

Political changes are also altering the characteristics of the marketplace. For
example, the return of Hong Kong to China in 1997 and China's transition to a
socialist market economy are likely to have far-reaching effects for retailers of all
kinds. In order to take advantage of the region's emerging opportunities, local
retailers and manufacturers must keep a close view on the rapidly changing
economic, political and social patterns in the region.
This review is about the the impact of these aspects of the wider marketing
environment on retailing in the Asia Pacific Rim and uses a series of short case
studies to illustrate the impact of the key economic, demographic, political and
sociocultural factors. Material for the case studies is sourced from a range of
academic, business and statistical publications. (For the purposes of this paper, the
Asia Pacific Rim region includes China, the newly industrialized economies
(NIEs) of Singapore, Hong Kong, South Korea, Taiwan, Japan and the developing
countries Indonesia, Malaysia, the Philippines and Thailand.)

The marketing environment

The marketing environment is a set of forces which either directly or


indirectly influences a business' acquisitions of inputs or generation of outputs.
Kotler[1] defines the marketing environment as "...the actors and forces that affect
the company's ability to develop and maintain successful transactions and
relationships with its target customers. It comprises 'non-controllable' actors and
forces that impact on the company's market and marketing practice." When the
marketing environment changes, companies face uncertainty, threats and
opportunities. Retailers wishing to capitalize on such opportunities must be ready
to predict likely outcomes and act quickly. According to Dibb et al.[2], "Marketing
managers who fail to recognize changes in environmental forces leave their firms
unprepared to capitalize on marketing opportunities or to cope with threats created
by changes in the environment". Retailers involved with consumer goods need to
be particularly vigilant as these products are particularly sensitive to
environmental factors. The marketing environment is sometimes broken down into
two components: the micro- and macro-environment. The micro-environment
concerns aspects which are close to the individual business and over which the
business has some control. This paper is concerned with the macro-environment,
sometimes also called the wider marketing environment, consisting of those
elements which are external to the business and have a broader effect on it. These
include economic, demographic, political, legal, technological, social and cultural
factors.

Economic factors

Economic conditions in the Asia Pacific region are affected by a range of


economic factors which have an impact on spending power and behaviour. In
recent times the region has enjoyed considerable growth and has remained
relatively unaffected by the 1990s global recession. The figures for 1993 indicate a
total GDP of almost US$5.8 trillion, with a further 40 per cent growth expected by
the end of the century. The full extent of this growth will be subject to factors such
as the effects of Japanese recession the significant increase in China's economy
and a slight slowing of the economies in Hong Kong, Singapore and Taiwan.
As shown in Table I, not all countries are likely to contribute equally to this
growth. Of the countries reviewed in this paper, the highest growth is expected
from Thailand and Malaysia. This is due to an influx of direct foreign investment
as labour-intensive businesses migrate from Japan and the NIEs to] cheaper areas.
For such businesses the attractions of Thailand and Malaysia are obvious: both
countries enjoy relatively low levels of inflation, cheap labour, and Malaysia is
particularly rich in natural energy resources.

As reforms take shape, China is also experiencing a rapid increase in its


economy, with predictions suggesting that double figure growth rates will
continue. In the run-up to the hand-over of power in Hong Kong, a three-way
economic relationship between China, Hong Kong and Taiwan has been emerging.
The size of the combined populations of these countries means that this
relationship is bound to impact significantly on other trading conditions in the
region. These trends are illustrated by the GDP figures and trends shown in Table
I.

Meanwhile, the Japanese economy has suffered as a result of world recession.


Since 1991, Japan has seen a decline in private investment accompanied by a fall
in consumption and profits. However, despite these setbacks, Japan remains the
second biggest global economy, with a GDP per capita of US$33,821 in 1993[4].
Here again, the diversity of economic outlook is starkly illustrated. Table II gives
further details by summarizing some key economic factors currently affecting …

1. Select an industry of your choice. Identify the changes that are occurring in
it and its wider environment (using tools like the PESTLE categories to
direct your search). You may try the following sites.

Industry : Retailing

A retail marketing environment consists of the external actors and forces that
affect the retailers ability to develop and maintain successful transactions and
relationships with its target customers. We can distinguish between the retailers’
micro environment and macro environment. The macro environment consists of
legal, social, economic and technological forces.
Demographic Environment

The first environmental fact of interest to retailers is population because


people make up markets. Retailers are keenly interested in the size of the
population, its geographical distribution, density, mobility trends, age distribution
and social ethnic and religious structure. Demographic structure is seldom static
for long and changes in its composition often test the residency of a marketing
firm. Further, these changes influence the behaviour of consumers which, in turn,
will have a direct impact in the retailer’s business. The ripples of these changes
will reach the organisation forcing it to alter or amend the existing marketing
practices in vogue. In short, Retail firms, will have to continuously measure the
changes – qualitative as well as quantitative – that are taking place in the
population structure. To avoid negative consequences brought on by active
consumer groups, a retailer must communicate with consumers, anticipate
problems, respond to complaints and make sure that the firm operates properly.

Political/Legal Enviornment

Retail marketing decisions are substantially impacted by developments in


the political / legal environment. This environment is composed of laws,
government agencies and pressure groups that influence and constrain various
organisations and individuals in society. Legislation affecting retail business has
steadily increased over the years. The legislation has a number of purposes. The
first is to protect from each others. So laws are passed to prevent unfair
competition. The second purpose of Government regulation is to protect
consumers from unfair retail practices. Some firms, if left alone, would adulterate
their products, tell lies in their advertising, deceive through their packages and bait
through their prices. Unfair consumer practices have been defined and are
enforced by various agencies. The third purpose of Government Regulation is to
protect the larger interest of society against unbridled business behaviour. The
retail marketing executive needs a good working knowledge of the major laws
protecting competition consumers and the larger interests of society.

Social/Cultural Enviornment

In recent years, the concept of social responsibility has entered into the
marketing literature as an alternative to the marketing concept. The implication of
socially responsible marketing is that retail firms should take the lead in
eliminating socially harmful products such as cigarettes and other harmful drugs
etc. There are innumerable pressure groups such as consumer activists, social
workers, mass media, professional groups and others who impose restrictions on
marketing process and its impact may be felt by retailers in doing their business.
The society that people grow up in shapes their basic beliefs, values and norms.
People live in different parts of the country may have different cultural values –
which has to be analysed by retail business people/firm. This will help them to
reorient their strategy to fulfill the demands of their consumers. Retail marketers
have a keen interest in anticipating cultural shifts in order to spot new marketing
opportunities and threats. Several firms such as ORG, MARG etc. offer social /
cultural forecasts in this connection. For example, marketers of foods, exercise
equipment and so on will want to cater to this trend with appropriate products and
communication appeals.

Economic Enviornment

Retail markets consist of purchasing power as well as people. Total


purchasing power is a function of current income, prices, savings and credit
availability. Marketers should be cognizant of major trends in the economic
environment. The changes in economic conditions can have destructive impacts on
business plans of a firm. Economic forecasters looking ahead through the next
decade are likely to find their predictions clouded by the recurrent themes of
shortages, rising costs and up and down business cycles. These changes in
economic conditions provide marketers with new challenges and threats. How
effectively these challenges could be converted into opportunities depend on well-
thought-out marketing programmes and strategies. Further, no economy is free
from the tendency of variation between boom and depression, whether it is a free
economy or controlled economy.

In any event, economic swings affect marketing activity, because they


affect purchasing power. Retail marketing firms are susceptible to economic
conditions, both directly and through the medium of market place. For example,
the cost of all inputs positively respond to upward swing of economic condition –
which will affect the output price and consequently affect the sales. The effect on
consumers also influences the marketing through changes in consumer habits. This
is an indirect influence. For example, in the event of increase in prices, consumers
often curtail or postpone their expenditures. Conversely, during time of fall in
prices, consumers are much less conscious of small price differences and would
buy luxury and shopping products.

Technological Enviornment

The most dramatic force shaping people’s lives is technology. Advances in


technology are an important factor which affect detail marketers in two ways.
First, they are totally unpredictable and secondly, adoption of new technology
often is prevented by constraints imposed by internal and external resources. At
the same time, it should be remembered that technological progress creates new
avenues of opportunity and also poses threat for individual firms. Technology has
helped retailers to measure the products with modern weighing machines. Earlier,
they have used balances which could not measure the merchandise correctly. With
the help of weighing machine, products can be measured with the result customer
satisfaction can be enhanced. In the following areas where technology have been
extensively used.

• Packing of the products


• Printing the name of the shop on the product visibly
• Modern refrigerators where merchandise can be used for a long time and
• Billing.

Technological change faces opposition from one group of people-telling that it


may lead to retrenchment of employees. But in the long run, this argument may
not sustain, retail marketers need to understand the changing technological
environment and how new technologies can serve human needs. They need to
work closely with research and development people to encourage more consumer
oriented research. The retail marketers must be alert to the negative aspects of any
innovation that might harm the users and create consumer distrust and opposition

Strengths and Opportunities to Improve Reputation

Meeting the Needs of Shoppers


For all stakeholder audiences, serving the needs of shoppers is what the industry
does best and is critical to its reputation. Delivering high-quality products to
consumers, particularly new, innovative products of the future, is core to defining
the industry’s reputation. The value retailers offer their customers not only is key
to driving shoppers to the store, but also shows that the industry is helping
enhance our standard of living. Despite recent headline-grabbing issues, product
safety emerges as a strength of the industry across all audiences. This suggests that
the retail industry is meeting the product safety challenge and weathering the crisis
well among all stakeholders. In fact, among investors and analysts, who tend to
prioritize issues that pose the greatest risk, product safety is the single most
important driver. Customer service, convenience and cleanliness also emerge in
the study as key strengths that are important in defining the reputation of the
industry.

“Giving Back”
Philanthropic efforts through supporting local charities and causes, donating a
share of its corporate profits to charitable giving, and encouraging and
supporting employees to volunteer for charitable causes, has a profound impact in
shaping the industry’s reputation. APCO’s reputation research for dozens of
Fortune 500 companies in other industries rarely finds philanthropy to be as
important as it is for this sector. Despite increasing expectations society has for
what companies are expected to do to give back, the retail industry is meeting the
very high expectations of stakeholders and represents a core reputation strength.
Expectations to give back are especially important among retail employees. For
many retail companies, employees play a very important role in giving back to
their communities through employeevolunteerism programs. The data reinforces
that employees are also members of the communities and are often recipients of
the philanthropic efforts by retailers. Philanthropy can generate significant pride in
their employers and, as a result, plays a very important role in defining reputation
that in turn helps to enhance employee engagement and recruit new employees.

Partnering with Communities


While the industry is meeting expectations for giving back through its
philanthropic activities, the study shows that the industry still needs to be seen as a
partner in solving the key issues facing communities. The industry’s most
important opportunity to enhance reputation is building ties with local
communities and cooperating with local governments to address community
concerns. Most audiences surveyed expect to see retailers act in a more
collaborative and cooperative way with local communities and governments.
Listening to the community and entering into a dialogue on community concerns
is the top priority for most audiences and an area where the industry has yet to
fully meet most stakeholders’ expectations. Listening and collaborating is not
enough, however. The study shows that the industry is not yet meeting
expectations for addressing landuse issues. On average, the industry is viewed
more negatively thanpositively for working to ensure that stores take up less land
and space.Audiences also expect retailers to plan ahead when building stores to
reduce traffic and congestion, and build stores that blend into the local
community. Retailers expected to be leaders in developing creative and innovative
solutions to suburbansprawl and blight. Land Use is the single mostimportant
driver of reputation among community activists, and addressing these expectations
is critical to the industry’s ability to mobilize advocates on its behalf and reduce
the number of vocal critics speaking out against new stores and the industry as a
whole.

Responsibility to Employees

Employment issues are undoubtedly one of the most challenging issues for the
industry. Across all audiences, fair wages are a fundamental expectation of the
industry, yet one that the industry is not meeting. However, the industry is seen
more favorably in the area of providing opportunities for job advancement.
Highlighting an industry’s “success stories” and emphasizing the chances an
employee has to move up through the ranks could help repair perceived
weaknesses in wages offered. Interestingly, Labor Relations (how the industry is
viewed in dealing fairly with employees who wish tounionize) has very little
impact on the industry’s reputation for all audiences except policy-makers. The
study suggests that labor relations issues have much less impact than what we
might expect.

Environment
Stakeholder expectations for addressing environmental issues continue to grow for
all industries.The study clearly shows that environmental expectations are
particularly important in defining the reputation of the retail sector. While
individual audiences differ in their environmental priorities, overall the most
impactful way to demonstrate environmental responsibility is through efforts to
promote energy efficiency. The data suggests an opportunity to build greater
awareness of the industry’s leadership in this area to enhance reputation. Almost
as important as Energy Efficiency in demonstrating environmental leadership,
Green Products emerge as one of the top opportunities for building reputation.
Despite recent efforts by some retailers to promote green products, the study
shows that there is room for improvement in communicating the industry’s
leadership. Demonstrating leadership on green products is especially important for
policymakers and can help to build the reputation capital needed to create a more
favorable policy environment. Employees also place a high premium on green
products when assessing the reputation of the industry. Although slightly less
important in defining reputation than the other environmental drivers, the industry
is generally viewed as meeting expectations for responsible waste and recycling
practices. The industry receives particularly high marks for offering recyclable
bags. Addressing waste and recycling issues is the most important environmental
expectation for community activists and a key strength that should be leveraged to
mobilize more advocates on the industry’s behalf. Land Use is the single most
important driver of reputation among community activists and addressing this
expectation is critical to the industry’s ability to mobilize advocates on its behalf
and reduce the number of vocal critics speaking out against new stores and the
industry as a whole.

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