PESTLE Analysis of Global Retail Supermarket Industry

The aim of the study is to identify the principle managerial issues and policies that re necessary for the success in international marketing. The study evaluates the various factors that influence the business activities of an organization. In this report, a thorough analysis of the global market will be conducted where the organization Wm Morrison can expand in the coming years. For the same purpose, a detailed analysis of the internal and the external retail-market business environment will be conducted. On the basis of the analysis, recommendations will be made on a particular country where WM Morrison can successfully expand its business.

The dimension of PESTLE analysis of the global retail supermarket industry illustrates the macro environmental factors of Morrison in the supermarket industry. The PESTLE analysis are described below.

• Political factors:Political factors of the global supermarket industry include free trade agreements, low labor standards and laws in the developing countries like India, Sri Lanka, China, regulations of the genetically modified food and organic foods, etc (Mahajan 2015).
• Economic factors:Economic factors include economic stability, employment rate and rising labor costs in some countries. In this perspective, the economic stability of the developing countries is growing while the employment rate is high as cheap labor is available in those countries (Tiwari and Herstatt 2013).
• Social factors:Social factors comprise of increased emphasis on healthy lifestyles of people, increased cultural diversity and wealth gap among the rich and the poor (Pearson and Chakraborty 2014). The socio cultural perspective of the retail industry is largely depended on the preference, taste and healthy lifestyle patterns of the customers.
• Technological factors:Technological factors comprise of developed automation in business, increased use of internet and mobile technology by consumers across the world, invention of technologies used in the store operations of the supermarkets across the world.
• Environmental factors:Environmental factors can be an opportunity or threat to the supermarkets. The factors include higher emphasis on the sustainability of the business, climate change, global warming, and complex standards of the waste disposal of the business (Chakravorty 2013). The countries have various laws on these aspects that can affect the productivity of the supermarkets
• Legal factors:Legal concerns regarding trade laws, anti-trust laws, advertising laws, environmental protection laws, labor laws, etc. have the effect on the productivity of the supermarkets in the different countries.

The 5 forces analysis help to analyze the competitive nature of the business. The analysis for Morrison follows as below:

• Buyer’s bargaining power-Buyer’s bargaining powers is high as there are many competitors of Morrison in the market. Sometimes the bad economic climate is responsible for low disposable income of the consumers that results in the lower expenditure of the consumers while less chance of switching supermarkets.
• Supplier’s bargaining power-Suppliers power is low as the availability of the suppliers is abundant. Morrison as a major supermarket has the authority of their buying power (Paliwoda and Thomas 2013). Hence, the supermarket can formulate their terms and policies of suppliers conduct.
• Threats of new entrants-Threat of new entrant of Morrison in India are medium or high. India is a developing country and the growth of supermarket industry is high (Akaka et al. 2013). Many big multinational supermarkets enter in the country that provides huge economies of scale to Morrison.
• Threat of Substitutes-The threat of substitutes is medium or high. Though the buyers have a many substitutes in the market, hence they can switch to other markets apart from Morrison. However, the in-house brand products of Morrison are more that will attract the customers to the company.
• Competitive rivalry-Competitive rivalry for Morrison is high. More is the competitor in the market; less will be the market share in the particular target market. There is a hard competition between the rival companies of Morrison in terms of brand loyalty, sales and market share. Major competitors include TESCO, ASDA and Wal-Mart (com 2017).

The value chain analysis is carried on to evaluate the ways that an organization use to carry out their operational activities. The analysis includes the following factors:

• Inbound logistics:Morrison follows vertical integration supply chain. The Company also owns abattoirs, bakeries, and fresh fruits and vegetables pack house. It is for the same reason, the Company gains facilities in its distribution (com 2017). This also helps to cut extra expenditure for distribution of products.
• Operations:As the production work takes place in the organization, the Company is successful enough to meet the demand of the consumers. The retail company also sells beef, lamb and chicken and thus supports the British farmers. All these factors help the Company in cost saving.
• Outbound logistics:Morrison has its own distribution centers across UK. Products are distributed from the warehouses to its various retail stores by the fleet of tractors and trailers (Samiee et al. 2015). The products are supplied by cutting travelling distances and thereby, reducing the carbon emission footprint.
• Marketing and sales:Morrison carries out high profile advertising campaigns and even takes them to the television screens. The PR and CSR activities carried out by the company is an effective means of marketing that boosts the sales of the Company.
• Service:The Company is well known for its customer servicing. They respond quickly to the demand of the customers. They follow the active JIT service.

Four international markets namely, India, Sri Lanka, Nigeria and Russia have been taken into consideration for the expansion of Mw Morrison. The Company has its presence in other countries. A detailed analysis of the market situation of these countries has been carried out (Refer to the appendix). Based on the analysis, India has been selected has the potential target market for international expansion.

The 12Cs framework helps to analyze a market for the business operation. An analysis of India as the potential market for Morrison for expansion has been discussed below:

There are numbers of ways of foreign entry modes that companies adopt in order to expand their business operations in the target country. Choosing appropriate market entry mode is essential for starting a business operation in a particular country. It has been evident that Morrison is a reputed multinational company that has its branches in many parts of the world. Some of the market entry modes are franchisee, joint venture, mergers, acquisitions, strategic alliance, licensing, exporting and others that can be used by the Company (Papadopoulos and Heslop 2014). To enter India, Morrison has to select an appropriate mode of entry. In this context, it is recommended that Morrison will adopt wholly owned subsidiary in India. As it has been found that India is a developing country and it has huge population, it can be predicted that Morrison by its wholly owned subsidiary, will be able to capture the market and will earn huge revenue from the Indian market.

Porter’s Five Forces Analysis of Wm Morrisons

There are two types of wholly owned subsidiaries. One is acquisition and another is Greenfield investment. In the view point of De Mooij (2015), acquisition is considered as a quick strategy of establishment of a new business firm but, for Morrison Greenfield investment is a better option. As Morrison is a big brand and has high brand reputation, it does not require the name of other companies for the establishment of the company in the market of India. Strategic alliances, joint venture, acquisitions, mergers, etc. require another company for fulfilling the establishment of a new foreign company in the country, but in terms of wholly owned subsidiary, the brand names of other domestic companies is not required (Warnick et al. 2015). However, Greenfield investment is a capital-intensive plan, which requires not only huge investments but also high level of skilled expertise, specialized know how, customization of strategies, etc.

Morrison is a big brand both in terms of reputation and in terms of revenue, so to fulfill the above aspects of green field investment i.e. wholly owned subsidiary would not be a problem. Apart from that, India is a huge market where the company can target huge customer base and will get skilled expertise with required experiences and capabilities easily (Pesch and Bhattacharyya 2017). The economy of India is booming and there is higher employment rate because the availability of cheap labor is high in India. Morrison may hire consultant in order to operate its business operations in the Indian market. It is a European company hence there will be cultural differences and differences in trade laws and government regulations (George and Suresh 2015). Morrison has to abide by these aspects to run the new subsidiary in India smoothly.

As it has been proposed that India is the most suitable market, where Morrison can expand its business, the Company needs to carry marketing in the country as well. As commented by Pearson and Chakraborty (2014), marketing should be carried on by understanding the socio-economic condition of the people of the target market. The target group of people for the Morrison products will be the middle class people that comprise the majority of the population.

The recommended marketing mix for Morrison in India is below:

Conclusion: 

The study focuses on the international expansion of Morrisons in India. The study describes about both internal and external analysis of the company along with global retail supermarket industry. In the external market analysis, the theoretical frameworks of Porter’s five forces and PESTLE analysis of Morrisons and supermarket industry at global level are described in details. From there, it can be said that India is a booming market for Morrisons in terms of business establishment. Apart from that, in the internal business analysis Porter’s value chain in terms of Morrisons’ business operations along with 12C framework are described in details. In terms of market entry mode, wholly owned subsidiary is suggested to Morrison in order to penetrate in Indian market.

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