Pestel analysis examines the political, economic, social, technology, legal and environmental factors affecting the organization.
Political factors: These include political stability in the country of operation, its taxation policy, foreign trade regulation and diplomacy as well as social welfare policies. Burberry Group is a multinational company doing business in many countries around the world, including emerging markets (Hill & Jones, 2012). As such, the Group is subject to different political climate which present different laws and regulations, taxation laws and rates, and foreign jurisdiction that it has adhere to. The Burberry luxury brand particularly faces challenges in penetrating emerging markets which are highly influenced by political and economic conditions because they affect the ability of the company to acquire or enter strategic business alliances with local franchises. In this regard, Burberry must take into consideration the specific taxation policy trade regulations of target international markets when marketing or sourcing products to regions outside its domestic market. This is crucial considering that Burberry sources about 60 percent of its raw materials from Europe.
Economic factors – These include such factors as inflation, unemployment levels, money supply and interest rates. The recent global financial crisis severely the degree of consumer spending especially on luxury items that Burberry Group deals in. Similarly, customers particularly from Middle East, Russia, Japan, China and other Asian countries who often purchase luxury goods while traveling domestically and overseas are relatively fewer compared to pre-2009 global economic downturn (Hill & Jones, 2012). This customer segment represents a large share of the Burberry’s sales, and thus the changes in travel patterns or decrease in travel volume have material effect on the Group’s trading results. Thus, Burberry Group needs to monitor inflation rates in the countries it operates because of the direct effect on the buying capacity. For instance, when the UK was hit by recession, stocks plunged to £1.60, forcing Ahrendts to cut its costs by £50m as staff reductions of about 10 percent (Hill & Jones, 2012).
Socio cultural factors: These include such factors as population demographics, lifestyle, consumerism, social mobility, and income distribution. Different countries or regions have different cultural, lifestyle, or dress code cultures. The Burberry brand is known by its Britishness, authentic outwear heritage, democratic luxury positioning, historic icons, making it so popular among many consumers. Given that Burberry’s latest strategy is to invest under- penetrated markets it is obliged to explore the different socio-cultural factors of these emerging markets.
Technological factors: These include such factors as new inventions and innovations, rates of obsolescence, and speed of technology transfer. Burberry has become the pioneering luxury brand to live stream its fashion show in 3D format, in which consumers could purchase products directly and instantly from the catwalk (Hill & Jones, 2012). The company has also strove to take advantage of technological advancement by tapping into social networking sites and websites such as artofthetrench.com, allowing customers to customize their products online and give the company a competitive advantage. Also latest trends in advertising have significantly improved the ability of the company to advertize and market its products and services to consumers. There is inclusion of appealing special effects in most television and Internet advertisements.
Environmental factors: These include such factors as environmental protection /conservation laws, energy consumption, and waste disposal. Burberry Group has embarked on diverting waste from landfill. Also, Burberry‟s recycling partner has managed to convert in excess of 130 tonnes of raw material waste and samples into car door insulation (Hill & Jones, 2012).
Legal factors: These include employment law, competition law, and product safety which must be taken into consideration by an organization in order to develop strategy and compliance. Burberry has faced an issue of copycats, in which other players infringe on its trademark. Burberry has reported spending £2 million a year in the effort to fight these counterfeits (Hill & Jones, 2012). Currently, the Group utilizes an Internet-monitoring service to track the discussion in addition to working with custom officials as well as local police in seizing and sueing fakes counterfeiters.
Reference:
Hill, C. W. L., & Jones, G. R. (2012). Strategic Management. Cengage Learning.
