Importance of PEST Analysis

Undoubtedly, any business which practices buying and selling goods/services will be affected by the external environment in which they operate in.

What is a PEST Analysis?

PEST analysis is a tool which examines the external environment from a political, economic, social and technological point of view. It is central for businesses to be aware of the potential changes occurring beyond their business activities, as many a time these changes cannot be controlled by the business. Therefore, this tool brings awareness of what internal business strategies need to be made to manage these changes and help weigh things in a very objective balance. (BSBM, 2016)

Certainly, one of the largest influences for the retail sector, in terms of the PEST analysis, is the potential political effects Marks and Spencer may well experience. It is imperative that the organisation considers certain political issues before beginning the marketing process as the entire marketing strategy of the organisation is dependent upon the prevailing political environment in the country (HubPages, 2011).

Analysis M&S

Currently the UK government is undergoing its decision to leave the EU, without a doubt this decision will affect the retail industry, including Marks and Spencer. Being part of the EU has substantial benefits for companies like

M&S, one of which being tax free trading amongst members. Therefore, the UK government’s notification of its intention to exit the European Union will have adverse financial impacts, including input cost inflation from increased tariffs and a weakening in sterling, as well as reduced UK consumer spending (Marks and Spencer, Annual Report, 2018).

This is likely to take effect on the company’s marketing performance as a numerous amount of their supply factories are located in the EU, for example, Italy, Spain, Hungary and France. Furthermore, as a retail company, M&S is required to follow several safety, environmental and health regulations which are adopted by the UK government. If these regulations are not met by the company it can have adverse implications on the business’s marketing performance and brand image.

As mentioned previously, one of the major political changes occurring in the UK is Brexit. This political change can result in economic changes also. This leaves many companies, including M&S, and consumers in economic doubt, as M&S states there are “increased levels of uncertainty within the global economic environment…being experienced within the retail sector” (Marks and Spence, Annual Report, 2018). Arguably, if the decision to leave the EU goes ahead, it has the potential to effect economic factors such as the value of the pound (sterling), interest rates, inflation and imports/exports to and from the UK.

For example, the value of the pound dropped as an initial reaction to the EU referendum, some economists predict that if there is a second fall in value for sterling, it “could be expected to boost the shares of firms whose earnings largely come from abroad; the opposite would apply to domestically focused firms” (Richard Evans, 2018). For M&S this may create unfavourable effects on their marketing performance due to their heavy reliance on their domestic market (UK). Perhaps a new marketing strategy will need to be adopted by the company to boost sales in their international markets to minimise any potential unfavourable effects on the company. However, it is difficult to clearly determine the economic effects of post-Brexit until the UK government finalises the decision in 2019.

Furthermore, most retail businesses aim to provide a service for consumers, whether that is selling goods or a service. Either way, consumers lie at the heart of a business. Therefore, social changes are crucial for businesses, like M&S, to monitor and adapt their business strategy to.