Applying PESTEL Analysis Directions : Assume that your manager has asked you to
ID: 398162 • Letter: A
Question
Applying PESTEL Analysis
Directions: Assume that your manager has asked you to prepare a short report concerning the external environment of your firm, Target. Target has recently been rocked by several setbacks (exiting the Canadian market, the Christmas hacking incident, and several poor sales/income quarters). In the report, I want you to focus your attention on the U.S. market
PESTEL ANALYSIS Identify five of the most important variables in the external environment that could have an impact on Target’s business. Use the PESTEL Framework from the text as a guide in completing this exercise. In identifying these five highest priority or most important external variables that Target will want to track over time, each must come from a different category of the PESTEL. For the report, you might want to set up a table something like the following (probably using a landscape print setting). The example used below is for the auto industry, whereas your report will be on the auto industry PESTEL environment.
PESTEL CATEGORY
VARIABLE TO TRACK
IMPACT ON IKEA
OBSERVATIONS/
RECOMMENDATIONS
Political
Pending U.S. Tariff Legislation
Higher Tariffs will likely impact the sale of cars manufactured in other countries and imported into the U.S. by increasing their prices. However, other countries are likely to respond by raising tariff protections against U.S. firm’s.
Briefly report any info you can gather about this variable.
Economic
Social
Technological
Environmental
Legal
For example (see above), under P (political) a key political variable that is important might be pending trade/tariff legislation and you have a concern that there might be trade legislation looming in the U.S. that would cause some tariffs on foreign manufactured or imported products to rise. How would this impact Target? You might, for example, want to talk about the risks associated with higher tariffs or any advantages or disadvantages this might result in from Target’s perspective. Please do not use the example above in your report.
The variable you identified would be one which you would then want to track consistently over time as long as you continue to see it as an opportunity or threat (SWOT analysis). If you are not familiar with this industry you might do a little background research just to gain a base level of knowledge about the firm or industry. This is not, however, primarily a research assignment, but rather application of the PESTEL Framework for analyzing an organization’s external environment.
Format: Report is limited to 3 (three) pages, standard 12 pt. print.
Due Date: Sunday, September 16 by 11:55 PM
Other: You may discuss and generate ideas with classmates but each of you is expected to do your own work on this assignment.
Reference Text Chapter(s): Material related to this assignment can be found in Chapter Three of the text.
PESTEL CATEGORY
VARIABLE TO TRACK
IMPACT ON IKEA
OBSERVATIONS/
RECOMMENDATIONS
Political
Pending U.S. Tariff Legislation
Higher Tariffs will likely impact the sale of cars manufactured in other countries and imported into the U.S. by increasing their prices. However, other countries are likely to respond by raising tariff protections against U.S. firm’s.
Briefly report any info you can gather about this variable.
Economic
Social
Technological
Environmental
Legal
Explanation / Answer
Political
Variable to Track – Its ties with China as a major supplier
IMPACT on Target – Target has a majority of the products coming from the Chinese factories. With the brewing trade sanctions between the US and China, Target’s operations could be negatively impacted.
Observations/Recommendations – Target needs to sort out its sourcing without really compromising on quality and price. It has to develop local vendors who could gradually act as a replacement to the China production houses. Prices will certainly shoot up but Target needs to plan an economies of scale for a Pan-American consumption. This need to be done till the trade tensions eases off between the 2 nations.
Economic
Variable to Track – Losses of billions of dollars
IMPACT on Target – With consumers looking for the best possible deals and the best possible price. Target would certainly find it difficult to match the aggressive price matching tactic of Walmart.
Observations/Recommendations – Target would need to keep up with the fluctuating demands and must analyze its prices at a regular level. Target still has its decent share of fan following in the US, but it needs to plan out its expansion little better and it cannot afford to make the Canada mistake again.
Social
Variable to Track – Outreach to the Community
IMPACT on Target – One of the major reasons as to why Target has a strong customer base is its philanthropic act of returning to the society from which they have gained so much. It prides itself on fostering a positive culture in the company.
Observations/Recommendations – Target needs to have products that are diverse and for multiple ethnicities. People admire that diversity and it should continue to eliminate pain for the customers to have a positive shopping experience.
Technology
Variable to Track – Internet Savvy customers
IMPACT on Target – Consumers are going tech savvy at a very fast rate and at our social media through their mobile devices nearly all the time. Marketing activities is completely moving towards this media with high return on investment.
Observations/Recommendations – Target needs to have a robust tech and digital marketing team. They need to talk to the consumers through social media on Facebook, Twitter or Instagram. Product reviews and ratings are the way forward for this young tech savvy crowd.
Legal
Variable to Track – Contamination of Products
IMPACT on Target – Keeping the safety standards, Target may at times suffer from product recalls and product liabilities.
Observations/Recommendations – Target must focus of reducing food and drug contamination from their own produce and pharmacy. They must abide by all laws pertaining to the environment, labor or privacy and security.
Environmental
Variable to Track – Growing trend of Eco-friendly products
IMPACT on Target – For their organic and fresh produce for the conscious consumers, Target should ensure that they prevent contamination at all levels.
Observations/Recommendations – Target should aim to reduce its waste, be it merchandise, raw materials or any electrical components. They should gradually move to more renewable sources of energy and also reduce its water consumption.
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