Week 6

1. What is meant by the term „External Analysis‟? What is the purpose of„PESTLE‟ analysis?

External analysis is the studying of marco and meso environment of business organization, in other words it is the study of factors outside of the organization. Unlike internal environment , an organization has only a little or almost no control over its external environment. Hence it is a must for any organization to conduct external analysis.

The purpose of PESTEL analysis is to take a more in depth looks at the overall external environment, to a normal person without PESTEL analysis they can see only competitors competing against them. However through PESTEL analysis one can understand we can see opportunities and threats as well.  Through PESTEL analysis we will be able to make a more detailed business strategies.

2. Read the article about Big Mart Super Store – what external
issues are the Super Markets would have to consider at this
time to have competitive advantage over others?
http://www.ekantipur.com/2012/08/01/business/bigmart-to-open-seven-stores-in-kathmandu-by-
2012/358057.html

After conducting PESTLE analysis of supermarket industry in Nepal i have come up with following results.

Political	Economical	Social	Technology	Environment	Legal
-Degree of government interference -Government instability -political parties problems	- Economic growth - cost of living - Interest rate - Inflation rate	- Cultural norms - Demographic	-R&D activities  - Information system	- climate  -Go green issue -  energy	- Consumer laws - Health and safety laws

From the above results we need to identify what will be our opportunity and limitations. Most of the threats and limitations of supermarkets industry in Nepal lies in political environment. According to many news reports and business journals the level of government red-tape and bureaucracy is every high when starting a business and expanding it. The interference from political parties is also very high, political party affiliated unions has been creating trouble in many different industry in Nepal including the supermarket stores .  

Besides this there are also some limitations in economic sector, inflation is around 10.4% according to latest government figures . This may effect the purchasing power of customers, the interest rate for business loan is also high Nepal Rastra Bank (central bank of Nepal) currently fix the borrowing rate for business loan is at 14%, this high interest rates may create problems in raising capital to expand branches in future.

Despite this there are also many opportunities despite the high inflation, there is growing level of middle income family group. The demographics in Nepal is also changing there are now smaller younger family with both spouses as working professions with higher disposable income. Unlike their parents they are more into convenience shopping in super markets. Technologically speaking there are many local software companies who are now capable of creating custom made Information System for supermarket that is tailored made for Nepalese market. IS not only streamlines the operation of supermarket but because it is locally made it saves a lot of money, IS can cost millions of dollars if done by a foreign IT companies

By carefully making a business strategy by taking the stated opportunity and threats into consideration , Big Mart in Nepal can gain competitive advantages over its rivals. .

Refernces


Mindtools . 2012. SWOT Analysis Discover New Opportunities. Manage and Eliminate Threats. [ONLINE] Available at: http://www.mindtools.com/pages/article/newTMC_05.htm. [Accessed 17 December 12].

PESTEL Analysis . 2012. PESTEL Analysis. [ONLINE] Available at: http://pestleanalysis.com/. [Accessed 17 December 12].