A Pestel Analysis of a Clothes Manufacturers and Suppliers

The PESTEL analysis shown in the appendix portrays some of the issues in the external environment that a firm manufacturing and supplying luxury men’s clothing may experience. In all six sections; political, economic, social, technological, environmental and legal there are issues that the firm would face. However, some have more significance to others. Although political, technological and environmental factors would have a big affect on the firm, when looking at the three most important issues facing the firm; social, economic and legal come out on top.Firstly, social factors play a massive part in the external environment of the firm. For-fronting the part it plays could be, as brought up in the PESTEL analysis, the men’s clothing market is very dynamic. Fashion has its own cycle, but it very hard to understand, with items coming in and out of fashion quickly. With retailers changing stock usually at least 4 times a year (seasonal clothes) it can be very hard for a m anufacturer to keep up with. Along with this rapid change, there has been seen a raise in men’s fashion consciousness, with more and more premium priced men’s clothing appearing.This portraying the difficulty the firm may have at keeping up with its competitors who have somewhat consolidated themselves in the market. However, with low barriers to entry, thus low initial capital costs to start the business, they may catch up quickly. This along with the a thorough PESTEL analysis may see the firm compete well. Changing fashion has often been led by national social change. A recent form of social change has seen consumers become more ethically driven, with products such as the Fairtrade brand seeing a steep increase in sales, according to their website around ?300m of sales annually (2007 figure).This rise in what is known as the ethical consumer has meant that attention on this front has to be sharply increased. Some companies such as the bath shop have turned focussed solely on a ethical approach. The manufacturing of the firm will not go unnoticed with pressure groups being very much present. Businesses such as Primark and GAP have felt a full force lobby from these interest groups. Primark, who were outsourcing the manufacture of their goods to India, were uncovered by a BBC report. The program showed children working for the outsourced manufacturer and bad working conditions.If the firm was to have bad press too, say from PETA and animal rights activists, who look very closely at fur farming (for luxury clothing), this may have detrimental affects on factors such as their reputation and finances. This shows issues the firm may experience from pressure groups, so work will be needed to keep these people happy and too shareholders with similar views. Demographics mentioned in the PESTEL may too conjure up issues for the firm in the current environment. Demographics include age, race and gender.When looking at the age of the population, the firm will need to address the issue to which age group (target market) to supply this luxury clothing too. According to a recent census males aged 15-64 years old make up 33% of the population, thus a age group within this seems appropriate. However, the lower of the group having lower disposable income and other factors will need to be considered. Race and culture will also bring about some issues to the firm. They will have to consider clothing that will be appealing to all races and not offend any culture.This being a small issue but will need to be watched. Secondly, moving on to economic factors that may affect and bring up issues in the external environment for the firm. Recession comes out as the biggest threat to the firm at the moment, with many businesses falling into liquidation and great times of uncertainty for workers. With Recession comes many problems that the firm will experience. One being unemployment, which according to BBC figures has rose to around 8-8. 9%, these be ing the worse figures since 1992.Rising unemployment along with a falling national disposable income demand in the economy will fall. The firm supplying luxury goods are usually going to be more susceptible to a fall in demand when there is a fall in income. This is because luxury goods are more income elastic. Consumers will be more willing to give up spending on these kinds of goods than say essentials such as toilet paper and drinks. This is an issue to the manufacturer so they will have to hope on considerations such as brand loyalty and correct marketing to push up demand.They may also need to drop their profit margin on clothing to help generate more sales. In this economic downturn there has been a big depreciation in the pound sterling. This has made exports more attractive (however, fall in value of pound means its not exactly positive) and importing more expensive. With the firm mainly supplying the UK market with some operations abroad it will be affected by this. If raw materials are being imported into the UK for use in production then the firm will be paying a higher unit price for these. This of course will add to the unning costs of the business. Also the few countries they firm supplies they will be receiving a lower price for the goods losing out on the bad exchange rate, which has been at its worse for a decade. Both of these are an obvious issue to the firm but are out of their control, so it is just a case of sitting and waiting for the economy to be boosted again. One way the government may try to help the economy recover again is through a policy implemented in times of turmoil called fiscal policy. This comprises mainly of controls on spending and taxation.For example the VAT cut of 2. 5% from 17. 5% to 15% was made in attempt to help businesses stay afloat. Many companies passed these cuts straight onto the consumer in order to stay competitive. Another policy installed is the monetary policy, which looks mainly at money supply and int erest rates. Interest rates, under the Monetary Policy Committee, were brought down to a very low 0. 5% stated on the Bank of England website. This along with other contributors has led banks to be very stingy with lending money to each other, consumers and business.The firm if it finds itself needing to borrow capital from the banks may find this difficult and with such a weak pound investors may be less willing to invest too. This may be a great issue to the firm as with no constant cash flow partnered with a possible fall in demand it may find itself struggling to compete and stay in business. The final factor of the 3 most important issues currently facing the firm is the legal elements. These will have a big impact on the business environment of the men’s clothing sector such as the social and economic considerations have done too.The legal system in the UK is very complex and there are many laws that the firm will need to abide for business to run. The firm is likely to be affected in the two usual ways by legal factors. Firstly, if new procedures and systems have to be developed then it can affect the firm’s costs. Secondly, if the laws affect the likelihood of the customer buying the good, it can affect the firm’s demand. The amount of laws present makes it harder for the firm to run with checks needing to be made along many points of the course of the business.The Health and Safety at Work Act, 1974, is one law that would bring up issues for the business. First, they would need to spend money on ensuring the workplace is safe and suitable under the law, this would avoid any possible suing or bad press. Second, training will need to be provided before an employee can work on the firm’s premise. This will cost the firm and will not see a return until the employee has been working for a good amount of time. Also the risk of employees quitting during training (first few weeks at work is a likely time for one to quite) will mean money is wasted if they do so.Training will not be the only issue cost to the business, things such as reporting all incidents will increase administration costs, as more files are created and submitted for health and safety. The firm may feel under pressure too from other laws such as competition laws and employment laws and issues may arise if they are caught breaking these laws. Competition law will be likely to protect the firm against other manufacturers who may make cartels or predatory price for example.However, it creates pressure on executives and others to keep by these laws and run the business in the â€Å"correct† way. Employment acts such as the Employment Relations Act, 2004, give certain rights to the employees to stop them being â€Å"abused† by managerial personnel. This has left the firm’s employees with a greater authority, allowing them to legally call strikes if they have any concerns. This is made more likely to happen to the firm as it i s sitting in a recession with high inflation.High inflation can lead to employees demanding higher pay, thus being an issue that the firm will need to keep tabs on. All laws, as said make business practice a very much controlled environment to work in, which has shown to cause business various issues, some stated already. These have mainly been issues that affect the firm’s costs. One issue that can affect the demand of the goods may be bad press. Many laws put in place to protect people e. g. employment laws and international agreements on human rights or environmental policy, will create bad press if broken.Emissions levels and road taxes may affect the firm if it is importing its raw materials laws may also make it hard for the business to import all the materials they need too or they may need to pay more for the surplus on the amount allowed. All three factors from the PESTEL analysis show many issues that the firm will face in the external environment of the men’ s clothing market. Overall, social, economic and legal considerations bring about more issues than technological, environmental and political elements. However, they too create issues that the firm will need to analyse and consult.The men’s clothing market is strongly influenced by social and economic happenings and controlled by laws portraying why they create more issues than the other three. All in all, politics do not play a great role in the manufacture of clothes. Also the men’s clothing market being a relatively simple segment in terms of technology, thus low barriers to entry, technological factors do not form many issues. Environmental factors seem to create the most issues to the firm but are closely linked to social and legal and seem more appropriate in these sections.