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Economics Essay Example: Analysis of Toolstations External Environment and Key Drivers in the UK

5 pages
1109 words
Middlebury College
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Analysis of the Company

Analysis of Toolstations External Environment and Key Drivers in the UK

PESTEL Analysis of the UK

Government Stability

Political analysis

Geopolitical relations of the UK have been positive in the recent years. As such the positive relations have translated into an avenue whereby the unity of the member countries has remained intact. Nonetheless, the prospect of Brexit poses an issue of concern for nations such as Ireland that would like to participate in the referendum to confirm the nation's position.

Economic analysis

GDP Growth

The gross domestic product of the UK has been enjoying a robust rise since the culmination of the global recession. Most recently, pundits such as Whyman and Petrescu (2016, 84)emphasise that the nation had a rise of 5.6% in 2015. As the economy continues to grow within, the question of Brexit remains an issue that may impact on the upward economic trend.

Favorable interest rates

In line with the robust economy has been the rise in interest rates from a mere 0.2-0.5% (Whyman and Petrescu, 2016, 84). Despite the rise in interest rates as per 2017, analysts maintain that reduction in liquidity is fundamental to avoid inflation. The inflationary approaches by the government to slightly increase the interest rates are important towards regulation of overspending.

Social analysis

Viable age distribution

Having a youth population is critical towards ensuring a working nation. Therefore, an analysis of the UK reveals that individuals aged between 17-60 account for at least 60% of the people (Whyman and Petrescu, 2016, 84). Only 13.8% account for over 65 years symbolising a country that does not face problems of extensive expenditure on social welfare.

Technology analysis

Advanced telecommunication infrastructure

The UK has one of the best technological infrastructures with its coverage over 80% of the region (Izatt, 2016, 82). Current estimates show that majority of the population, especially in the urban regions can access one of the fastest internet connections. Further, broadband internet connection has been on the rise with an emphasis on reaching over 100% coverage.

Environmental analysis

Environmental sustainability as a contemporary issue

Environmental impact regarding operations is an essential topic for organisations in the UK, especially those operating in the prospect of green operations is a contemporary issue (Izatt, 2016, 69). Adopting a sustainable approach to conduct has been encouraged through incentives for companies that adopt different forms of eco-friendly infrastructure.

Legal analysis

Brexit and legal implications for companies

Brexit forms a legal hurdle for both the local and foreign companies operating in the country. With negotiations still in place for the exit of the UK from the EU, it is advisable for a business to examine the legal implications (Homann, Koslowski, and Luetge, 2017, 20). The region may not be viable enough to necessitate profitability in operations.

PESTEL Analysis of Australia

Political factors

Certainty for operations

The political and regulatory environment of Australia is an incentive for businesses willing to set up operations. As such, the nations long period of peace should be a reason for confidence and certainty for establishing long-term transactions. As a clear example, in the last decade, Australia has not faced any form of terrorist attacks despite the global threats evident. Further, the adaptability of the government to progress through changes in policy can favour unique but legal operations.

Economic factors

Risky real estate boom

The increasing influx of people poses a challenging environment for the property prices. As such, the increase in asylum seekers may lead to rent being higher than the income. Among the people entering Australia emanate from nations such as Iraq, Myanmar and Papua New Guinea. Therefore, the need for a company such as Toolstation to examine the most favourable regions with potential low expenses is advisable.

Social factors

Social class

There is a huge disparity between the richest and the poorest in the nation. As a larger continent, it offers an avenue whereby effective comprehension of the demographic and income level differences is critical for understanding the pricing process. Further, the manual workers are at the heart of the working class in Australia accounting for 30-40%. The blue collar workers in Australia also offer a lucrative source of revenue for the company. Therefore, targeted marketing by Toolstation should offer potential for revenue yield.

Technological analysis

Research and development dominates the sector

Research and development form the key to successful operations across various industries. With competition an issue of concern, it has become paramount for companies to be ahead in any sector. The Australian government through funding of both the education and private sector has maintained its emphasis on research as integral for profitability and competitive environment. Therefore, a business has to invest highly in research and development which may be counterproductive.

Environmental analysis

Global warming is a subject of concern in Australia (Izatt, 2016, 69). As a nation that is sensitive to changes in weather, the government encourages companies to invest in the latest technologies to mitigate greenhouse gases emissions. Further, the climate can be an issue of concern with the increasingly warm summers and spring season. In light of climate change, Australia has been experiencing increased bush fires, heightened temperature and sporadic climate changes.

Legal factors

The market is sensitive to the minor and discriminated. Therefore, the nation has one of the strictest laws related to age, disability, and gender discrimination. As a clear example, the Equal Employment Act of Australia imposes strict sanctions on any business deemed to be undertaking any discriminatory activities. The prospect of compliance with the legal stipulations is necessary for the sustenance of successful operations.

Analysis of Toolstations Internationalisation Drivers and Scenarios (Yip's Key Drivers)Toolstation has been successful through its adoption of the online approach. Through setting up of centralized distribution centres coupled with direct sales, it has a potential to operate in Australia. Therefore, to comprehend the potential of the market, the evaluation of the George Yips market drivers inclusive of cost, market (Dobes, Argyrous, and Leung, 2016, 53); government and competitive drivers should enable the company to select the most viable option. Accordingly, from the evaluation of the Australian market, the main driver for internationalisation at Toolstation includes the potential marketability in the sector.

Internationalization for Toolstation through venture into Australia offers a new avenue to enjoy the potential economic incentives. As such, internationalisation exposes a company to a new and diverse potential and lucrative market for the commodities. As an organisation that focuses on tools, the emphasis on venturing into the international spectrum should widen its marketability, thus enhancing its profitability (Dobes, Argyrous, and Leung, 2016, p.53). Of utmost importance is the potential to widen its reach to the customers (Wilson, Hooley,and Loveridge, 2016, p.62). Australia for Toolstation will entail a chance to expand its market through meeting a new kind of customers such as those from the out...

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