The central role of this PEST analysis is to identify the key factors that
are likely to drive change in the environment. Then the aim is to establish
how these key factors will affect the industry in general and the organisation
in particular.■ Industry analysis
An organisation has to understand the nature of the relationship within
its industry, in order to allow the enterprise to develop strategies to gain
advantage of the current relationships.
A useful framework, that can be utilised when undertaking this analy-
sis, is Porter’s ‘five forces’ model of establishing industry attractiveness
for a business (see Figure 2.4). This analysis should be conducted at the
level of the individual strategic business unit (SBU) rather than at the level
of the organisation as a whole, otherwise the range of relationships facing
a company with several divisions, causes the analysis to loose focus.
Porter identified five factors that affect the level of competition and there-
fore profitability within an industry:
1 Suppliers: The power of suppliers is liable to be strong where:
●Control over supplies is concentrated into the hands of a few players.
●Costs of switching to a new source of supply are high.
●If the supplier has a strong brand.
●The supplier is in an industry with a large number of smaller dis-
parate customers.
2 Buyers: The power of buyers is liable to be strong where:
●A few buyers control a large percentage of a volume market. For exam-
ple grocery and electrical goods retailers in the UK dominate the mar-
ket and are in a very strong position versus their suppliers as a result.
●There are a large number of small suppliers. In the meat industry in
the UK there are a large number of small farmers supplying a retail
sector dominated by a small number of large supermarkets.
●The costs of switching to a new supplier are low.
●The supplier’s product is relatively undifferentiated, effectively
lowering barriers to alternative sources of supply.26 Strategic Marketing: Planning and ControlIllustrative Example 2.1 (Continued)
in traditional retail stores. A secondary factor was to avoid the high street retail experience. One
on-line retailer is reported as saying sales in this sector have been growing at 50 per cent a year
over the last few years. This is in line with Internet retail sales generally which rose 50 per cent in
the 10 weeks leading up to Christmas 2006 to hit sales of £7.5 billion against £5 billion in 2005.
Internet sales in November 2006 reached £3.2 billion the first time monthly sales had broken
through the £3 billion barrier. Despite the general evidence of high growth in Internet sales and the
specific evidence of growth in the on-line clothing market a number of fashion retailers currently
have no on-line clothing operation these include Zara, Selfridges, Matalan, Bhs and Primark.