The External Environment affects the internal operations of all businesses.
What’s happening in the world of politics, economics, socially and technologically impacts how a business has to act in order to survive. External elements that affect the inner working of a business are known as PEST factors. ‘PEST’ is an acronym for Political, Economic, Social and Technological. Politics may affect the ability of a business to achieve its aims and objectives and changes in laws may mean a company has to change the way in which it operates.For example, the annual rising of minimum wage each year may result in a business being unable to employ as many people as they would have done in the past.
The state of the economy has a great impact on a business as it affects, for example, how much of a disposable income their customers have, and, consequently, how much of it comes to them. Interest rates contribute to a business’s success, as it impacts how much they have to reinvest into their business. For example, in Feb 2009, the interest rate was at 1%, this dropped of 0. 5 % by March.This may not seem like much, but imagine: if Greggs borrowed ? 500 000 from the bank over 3 years, with an interest rate of 1%, they’d be required to pay back ? 515 000.
With the interest rate of 0. 5%, they’d only be paying back ? 507 500. The ? 7500 saved could be used on a new marketing campaign, which may boost their annual turnover. Social trends affect the success of Greggs. For example, in early, there was a horse meat scandal in the UK: in January, it was discovered that horse meat – predominantly from Eastern Europe – was imported to the UK and being sold as beef.As a result, all across the UK, sales in beef products dropped significantly, as people became more wary about they ate.
Furthermore, today’s society is a lot more health conscious than previous generations, meaning some people would rather spend ? 3 getting a healthier lunch i. e. a Caesar Salad than a Greggs pastry. Technology can also help or hinder Greggs’ ability to achieve their aims and objectives. For example, social media sites have grown a lot in popularity over the last decade. Some people spend a lot more time online, than they spend interacting with people in real life.
This means people now have a lot more power – to build or break Greggs – than they did in previous years. For examples if Katy Perry – the second most followed person on Twitter, after Justin Bieber, with over 44 million followers – was to tweet something along the line of ‘Just had Greggs; found hair in my food #disgusting’, it is more than likely that people will avoid eating at Greggs at least for a while, due to the facts that: firstly, Katy Perry – a role model to a lot of young people – does not approve and it may be unconsidered ‘uncool’, because of that and, secondly, she’s brought attention that there was hair in her food.While I’m sure that it’s a rare occurrence, Greggs was unfortunate enough that someone of great influence happened to have been the one to buy it. As part of 2012 UK Budget, Conservative Chancellor, George Osborne, suggested the introduction of a pasty tax. Osborne suggested adding VAT to all pasties, including those baked where they we to be sold.
A lot of companies and bakeries – Greggs included – protested greatly against this. Health and Safety regulations affect the internal operations of business.For example, people have to have certain qualifications in order to work in the kitchen. This may make Greggs’ job harder than it needs to be.
For example, their aim to be strong competitor on the FOTG market may be made harder as they need efficient people to work in the kitchen, in order to keep up with their busy customers, however, they’d also need trained staff. This may prove costly for Greggs, and will either slow down or hinder their progress. The government has the power to refuse a business their desired location.For example, suppose Greggs wanted to open a second branch on the high street, the local government can refuse to give them that area, in order to allow other businesses a chance.
Current social trends may not necessarily help Greggs achieve their aims of “transition from traditional bakery… to the food on the go market”. The horse meat scandal is an example of one. Like I mentioned above, people were a lot more conscious of what they ate and what they fed their families. Sales of beef dropped temporarily, as people weren’t entirely sure whether or not what they were eating is actually beef.Consequently, a lot of supermarkets and restaurants chains either invested a lot of money into assuring people that their products were 100%, British beef. Over time, people started buying beef again, but a lot remain cautious to this day.
Sales of products likely to sold by Greggs (Fresh pre-packed hot pies) hold 15% of the market share of which consumers spend on processed beef. This figure undoubtedly dropped, as a result of the horse meat scandal. On the other hand, social trends can also work in their favour.For example, the fact that people are living busier, more demanding lives nowadays means Greggs is a lot more likely to achieve their aim of completing the “transition from traditional bakery… to the food on the go market”. Finally, technology also has the power to help or hinder Greggs’ ability to achieve their aims. One of their aims is the reshape the business “over the next 2-3 years, as we build a platform to deliver long term sustainable growth”.
Technology can help Greggs achieve this aim.Through the use of social media sites – where more and more people are spending an increasing amount of time each and every day – such as Facebook and Twitter, and microblogging sites like Tumblr, Greggs would be ‘re-shaping the business’ as they’re putting themselves to places where they’re more accessible to their customers than they may have been in previous years. If they were to tweet, for example “2 for 1 on all hot snacks this weekend, nationwide #comequick! ’, this method of marketing may prove successful as twitter has 10 million, active UK users (thedrum. com), 72, 000 of whom follow Greggs.If they were to send that tweet, they would have a guaranteed outreach of 72, 000 people, and some of those may choose to retweet it, favourite it and/or quote it to their followers.
Furthermore, Greggs can pay to be a promoted Trending Topic, meaning all twitter uses – regardless of their location – will see their promotion. The same can be said for Facebook, as it allows you to target people who are most likely to shop at Greggs, and the advert will appear on the right hand side of their screen, if they’re in a computer.There’s been an influx in the amount of machinery replacing people nowadays. There are machines that do everything Greggs could possibly need: the baking, packaging, and it will even sell the products to the customers, although that may go against the brand image Greggs is trying to maintain. However, machinery can come in useful in times of need.
For example, at rush hour, you could set the oven to turn on at certain time, so it will be ready for the next rush of people.
