There are many factors in macro-environment that will affect the decisions of managers in any organization. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change. Managers can analyses these factors through the Pestel analysis. Pestel Analysis is one of the tools that often used by managers to analyze the broad macro-environment of an organization. It provides a comprehensive list of influences on the possible success or failure of particular strategy. Pestel Analysis includes political, economic, sociocultural, technological, environmental and legal.
Political
The government has announced subsidy cuts for sugar, petrol, diesel and liquefied petroleum gas (LPG) as part of its gradual subsidy rationalization programme. With the upward adjustment of 25 sen/kg (+15%) for sugar, the effective retail price of coarse sugar is now RM1.90/kg in Peninsular Malaysia and RM2/kg in Sabah & Sarawak, compared with RM1.65/kg and RM1.75/kg previously. It will be insignificant impact on F&N’s earnings; more than 2% of core earnings, assuming one or two months in passing down costs. Sugar is one of the main ingredients in F&N’s soft drinks. The F&N group has been shifting its focus toward production of beverages with low sugar content and it has reduced the average amount of sugar by 7.5% in its products.
As for the political, it is an insignificant which the environment and products could be affected through political values as a country’s political decision. The current political stability in Malaysia has estimated about 4.5% growths in Real GDP (Gross Domestic Product), and consumer price inflation about 3.3%, which may affect the organization especially the beverages industry. For example, the market demand will increase when the Real GDP is increase because consumers tend to spend more on the products or services as their income increases. At this point, consumer purchasing power is high. However, when the consumer price inflation increase, consumers may tends to spend less on products or services due to the increase in price of the products and services where consumer purchasing price is low.
Therefore, these can determine the consumers’ buying behavior in term of the politic on the products and services that they will spend for their daily usage based on (The Economist Intelligence Unit Limited, 2011). All of the policies been made could affect the business in several ways such as how their products are produced, sold and been promoted throughout the organization. Besides that, it is certified F&N Beverages as halal by JAKIM Malaysia as this can allow those Islamic people to purchase and consume the product.
Economic
Economic refers to macroeconomics factors such as exchange rates, business cycles and economic growth rates around the world. The F&N Beverages Marketing Sdn Bhd. division reported a solid performance, registering its third consecutive year of record growth, building on the momentum of expanding volume and reinforcing market share leadership in the ready-to-drink segment via a broad portfolio of offerings in their products such as carbonated soft drinks, isotonic, Asian drinks, teas, and juices. Besides that, it has setting a new historical benchmark due to the overall revenue that increases 21.3 per cent.
Operating profit grew 42.1 per cent driven by robust sales volume growth of 19.6 per cent. This growth momentum was achieved on the back of sales and distribution superiority, combined with targeted marketing activities, including the launch of some key new products, and supported by brand leadership. The year 2010 was marked by an increase of RM0.25 sen per kilogram in the price of sugar which is a key ingredient that would have a major impact in producing their beverages. Although it has a major impact on their products but was balanced by the benefits of continuous cost saving and increased organizational efficiencies.
Sociocultural
Social changes involve changing of attitudes and lifestyles. Many Malaysian citizens are practicing healthier lifestyles as compared as before. People now are demanding for beverages that are low calories, sugar, carbohydrates and total fat. Therefore, F&N beverage has to adapt to the increasingly health-conscious consumers and refocus more marketing resources and efforts into ‘healthier’ products to meet the customers’ needs before it is too late. Besides that, changing lifestyles also lead to different demands from the consumers. Therefore to cater for the needs of consumers, F&N beverage marketing came out with different kind of flavours of 100 PLUS which include ‘original’, ‘lemon lime’, ‘tangerine’ and ‘Aqtiv’ to satisfy the needs of the consumers.
Technological
Technological change creates opportunity for product improvements and new marketing techniques such as the internet and e-commerce. Technological factors that contribute to the improvement of company’s result are as follows: •The effectiveness of the company’s advertising, marketing and promotional programs. The new technology such as internet and multimedia’s are used as a tool to provide advertisement to attract their customers. This technology is used to sell their products. •Introduction of cans and plastic bottles have increased the sales for 100 PLUS as these are easier to carry around •As the technology is getting more and more advanced, there has been introduction of new machines all the time which increases the productivity of the company tremendously •Direct store-delivery (DSD) which allows them to supply all of their retailers and customer-distributors. DSD works well because it allows them to distribute products quickly and efficiently.
Environmental
Environmental defined as specifically for ‘green issues’ such as pollution and waste.It includes all elements that will often occur on earth such as air, water, weather and climate change. Changes in environmental can effect on many industries including farming, tourism and insurance. Changes in climate often occur when there is global warming and this external factor is becoming a crucial issue for firms to consider in an organization. Therefore, it has greater impact on many industries to protect the environment. This will affect the industries to move into producing more environmentally friendly products and processes. It will affect the demand patterns and creating business opportunities for them. At F&N, they believe that their commitment to integrity in everything they do will be bring benefits towards to environmental.
They have implemented and executed various environmental stewardship initiatives that compliance requirements in order to minimize their environmental footprint throughout each phase of their products’ life cycle. Furthermore, F&N Holding Bhd. provide cleaner operations at their soft drinks, dairies and glass container plant. The setting up of F&N at the soft drinks manufacturing facility in Shah Alam has helped lessens logistics, storage handling cost and improves their overall manufacturing efficiency. F&N introduce new packaging style to its products with refineable bottles. The refineable glass bottles are more environmental friendly compare to the plastic ones. Although glass bottles are expensive to make compare to plastic bottle but it will be worth due to reuse over and over as this can also covers up its cost. This makes the product cheaper and environmental friendly as the customer who buys and finish the drink must return it to the vendor which in return comes back to the company to rewash it and use it again.
Legal
Legal factors are related to the legal environment in which the firm operates. With F&N group being geographical presence in more than 20 countries, the group’s businesses will be facing different degrees of political exposure. Therefore, the company has to maintain close working relationships with local business partners and authorities to adapt to any changes of law and regulations of the government. Besides that, F&N group should also adopt the ISO 9001: 2008 standard. This standard provides a set of standardized requirements for a quality management system, regardless of what the organization does, its size, or whether it is in private, or public sector. The ISO 9001: 2008 standard provides a tested framework for taking a systematic approach to manage the organization’s processes so that they are consistently producing products that satisfy customers’ expectation.
