PESTLE analysis is a beneficial tool for examining the external environment of an organization. PESTLE analysis of Burberry provides information in terms of the threats and challenges that are present in the external environment, which facilitates the decision making process. The following section presents the PESTLE analysis for Burberry. Burberry is UK based which has been operating in the fashion industry.
Political Factors
The political environment includes factors such as political stability, bureaucracy, and the laws and regulations governing the businesses. A stable political environment facilitates the businesses in growth as well as brings in investors from other countries. Political instability makes it difficult for the businesses to maintain profitability, and foreign investors refrain from making investment decisions under such conditions.
The political factors within UK are stable as compared to the under developed countries, however in the past 5 years, the political uncertainty in the UK has affected the businesses negatively. According to Thomas (2022), the resignation of PM Liz Truss has further added to the pressure for the businesses as they had to deal with the after effects of the political instability. Another factor that has affected the political environment and Burberry is Brexit. The company was managing its supply chain operations globally effectively but Brexit altered the supply chain processes. The delivery within Europe could be done within 2 days, but Brexit would delay the delivery, which would create an opportunity for the rival fashion brands to market their products and fill up the gap (Rovnick, 2019).
Economic Factors
The economic factors play a critical role in supporting the development of a business. If there are unfavorable economic conditions, businesses struggle to maintain their revenues and in some cases go bankrupt. UK has been dealing with rising inflation and interest rates which has negatively affected the sales and profitability of Burberry (Thomas, 2022). The cost of energy has also increased which further made the economic environment unfavorable for the company. Another challenge that Burberry faces related to the economic factors is the shortage of labor which creates difficulty in the management of business operations. Unemployment is another indicator for economic conditions and in UK low employment rates suggest that the job market is stable.
Social Factors
Burberry has established its position as a luxury fashion brand that attracts customers from within the UK as well as from other countries. Even though the low unemployment rate is a positive indicator, the high inflation and interest rate is likely to affect the consumer spending habits negatively. The global economic decline also affects the consumer spending habits of the tourists, who would prefer alternate brands with a lower price and similar quality. Brexit has also changed consumer trends as people prefer other options for shopping of luxury items (Bottaro, 2021).
Nevertheless, the company has been gaining increased profits due to its focus on the younger segment of the population. The young consumer is attracted to the range of luxury fashion items being produced by the company including streetwear and leather goods.
Technological Factors
The technological factors include the emerging technologies and their impact on the businesses. Organizations that are able to keep with the pace of changing technology are able to progress, while businesses that fail to adopt the emerging technology have to face the consequences. Burberry has integrated technology as a part of its business operations as well as in connecting with the consumers. For business operations, the company is using up to date IT and other technology to create products that meet the environmental and customer requirements, along with bringing personalized experience to the consumers.
For connecting with the market, Burberry is using social media to create a strong presence in the global market, offering the customers a highly personalized shopping experience. As mentioned by Stockdill (2022), the company has been able to use digital marketing to reach the consumers on a global scale. Moreover, the company’s focus on omnichannel marketing has helped it to expand the customer base, allowing the company to target the digital technology users besides the people visiting the stores.
Legal Factors
The laws and regulations imposed on businesses create industry dynamics for organizations. Some countries have a high level of corruption and the rule of law is weak, resulting in manipulative business practices. A strong legal framework and effective application of regulations ensures that the businesses are abiding by those rules. Burberry had to face the risk of boycott during the Xinjiang cotton issue in China as the region was reported to be exploiting the labor. Burberry had decided to refrain from using the cotton from Xinjiang which resulted in the boycott of the brand and China imposed sanctions on the law makers from the UK who had raised the issue (Togoh, 2021). The legal conflict had disrupted the sales of Burberry in China. Along with that, the changing and uncertain tax policies in the UK have negatively affected the company’s business operations.
Environmental Factors
The fashion industry in the UK is governed by environment protection laws that require the businesses to adopt environment friendly and proper waste management practices to limit the harmful impact on the environment. Burberry had to face criticism on its waste management practices related to the destruction of the unsold stock. In recent times, Burberry has shown an environmentally responsible attitude through its emphasis on the Climate Positive goal, claiming to reach the environment positive goals by 2040. To illustrate the environment friendly agenda, the company has made efforts to reduce the carbon emission working towards becoming carbon neutral and is only relying on renewable sources of energy for the electricity needs. Furthermore, Burberry has also strived to procure raw material is that is sustainable in nature (Burberry, 2022).
Conclusion
Overall, it can be seen that Burberry is operating in a moderately stable external environment, with some degree of pressure arising out of the political and economic uncertainties. However, the other factors are favorable for the company. Through targeting the key social trends, using technology to effectively connect with customers and upholding positive environmental practices company has increased its profitability.
References
Bottaro, G. (2021). Burberry says Brexit makes UK less attractive for luxury shopping. Proactive. Retrieved from: https://www.proactiveinvestors.co.uk/companies/news/938954/burberry-says-brexit-makes-uk-less-attractive-for-luxury-shopping-938954.html
Burberry (2022). Strategic Report. Retrieved from: https://www.burberryplc.com/content/dam/burberry/corporate/oar/2022/pdfs/Burberry_2021-22_Strategic_Report.pdf
Rovnick, N. (2019). Burberry warns on impact of no-deal Brexit. Financial Times. Retrieved from: https://www.ft.com/content/073cc80a-1edb-11e9-b126-46fc3ad87c65
Stockdill, R. (2022). Burberry’s focus on younger customers is paying off. Inside Retail. Retrieved from https://insideretail.asia/2022/01/19/burberrys-focus-on-younger-customers-is-paying-off/
Thomas, D. (2022). UK businesses plead for political stability as economic conditions worsen. Financial Times. Retrieved from: https://www.ft.com/content/212a0a7f-f94b-4695-9a2d-4c1203482a90
Togoh, I. (2021). As Burberry Faces Backlash In China Over Xinjiang Cotton, Other Luxury Brands Could Face Boycott. Forbes. Retrieved from: https://www.forbes.com/sites/isabeltogoh/2021/03/26/as-burberry-faces-backlash-in-china-over-xinjiang-cotton-other-luxury-brands-could-face-boycott/?sh=7922748b3f9a