Decathlon is a part of the sporting goods retail industry, with the company originating in France in 1976. Over the years, the company has established a significant position in the global sportswear market. The PESTLE analysis of Decathlon details the effect of external environment on business and its subsequent response to these environmental dynamics.
Political Factors
In case of political conflict, the businesses have to pause their operations, resulting in lower sales volume. The Russian attack on Ukraine has created uncertain business environment for Decathlon, making it difficult to carry on smooth operations. Furthermore, the pressure from stakeholders influenced the decision to suspend business activities in the region (Morton, 2022).
The supply chain process of organizations can also be disturbed in case of trading restrictions linked to the geopolitical conflict such as trading issues between the US and China and Russian war. Different restrictions have been applied on Russia amidst the conflict, making the business environment unfeasible, due to issues with the supply chain, which effected Decathlon.
Considering the supply chain issues the company had to face due to the political turbulence, the management has increased focus on local production to offset the impact of uncertainty. Government’s decisions related to tax, interest rates and other policies also affect the way Decathlon’s strategy and operations are shaped.
Economic Factors
The economic factors of a country play a crucial role in production process of an organization. In addition, the economic prosperity or decline also effect the revenues generated by businesses. Stable economy provides organizations with various growth opportunities while negative economic outlook indicates risk factors for business entities.
Factors such as GDP growth and inflation have a strong effect on Decathlon. The company has been facing the adverse impact of inflation and increasing price of raw materials. Since the raw material has become more costly, the company needs to respond to the price changes and lower the negative effect of price increase on the profitability.
The increasing prices of raw material as well as the fuel price hike, due to the Russian conflict has affected the pace of business growth. Nevertheless, having global presence has enabled the company to hold reasonable growth prospects in the next 4 years. At the same time, the management aims to retain low prices for the products, which can be a challenge (Kit, 2022).
COVID-19 had exerted pressure on the economic stability of different regions and various organizations had to pursue with the closure of their operations. Decathlon has faced losses as a result of the pandemic and had to close its outlets that were not significantly contributing to the company revenues.
Social Factors
Taste and preference of people is one of the prime components that constitute the social factors for the sporting goods industry. The design of the products needs to be in accordance to the requirements of the market, while pricing is also determined by the consumer’s mindset. Decathlon focuses on keeping the prices of its products within affordability range.
Moreover, the degree of people adopting active lifestyle in the population open up the possibilities of growth for the business. Recently, there has been an increase in the number of people who are focusing on healthier lifestyle, and incorporating fitness and sports as a part of their life. This change can be beneficial for Decathlon as its customer base can increase.
The sales achieved by the company were also impacted as due to the pandemic, the in-store purchase of sporting goods declined as a large number of people were following the social distancing. On the other hand, the online sales increased as the consumers preferred option for purchase of the goods (Shearsmith, 2022).
Technological Factors
The technological development has facilitated the sporting goods industry as the tools such as automation and AI help with creating quality products. The availability of technology has also been used to come up with unique product design, such as a recyclable ski jacket (Decathlon, 2022). Another example is conversational AI as a part of the customer management system.
Moreover, technology helps Decathlon in the management of warehouse. The level of efficiency has increased, owing to the use of software and robots that help the company in handling the inventory. Managing sales online effectively has also been made possible due to the availability of technology that supports online business.
Decathlon needs to keep up with the pace of evolving technology to handle its product design, distribution and other operational processes. The domain of R&D is particularly supported by the technological developments. Digitalization is at the core of the online presence of the company and the management has incorporated different tools to support seamless customer experience.
Legal Factors
The legal aspects of Decathlon include labor laws and rights, detailed by ILO. The workers employed in the manufacturing facilities need to be treated in accordance to the labor laws such as salary, number of work hours, work safety etc. The management also practices fair labor practiced by discouraging forced and child labor (Decathlon, 2022).
Furthermore, the contractual agreement with the suppliers and management of company subsidiaries needs to be handled under the legal framework. Another notable legal guideline for Decathlon is the Extended Producer Responsibility (EPR). This entails that the products displayed on the shelves need to be removed once they are near expiry.
Environmental Factors
The environmental concerns have played an important role in shaping the business operations and product design at Decathlon. From the emphasis on product recyclability to reduction of waste, the company has been committed to lower its impact on the environment. ECODYE is one such component that has helped it to achieve environment friendly manufacturing (Decathlon, 2022).
Along with recycling, minimal waste design has also been the focal point at Decathlon. In addition, decreasing emissions during production process has also been a part of the sustainable endeavors at the company. The management has also limited the use of plastic in packaging, eliminating the plastic use for majority of its product categories.
Conclusion
Decathlon has faced pressure from the external environment in the form of geo-political conflict and pandemic, which had adverse effect on company sales. The managerial decisions have been guided by the influence of these threats from the environment. The growth opportunities in the form of technology upgrades have benefited the sporting goods manufacturer.
References
- Decathlon (2022). Annual Report. Retrieved from https://sustainability.decathlon.com/decathlon-annual-sustainable-development-reports
- Kit, T. S. (2022). Not immune to rising costs, but Decathlon says it aims to keep prices ‘as low as possible’. CNA. Retrieved from https://www.channelnewsasia.com/singapore/decathlon-singapore-keep-prices-low-inflation-rising-costs-2887596
- Morton, B. (2022). Decathlon backtracks on Russia after boycott calls. BBC. Retrieved from https://www.bbc.com/news/business-60912746
- Shearsmith, T. (2022). Decathlon reports online shopping surge as retail sales dip in 2020. The Industry. Fashion. Retrieved from https://www.theindustry.fashion/decathlon-reports-minor-sales-dip-in-2020-with-online-shopping-surge/