Dunnes Stores is a renowned brand in the retail chain industry, providing a range of products to its customers from food to household items. The company is based in Ireland and operates various retail stores. The following section provides an overview of the external environment (using PESTLE Analysis of Dunnes Stores) being faced by the company and how the management navigates through these industry trends.
Political Factors
The Russia and Ukraine war had a profound effect on the different firms in the retail sector, as the supply of goods, primarily grain which can influence the pricing of food items. The presence of conflict between the two regions also threatened the steady supply of fuel to Europe which could cause a price hike, indicating how unstable political climate disrupt Dunnes Stores (McSorley, 2022).
Taxes that are applied on the retail industry are also an important factor that effect the business operations of the company. For instance, the application of plastic bag levy implies the payment of tax to the government, determined by the use of plastic bags by the company. Dunnes Stores has not fulfilled this tax obligation amounting to a pending amount of €36.5 million.
Another political factor that can significantly affect the growth prospects of the company is the ease of trading and the regulations pertaining to trade with other countries. In case of trading barriers, the company is likely to experience disturbance in supply chain. Brexit has also influenced the management’s decision to exit from UK due to unfavorable business environment.
Economic Factors
The economic prosperity of a country determines the sales that are generated by a retail organization and the profits attained through the sales volume. When economic indicators suggest unfavorable business environment in the form of high inflation, rising prices and low GDP growth, the retail sector is negatively affected. The increased prices of food items and grocery products has been area of concern for the retail brand (Jones, 2022). Dunnes stores had to revise the prices of its food segment to respond to the changing price structure. The management had decided to pursue an increase in the prices of the food related items in response to the fuel price pressure.
The price increase is linked with rising cost of fuel, which suggests that changing economic factors such as fuel prices can lead to higher prices. The company also had to deal with a higher operational cost due to the changing price of goods, as well as the soaring cost of energy. In addition, the labor cost, transportation charges are also exerting financial pressure on the profits.
Unemployment ratio is also an important part of the economic environment for the company. High unemployment rate indicates the high supply of labor in the market, while low unemployment leads to labor shortages. The unemployment rate in Ireland has decreased, which carries implications for availability of suitable candidates for different job openings.
Social Factors
The ongoing inflation has changed the buying behavior of the people. The consumers are more interested in purchasing products that are low cost instead of buying items that are linked with brand names. The food prices have been increasing to more than 15% which has also shifted the focus of the buyers towards own brand ranges (Pope, 2023).
Seasonal sales increase also constitute an important part of the social factors for the company. The back to school season is particularly profitable for Dunnes Stores as it has reported a higher ratio of sales in the domain of school related items. Moreover, special festivals such as Christmas also increase the number of people visiting the stores for making purchases.
The pandemic has been a key force for business decisions related to company operations. Dunnes Stores had to adhere to the social distancing guidelines and deal with the pressure of lockdown, while maintaining profits. The safety measures had to be taken due to the pandemic, being an additional expenditure for the retail company, which increased its financial burden.
Technological Factors
The development of technology has helped businesses to flourish in the physically located stores as well as manage the sales through online presence. Dunnes Stores has established its online market presence through its website which allows the customers to place orders online and engage in hassle free purchase experience.\
The company is also taking benefit from technology for analysis of market trends and to adjust the business strategy accordingly. Management of inventory and keeping the stock updated is also a part of the business operations, which is significantly supported by the available technology.
Legal Factors
The legal environment of retail sector specifies adherence to copyright and intellectual property regulations, which are particularly linked with its clothing segment. Not adhering to these laws can lead to legal issues, as evident in the case where Dunnes Stores was found to be engaged in copying designs from one of its competitors (BBC, 2014).
Implementation of labor rights at the workplace is another important legality for the company. Poor compliance with labor rights has resulted in strike and protest from the employees working at the company. The implementation of employee safety is also an integral part of the legal guidance that Dunnes Stores have to follow.
Furthermore, the company is also bound by legal framework to refrain from sharing deceptive information with the customers and maintain the quality standards. Failure to provide accurate information or selling goods that do not aligned with the promised level of quality can lead to litigation.
Environmental Factors
The retail sector in Ireland has to follow ethical and sustainable business practices. Dunnes Stores is working towards creating a sustainable organization where the processes are focusing on becoming environment friendly. Moreover, the management also makes sure that it engages in ethical procurement from suppliers that have adopted sustainable business practices.
The company has also initiated recycling of the old electric appliances to lower the environmental damage. Recycling these items can reduce the number of products being sent in the landfill and their subsequent effect on soil and water (Dunnes Stores, 2023). In addition, the management has planned to incorporate solar energy as a renewable energy alternative.
Conclusion
Dunnes Stores is operation in a moderately unfavorable environment due to the uncertain political and economic climate. However, the company has been able to identify the need of the customers for value based pricing and has been able to deal with inflationary pressures. Technological factors have also supported the company in maintain strong market presence.
References
- BBC (2014). Karen Millen wins design case against Dunnes Stores. Retrieved from https://www.bbc.com/news/world-europe-27923008
- Dunnes Stores (2023). Recycling. Retrieved from https://www.dunnesstores.com/content/weee-recycling
- Jones, W. S. (2022). Grocery Inflation Hits 11% In Ireland, Dunnes Stores Sees Strongest Growth. European Supermarket Magazine. Retrieved from https://www.esmmagazine.com/retail/grocery-inflation-hits-11-in-ireland-dunnes-stores-sees-strongest-growth-207908
- McSorley, A. (2022). How Russia and Ukraine conflict could impact your trip to Tesco, Aldi, Lidl, SuperValu and Dunnes. Irish Mirror. Retrieved from https://www.irishmirror.ie/news/irish-news/how-russia-ukraine-conflict-could-26333935
- Pope, C. (2023). Grocery prices rise nearly 17% as shoppers turn to own-brand products to save money. The Irish Times. Retrieved from https://www.irishtimes.com/business/2023/04/03/grocery-prices-nearly-17-up-on-last-year/