Influence of External Environment Factors on Business Enterprise

This report explores the influence of external environment factors on a business enterprise, using John Lewis as a case study. It includes a critical evaluation of the PESTLE analysis, as well as an analysis of the SWOT, VRIO, and McKinsey models. The report also discusses the Porter's Five Force model and strategies for gaining a competitive edge.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P1 Influence of external environment factors on business enterprise.........................................1
M1 Critical evaluation of PESTLE ............................................................................................3
LO 2.................................................................................................................................................3
P2 SWOT, VRIO and McKinsey................................................................................................3
M2 Critical evaluation of internal surroundings.........................................................................7
LO 3.................................................................................................................................................7
P3 Porter Five Force model.........................................................................................................7
M3 Strategies for gaining competitive edge ..............................................................................9
LO 4.................................................................................................................................................9
P4 Strategic planning for business enterprise.............................................................................9
M4 Strategical administration plan...........................................................................................12
D1 Representation of information from competitor evaluation................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business strategy is considered as the competitive moves taken by company in the form
of actions for influencing interest of customers towards them. This is effectively done by
strengthening employees performance that is supportive in attainment of company's objectives
(Yuliansyah, Rammal and Rose, 2016). The present report upon John Lewis, a UK based chain
departmental store. The company mainly deals in various categories like watches, food, jeweller,
furniture, accessories, clothing and many others. This report is conducted to explore strategies
adopted by this company and its decisions taken by them over the passed time period. The
current report will include description about PESTLE, SWOT and VRIO analysis for exploring
macro environment, internal environment, in internal resources and capabilities of John Lewis
respectively. Furthermore, Porter's Five Force framework will going to be explained in order to
analysis competitiveness of this company within the industry. In the last section, availability of
strategic options will be explored with the usage of Ansoff Matrix. It will further be used for
developing strategic management plan for business entity.
LO 1
P1 Influence of external environment factors on business enterprise
Business associations are required to evaluate external environment for identifying major
threats and opportunities available to the company at marketplace. Managers of John Lewis is
using PESTLE analysis to analyse influence of macro environment. These factors are elaborated
as below in effectively:
Political: Political stability of UK is strong and stable. This clearly states that there is
huge opportunity for John Lewis within this area as political stability ensures that company will
remain stable in that nation for longer period of time (Chang, 2016). Any incident associated
with political turmoil or terrorist attack might develop threat for John Lewis within UK as this
activity may not allow company to execute their organisational work at regular basis. For
managing this kind of situation, the company is required to keep satisfactory level of stock all
time in order to tackle overall footfall at store and deal with demand and requirement of
customers in this kind of situations.
Economical: Economic stability of United Kingdom is very effective and strong which
ensures that the companies belonging to this nation has strong backup which supports them in
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introducing innovative products, new techniques and systems within the nation. It includes
unemployment, recession, inflations and many more terms. With reference to UK, it can be said
that if this nation goes through recession then it will also reduce purchasing power of the localise
people. This will also reduce sales performance of retail sector as people of this nation goes from
financial trouble which enables them to buy costly products. Here, John Lewis can tackle this
situation offering affordable products to customers so that victims of Brexit can also deal with
the situation.
Social: John Lewis has specific team of market research that analysing external market in
order to develop their knowledge on latest lifestyles and trends of customers. This allows them to
formulate trendy commodities as well as services as per current needs and requirements of
customer in segments of clothing, accessories, watches etc. (John Lewis: competitive advantage
in a tough retail market, 2015). Also, if any of the rival company introduces trendy product
before John Lewis, then there are probable chances that it might create threat for this company.
This is because, customers of this company might shift to another company due to trendy
product. For handling this errors, manager of John Lewis is required to conduct regular based
research in order to update themselves about customers preferences.
Technological: There are numerous of changes which can be seen in technology with the
passing time. These changes allows companies in upgrading making performance of enterprise
smoother that also contributes in the enhancement of this sustainability. In context of John
Lewis, the company holds good coverage at technological ground. It has taken initiative to enter
into e-commerce for minimising their paper work so that its performance could be strengthened
in effective way (Nadeem and et. al., 2018). The main threat associated with this factor is that it
requires huge capital so that latest technology can be adopted by the same. For reducing this,
John Lewis can go for cost cutting in different departments so that they can use this saved cost in
acquiring new technology.
Legal: The organisations pertaining to retail sector have to abide by certain laws and
legislations in order to survive in market for long term. These include employment regulations,
Health and Safety Law, Anti Retail Law, Equality Act, Anti Discrimination Act etc. By
complying with the provisions of all these laws, the management of John Lewis ensures
sustainability within retail sector for a long period of time. Adherence to standards and
legislations that are formulated by authorises of retail sector support the respective entity in
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creating positive image in front of community. This helps in attracting customers and
formulating a base of loyal users.
Environmental: John Lewis performs all of its activities by considering interest of
community as well as environment which is also supported by local bodies as well as
government. John Lewis has used biodegradable packing stuff which ensures that it does harm
environment (John Lewis unveils biodegradable packs, 2019). This requires huge investment
which affects financial position of company in negative manner.
M1 Critical evaluation of PESTLE
The overall analysis of PESTLE framework has provided knowledge about influence of
macro environmental factor on John Lewis. From this analysis, it has been identified that it has
both positive as well as negative influence over organisational performance. Constant
fluctuations in customer's taste and preferences, strong political stability of UK, non compliance
with retail legislation etc. are seen as the positive and negative influence of external factor on
John Lewis. For dealing with these lack areas, managers of John Lewis should develop effective
strategies towards the same errors by taking expertise advises (Tsai and Lin, 2016). This will
support them in managing the situations at the same time and improvising their operational
activities within the company in effective manner.
LO 2
P2 SWOT, VRIO and McKinsey
SWOT Analysis
Strength Weaknesses
 One of the big supermarkets in UK
which offers a wide range of products
to its customers.
 Highly qualified staff and team makes
company achieving their goals
(Hamilton, Cruz and Jack, 2017).
 The company makes use of latest and
emerging technological trends to
 Price is comparatively high as compare
it to other grocery stores.
 Lack of international business presence
as the company is limited in certain
countries only.
 Usage of non effective marketing
techniques keeps them away from
attracting potential customers
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develop high quality products.
Opportunities Threats
 John lewis has the opportunity to
expand its market in other countries.
 The company can also enter in new
market segment for e.g. they can offer
healthy food to its customers.
 John lewis online presence give higher
margin to the company if they can
provide good services to its customers .
 Competition from strong players like
Tesco, marks and Spencer dominate the
sales of John lewis
 Due to cultural differences John lewis
fails in new market (Whitehead, 2017).
 John lewis target older customers who
is around age of 45, might be the risk
for the company.
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VRIO Model:
Resources Valuable Rarity Inimitable Organized What is the
result?
International
presence
International
presence
- - - Competitive
Disadvantage
Offerings Offerings Offerings - - Partially
combative
Technology Technology Technology Technology - Competitive
benefit on
ephemeral basis
Human
resources
Human
resources
Human
resources
Human
resources
Human
resources
Competitive
advantage
The inner capabilities of John Lewis have been determined by taking into account 4
resources, namely, international existence, offerings, technology and human resources. A
discussion upon all of these by applying VRIO model is given below:-
Valuable: This comprises of those resources which aid an entity in attaining a
competitive advantage at market place. In this context, the resources fulfilling this criterion of
VRIO are explained as follows:- International presence: John Lewis is present in a number of countries across the global
periphery. This makes international presence a valuable resource for company which aids
entity in attaining a competitive advantage. Offerings: The respective company render wide array of products following the
standards set by industry. Further, they are produced with the use of latest and emerging
technology that helps company in attaining high customer contentment (Laudon and
Traver, 2016). Human resources: The staff of respective entity carries out business operations by
making use of their skills and knowledge. This helps the enterprise in obtaining corporate
goals in a timely manner.
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 Technology: Paragon’s Live Management software is used by respective company for
the governance of its business operations spread across the globe. This aids the entity in
inflating the efficiency of tasks.
Rarity: Such resources are unique for enterprise and also gives a strategic edge to firm at
market. International presence does not meet this criterion. The rare resources for John Lewis
are:- Offerings: The ware developed by John Lewis are produced as per the consumer
lifestyles and trends. This inflates the rarity of offerings of this business enterprise
(Spieth, Schneckenberg and Matzler, 2016). Human resources: The staff of respective organisation is rare as their skills and expertise
can not be replicated by any other firm. Their collaborative initiative leads to timely
realisation of goals.
 Technology: The software taken into use by company owes its rarity to the fact that it is
developed as per organisational requirements.
Inimitable: These resources can not be replicated by rivals. Within John Lewis,
organisational offerings do not meet this criterion. The main inimitable resources for respective
company are explained below:- Human resources: The educational and professional backgrounds of individuals working
within John Lewis provide the base for their skill set and knowledge base. As these can
not be replicated, thus human resources are inimitable for the respective corporation
(Jones and Comfort, 2018).
 Technology: As the software is made keeping in mind the current business situation and
need, it can not be copied by rivals.
Organised: This criterion contains such resources which are effectively organised in a
company. The technology (Paragon’s Live Management software) of John Lewis does not meet
this criterion.
 Human resources: John Lewis attains its global objectives and maintains its brand value
across the world with the assistance of its qualified and skilled human resources. They
aid the entity in sustaining for longer time for enhancement of market value (Quirke,
2017).
McKinsey 7S
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Strategy: The make use of effective leadership strategy that helps them in operating their
business activities at international marketplace in appropriate manner
Structure: John Lewis uses hierarchical organisational structure while working at
international market scale.
Systems: They prefers to carry their own existing systems while executing their business
activities at every locations. This makes it easier for them to attain their core organisational
goals.
Shared value: It provides value to each and every employee in terms of their cultures,
gender and work. This assures that every employee places their complete efforts in
organisational success.
Skills: Manager of the respective company hires skilled employees at every location.
Staff: It has around 38100 employees who effectively manages business activities at all
locations across the world.
Style: Democratic leadership style is used by them at international marketplace.
M2 Critical evaluation of internal surroundings
The overall analysis of internal environment is helpful in exploring its positive and
negative areas. For respective company, its employees as the highly important resources which
are valuable, rare, inimitable and organised (Jansen, 2017). Along with this, it has also been
identified that this company is not making use of effective marketing techniques which keeps
them away from reaching their potential customers. Also, major competitors of this company in
retail sector are Tesco, ASDA, ALDI, Marks & Spencer etc. Presence of these competitor
increases rivalry among industry which also affects their sustainability.
LO 3
P3 Porter Five Force model
Porter's five force model is mainly used by business organisations for analysing
competitiveness in same sector. It is also helpful for company in devising effective strategies for
company by which they can easily gain competitive edge. The framework is consist of five
competitive forces (Parry and Lind, 2016). For respective business enterprise, its manager have
opted this framework for analysing competition within the industry. All forces of this framework
is described as below in appropriate manner:
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(Porter's Five Force Model, 2017)
Threat of new entrants (Low): Entry of new companies in retail industry is difficult
which ensures that threat for John Lewis is relatively low. This is because, for establishing their
business in effective manner, these new company will require higher capital so that each and
every work of company can be established in rightful manner. For respective business enterprise,
it holds remarkable command in UK which less number of new entrants will create opportunity
for them in enhancing their sustainability as well as profitability within similar market zone.
Threat of substitutes (High): Threat developed from substitutes is higher for John Lewis
as it has numerous of companies which deals in similar sector and offers almost similar sort of
products and services to customers. These competitors also prefers to introduce substitute
products to customers at lower price with same level of quality (Ciasullo Cardinali and
Cosimato, 2017). For reducing its impact, it is essntial for John Lewis is to effectively analyse
needs of its targeted customers according to this only they should develop products. It will attract
customers as they are getting their desired products and services.
Bargaining power of customers (High): Negotiation power of customers for respective
business is identified higher. This is the major threat for John Lewis as if these customers founds
any similar kind of product in competitors stores at lower price then they might shift to that
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Illustration 1: Porter's Five Force Model, 2017.

company (Wirtz and Göttel, 2016). This could reduce its sales within the retail industry. In order
to deal with this, John Lewis is suggested to offer all of its products at affordable prices at
market.
Bargaining power of suppliers (Low): John Lewis holds good presence in UK market.
This ensures that all the order to provided by this company to suppliers are of higher quantity.
This simply states that threat of suppliers for John Lewis is low as if supplier does not agrees to
the provided quotation then there are higher chances that company might move to another
suppliers.
Competitive rivalry (High): Competitiveness in retail sector is very high which states that
threat of this force is higher for John Lewis as the industry is consist of many rival companies
like Tesco, Sainsbury's M&S, ALDI etc. which are offering similar kind of products and services
to customers at affordable prices. It is suggested to John Lewis for collaborating with their rival
company only in order to enhance their access on more number of customers (Cubas‐Díaz and et.
al., 2018). This will support retail companies in gaining benefits with the collaboration of one
another. It will also result in enhancement the market share of this industry as a whole.
M3 Strategies for gaining competitive edge
On the basis of overall observation, marketing activities of John Lewis is less effective
due to which they are not able to communicate to customers and influence them to make
purchase (Marsh, 2013). In order to improve this, its manager is planning to use modern and
effective marketing strategies such a social media promotions, marketing campaigns, promotion
through flyers etc. for enhancing awareness about its commodities among customers. Usage of
these strategies will help John Lewis in maximising its sales performance that also influences
their profitability in positive manner.
LO 4
P4 Strategic planning for business enterprise
Ansoff Matrix is a framework that helps executives, marketers and managers to build
strategy for the future growth. It is also known as market growth matrix (Gupta, 2016). Manager
of respective company uses this framework for identifying best growth strategy. Explanation of
ansoff matrix in context of is explained below:
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Market Penetration: This strategy emphasises on offering existing product to customers
within existing marketplace. John Lewis can go for this strategy by finding out untouched
customers within the existing marketplace. This will support in influencing sales of company in
positive manner. Usage of this strategy will also allow John Lewis in maximising its market
share within UK.
Market expansion: As per this strategy, companies are suggested to introduce its
existing offering at new marketplace (Hawkey, 2017). With reference to John Lewis, it can be
said that if the company uses this strategy they are required to enter into new locations so that
they attract more number of customers towards them. This will influence its sales as well as
profitability in positive manner.
Product expansion: This growth strategy states that new product is required to be offered
at existing marketplace in order to enhance business growth. John Lewis can go for this strategy
by increasing number of product in its portfolio in order to attract maximum number of
customers towards them.
Diversification: This strategy states that companies are required to introduce new product
at new marketplace for enhancing their growth (Priem, Wenzel and Koch, 2018). It is considered
as most riskier strategy as if the introduced new product at new market is not accepted by the
customers then it might also create situation of loss for the company. Thus, it is suggested to
John Lewis to not go for this strategy because it might not work for it in positive manner.
As per the analysis of all stated growth strategies, it has been examined that market
penetration is identified as the feasible growth strategy for John Lewis that will lead to its
business growth (Orr and Pegram, 2017). The company will use it by expanding its business in
periphery location by opening few stores. John Lewis holds strong brand name that supports
them in influencing new customers are new marketplace as well. It also ensures that customers
will easily accept this strategy as they are already aware about this brand. This will result,
increase of sales performance of company. Along with this, it will also enhance market share and
revenue of the same company. This clearly depicts that it is suitable for John Lewis.
Porter's generic Matrix
It is consist of different strategies by which business enterprises can easily gain
competitive edge. In respect of John Lewis, its manager have also considered this matrix in order
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to identify best strategies for them that will contribute in its business growth. Various strategies
of this matrix are explained as below:
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Cost leadership: For opting this strategy, John Lewis should provide its product at
lowest price to customers. This supports them in grabbing attention of customers with lower
prices.
Differentiation: For acquiring this strategy, manager of John Lewis should offer
completely different product to its customers (Baraibar‐Diez, Odriozola and Fernández Sánchez,
2017). Here, main focus of company is on offering higher quality product beyond which
customers do not even care about its prices.
Cost focus: In this, main concern of respective company is to provide low cost product in
their particular location or area of business.
Differentiation Focus: In this, main emphasises of respective company should on
providing different products to its customer within the provided scope.
Horizontal and Vertical Integration
Management of John Lewis also uses horizontal and vertical integration in order to
enhance their growth. Both of these terms are described as below:
Horizontal integration- Manager of respective company can go for this strategy as it
allows them manage their activities at the same level within the same sector or other (Whitehead,
2017). This will also support them in enhancing their market share along with this, it will also
reduce competition within the same sector.
Vertical Integration- As per this strategy, if company opts this strategy they will
definitely expand business at the upper level or lower level of supply chain. This is supportive in
reducing cost of company's transportation cost as work of supply chain is effectively managed in
appropriate manner.
M4 Strategical administration plan
Manager of John Lewis has developed effective strategic management plan in order to
communicate about their newly developed growth strategy to its stakeholders. This plan is
explained below in appropriate manner:-
Aim: To maximise output of operations team within UK.
Vision: To become best retail company across the world.
Mission statement: To provide higher quality products to customers with value added
services for enhancing their satisfaction level.
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Goals and Objectives: The main goal of John Lewis is to expand their business in
emerging marketplace so that their market share at international can be improved.
Strategies: John Lewis will go for market penetration strategy for approaching more
number of customers in order to enhance their sales performance as well as profitability within
domestic market (Yuliansyah, Rammal and Rose, 2016).
Tactics: Manager of John Lewis will provide several discounts to customers in order to
attract them towards their products and services and also influence their sales within less period
of time.
Marketing mix
Marketing mix refers to those factors that could be managed by business association in
order to influence customers to make purchase from that company. For John Lewis, manager of
this enterprise uses this framework and its application is described as below:
Product: The company offer vast range of products such as electronics, celebrations,
gifts, home and designs, fashion products, baby and child items.
Price: John Lewis uses competitive pricing strategy for enhancing their sustainability at
marketplace. Also, they also ensures to offer all of its products with higher quality as compared
to competitors in same range of products for sustaining customers for longer period of time
(Chang, 2016).
Place: It provides products to customers at their outlets which are located at various
locations. Also, the company provides options to customers to order their favourite products
from online medium as well.
Promotion: The company uses advance technology in its promotional strategies so that
they can easily spread awareness about their products among targeted customers.
Above described plan is helpful for the company as it will allow them in executing their
business activities effectively in the marketplace. It will also support them becoming successful
within industry as they are able to attain their respective goals in quick manner.
D1 Representation of information from competitor evaluation
On the basis of above performed environmental evaluation with the help of porter's five
force model to has been determination that the John Lewis has greater market advantage within
UK as it is a big consumer market. In addition to this the bargaining power of suppliers are
relatively low which allows it get required material in cost effective manner. Despite of this the
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threat of new entrant is also low which provide an advantage to offer quality services to gain
high market share (Hamilton, Cruz and Jack, 2017). By despite of, the customer power are
relatively higher which may leads to brand switching when they not get satisfied with the
services of John Lewis and the competition is also relatively higher.
CONCLUSION
From the above mentioned report, it has been analysed that development of strategy
within the company is highly important as it supports them in attaining their organisational goals
and objectives in quick manner. These strategies are developed according to the size of company
and its operating nations. Use of PESTLE analysis is supportive for company as it allows in
developing knowledge on threat and opportunities at marketplace. The report has also explored
various growth strategy that is supportive for companies in enhancing their business
performance. Among them all, it has been identified that product development is identified as
main growth strategy that allow large scale companies in attracting large number of customers
that also results in their growth. At last, it can be said that strategic management plan works as a
blueprint for business managers as well as employees that provides them guidance about
company's aim, strategy, vision and mission statements, tactics etc.
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Orr, S. and Pegram, G., 2017. Business strategy for water challenges: From risk to opportunity.
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Online
John Lewis: competitive advantage in a tough retail market. 2015. [Online]. Available
Through:<https://www.accaglobal.com/in/en/member/discover/cpd-articles/business-
management/john-lewis.html>.
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