Business Environment Analysis of Halfords Plc: A Detailed Report

This report provides a comprehensive analysis of the business environment surrounding Halfords Plc. It begins with an examination of corporate governance structures, including an overview of relevant theories like agency theory, stakeholder theory, stewardship theory, and transaction cost theory, alongside an organizational chart. The report then delves into a PESTLE analysis, focusing on the potential of the Indian market for Halfords, considering political, economic, social, technological, environmental, and legal factors. Finally, the report employs Porter's Five Forces model to assess the competitive landscape. The document concludes with recommendations and a summary of the key findings, offering insights into Halfords' strategic positioning and potential for expansion.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASKS............................................................................................................................................1
1. Corporate Governance organisational structure of Halfords Plc............................................1
2. Pestle analysis of the Halford company by considering Indian market..................................4
3. Porter Five Model to analysis the competitive environment..................................................7
RECOMMENDATION...................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10
Books and Journals...................................................................................................................10

INTRODUCTION
All over the world there are lots of businesses which are running and the basic aim of
these is to earn profit. Business is a procedure which includes transfer of goods and services and
in back the owners get money. They will prepare or produce products which has some value in
the market so those will be sold to the consumers. They have to carry out their business activities
in an business environment and this includes where factors which prevails internally and
externally. If any company wants to grow their business it is necessary that they are well aware
about these factors and for that they can conduct a PEST and SWOT analysis (Aula, 2010).
Organisations should shape their policies and strategies by keeping those factors in mind. This
all business report will be highlighting key elements of business environment and how it affects
the company Halfords Plc which is a British retailer of the car parts, car enhancements,
campaign and touring equipment and bicycles in UK and Ireland.
TASKS
1. Corporate Governance organisational structure of Halfords Plc.
Corporate governance is defined as the rules, practices and processes by which an
organisation id directed and controlled. Through this a balance is set in the company and it is
made sure that interests of their stakeholders like shareholders, management, consumers,
suppliers, financiers, government and the community is maintained (Belás and et. al., 2015).
With the governance structures and principles the distribution of the rights and responsibilities
can be done in proper manner among the members of the company who are directly or indirectly
connected to them. This is the best way and help the managers and board of directors to make
decisions which will produce better results. This can be a way to better company function better
and avoid any conflicts. Halfords Group Plc has been a successful venture and the reason behind
this is their way of functioning. They make sure that all the tasks are aligned according to the
functions of the firm (Bill Pasmore PhD and CMC, 2010). It is seen that several companies in the
world have faced collapse due to corporate mis governance. There are lots of corporate
governance theories which Halford group can adopts and some of them are listed below.
Agency Theory:- With this theory someone can understand the relationship between
agents and principals. Agents are appointed by the principals so that he can carry out operations
on their behalf. The agent should side away his self interest and should work for the principals
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and help he to achieve whatever he wants. If both will have different interests then principals and
agents may become a source of conflict and the agent will not work with his full dedication. But
the agency costs are incurred by the principal only as there is a lack of trust between both of
them. When the agent undertake all the tasks on the behalf of principal he becomes responsible
and accountable to the principal whom they are employed (Blanchard, Tolbert and Mencken,
2011). This theory can be applied in the organisation as the ownership can be defined through it.
In the scenario of Halford group the shareholders will be considered as principal who employs
the directors who is agent and the directors are accountable to them. The directors perform tasks
of managing the Halford group and with the aim of achieving high salary and large bonus they
try to bring effei9eciency in their work.
Stakeholders Theory: This theory shows the effect of corporate operations on all the
noticeable stakeholders of the company. It states that the directors should identify the interests of
every stakeholder in the governance process. With this the conflicts between the stakeholder
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Illustration 1: Agency theory and
corporate governance, 2012

interests can be reduced. Stakeholders are categorised into two one is internal and other is
external. Directors and employees of Halford group are its internal stakeholders and in external
their creditors, auditors, customers, suppliers, government bodies and etc. are included.
Stakeholders although have influence on the company but they are not directly involved in the
process of it (Cantwell, Dunning and Lundan, 2010).
Stewardship Governance Theory: It defines a person who takes care of the demands of
the other individuals or communities. They manages all the assets which they control and is
somewhat related to the Agency theory. They act on the behalf of shareholders and the owners of
the company. In the scenario of Halford group the managers will act in such a way that the
financial interests of the company is met.
Transaction Cost Theory: It is based on the principle that the costs will arise when the
company will hire someone else to do their work on the behalf of them. For example; Halford
has hired a director who will be appointed for the operation tasks of the company (Chow and et.
al., 2012). It briefs about the governance frameworks as based on the net effects of internal and
external transactions, rather than as contractual relationship outside the company. All the
transactional cost will come when they deal with the external party.
With the corporate governance Halford Group wants to deliver effective and accountable
leadership so that their shareholders can be benefited. With the proper corporate governce
policies and practices they will be contributing to the success and future of their business. With
the use of committees and delegated decision making they are able to design their Corporate
Governance codes.
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Illustration 2: Halford Group Annual Report, 2012

The above shown diagram shows the management structure of the company and the below
mentioned figure illustrate that how the board of directors handles the activities of the business
by making different decisions.
There corporate governance model of the Halfords company shows that board of directors should
be independent in their judgement and character and have to be free from relationship. Halfords
company has board members and in which two are executive directors and four non-executive
directors. Out of all three of them are independent and it also shows that no single person or
group dominates the decision making. It is a private company which has four committees i.e.,
audit, nomination, remuneration and CSR (Commander and Svejnar, 2011). All these have
different roles and responsibilities which are assigned to them. They operate their business in
two market that are motoring and cycling and most of their sales are generated from the products
and services which are related to motoring. It is only the 30% which is coming form the cycling.
In Uk only they have 30000 garages.
2. Pestle analysis of the Halford company by considering Indian market.
Currently, Halford has restricted their services to UK and Ireland but they want to grow
their business in order to expand that to the other countries also. This will be the part of their
international expansion as till now they were focused on the British region only. They have
options of different countries where they can expand their market and for that they have to a
research the market of these nations (Cordes, Richerson and Schwesinger, 2010). After seeing all
the aspects they have to decided that India will be the country where they will be expanding
market. India is the world's second largest populated country and are among the top developing
nations. Indian markets holds a great significance and has lots of opportunities if anyone wants
to settle their business there (Cronan and et. al., 2011). To make a successful business it is
important that they have full fledge knowledge about the factors which can influence their
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business. Although internal environment can be controlled by the company as they exercise full
power over it but they have little control over the external factors. They need to have all the
information about them and can shape their strategies according to it. This will be a big
challenge for them because they are aware about the fact that business grow only if there is
appropriate business environment. So for that they have to do a PESTLE analysis of the market
in which they are going to invest for the new business (De Jonge, 2011). PESTLE is expanded as
political, environment, social, technological, environmental and legal factors. This was designed
to scan a business environment and before a strategy is build a highlights needs to be put in on
them.
Political: It has to do with the policies and laws formed by the government and this is the
way through which the governing body intervenes in the economy. They are also have to do with
the goods and services which the government provide in the nation. In the large scenario it can
be said that it includes the views and attitudes of the regime. What are the priorities of the
parliament for the business. There decisions impact the infrastructure of the country and there
health services also. India is a democratic country and follows the federal government structure.
There is lots of common things between the UK and the India and one of the main thing is its
political structure. UK in past ruled India and now shares a friendly relation with them. In recent
era the country has experienced a political reform and the UPA government lead by Indian
National Congress has been removed from the power and the other government called as BJP has
taken over the chair with a majority (Erving and et. al., 2011). It has been a good sign for the
businesses and just after the decision Indian markets went up. In the manifesto of their election
campaigns they have announced various things related to business. After the two and half year
government has declared a lots of programs and policies which has encouraged business all over
the wo0rld. They are focusing on the creating a business environment where the companies can
come to India and expand their business here (Welford, 2013). They have announced Made in
India concept which will be focusing on encouraging international companies to India and set up
their production unit here. With the new policies ease of doing business has also been improved.
This can be an advantage Halfords as there are lots of opportunities in the market and at the same
time they also don't need to face much competition as there are less companies in the cycle
business. Although they have to face a tough competitions in the motoring segment (Fernando,
2011). They also have to pay less tax to the government as they are one encourages CSR model.
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Economic: Indian economy came into the limelight when the various barrier gates which
was restricting multinational companies to expand their market in India. The government felt the
need of economic development and they knew that without the privatization and globalisation
they cannot survive with the local market (Gebauer, Paiola and Edvardsson, 2010). They have
changed their policies in 1091 and there was huge reduction to 6 on industrial compulsory
licensing, divestment on crowded public sector enterprises, liberalization of foreign capital and
granting of permission on foreign technological agreements. After that the country has
experienced growth in their economic factors. When the world was facing economic crises in
2008 the country have experienced a GDP of 3.965 trillion US dollar with a growth 6%. At the
same time there was also a growth in the foreign direct investment up to 10.532 billion US
dollar. So these figure states that the markets of India have huge potential to grow. When talked
about the cycle market India is the second largest player in the sales of cycles. In previous year
the sales went to 12 million units a year (Guglielmetti, 2011). There are also estimation made by
the Indian Bicycle Market Outlook that the industry has a immense growth rate in the upcoming
year. They have to compete with the domestic players which holds a big market and some of
them are Hero cycles, TI cycles, Avon Cycles and Atlas. Other than them they also have to face
a tough competition from the Chinese bicycle makers.
Social Factors: These factors have a significant role in the business environment. Indian
youth population is maximum so they have a advantage for this. Halfords company will have to
deliver bicycles to larger number of population. Most of the Indian population cannot afford to
buy a four wheeler and those who buy the two wheeler also don't use it much. Bicycles are the
products which is no9t that much expensive and even a poor person can also afford it. They have
to bring cycles according to the Indian market and needs to bring them for all kind of people and
class. The sports cycles can help them in gaining competitive advantage the youth has become
more focused on the health awareness. There can also be cycles for the women which will help
them in symbiosis the women empowerment. Indian roads are elevated so the two and four
wheeler find it difficult to work properly (Trkman, 2010). Cycles is the vehicle which symbolises
eco- friendly thing. This can be replaced with the vehicles which causes pollution. In leisure
timings people can use the cycles and the cost of maintenance is quite low.
Technological: In the era where technology has taken our life so it is necessary that
Halfords company introduces some technology with their cycles. This can be done through new
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product development and will help them in cost reduction. They have to adopt new methods
which will help them to produce new bicycles in higher number and with this the demands of the
market can be fulfilled. In order to beat their competitors they can add a extra feature with their
bicycles. This is the country where new technologies are coming and making their life more
easier. With the bicycles they can give extra feature which will have a lot of benefits to the
company.
All the above mentioned factors needs to keep in mind before setting up their business in
India. With this they will able to deal with the customer and can increase there sales.
3. Porter Five Model to analysis the competitive environment.
Porter's five forces analysis is a model for analysis the level of competition within a
specific market and with this business strategy can be developed. It define forces that can bring
competitive intensity and later the attractiveness of an industry. With this model Halford can
know there competition in the bicycle industry.
Rivalry Among Existing Competitors: It define the intensity of competitive rivalry
which is the major determinant of the competitiveness of the industry. There are lots of potential
factors through which they can beat their competitors. They can bring innovation through
sustainable development (Robbins, Judge and Campbell, 2010). They have to invest more into
the advertising campaign which will help Halfords to create a image in the market of India.
There are high exit barrier and high fixed cost in this market. This is the sector where it is
difficult for the companies to show difference in the product. There is high rivalry among the
current companies.
Threat of New Entrants: This can be ease for them as there are low chances of threat to
new entrants. But as it is seen that it is a profitable market which might attract some new entries.
There are lot of factors which can stop the entry of the new player. Some of them are
government policies, economies of sale and absolute cost. But the cost of the current player is
low which avoids entry of the new one. The profit will become difficult if the Chinese bicycles
manufactures are entering into the market (Siewiorek and et. al., 2012).
Threats of Substitute: It is also low because customers are well aware about the
environmental issues so they will not substitute this with the other vehicle. The government is
also encouraging people to buy bicycles instead of other pollution causing vehicles. The other
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advantage is that the prices of cycle is lower than the other transportation. Consumer has also
become well aware about their health so they prefer bicycles which maintains their physique.
Bargaining power of consumers: It is higher than expected as Indian customers focus
on the prices when they buy something. They are very much sensitive about it and in switching
from one product to other is less.
Bargaining power of suppliers: India is a country where labours and raw materials are
in large number so the bargaining power of the suppliers are less (Teece, 2010). There is also no
product differentiation.
RECOMMENDATION
It can be received from the above report that Halfords Plc should work in compliance
with the various organisation structure design strategies in order to expand business successfully
in external market. Some of the recommendation the company expansion in market of India are
follows:
 Firm can implement various strategies while defining an efficient functional
organisational structure in practices which will results in achieving goals and objective of
firm effectively.
 Indian market is an profitable prospective market for expansion of cycle business of
Halfords Plc. This can be recommended that this market is having great potential to make
purchase of cycles as these provided an fit and healthy life to users.
 Hlafords is trying to expand their business globally. This have to be complied with study
of external market factors and also with the governmental policies. The government
policies like GST and other like increasing the manufacturing India can be an beneficial
decision to invest in Indian market for expansion of business internationally.
CONCLUSION
From the above report to can be concluded that business environment largely influence
the strategies, decision making process and international functionality of firm to large extent.
Halfords plc is an company which is engaged in delivering spare parts to customers and also
engaged in selling sports cycles. Company is developing new strategies and organisation design
in order to capture target potential market of India successfully. So, company have to study about
competitiveness of market and the entry mode of firm. This is also concluded that government is
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making effective strategies in order to deals with higher bargaining power of suppliers and
customers in market of India. Government policies largely influence the promotion and
profitability of Halfords plc to large extent. The company is also having large future growth
opportunity through increasing product line in the market of India. Like Halford can go for
expanding business of delivery of car spare part also in market. This will be an profitable
decision of expansion of business globally.
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