BM461 Global Business Environment: Retail Industry Trends & Analysis

This report provides an overview of the global business environment within the retail industry, focusing on the impact of factors exogenous to an organization's home environment. It highlights the uneven changes in consumer purchasing power, rising costs, and the increasing role of digitalization, particularly internet retailing. The report uses Porter's Five Forces model to analyze the bargaining power of buyers and suppliers, the intensity of competitive rivalry, and the threats from substitutes and new entrants. Key drivers of change are identified as the shift in power to consumers through online tools, the obsolescence of channel thinking due to increased technological awareness, and the adoption of data analytics and management strategies. The report concludes that the retail industry has significantly evolved, driven by these factors, and emphasizes the need for retailers to adapt to these changes to remain competitive.

Running Head: GLOBAL BUSINESS ENVIRONMENT
Global Business Environment

GLOBAL BUSINESS ENVIRONMENT 1
Contents
Introduction......................................................................................................................................2
Overview..........................................................................................................................................2
Porter’s Five Forces Model.............................................................................................................2
Driver of Changes in Retail Industry...............................................................................................3
Conclusion.......................................................................................................................................3
References........................................................................................................................................4

GLOBAL BUSINESS ENVIRONMENT 2
Introduction
The global business environment can be defined as the environment in diverse independent
countries with factors exogenous to the organization’s home environment which, in turn,
influences the decision making relating to the use of resources and capabilities (Caiazza, Shimizu
and Yoshikawa, 2017). This assignment is focused on the overview of the global business
environment of retail industry and on the identification of the drivers of change.
Overview
Since September 2017, uneven changes in the consumer purchasing power and rising financing
and operating costs have impacted the global retail industry. Also, there is a great improvement
in the overall sales and profitability of the 30 largest retail companies of the world. The global
retail companies are taking the advantage of opportunities of growth provided by digitalization.
The fastest growing segment in the retail industry is internet retailing which is a modern way of
shopping. This has increased the sales and profitability of the organizations in the retail industry
to a great extent (Euler Hermes, 2019).
Porter’s Five Forces Model
The overview of the global business environment of the retail industry has been presented below
with the help of Porter’s five forces model:
Bargaining Power of the Buyers- There is high bargaining power of the buyers in the retail
industry due to due to the easy accessibility of plenty of substitutes. This is due to the existence
of scope for switching from one supplier to another with the best price offering. The
organizations in this industry are impacted due to poor loyalty of the buyers towards the brand.
Bargaining power of the suppliers- There is high bargaining power of the suppliers due to the
unique quality of input and raw material required by this industry for succeeding in the global
business environment. The organizations are impacted by such bargaining power in getting the
quality raw material for the product.

GLOBAL BUSINESS ENVIRONMENT 3
The intensity of competitive rivalry- The global retail industry is facing cut throat competition
and is still governed by the major players that are already established in the global market
(Ezeala-Harrison and Baffoe-Bonnie, 2016). The high competitive rivalry is a threat as it affects
the organization by weakening the profit prospects and the prices.
Threat from Substitutes- The global retail industry suffers from the high threat of substitutes
which impact the organizations by lowering their profitability. This is due to the fact that great
number of alternatives are available to the buyers for satisfaction of their requirements.
Threat from new entrants- There is intense competition in the global retail industry and barriers
are imposed by the existing players for gaining a cost advantage. Trade barriers and economic
regulations are also created for the foreign players.
Driver of Changes in Retail Industry
The drivers of change involve shift in the power from retailers to consumer through the use of
online tools and technologies such as blogs, social media, etc. Real life example of Tesco, which
is the largest food business of UK, provides that it monitors the web for chats about the brand
and reaches out to the customers for acknowledging compliments and addressing complaints.
Moreover, obsolescence of channel thinking have also brought changes in retail industry.
Technological awareness allows the customers to access the web through their smartphones. For
example, Walmart has introduced online grocery delivery option to the customers for their
convenience. Furthermore, data analytics and management strategies adopted by the retailers
have brought big changes in the retail industry (Magel, 2018).
Conclusion
Therefore, it can be concluded that the global retail industry have changed to a great extent in the
recent time. The drivers of change involve shift in power from retailers to consumer,
technological awareness and use of data analytics and management strategies.

GLOBAL BUSINESS ENVIRONMENT 4
References
Caiazza, R., Shimizu, K. and Yoshikawa, T., 2017. Cross‐border M&A: Challenges and
opportunities in global business environment. Thunderbird International Business Review, 59(2),
pp.147-151.
Euler Hermes. 2019. RETAIL, [Online]. Available at:
https://www.eulerhermes.com/en_global/economic-research/sector-reports/Retail.html [Accessed
on: 24 January 2019].
Ezeala-Harrison, F. and Baffoe-Bonnie, J., 2016. Market Concentration in the Grocery Retail
Industry: Application of the Basic Prisoners' Dilemma Model. Advances in Management and
Applied Economics, 6(1), p.47.
Magel, N. 2018. Three Drivers of Change in Today’s Retail, [Online]. Available at:
https://retailnext.net/en/blog/three-drivers-of-change-in-todays-retail/ [Accessed on: 24 January
2019].