Superdrug's Expansion into Spain: A PESTEL Analysis

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Business Organisations and Environments in a Global
Context
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Executive Summary
The report provided below discusses the background of the selected organisation, Superdrug.
The host country in this scenario, Spain has been overviewed as well. The data concerning the
financial system and political scenario of the country have been discussed. The culture of this
region has also been explained in this task. This report will discuss the PESTEL analysis of the
company, Superdrug, based on Spain. Each element of the PESTEL analysis is followed by three
factors each and a detailed analysis on how the factors will affect the company. Porters Five
Forces will also be discussed in the report along with a demand and supply scheme to meet the
equilibrium.
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Table of Contents
Introduction......................................................................................................................................4
Background information on Superdrug...........................................................................................5
Background information on the Business Environment in Spain....................................................7
Analysis of the Business Scenario...................................................................................................9
Conclusion.....................................................................................................................................26
Reference List................................................................................................................................27
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Introduction
The environment of the organisations influences the firm’s activities. It provides opportunities
as well as threats to the businesses that can affect its structure as well as functioning. It has some
limitations and put pressure on the firm as well. The present report would have a discussion on
Superdrug Stores plc that is expanding in Spain through the foreign direct investment method.
Through this method, the company can open the business in the foreign nation as well as gain
control over the interest made in that particular region. This method will assist the organisation
in expanding its market share as well as increase the base of profit.
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Background information on Superdrug
Superdrug is a subsidiary of “A.S. Watson Group” that falls in the retail sector. Peter and
Ronald Goldstein have founded this firm in the year 1964. It is headquartered in the United
Kingdom. At present, Peter MacNab is the managing director of the organisation.
As per the report generated from superdrug.com (2019), there have been around 796 locations or
the number of outlets of the company. The products traded in this organisation are beauty and
health-related goods. The services provided by this firm included threading, health checks,
prescriptions, and laser hair removal. The annual revenue generated by this company has been
1.20 billion Euros in the year 2017. ”CK Hutchinson Holdings” company owns this organisation.
There are various subsidiaries of this corporation such as ‘Superdrug Opticians’, ‘Superdrug On-
Line Doctor’, ‘Beauty Studio’, and ‘Superdrug Mobile’.
This organisation has location in Ireland, the UK, and serves countries such as Norway, Finland,
and Sweden through online method. It employs 14,000 workers all over the countries where it
has activities. It ranks fourth in the chain of chemist in the UK. This organisation has pharmacies
as well as nurse clinics. It is linked with the other companies of A.S. Watson group such as ‘The
Perfume Shop’ and ‘Savers’.
The legal structure of this company is of public limited company. As per this legal form, the
public can own the organisation’s shares. The owner of this firm can raise capital by issuing the
shares of the public. The business as per this structure is accountable to reveal transparency in is
functions. However, the takeover chances of such a business are high as it is a public body.
In the year 1988, this organisation has acquired the business of ‘Tip-Top’ that has been a chemist
chain presence in the regions of Scotland and England. It has also acquired the ‘Share Drug
Stores plc’ thus, expanded the business to generate mere profit from sales of more goods. The
rebranding programme of this organisation that has been formed in the year 1995 has increased
its growth as it has incorporated a new identity under the slogan of the ‘real beauty is the price’.
The formation of stores in the prime locations has induced more sales of the products. The price
of the merchandises has also increased due to its leaving the discount heritage. The stores of
Ireland focus on cosmetics as well as perfumes. It has modified the infrastructure of the shops by
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including plasma screens. It has become a part of the BUAV retailer, which opposes the use of
animal testing method in the year 2010.
In the year 2018, it has formed the vegan shops that provided cruelty-free and organic products
to the consumers (metro.co.uk, 2018). The ‘Superdrug Mobile’ has been launched in the year
2018 that are exclusive to the company’s loyalty scheme, ‘Health and Beautycard’
(moneysavingexpert.com, 2018). Its partnership with ‘The Perfume Shop’ has increased its profit
in the year 2010. It has collaborated with “Pro Skin Clinics” in the year 2012 that has let it
provide treatments such as laser hair removal, facials, and such to the customers. It has started a
venture named ‘B’ that offers make-up and skincare products in the year 2013. It used to provide
chickenpox vaccination in round 58 shops in the year 2017 (Gill, 2017).
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Background information on the Business Environment in Spain
As per the 2018 report, the nominal GDP of Spain has been 1.506 trillion dollars. Its GDP based
on purchasing power parity has been 1.864 trillion dollars in the same year (imf.org, 2019).
Figure 1: GDP of Spain
(Source: tradingeconomics.com, 2019)
It is a parliamentary monarchy as well as secular democratic country (Shelley, 2015). This
developed nation has King Felipe the sixth as the state’s head. This state comprises of seventeen
autonomous communities as well as two autonomous cities. As per Spain’s Constitution, there is
no state religion and everyone is free to practice what he or she believes. It has approved the
‘Equality Act’ in the year 2007 (ipsnews.net, 2019). The executive branch of this country
consists of Council of Ministers, Prime Minister, monarch, and Congress of Deputies. The
autonomous communities have larger autonomy as they have their own regional governments as
well as parliaments.
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The culture of this country has been infused by the Roman heritage. Its identity has influence of
Catholicism as well as its cuisine, art music, and architecture have influenced the foreign
invaders.
The financial system of Spain is integrated with financial markets of foreign countries. This
system consists of money and stock markets, credit, and others (investinspain.org, 2015). The
operators of the financial system of the country include the central bank, saving banks, rural
banks of savings, and entities such as electronic money entities, credit financial establishments,
and others. It also comprises institutions like real estate, mutual funds, pension plans and
financial advisory organisations, brokers, and such (spainbusiness.com 2019).
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Analysis of the Business Scenario
Elements Factors Analysis
Political  Corruption Level- Spain comes under 41
least corrupt countries out of 175 countries in
the world (Tradingeconomics.com, 2019). In
the recent survey, it was recorded as the 20
least corrupt countries.
 Government Stability- The government
stability of Spain was stable but after 2018,
the legacy ended, when Prime Minister
Mariano Rajoy of the People’s Party was
dismissed before his term ended
(TheGlobalEconomy.com, 2019).
 Import-Export regulations/restrictions-
There is no free trade in Spain and the
European Union. In order to import and
export goods the company or an individual
has to pay taxes.
 Since Spain is
the one of the
least corrupt
countries in
the world, it
will have a
positive
impact on
Superdrug.
The
establishment
of the
company in
Spain will be
not being a
difficult
process and it
will easily get
access to its
trading
licence.
 The
government
of Spain has
become very
unstable in
the recent
years. This
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will have a
negative
impact on the
company. If
there is no
government
stability then
there will no
stability on
the laws
created by the
government.
If the
government
changes then
the laws will
also change,
which will
somehow
affect the
company
negatively.
 This will
create a
negative
impact on the
company, as
the company
will have to
pay huge of
taxes to
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import or
export its
commodities.
Economical  Inflation rate- The inflation rate in Spain
was -1.28% in January 2019
(Tradingeconomics.com, 2019).
 Price Fluctuations- The price of the products
in Spain shows many price fluctuations
(Perez-Mora et al., 2018). The producer
prices decreased by 0.6 percent in June 2019.
 Unemployment Trend- The level on
unemployment is very high in Spain
(Tradingeconomics.com, 2019). It faces the
highest unemployment in the developed
world, 18.5% unlike 4.7% in United States.
 The low
inflation rate
will create a
positive
impact on the
company for
its
establishment
in the
country. Low
inflation rate
will help the
company
grow, as it
would be
required for
the company.
 The price
fluctuations
will have a
negative
impact on the
company.
The producer
price often
goes down
and the
company will
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face losses
because the
company will
have a thin
profit margin.
 The high
employment
rate in the
country will
create huge
opportunities
for the
company thus
will create a
positive
impact on the
company.
Due to high
employment,
the company
can appoint
locals for low
wages, which
will therefore
lower the
costs of the
company.
Social  Population Size- The country’s population
has been decreasing since 2015 because of
high migration as recession and high
unemployment (Worldometers.info, 2019).
 The low
population
size of the
country due
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