Discussion Pest Technique

Discussion 6-1 PEST Technique

New trends are shaping the retail landscape.  Particularly, it is the technological and economic trends that are having the deepest effect on it.  With time the competitive pressure is also growing which is because of the growth in the number of players and creation of the e-retail.

The PEST analysis shows how various forces affect the retail industry.

Political Factor – Political stability means better business because political disruption leads to the disruption of supply chain and sales.  Moreover, political issues can also become an interference to smooth business operations.  For big International retailers it can be quite difficult to expand into Asian countries.  India still has difficult laws and restrictions on Foreign Direct Investments.  All these factors can make it difficult for the retail brands to operate profitably in the international environment (India: Macroeconomic Outlook, 2018)

Economic Factor - Economic forecasters predict that India’s economy will climb to the third largest in the world, behind only the U.S. and China, but despite the rapid economic growth, unemployment is rising.  The country’s low skill intensity, and low education attainment present a major challenge in preparing the workforce for India’s future (Mallya, 2018).  The Indian government launched a nationwide employment guarantee scheme to provide at least 100 days of guaranteed employment every year to every household to support its large, unskilled rural population (India: Macroeconomic Outlook, 2018)

Social Factor - Customer Demographics – India is the second most populous nation in the world, with more than 1.27 billion people, according to MarketLine.  The median age in India was 27.9 years in 2017, according to CIA – The World Factbook.  Approximately 93.9% of India’s population was less than 65 years old in 2016, according to MarketLine, whilst 66.2% of the population was in the working-age group of 15-64, meaning there is a low number of dependents on the working-population.   More women are joining the workforce which will help with the demographic dividend of the country.  The population has grown in India by 1.14% in 2017 to reach 1.29 billion; however, the growth rate has slowed down from 1.8% in 2000 to 1.1% in 2017.  The birth rate has declined in the urban areas as people tend to prefer not to have as many children (India: Macroeconomic Outlook, 2018).  Hinduism is the largest practiced religion in the country, accounting for 79.8% of the total population.  People in India are free to practice any religion (India In-depth PESTLE insights, 2018).  

Technological Factor - E-Commerce - India’s Business to Business (B2B) e-commerce market is expected to reach US$700 billion by 2020.  Online retail is expected to be at par with the physical stores in the next five years and has grown 23 per cent to $17.8 billion in 2017.  India is expected to become the world’s fastest growing e-commerce market, driven by robust investment in the sector and rapid increase in the number of internet users.  The Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online retail of goods and services through the automatic route, thereby providing clarity on the existing businesses of e-commerce companies operating in India (Retail Industry in India, 2018).