Fashion companies are likely to be exposed to several external factors of change, many of which the company has no control over, but the effects of which need to be comprehended. All companies need to identify external drivers within their environment that could have an impact on their operation practices. A popular tool for identifying these external factors is the PESTLE Analysis. A PESTLE analysis provides examination of six key macro level elements which affect a business. The PESTLE acronym represents these six factors and stands for political, economic, social, technological, legal and environmental factors.
Kotler (1998) suggests that P.E.S.T.L.E analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. The use of this tool can be effective for business and strategic planning, marketing planning, business and product development and research reports. P.E.S.T.L.E. also ensures that a brand's performance is correlated positively with the powerful forces of change that are affecting business environment (Porter, 1985).
Political/Legal: Political factors are closely linked to the legal factors, which cover legislative issues like consumer, labour or safety laws. A company must follow the given policies and regulations of the government to be considered as legal and authorised to trade. The government can intervene in an economy in terms of environmental and labour laws, tariffs, trade restrictions and tax policies. One of the biggest political concerns is the exploitation of cheap labour in developing or “third world” countries since the globalised trading, price competition among retailers, even the competition between countries for foreign earning are all pushing the weight on the labour chain. The apparel industry is labour-intensive; therefore, the effect on employee laws are significant. Some potential labour laws to consider are minimum wage, over time, benefits and health and safety regulations.
Economic – Relates to how exchange rates, inflation rates, interest rates, levels of employment and unemployment, cost of raw materials and economic growth will impact on a business. In the fashion industry, businesses which export goods can be greatly affected by exchange rates. During the financial crash of 2008, businesses struggled as the public's spending power was very low, which also led to companies letting people go, increasing unemployment rates and sometimes leading companies to bankruptcy. Economic factors may vary in different countries.
Fit this in - The economic condition of world can also affect the industry as increasing inflation rate make the cost of production high and thus reduce the profit margin of the industry.
Social/environmental – Customers are more aware about the social impact of the money they spend. Some pay more to support brands who comply to sustainable practices and avoid companies known for irresponsible practices, demanding more transparency and accountability on behalf of the fashion firms. Negative publicity about bad CSR practices, such as outsourcing manufacturing to exploitative sweatshops in under-developed countries, can be very damaging to a company. The Rana Plaza disaster of 2013, where 1100 employees died due to poor working conditions, led to subsequent changes in customer behaviour and attitudes towards fashion companies and outsourcing. Waste management, and trends. Attitudes, interests and opinions shape the buying behaviour of consumers. Changes in social trends can impact on the demand and availability of a brands product. From a purely environmental aspect, climate change, air and water pollution, waste disposal and the treatment of scarce resources are elements that are concerned in regards to sustainable practices.
Should be start Corresponding indicators that will be looked at include demographic changes, lifestyle and trends, attitudes, consumer demands, income distribution and health consciousness.
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