PESTEL Analysis Of Chick-fil-A’s Expansion To The UK Market

Company Overview –Chick-Fill-A

While entering into a new market, it is necessary for the organizations to learn the trends of that market. By knowing the possible trends and challenges of the market, the firm could deal with the potential barriers and develop the marketing solutions (Gupta 2013). Thus, to learn about the trends and market challenges, the organizations should focus on the external environment. As mentioned by Koumparoulis (2013), PESTLE helps the marketers to spot the business opportunities it gives them advanced warning of the significant threats. The external environment can well be analyzed with the strategic marketing tool like PESTEL. The purpose of the report is to understand how strategic marketing tool like PESTEL helps the firm to decide whether to enter a new market or not. The report considers the scenario of the fast food chain Chick-Fill-A located in America, which is intended to enter UK market. Working as the management consultant of the company, I will provide the market review and the suggestion to the company t get into UK market and run the operation.

Chick-Fill-A is one of the fast food chain headquartered in the Atlanta suburb of College Park. The firm has been established in 1946 and now the firm has more than 2000 restaurants. The total revenue of the firm earned in 2016 is US$6.8 billion (Chick-fil-A 2017). In 2010^, this fast food chain took the industry lead in average sales per restaurant. The firm has made average sales of $2.7 million per resultant.

As put forward by Sagala et al. (2014), to increase the benefits of the PESTEL analysis, the firms could conduct the analysis involving the required elements associated with on a frequent basis.. The influence of a certain external factors might have more severe consequence for a specific divisions and use of PESTEL could help to clarify why the change is required as well as identify the potential options. As put forward by Ho (2014), PESTEL analysis provides a simple and easy-to-use framework for the analysis of external environment. Similarly, Gupta (2013) also mentioned that the analysis includes cross-functional skills as well as the expertise. The implementation of PESTEL analysis could help to reduce the impact as well as the effect of possible threats to the firm. There is a particular techniques involved that helps the company to identify as well as exploit new opportunities. However, Koumparoulis (2013) mentioned that the technique needs to be implemented frequently to become effective. The firms cannot make such frequent investment. Moreover, the organizational access to such external information is often restricted because of the issues of cost and time to collect those information. On the other side, Shabanova et al. (2015) emphasized on the fact that all firms should identify some external factors existing and creating large impact on their environment. The organizations might not have any control over those things; however, the implications of those things should be well recognized.  

Figure: 1 PESTLE analysis

(Source: Sagala et al. 2014)

Gupta (2013) mentioned that all PESTEL analysis helps to identify the issues that fit two different criteria such as control over the external environment of the company and the level of impact on it. All discussions should be carefully controlled to keep the focus on addressing the issues instead of trying to solve them. The firms need to consider the implications of any factors, it identifies and the possibility of them occurring. However, Validi, Bhattacharya and Byrne (2014). mentioned that the firms should avoid failing into the trap of arguing possible solutions or strategies. Whenever, an organization is intended to get into the new market, it should focus on political stability, economical state and social culture of that place. These could appear as the challenges in front of the company. The instability in the political environment can cause trouble because the change in the trade policies is the consequence of change in the political environment. On the other side, if the economy of the country is unstable, the firm might not be able to conduct the marketing strategies or develop the pricing strategies. The external factors considered at the time of PESTLE analysis are dynamics as well as they change at the very fast pace. The existing analysis indicate that these could occur in less than a day’s time; therefore, making it tricky to foresee and how these factors could affect the present or future of the implemented strategies. Three different elements of PESTEL are discussed in the following could affect operation of Chick-Fill-A.

Reviewing PESTLE analysis as the strategic tool

Strength of the tools- The major strength of this strategic marketing tool is to provide an enhanced and easy-to-use model for the external analysis. It involves the cross-functional skills as well as expertise. Each aspect involved in PESTLE analysis helps to determine and reduce the impact and effect of major threats to the organization. The implementation of the tool introduces the strategic thinking in the organization. This strategic tool also contributes to the implementation of exploited new opportunities.

When the organizations need to learn the external environment, they often choose PESTLE as th strategic tool. Five different aspects involved in PESTLE namely such as political which helps the firm to consider the government intervention in the economy. The organizations use the political stability as the advantages of increasing profitability. The next aspect is economic factor, which has a direct impact on the profitability of the business. This factor may involve inflation rate and interest rate, disposal income and others. Likewise, the social factor involves the culture influences as well as the beliefs of the consumers of the respective market. For example, the advertisement of a particular product might be deemed offensive in a particular culture while it would be perfect in another culture. Similarly, the technology plays a significant role in producing goods and services and distributing the goods.

Political environment-

As put forward by Validi, Bhattacharya and Byrne (2014), compared to other countries UK has observed the highest fast-food consumptions. The nation has multi-culture, which is influencing the global success of the fast food sector. This means people from different cultural background live in UK; thereby, the restaurants have the opportunity to increase their options of food times. They keep different varieties of food items based on the types of culture existing in UK. This increasing variety of food items positively contribute to the sales margin. The labeling of GM (“Generally Modified”) food becomes a necessary step since 2009 as the new regulation associated with the GM labeling came into the existence. In addition, the major motive of behind the GM labeling is to make the consumers aware if the ingredients in the food genetically developed as the customers have the right to take the decision of whether buy the product or not (BBC News 2017). The government of UK has developed stiff regulations for the food suppliers to inform the buyers if the food items they purchase contain genetically modified (Schrempf 2014). The political environment could affect the market decisions, as there are certain regulations of business in the recent time

Table 1: PES factors in the proposed market

The confidence in the fast food sector is largely fragile since the trouble caused by Brexit.  A survey reveals that UK’s largest food sector struggles with tough trading conditions. In spite of the sales reaching their highest range since 2013, three-quarters of FDF (Food and Drink Federation, UK) members have observed soaring ingredients prices decreasing profit margins as well as concerns for the coming future by their EU workforce (Crafts 2016). On the other side, the establishment of the law of Goods and Service Tax also affects the fast food industry in UK. This resulted in the charges of the price in the fast food chains, whereas the price of other food items remained unchanged. As the consequence, the fast food sector started emphasizing more on the services instead of the product mentioning that the buyers will not get such type of service to differentiate them. Furthermore, the survey reveals that almost 69.5% of the owners of fast food chains mentioned they are less confident about the positive changes that might occur due to the occurrence of Brexit (Lang and Schoen 2016). This scenario indicates that Chick-Fill-A might have to deal with such trade barriers. Although, the firm might observe an easy access to the UK market, as the people have the tendency to eat fast food items. However, the trading policies and taxes might affect the operation, which means having the tendency of eating fast food may be  favorable option to Chick Fill for gaining reaching the customers. However, the health sector in UK put the emphasis on the obesity rate. The National Planning Policy Framework put the regulations of restricting the ingredients in the fast food that cause obesity.

Use of PESTLE in the organizations

The economical environment of UK has always been stable which stands as the benefit for the organizations who wish to get into the market. The fast food environment of UK has the nature of growing and this growing market is significant for the fast food sector. Conversely,  Harris et al.  (2015) commented that during the period of recession, the fast food chain do better business than other expensive restaurants as the price factor become significant at such time. People tend to cut-down their expense, as their disposal income is less. Another significant point raised by Zabeen, Wei and Lu  (2016), helps to learn that low business establishment costs could lead to rapid expansion. As the set up cost is comparatively less in UK market, the firm could set the low prices for the fast food items. The leading competitors like McDonald use the policy of providing financing assistance as well as training for new franchise owners to deal with the cash flow and keep the operation profitable (BBC News 2017). In addition to this, the UK market has franchising facilities that help to set up the business.

The official trade statistics demonstrate that EU is the destination for regarding the half of all British good exports. It is also learnt that financial services have more to lose immediately after EU’s exit than other sectors of the economy. Mortimore and Wallace (2015) argued that the occurrence of Brexit has obviously added a bit of oxygen to the fire of recession, which stands as the boon for the fast-food chain because people have turned to cheap as well as easy food. At the same time, restaurants chains hit by increasing operating costs as well as lower spending among the diners that scale back growth plans. As the result, the fast food organizations are influenced by new practice and custom. Thus, it can be added that Chick-Fill-A has the opportunities to build the business with low cost.  However, the occurrence of Brexit has largely affected the economy and though people have turned to easy food, the competitors like McDonald having larges market share will get the benefits of the recession. Hence, Chick-Fill-A might have to make large investment in developing the products and services to gain the attention of the customers.

In addition to Brexit in the recent time, there is persistent stability in the economy of UK, which increases the employment opportunities to the country. Thus, people are busy in their corporate life. People do not have plenty of time to make food at home and they rather bring the easy food at home. Therefore, there is an increasing demand for the fast food items in UK. However, the people now in UK are opting for healthier options like SUBWAY, which provide more varieties for health conscious customers. The government in UK recently has put the emphasis on food safety. As the consequence, the organizations have to implement the regulations imposed by the government. The fast food sector in UK plays a significant attention to the requirements of the UK society. As put forward by Reisch, Eberle and Lorek (2013), the people in UK have busy life style as well as there is a fact that fast food restaurants are well known for a quick as well as convenient services.

Applying the strategic tool to Chick-Fill-A

On the other side, Schrempf (2014) opined that people are becoming more health conscious as well as have started implementing healthy eating as obesity is a known problem in United Kingdom. There is another fact that fast food restaurants are well known for serving foods items that contains calories. As there is an increasing demand of fast food, the data revealed by local companies indicate that 705 towns centers around UK, the number of fast-food chains in the top 10 UK cities increased by 8.2% in the year and 6.6% in the last year (BBC News 2017). Nestle (2013) mentioned that increasing popularity of fast food have not been all bad news for country’s waistlines.  Indeed, a significant increase in number of stores is there among healthier sandwich sellers across the towns. MacDonald’s and KFC have the highest market share in UK. Therefore, Chick-Fill-A may have the opportunity to increase the customer base in the initial stage of the business. If the firm focuses on the quality of food and maintain the industry standards, it might not have to deal with the possible social challenges.

Working as the management consultant in Chick Fill-A, I have found the firm needs to expand its business to a new market. As I live in UK, I have observed that the fast food sector in the country has rapidly been growing, which leaves the scope for new business to get in the market. However, the after the occurrence of Brexit, the trading policies in UK has been amended by the government; thus, as the consequence, scenario of fast food sector in UK has been dynamic. Thus, to enter this competitive market, the firm needs to know external environment and demands of the products and services. I, as the management consultant of Chick-Fill-A suggest the firm to conduct macro environment analysis with the help of the strategic marketing tool like Porter’s five forces. This analysis might help the firm to know the trends, market challenges, demands of products and service in the UK market.

Conclusion 

On the completion of the report, it can be mentioned that Chick-Fill-A has significant opportunities to get into UK market for the expansion of business. However, there is fact that everyone does not enjoy fast food has resulted in the weakening of buyer power in fast food industry. However, it is highly populated with the maximum UK consumers. Many fast food organizations in UK offer different range of food items and keep them differentiated from others. Thus, to compete in UK market, the firm needs to make large investment on products and services.

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