GRAMMAR CHECKING

1. Introduction

According to the news reported by The Guardian on July, retail sales at the luxury brand Burberry declined by 3% year on year in the three months to June 30, 2016， the company was warned by external environment challenges. The article mentions that the company announced retail sales are the same level as the previous year at constant exchange rates. The news also illustrates the situation of weak wholesale revenue in Burberry and lists some development tendency of Burberry. With the accompanied sales decline in Hong Kong, the luxury British brand’s chief creative officer and chief executive Christopher Bailey said Burberry continued to face a “challenging external environment”. (The Guardian, 2016)

The environment factors influencing the nature and development of the retail industry, macro-environment factors have huge implications for performance of Burberry in this news. In this report, mainly to explore the wider implications arising from the described situation of Burberry, and to analyze the possible environmental factors those drive to these situations on the Burberry by using relevant concepts and models.

2. Analysis

Environment means the surroundings of an organization, the ‘climate’ in which the organization functions. (Dill, 1958) The very great differences that can exist between different environments, environmental factors to a large extent defines the challenges and opportunities of an industry, accordingly, environment makes great affection on the economy of a company. To consider the environment, at the macro level are related to customer’s needs and wants, economic policy, its state of development and economic outlook. The macro-environment factors include areas where organization do not have any control, the article refer to the relevant macro framework, the PEST analysis will be used to discuss the implications of the above article.

The PEST Analysis is a framework used to scan the organization’s external macro environment; the letters stand for political/legal, economic, socio-cultural, and technological.

Political/legal - Political and legal factors refer to the political environment, political movement or parties, EU and national laws, codes of practice. In this news about Burberry, political and legal factors played an important role. After the vote decided the UK should leave or remain in the European Union on June, economy appears to have the initial shock of the Brexit vote, although the value of the pound remains near a 30-year low. (BBC, 2016) The post-Brexit crash in the low pound makes the UK became cheap market in the world for luxury goods, this lower price luxury goods boosts tourist purchasing power in UK. However, increased sales in the Burberry’s UK market to some extent covered the loss in the Hong Kong and Macau in China. So that the article mentions Burberry’s retail sales of £423m in the three months to 30 June, the same level as the previous year at constant exchange rates. Burberry’s UK business has enjoyed a boost from the weakness of sterling following the Brexit vote the low pound stimulates the consumption, but also profits in UK market are volatile. Brexit vote has great influence on international marketing sales, the company’s overseas earnings would be boosted by the relatively higher value of the dollar and the euro versus the pound. “Burberry said profits would benefit by £90m from changes to exchange rates, compared with a £50m benefit predicted in May.” (The Guardian, 2016)

Political and legal factors also results Burberry’s sales in Hong Kong, the news described as “Burberry said sales in Hong Kong continued to fall by double-digit percentages, as a result of travel restrictions that were imposed on Chinese nationals after democracy demonstrations last year.” China is the main target market for luxury brands, China account for 35 per cent of Burberry’s retail revenues, so that Burberry is more reliant than other luxury goods groups on buyers in China. (Financial Times, 2016) Hong Kong and Macau as low tax rate cities are the popular draw for mainland Chinese tourists. But in the end of 2015, China limit Hong Kong visits by mainland Chinese, this policy cuts a large mount of tourists and purchasing power in Hong Kong. The Guardian shows unlimited trips cut 47 million visitors in 2015, hence luxury British retailer like Burberry has to struggle sales collapse in Hong Kong and Macau.

Economic factors – include economic growth rates, price of materials, employment and unemployment exchange rates and interest rates, etc. Like this report mentioned above, Brexit affected exchange rate in UK, political and economic factors always influence on another. Changes of exchange rates made influence on export and import trade, and led to different supply and demand in diverse countries. Influence of economic factors reflected in “Shares in the company shot up by more than 5% in morning trading on hopes that the company’s overseas earnings would be boosted by the relatively higher value of the dollar and the euro versus the pound.” (The Guardian, 2016)

China become stronger brings more purchasing power for luxury markets, on the time of Chinese luxury-loving tourists became significant target customer in the world, Chinese economic slowdown, which has held back overseas spending of Burberry.

Socio-cultural factors – represent the cultural of society include demographics, age distribution, change of population, living conditions and lifestyle, etc. With the development of China, the growth of economy improved living conditions and lifestyle of Chinese. Chinese became strong purchasing power for those British luxury brands, especially for Burberry. Based on this reason, the Burberry’s sales fall as expert markets suffer.

Social stability is one of socio-cultural factors, stable country could provide a steady market and safe buying environment to attract customer. Due to insecurity factors in some European countries like Paris attacks, sales in these countries has been hit.

3. Conclusion

This report discussed several influential environment factors on the news Burberry's sales fall as export markets suffer, different macro-environment factors were analysed by PEST analysis model. Environment analysis is a complex and difficult process for retail market. There are many disparate but interaction environment factors in the both external and internal of industry, resulting in complex market situations. However, analyse environment is a necessary and significant process for retailing industry, a company or even an industry will identify the challenges and opportunities and benefit from it. Saxby et al (2002) observe that environmental scanning provides information about the environment which can guide strategic direction. Accordingly, company or industry should pay attention on environment in order to cope with the fickle and intense situation and maintain the edge in the marketplace.