Introduction
Arabella Nuts and Confectionery is one of the UK’s finest confectionery, nuts and dried fruits company. The company produces a variety of Mediterranean, Middle East, and other international tastes. Arabella has been in existence for more than 20 years in which it has been serving exclusive and top-end stores and hotels in the UK (Arabella Nuts and Confectionery, 2017). The company operates majorly through its online channel. However, it also has physical shops within the Westfield Shopping Centers at both London Shepherd’s Bush and Stratford City. In light of this brief background of Arabella Nuts and Confectionery, this report focuses on the environmental scan of the company. The analysis follows the PESTLE model of analysis, which encompasses the analysis of the political environment, the economic environment, the social environment, the technological environment, and the ecological environment (Team FME, 2013). The importance of focusing on the mentioned areas of study is to ensure an all-inclusive assessment of the external factors that influence the success of Arabella Nuts and Confectionery. Various factors are discussed under each of the key areas mentioned in this introduction. A justification for the selection of each of these factors is also provided.
Political Environment
The political environment has a critical role in the success of any business. Concerning the case a hand, it is important to focus on the political environment both in the UK and in the countries where the company sources the nuts and other inputs used in the business. The company indicated that the nuts and all other inputs used in the business are sourced from farmers in the countries of origin with the majority of the nuts being sourced from West African countries (Arabella Nuts and Confectionery, 2017).
The Brexit issue is considerably the most notable political issue that should be considered in the analysis. The UK voted to leave the EU in 2016. The vote greatly impacted businesses in the UK with there being a high level of uncertainty in the business environment. Key events after the Brexit vote include the exit of many businesses from the UK. Major banks announced that they would be moving their international offices to other locations within the EU. The Brexit vote was the reason why David Cameron resigned from his post, and it was the reason why Theresa May is in her current position. Additionally, the Brexit had major implications on the value of the Pound with there being notable depreciation of the currency immediately after the vote (Global Counsel, 2015).
Politics of the Brexit vote have far reaching implications on the business environment in the UK. The EU is determined to make sure that there will be a hard landing for the Britons after voting to exit the EU. This means that the UK will find it more difficult to transact business with other members of the EU. For Arabella, the Brexit means that the market may be depressed as there might be restrictions on where the company can sell her products. Additionally, the Brexit means that the UK has to independently negotiate trade agreements with countries where Arabella sources its nuts and fruits among other inputs used in the confectionery business (Global Counsel, 2015).
Focusing on the politics of the regions where Arabella sources the nuts, there is consideration of the political risk in that most of these countries are located in The West African region. In the recent past, there has been reported cases of political violence with many elected leaders failing to concede defeat after losing elections. The implications are the displacement of people from their firms, as well as the disruption of trade channels making it difficult for Arabella to access the nuts and fruits needed in the business. Due to the political environment in the West African countries, Arabelle is forced to consider other locations such as India for the sourcing of nuts and other inputs (Arabella Nuts and Confectionery, 2017).
Economic Environment
The economic environment includes all factors in the macroeconomic environment that may affect the manner in which Arabella Nuts and Confectionery conducts business. Key economic factors of consideration include the foreign exchange rates, the rate of inflation, and the changing profile of the UK as the preferred location for businesses offices.
Focusing on the foreign exchange rates, the Pound has weakened against the USD since the Brexit vote. The foreign exchange rate is important considering that Arabella imports nuts and fruits from other countries and pays in foreign currency. With the Pound weakening, this means that the company would be required to pay more than normal rates on the supplies of nuts and other commodities (Arabella Nuts and Confectionery, 2017). On the other hand, the business of the company is purely local meaning that it gets revenues in the local currency and with a weaker currency, then there is a lower value when compared to the global environment.
The second major consideration is attached to the rates of inflation. The rate of inflation has been rising since the Brexit vote. Similar to the rate of inflation is the rate of interest. The implications are that Arabella would incur more on the cost of capital while at the same time incurring high costs on purchases. Notably, inflation erodes the value of money meaning that the company purchases a small amount of good per every Pound when the inflation is high. It is considerably important also to note that other than affecting the company's purchases, high inflation also raises the cost of living and this may mean lower demand for the company's products (Global Counsel, 2015).
Other than the factors mentioned above, there is the consideration of the commodity markets and the trends in these markets. The commodity prices are low meaning that the company can import nuts at lower prices than when the commodity prices are high. The low commodity prices are an important factor of consideration in that nuts are one of the commonly traded commodities in the global markets for commodities. Hence, the low commodity prices can be considered a proxy in the determination of the trend in the company's direct costs.
Social Environment
The social environment is characteristically one of the most important considerations in any environmental scan. Considering the business of Arabella Nuts and Confectionery, the social aspects of the business are an important factor. It is important to look into how the culture and social life of the market affect the business at hand.
Nuts, chocolates, and other confectioneries are an important element of the social life in the UK. The social life, therefore, affects the people's tastes and preferences concerning the products offered by Arabella (Arabella Nuts and Confectionery, 2017). Being able to influence the tastes and preferences of the consumers remains an important success factor in the consideration of how the company moves through the current business environment.
One of the major markets for the company's products are the weddings that take place now and then. Quite importantly, the manner in which the company delivers on orders from weddings greatly determines its success as a key player in the industry. Considering the changes in seasons and how the numbers of such events change over time, it is important to track demand across different seasons and then attempt to model the data on demand levels as per the various social events that lead to the generation of orders.
Technological Factors
The technological environment is an important consideration for Arabella Nuts and Confectionery (Team FME, 2013). Analysis of the company's business model indicates that there are more orders generated via the internet and via the e-commerce platform than there are orders from the brick and mortar shops that the company has in London and Stratford areas (Arabella Nuts and Confectionery, 2017). The technology employed by the company in the form of an e-commerce platform is important to consider since it determines the future success of the company in the industry which is considered as highly fluid of rather, one that changes quickly.
The market for confectioneries is greatly segmented, and this is dependent on whether the products sold by the firm are customizable or not. For products that are produced for the mass markets, the brick and mortar model is considered appropriate and effective. However, for Arabella Nuts and Confectionery, the products are customizable, and the products created by the company are on an order-by-order basis. This understanding marks the beginning of the application of technology in the business model of the company (Arabella Nuts and Confectionery, 2017).
The nature of the markets for the products sold by Arabella explains why the application of technology is important in the marketing of the company’s products. The use of technology in the marketing of the products is important to generate orders. Secondly, the use of technology enables the company to reach out to larger groups of target customers. Thirdly, technology makes it easy for the customers to specify the products that they require, generate a quote, and pay for the product online. For the company, the use of technology should be extended beyond the current understanding to accommodate the use of data analytics to determine what tastes and flavors attract more orders. Essentially, this would ensure proper resource allocation to the categories of the products ordered by the customers.
Legal Factors
The legal environment factors are an important consideration for the business herein analyzed. The various legal considerations include the ease of accessing business documents and permits. The legal environment influences the ease of doing business and more particularly, concerning the nature of the business at hand.
Arabella has been operating under the statutes and the legal framework of the EU according to the EU Act. The Act had established an environment in which business in EU would be able to sell products across Europe without restrictions. However, the legal environment is set to change as the UK Parliament regains its sovereignty. The parliaments are set to start making laws that will affect how the businesses in the region relate to the state as well as the may legal and regulatory environment. It is not expected that there will be any major changes in the business environment. However, it is expected that there may be several new laws that may be a little different from those currently applying to the business (Global Counsel, 2015).
Ecological factors
The last factor to consider are the climatic and weather conditions as they affect the business and operations of Arabella. The company is largely dependent on the state of the ecological environment in the areas where the nuts and fruits that the company uses are produced. There has been continued concerns on climate change and its effect on productivity (Team FME, 2013). The rainfall levels in the regions where the company sources the nuts has been low. The lower productivity impacts on the sustainability of the business in that the company will not continue its operations if there are no nuts and other such products used by the company (Global Counsel, 2015).
Other than the factors mentioned above, the consideration of the environmental impact of the company is also an important factor for consideration. It is important to track the company’s carbon print considering that the release of carbon is one of the factors causing adverse climatic changes in the regions where the company sources the nuts, fruits, and other such farm products that are important in the production processes of the company. Moving forward, the purchase of carbon credits may become an important part of the company’s business.
Conclusion
In conclusion, this paper presents the analysis of the external environment affecting the operations of Arabella Nuts and Confectionery. The analysis followed the PESTLE as the approach of the environmental scan. The approach is important as a tool of analysis as it shed light on the major environmental factors affection the operations of the company. Notable factors include the Brexit politics and how they have impacted the business environment in the United Kingdom. Similarly, there are the concerns of rising rates of inflation and interest rates, the concerns of technological changes and how they impact the e-commerce model of the company, and the issues of climate change and how this affects the supply of nuts and fruits used by the company in its production processes. Moving forward, the purchase of carbon credits may become an important part of the company’s business model.
References
Arabella Nuts and Confectionery. (2017). Welcome to a World of Fantasy and a Celebration of Colors and Taste. Retrieved from http://www.arabellafoods.co.uk/index.php?route=information/information&information_id=4
Global Counsel. (2015). BREXIT: The Impact on the UK and the EU. Retrieved from https://www.global-counsel.co.uk/sites/default/files/special-reports/downloads/Global%20Counsel_Impact_of_Brexit.pdf
Team FME. (2013). Pestle Analysis. Retrieved from http://www.free-management-ebooks.com/dldebk-pdf/fme-pestle-analysis.pdf
