Environmental forces affecting Greggs and their impacts In today’s society there are a number of forces affecting how businesses run; in this essay I will explain how different forces affect a bakery chain called Greggs. Greggs is the largest bakery chain in the UK, over the course of its existence Greggs has already adapted numerous times to adapt to changing requirements in its target population and to try and maximise profits. In 1972 Greggs expanded outside of North Eastern England for the first time opening a regional division in Glasgow, twelve years after this happened Greggs started to trade on the London Stock exchange.
Also in 1994 Greggs acquired 424 bakers oven shops which enabled Greggs to have an in store bakery this enabled them to put Greggs shops in built up busy areas and Bakers oven shops in smaller previously untouched areas with a lower population as the shops could bake what is needed for demand. Greggs offers take outs so it can be a quick and easy visit to the store whilst bakers oven offers seating and works similar to a restaurant for people on the move wanting a seat and something to eat.
Greggs competes with all bakery chains and food outlets as well as coffee shops to gain customers as Greggs relies on people needing food so they must make their products affordable and of high quality in able to ensure that customers will choose their products rather than other food retailers. Greggs has also set the standard for other bakery chains by expanding outside of the UK with two shops in Belgium and plans for many more shops in Europe making them the first british bakery chain to attempt and expansion outside of the UK.
In 2008 the global bakery products market is estimated to have been worth US$275 billion making it a very profitable market which is ever increasing. The forces I talked about earlier are environmental forces, which are made up of the macro and micro environment, macro environment is uncontrollable external factors to the business, which consists of political, economic, social, technological, legal and eco environmental factors. The micro environment is made up of stakeholders and how their ideas and demands affect how the business operates.
For the purpose of this essay I will concentrate on the macro environmental forces in the form of a Pestle analysis. Greggs is British bakery chain which operates mainly in the UK with at least 1500 shops, the government in the UK is classed as stable so this is of benefit to Greggs as it does not have to keep changing because of an unstable government making changes to laws and legislations or with a shift of power between parties battling to gain power.
Political factors affecting Greggs consist of health and safety regulations for employees which means that Greggs must operate in a safe way in order to prevent any injuries to staff or customers. All businesses must take great interest in health and safety but Greggs being a bakery chain that sell food products must pay extra attention to health and safety as a cut could contaminate products and cause waste. Staff members must be careful while working to ensure there are fire exits accessible and the floors are clear of obstruction along with suitable oven cleaning equipment and personal protective equipment.
Greggs must adhere to food hygiene legislation set forth by the government such as the HACCP to ensure that no cross contamination has occurred and no bodily fluids or pathogens have come into contact with the food which could cause harm to a customer through food poisoning. Also any plasters worn must be blue in colour and waterproof so if it comes off in the baking process and comes into contact with any of the bread mixes or pastry mixes it is easily identified and taken out preventing contamination through blood etc.
Therefore all food must be of optimum quality and not posing a risk to consumers health and wellbeing by being unhygienic or uncooked. This brings me onto my next point of food safety legislations that state that meat products must be cooked to achieve a temperature of 85degrees also legislation to do with hot holding foods and how long food can be hot held. Another political factor is the minimum wage as the government and not Greggs sets the minimum wage it expects Greggs to pay its workers, this can pose threats to some bakery chains as the pay rate for people over 21 is ? . 08 and usually there are a few people in the stores working for a few hours so this is going to eat away at the profits and smaller stores will be the worst affected however it will affect the likes of Greggs as well through eating profits. Greggs must also adhere to public holidays by not opening up on days that are specified to enable workers to have a day off, the government sets the public holidays and the businesses must adhere. Greggs stated that the 2 extra public holidays in 2011 had cost the business ? million in profit. The government in the UK may be classed as stable but the economy of the UK like so other many countries is in ruin, but has this had an adverse effect on Greggs? At the start of the recession in 2008 Greggs pre-tax profits were ? 45. 2 million up from ? 39 million in 2007 which was just before the start of the recession. Was this rise in profits a freak anomaly? No, Greggs is making steady progress year on year throughout the recession with pre-tax profits in 2009 of ? 8. 8 million and 2010 ? 52. 2 million respectively. This goes to show that the recession has actually helped Greggs as a business with people cash strapped and in need of food the delicacy of a reasonably priced pasty seems to have been first port of call. However the recession has affected people all over the UK and in 2011 the London riots showed just how bad it was with 19 shops being forced to closed whilst one shop was looted and another set on fire in Peckham.
The London riots also badly disrupted the Greggs delivery vehicles through prevention of access to stores and damage to vehicles. This has ultimately caused damage to profits of roughly ? 1. 2 million as profits dropped. The London riots were one of few social impacts that affected Greggs in 2011 along with recession which as I have already said saw Greggs prosper with profits rising, this was due to Greggs selling cheap, quality food in readily available areas to attract customers.
Greggs, like all businesses cares about its consumer perception, this has led to the creation of 150 breakfast clubs in primary schools which aim to give school children a free nutritional breakfast which is provided by Greggs. This scheme also gets parents and carers in on the action as they can volunteer to serve up the food after the delivery of food is made to the schools this will give Greggs a better consumer perception. The breakfast club scheme has been running since 2000 and will continue to run and expand to include more schools.
Greggs also recognises that where its shops are located will determine the sales outcome, so it has opened stores in student friendly areas in towns and indeed in some university campuses as it recognises that the typical student stereotype is someone that is always busy hasn’t got time to wait around and is pretty skint most of the time, what better place to locate a popular bakery that has cheap products than in an area that is predominantly student and work orientated with lots of people wanting the products on offer.
Greggs also has a foundation set up with a hardship fund, this helps there consumer perception as they allow people to apply for household appliances if they cannot afford to buy them due to poverty. The hardship fund operates in the four counties of Northeast England and has been running since 1993 and has so far given around ? 2 million to people in poverty in the Northeast.
Having things like this showing people that Greggs cares will predominantly boost sales as it helps their social status and people will know that Greggs helps people in poverty with its profits and as a result of this people may be more willing to purchase Greggs products. Technologically Greggs has been affected with an increase in computer technology which has led to new advertising campaigns, as well as Greggs advertising with billboards and television adverts etc. hey now also advertise on the internet through their easy to use website and not only are their advertising techniques improving with technology but their checkout terminals are improving too with new contactless technology being implemented in stores which enables bank cards with this technology to just be tapped against the terminal and the payment will be made, this has been implemented to cut down on queues at peak trading times to keep the customers happy so they are not waiting around for ages.
Greggs also benefitted through some free advertising on the 20/6/2011 with a newspaper having the headline queen has Greggs cater for dinner party with 8000 big name guests, this will no doubt have boosted Greggs sales with royalists thinking if it’s good enough for the queen its good enough for us so this will have led to an increase in profits. Greggs has plans to open up 600 more stores in the UK to help boost profits by having more stores in areas that do not currently have Greggs stores to tap into new customer pools to generate a larger customer base.
Along with the plans for expansion in size are plans to expand into new areas such as frozen food with Greggs planning to create branded frozen foods such as sausage rolls to be sold the Iceland food store chain. This will help Greggs also tap into new markets as they have never before been involved with frozen food sales and this offers great scope for expansion. Greggs is affected legally though hygiene laws and requirements such as the HACCP food hygiene regulations guarding against food poisoning.
This prevents Greggs from being unhygienic and posing a risk to consumers. Greggs must also abide by the data protection act 1998 as it takes customer information for storage etc. it must not distribute this to third party groups or do anything else with it without the person’s permission. Greggs is also legally required to pay the national minimum wage to its employees. When laws are passed in regards to bakeries etc.
Greggs must accept them and work within the law or face the risk of prosecution, court cases and potential fines or store closures. Like all businesses Greggs knows that people are getting more environmentally friendly and as a result are striving to be more eco environmentally friendly themselves, trying to work upon the reduce, reuse and recycle principle. Greggs is trying to reduce landfill waste, recycle what it can and reuse what it can in order to cut down on pollution.
Greggs is also offering some of its unsold food to charities in order to try and give people the chance to have food if they cannot afford it or if they are homeless. Greggs are not handing out free carrier bags to everybody now as well unless people ask for one if they have a lot of stuff they won’t get one. Also on Greggs paper bags it says keep Britain tidy which shows that it wants the customers to put the packaging in the bin or recycle it if possible.
Paper is also bio degradable so will rot away so will not damage the environment as much as plastic will. Greggs knows that it needs a good consumer perception and as a result throughout the different environmental forces affecting the running of the business Greggs has stayed focused on this aspect with focus on charities and the Greggs foundation along with the breakfast clubs. Greggs is an ethical company with interests to help the people in need of it and trying to reduce its carbon footprint whilst offering tasty, reasonably priced foods.
Greggs is not really threatened by the changing environment as it is still making a profit which is getting bigger every year it is more prompted to do things slightly different for example the packaging and not giving out free plastic bags to everyone. As a result of my PESTLE analysis I have formulated an Ansoffs matrix to help formulate an idea for Greggs to respond to and prosper in its changing environment.
For market penetration I thought of new advertising campaigns advertising new applications for android and tablet technology such as the ipad which will give users details of where the nearest Greggs store is and what deals are on in the store along with prices. This brings me onto my next idea for market penetration, with the UK being in a financial crisis if prices are slightly lower or there are offers on for multiple purchases this could increase the sales and ultimately the profits if there is say a 2 for ? . 50 on 87p pasties this will no doubt increase the number of sales as people like to think they are getting a bargain. For market development I came up with the idea of new stores in other areas that do not currently have Greggs possibly because of a smaller population, this could gain Greggs a larger customer base. I also came up with the idea of focusing on expansion and opening more stores outside of the UK in order to globalize Greggs more so further expanding the customer base.
My last idea for market development is to have Greggs stores on more university campuses with student friendly deals on which would boost sales on products currently sold through Greggs. For product development I came up with the an idea for more pasties and sandwiches along with more varieties of hot drink potentially even a coffee bar inside the stores or in certain stores kind of like a mini Starbucks so there are a larger range of coffees so that people can call in and get a quick bite to eat and get a nice coffee in the same place rather than have to go to numerous places or just settle for a basic coffee.
For diversification I came up with an idea for frozen food, as a kind of expansion to Greggs plans to sell frozen sausage rolls in Iceland stores and develop from there I thought Greggs could sell part baked frozen breads in store for customers that potentially want bread but not straight away for example if they are having a dinner party and are preparing a week in advance or so they could buy them put them in the freezer and are then able to bake them prior to the event starting so the bread is still warm.
I also thought Greggs could allocate a cake maker to larger stores so they could receive orders for cakes for special occasions and make cakes to specifications of the customer for example special birthday cakes or a cake for a wake after a funeral. The idea I think Greggs should take on to prosper in the changing environment is simply market penetration, I believe they would benefit from an application for android or tablet technology which would inform potential customers where the nearest Greggs store is and the deals they have on.
Also new television advertising campaigns advertising the application and the deals that are on in store would increase the number of potential customers entering the stores. Having lower prices or better promotions on products will boost profits as more people will be willing to buy more than one thing so will increase their basket spend, this would mean that potentially a ? 1 visit to the store could turn into a ? 3 visit with the right promotions in store and advertised well.
Due to the current financial crisis and talk of double dip recessions I believe this would help Greggs continue to make profits in tough times and potentially make profits soar higher. By lowering prices and having better promotions it eliminates the risk of being undercut by smaller bakeries as they will not be able to afford to undercut the prices of Greggs as they will get less customers and if Greggs a more reputable bakery is cheaper they will struggle to generate as many sales.
Also new technology and advertising campaigns could increase the size of the customer base with potentially more people hearing about the deals and knowing where their nearest store will be. Smaller bakeries will not be able to afford extra advertising to this scale or the increase in technology to hire someone to create applications. This would also see off threats from supermarkets with bakeries as Greggs would stay market leader for bakery products in the UK and it would give them the scope to develop further.
If Greggs markets itself and its products effectively with my market penetration ideas I believe the profits could soar and the amount each customer entering the store was planning on spending would increase. New technology will help Greggs to expand and develop and when profits and technology get better they could then seek to expand into new markets such as frozen food and stores outside of the UK like what McDonalds did more technology applications for iPhone etc. ore stores open up in more and more countries, Greggs could also vary the products that suits the demographic of each new country as well by adapting its menu to suit the area it is located in, in terms of religion and culture. http://www. parliament. uk/documents/post/postpn326. pdf http://www. referenceforbusiness. com/history2/93/Greggs-PLC. html http://www. gobi. co. uk/bakery_products_market. htm http://www. direct. gov. uk/en/Employment/Employees/TheNationalMinimumWage/DG_10027201 http://www. thisislondon. o. uk/standard-business/article-23976649-greggs-need-of-help-as-trading-conditions-had-been-tougher-than-anticipated. do http://www. scotsman. com/business/greggs_profits_rise_to_a_tasty_163_49m_1_1158972 http://www. greggs. co. uk/breakfast-clubs http://www. bbc. co. uk/news/business-12756649 http://news. bbc. co. uk/1/hi/business/8573805. stm http://www. guardian. co. uk/business/marketforceslive/2011/aug/09/greggs-hit-by-riots http://www. greggsfoundation. org. uk/grants/grant-programs/hardship-grant