Pestel Analysis of Tk Max Essay
Executive Summary Some of the companies have best policies to attract the customers even in economic crisis. But are they really success in doing so. Cutting the prices may be the solutions for a middle class customer to buy goods. This study is going to explain briefly about a retail market that always promises to its customers of giving 60% discount in price. That is T. K. Maxx. Most of the data to complete this study is based on data collected from the official website of T. K. Maxx itself and other website and statistical data. To critically analyze the companies trends, various techniques has been used.
For this study 3 techniques PESTEL analysis, Porters Five Force Model and Industry Life Cycle has been used. Introduction In UK the first T. K. Maxx was opened in 1994 in Bristol. Till the year 2006 T. K. Maxx open its 210 stores in All over the UK in present time there are over 238 stores in UK including Ireland and some stores are Germany. T. J. Maxx is the parent company of T. K. Maxx that is located in United State. If we study the history of T. K. Maxx the we need to start from 1919 when the New England Trading Company was founded by the brothers Max and Morris Feldberg in Boston, Massachusetts.
After 10 years, Feldberg opened its first retail store and started to sell ladies hosiery. In the mid 1950, Stanley and Sumner who was the next generation of Feldberg established a new company called Zayre discount department. This Zayre stores was providing convenience selection of the family product with outstanding price. In 1970, Ben Cammarata a talented young merchant built a off-price chain which was working in his leadership. And this is how the T. J. Maxx Company was born. And with success of T. J. Maxx, the company got growth and named TJX Companies Inc.
TJX Companies Inc. is one leading off-price retailer in the United State and worldwide. That offers to its customer new fashion, quality with brand name at excellent values to the reach of its customers. In all over the UK, T. K. Maxx is only one off-price retailer. This off-price retailer concept is from America and came to UK in 1994. (T, K. Maxx website http://www. tkmaxx. com/icat/whatstkmaxx ). What does it mean by off-price retailer? That means a store that is providing merchandise at the price less than other retailer.
How off-price retailer performs their task and gain profit is discussed in later topics. T. K. Maxx, according to TNS Fashion Tracker is the 10th largest retailer in fashion industry in the UK. It means that market position of the T. K. Maxx really excellent. In fashion the policy of T. K. Maxx is very different than other fashion retailer. T. K. Maxx buyers do bargaining every week of the year while other fashion retailer buy 4 times in a year. For the lay customer it does not matter how the retailer is working if it dose fulfill the demand of customers.
According to the official website of T. K. Maxx, the buyer of this company have 10,000 vender to negotiate the deal in over 60 countries they do this deal on daily basis, and it is unpredictable for the customer what he can get in the store in his next visit. And that makes T. K. Maxx a favorite selection of customers. TK Maxx is the fourth favorite retailer in clothing and shoes in the UK for 2009. (Verdict Retail Group Report). In a typical store of TK Maxx, there are 50,000 items available and every week store receives 10,000 items. T.
K Maxx core target customer is middle to upper middle income shopper PESTLE Analysis PESTLE analysis stands for Political, Economical, Technological, Legal and Environmental these are the factors that can affect the industry as a whole. Or in other words PESTLE analysis is the tool that is used to understand the situation of the industry. http://www. marketingminefield. co. uk/marketing-plan/pestle-analysis. html We are going to understand the company situations of T . K. Maxx using the PESTLE analysis. T. K. Maxx is very famous cloth retailer in UK. Political Factors
In the political factors all the current taxation policies, political support, future taxation policies, wars and the relationships with other countries are being studied to see the direct or indirect effect on the company. In the current time the political environment is not so bad to affect cloth retailer directly. Most of the time taxation policies affect the retailer industries. T. K. Maxx is one of very old retailer company so it has big experience to face some changes in political laws and regulations. But the future can be predicted because the relationship between two countries can become the cause to change the laws.
And due to this changes company may have problems with the vendors and their supplier. Any changes that come in other countries where the vendors of T. K. Maxx exist can affect directly the performance of this off-price retailer. Economical Factors The overall economical situations of a country have a direct effect on an industry. And this is the time when UK is facing the economical recession and that can affect the company’s performance and growth. Other issues that are considered in economical factors are the capacity of consumers spending, level of government spending, currency exchange rates.
The retailer who is in off-price industry, faces the big problem of frequently changes in currency exchange rates. The overall business of the T. K. Maxx depends on its vendors who are located in so many countries. Company has to keep itself on the track all the time to bargain from all over the vendors from every country. Off-price industry is very sensitive to be affected by economical factors not from economical change in one country but from all over the countries. Social Factors Company’s performance is always affected by the changes in society. For example in the modern society no one can very old fashioned products.
And we can see the changes in fashion world during some decades. People wants to go for new styles, new fashions and new brands with the good quality and some they go for discount if any brand is giving them. The concept that the T. K. Maxx is using is called off-price retailing it is very effective to beat the social factors to some extent. Whatever people want to buy, the off-price retailer can provide them a better deal with new fashion. But the attitudes of consumers is also comes in category of social factors and if the attitudes towards any company changes then it can affect the entire industry’s goodwill and market position as well.
Technical Factors Technology plays a vital role for any industry. Better technology can be very useful to reduce the price of a product and improve the quality of a product as well. The T. K. Maxx does not have its own manufacturing units of production. Even then technology plays another role to increase its sale. Such as online facility for the customer and e commerce facility must be adopted by the company. Even in logistic this is the factor that is more important to look seriously. T. K. Maxx has to make conform that what kind of fabric has been used by their vendors and what type of dealing they are giving to the T.
K. Maxx. Legal Factors There are some legal factors which can affect any industry for example the futures changes in the legalisation, changes in the laws, regulatory bodies and changes in trading policies. Because of being off-price retailer the T. K. Maxx is affected by this factor indirectly not directly. Company that have a production unit may be affected directly because of these legal factors. Environmental Factors In these factors some areas like pollution created by a product, recycling consideration, media, and consumer’s attitudes are being considered. It has less affect on cloth retailers.
Only the consumer attitudes can affect the industry directly. Porter’s five forces framework Porter’s five forces is very effective tool to understand the strength and the weaknesses of any industry. This tool analyze 5 forces that shape all industry, it also provide help to know where the power is lying in business situation. This Porter’s five forces analyze five factors such as new entrance, buyers, substitutes, suppliers, industries competitors. Threats of new entrance Power of Suppler Power of Buyers Threat of Substitutes http://www. indtools. com/media/Diagrams/Porter5Forces. gif The Threats of Entrant T. K. Maxx is one of most popular retailer industry in the UK. It is off-price retaler in that makes it unique from other retailer. It gives a good deal to its customers. It has very big market and vendors from all over the world. Still there are always chances for others to enter into the market with the same concept of off-price retailer. There are some other companies which are working as off-price industries like Ross Stores, DSW, Big Lots etcetera. These companies are not from UK. There is less problem for T.
K. Maxx in UK for getting new competitors in off-price industry. So it does not mean that T. K. Maxx is safe and run its business without any threat of new entry. Other industry always involved in watching the market, current trend, customers choices by conducting survey, events and exhibitions. For example IDEX Exhibitions Limited is going to organize a off-price show in next year on March 14th and 15th. http://www. offpriceshow. co. uk This kind of events and shows can motivate other retailers to enter into the market with the concept of off-price industries.
And in the global economy the new entry is always easy. Power of suppliers Any off-price industries totally depend on the manufacturing mistakes of their suppliers and that makes supplier more powerful. Suppliers might have other substitutes because off-price retailers gain the profit from the branded product by selling them with lower prices. Some branded company in India open their own temporary sale stores just to sale their over stock product with lower prices. T. K. Maxx has to do dealing with its supplier all the time that means day in and day out it has to work to get new stocks.
There are always the case for and off-price retailer that the supplier will have the power all the time. If supplier refuses to work with the industry and increase the rate of its product then company’s performance could be affected. Power of Buyers The company is running by customers or buyers. Any company has to look always the need of costumers and the current market trend. In case clothing industry the trend changes very frequently. There are many competitors in market who wants to attract the customers by giving them low price product or giving them with other schemes and discounts and offers.
In case of T. K. Maxx it has got the big competitor such as Primark because primark also provide the cloths in low rates and the quality is not very high but it can attract the middle class customers . T. K. Maxx do doubt give the branded product in 60% discount but there are other factors as well in customers mind that can make him to switch from one brand to another. T. K. Maxx has to make some other strategies to beat the market. Threat of New Entrant New organization entry is always unpredictable in this global economical environment.
Any company can come with new concepts and may be better concept than off-price retailer. T. K. Maxx can not be considered as a very unique cloth retailer in the present time. The treat of new entrant for any off-price retailer comes from the streets cloth retailer and cheaper cloth retailer such as Primark. So T. K. Maxx has a big work load to stay in competitive market. Threat of Substitutes It is very obvious fact that customer are price sensitive so they may go for the T. K. Maxx store just get the benefits of 60% discount all the time. But that is not the true every time.
Off-price retailer has a big problem with the new trend because they always buy over stock product from its vendors. Sometime it is been seen that the trend which is being soled by off-price retailer become older. Customer, in that case has other option to go for their choices. Some time fashion becomes more important than the prices and in that case off-price retailer has very less option. T. K. Maxx has good rating in the fashion world just because of its price discount. But if any other company comes into the market with quite same price and more modern fashion than T. K.
Maxx then company may be affected in sale and growth as well. Competitive Revelry In the present time competitive revelry is not so high for the T. K. Maxx in comparison with other cloth retailers at least this company has powerful strategies to stay in the market with well reputations. Even in the time of global economical crisis the company is performing well. When there is change in global economy only then the T. K. Maxx may face the problem of maintaining its existing reputations. 3. Industry Life Cycle Industry Life Cycle is used to understand all the stages of any industry from its beginning to its declination.
In the industry life cycle mostly four stages are being considered to look at. These stages are Introduction, Growth, Maturity and decline. We are going to understand some stages for the T. K. Maxx cloth retailers. Sometime any company which now growing might have faced the stage of declination that is why these stages are called industry life cycle. . Industry Input Introduction growth maturity decline Time Industry Life Cycle Introduction
As mentioned earlier that T. K. Maxx opened its first store in 1994 in Bristol and 2010 it has got 210 stores in all over the UK. T. K. Maxx has introduced the off-price concept to the UK first time. This concept is from America. This is one of the success alternatives to sale the product of third party. T. K. Maxx introduces so many ranges from all over the world to the UK. And became one of the most popular fashion retailer industry. Growth T. K. Maxx has got the growth very soon; it did not take a long time in order to get the present position in the market.
Even now in present situation of global crisis T. K. Maxx is one of the growing industries. can you add some more data you got from internet in this topic,. just two or three lines. Maturity If the company’s focus is on the growth then it should be considered at this stage of Maturity. The T. K. Maxx is still not mature enough according to the definition of the Muturity stage of industry Life Cycle. Company is planning to expands its business by opening more stores and also planning to get more vendors to attract the customers from every class.
In this stage we can assume any company whose goal is not get the further growth. In this stage the company’s main focus goes to market share and cash flow. The case of Next does not look like this. Company is still focusing on the growth. According to official website Next, company is looking for further market to start its stores and other product and new design and stylish cloths according to market demand. Decline T. K . Maxx has seen this stage when 2007 credit and debit card fraud had happened. Company faced the problem of its low reputation and the customer faith on the company.
But because of its powerful strategies and policy company has again built the previous reputations and performing in the market of fashion and cloth very well. Recommendations T. K. Maxx has more than 10000 vendors from all over the world, but the company has store only in some countries like US, UK and Germany. Company can start its own store in other countries as well or it can go to those countries where most of the vendors are located. Company must try to get more vendors from all over the world because it is well known that policies from the other countries or suppliers demand may affect the present situations of the T.
K. Maxx. T. K. Maxx must make new strategies to protect their customer’s detail; because of weak software security company has faced one big loss in 2007 credit card fraud. Conclusion It sounds very nice if someone say you that you can get the same brand in cheaper rate from the T. K. Maxx. But when you go to T. K. Maxx it becomes quite hard to find out the product you were looking for. This studied has shown how T. K. Maxx is working and its market positions. But there is more to know about the off-price retailer, because in future we don’t know what can the new concept may come and beat these off-price retailing industries.