UNIVERSITY OF NORTHAMPTON

SURNAME HURLOLL
Student ID:

(18425305) NEERUNJUN
NAME

Programme Title: Masters in Business Administration (General) (2018-19)

Year: 1 (2018) Trimester: 1

Module Code: MKTM 028

Module Title: Strategic Marketing

Assignment 1:

PESTEL Analysis of UK for the commercialisation of Pollution Eating Bikes

Module leaders: Associate Prof Ashish Gadekar (AGBS-LOCAL)

Dr Stephen Castel(UON)

Date summitted: 04.06.2018

Word count:2185
Table of Contents
List of figures................................................................................................................................................... 3
Executive summary ........................................................................................................................................ 4
Introduction .................................................................................................................................................... 5
Theoretical Framework. .................................................................................................................................. 5
Overview .................................................................................................................................................... 5
Political ....................................................................................................................................................... 6
Economic .................................................................................................................................................... 6
Social .......................................................................................................................................................... 6
Technology ................................................................................................................................................. 6
Environment ............................................................................................................................................... 7
Legal ........................................................................................................................................................... 7
Strengths and Weaknesses of PESTEL analysis according to Tiduko (2017) .............................................. 7
Strengths ................................................................................................................................................. 7
Weaknesses ............................................................................................................................................ 7
Application of PESTEL Analysis to United Kingdom ................................................................................... 8
Political factors ........................................................................................................................................... 8
1. Political stability ................................................................................................................................ 8
2. Legislation ......................................................................................................................................... 8
3. Anti-Pollution Policy ......................................................................................................................... 8
4. Brexit impact on cycling industry...................................................................................................... 9
5. Fiscal policy ........................................................................................................................................... 9
6. Infrastructural support ....................................................................................................................... 9
Economic factors ...................................................................................................................................... 10
1. The size of the market...................................................................................................................... 10
2. Risk Assessment of UK ....................................................................................................................... 11
3. Currency Fluctuations ...................................................................................................................... 12
4. Rate of Inflation ............................................................................................................................... 12
5. GDP growth rate .............................................................................................................................. 13
Social factors ............................................................................................................................................. 14
 1. Change in lifestyle ............................................................................................................................ 14
2. Change in buyer behaviour .............................................................................................................. 15
3. Attitude of people towards technology ........................................................................................... 15
4. Increase in use of bicycles as a mode of transport ........................................................................... 15
5. Decrease in general crime rate .......................................................................................................... 15
Recommendations......................................................................................................................................... 16
References .................................................................................................................................................... 17

List of figures
Figure 1: sales revenue by segment ............................................................................................................. 10
Figure 2: Risk Ratings 11
Figure 3: Currency fluctuations .................................................................................................................... 12
Figure 4: Rate of Inflation ............................................................................................................................. 13
Figure 5: GDP per head ................................................................................................................................. 14
 REPORT

To: Daan Roosegaarde

From: Management Consultant

Date: 04.06.18

Terms of Reference: PESTEL Analysis of UK for the commercialization of Pollution Eating

Bikes

Executive summary
This report identifies and evaluates the arguments favouring the entry of pollution eating bikes in
the United Kingdom. The PESTEL (Political, Economic, Socio-cultural, Technological,
Environment and Legal) framework has been used for analysing the external UK business
environment to reach a conclusion on investment possibilities.

However, impact assessment has been carried out using only the political, economic and social of
the PESTEL model. This is so because pollution eating bikes is expected to bring its own
technological knowhow. Also, with the concept of filtering and releasing clean air in the
atmosphere, the environmental factor will be taken care of. The legal factors are linked to the
political ones as government policy is rigorously implemented in the UK.

Furthermore, the report attempts to chart the UK to be a good selection as nearly 60% of the
population are living in regions where the levels of pollution are beyond the allowable limits
(Laville, 2017). The UK stable political climate is also a priceless asset that will create a promising
business environment for pollution eating bikes. Moreover, the UK government has implemented
fiscal policies, incentives and environmental legislation to promote cycling and alleviating air
pollution.
The UK is a highly developed economic nation with the 6th largest GDP figures in the world. It
also offers a robust economic environment compared to other countries. The market for bicycle
industry represented £1.5 billion in 2017 with a growth rate of approximately 5%. And the current
economic climate is favourable. The socio-cultural factors align with the concept of pollution
eating bikes due to the factors like physical fitness and eco-friendly attitude of British citizens
towards innovative products.

Hence it can be concluded that pollution eating bikes should enter the UK market and focus on the
urban areas given their high rate of air pollution.

Introduction
This report sets out an analysis of the external environment of UK and the possibilities of setting
up business in this country. UK is being analysed because it represents a substantial market for
pollution eating bikes. Also, “consumers respond well if they see an advantage such as superior
design, branding or environmental benefits” Santander (2018). The PESTEL framework will be
used to assess the attractiveness of the market. Three elements of the PESTEL model namely
political, economic and social will be evaluated in the context of business development and
acquisition of new markets in the UK.

Theoretical Framework.
Overview
The business environment is constantly evolving, making organizations take calculated risk in in
business development and acquisition of new markets. Based on this premise, “the PESTEL
framework of political, economic, social, technological, environmental and legal factors” (Song et
al, 2017) can be a valuable tool in assessing the opportunities and threats of setting up a new
business. Each of these factors are further elaborated as follows:
Political
“Political factors refer to government’s intervention in the economy and political elements can have
considerable impact on the development of businesses” (Kolios and Read, 2013). As such, business
organizations should be conditioned to cope with political interference. As far as possible measures
should be undertaken to make political forces become business allies.

Economic
“Business does not operate in a vacuum but rather within a framework of economic forces” (Dias,
2009, p. 13). Hence the impact of these forces on the business should be thoroughly evaluated.
Economic factors that can be considered as critical success factors include aggregate demand, the
unemployment rate, the economic growth rate, the inflation rate, the trade cycle, monetary and
fiscal policies. The business development index should also be considered.

Social
“Socioeconomic impact is a major predictor of business success, especially in the long term”
(WBCSD, 2018). Baines, Fill and Rosengren (2014) argue that “people habits and ways of life are
continuously changing and businesses have to become accustomed to the dynamic changing pace
in the environment”. In other words, the cultural development of a country should be studied by
businesses to better understand buyer behaviour.

Technology
“Technological infrastructure affects the culture, efficiency and relationships of a business”
(OKSBDC, 2015). The impact of technology is substantial on business activities. Irrespective of
the size of an organisation it offers a wide a range of possibilities. For instance, it can help in
meeting customer needs more accurately. This can lead to an increase in demand, which, will
eventually turn into higher profits.
Environment
“Ecological factors include legislation on environmental protection, waste removal and energy
consumption” Gregorié (2014). Such regulations influence the business location. The eco-
friendliness of products being made available over the market is also assessed.

Legal
“This factor takes into consideration all legal aspects like employment, quotas, taxation, resources,
imports and exports” (Trivedi, 2016). Statutory requirements regulate the business environment as
well as business operations. Statutory analysis considers both of these perspectives and then crafts
business strategies in light of these legal requirements.

Strengths and Weaknesses of PESTEL analysis according to Tiduko (2017)

Strengths

1. PESTEL is a straightforward framework, very easy to understand and to make use of.

2. PESTEL help companies to recognize in advance potential dangers and opportunities and
to act accordingly.

Weaknesses

1. Environment may change rapidly and this can create issues to forecast the future.

2. It may be not cost effective as PESTEL analysis should be carried out frequently as the
environment changes.
Application of PESTEL Analysis to United Kingdom
Discussions over the PESTEL framework will focus on political, economic and social factors only.
This is so because the pollution eating bike will bring along its technological innovation. The
commercialization of this product will immensely benefit the environment given that polluted air
will be filtered and released into the atmosphere every time a rider is cycling. As far as the legal
aspect is concerned it is interlinked with the political scenery in the UK.

Political factors

1. Political stability
The UK is a politically stable country and the government is encouraging for external investors to
invest in the UK economy. According to Godfrey (2012), “the government has portrayed their
political philosophy as congruent with the key principles of the environmental movement” This
makes a very profound statement in favour of pollution eating bikes entering the UK bicycle
industry.

2. Legislation
The UK parliament in 2008, passed the world’s first climate change act to reduce the gas emissions
with a target of 80% cut by 2050. Moreover, with the climate change and the high level of air
pollution in UK shifted cycling into the foreground as a means of reducing CO2 emissions. On the
other hand, since the implementation of few environmental law acts, some of these acts were not
fully executed due to low political and investors’ engagement (Lockwood, 2013).

3. Anti-Pollution Policy
According to the Independent (2018) UK’s latest clean air strategy aims at “phasing out fossil fuel-
only vehicles by 2040”. The implementation of such a policy will benefit the marketing of pollution
eating bikes for short distance travelling. However, there could be practical implication in
execution of this policy. For instance, the reaction of key players in the transport industry given
the direct threat this policy poses to business operations.
4. Brexit impact on cycling industry
This policy measure will impact on the retail price of all types of bicycles. The EU is a trading
block which provides members countries preferential treatment on tariff and trade. The exit of
Britain from it has led to a depreciation of the pound hence making imports more expensive. The
pollution eating bikes company should therefore change the product launch campaign to focus more
on product features rather than price.

5. Fiscal policy
The UK provides a 10% corporation tax which was 20% before and no tax is levied on the foreign income
invested (Deloitte, 2015). There is also a ‘Cycle to Work’ tax scheme in support of healthier rides to work
and to decrease environmental pollution and congestion by enhancing bicycle activities. Such kind of
incentives stimulate foreign direct investment.

6. Infrastructural support
The UK cycling infrastructure has come a long way, the government constant investment in the
National Cycle Network has developed its infrastructure by 12,600 miles including cycling and
walking paths across the country in urban areas including London (Sustrans, 2002, p.2).

The political climate is stable for pollution eating bikes to enter the UK as the government is taking
bold initiatives and working towards its improvement. The government has portrayed their political
philosophy as congruent with the key principles of the environmental movement (Godfrey, 2012,
p.2).
Economic factors

1. The size of the market

According to Mintel “the aggregate market
size for bicycles stood at £1.5 billion in 2017
with a growth rate of approximately 5%.”

From the pie chart it can also be inferred that

there are two related markets in the UK, i.e.,
the bicycle parts & accessories is worth £750
million) and cycle repair £100 million

Market growth is a very good indicator for

industry attractiveness for pollution eating
bikes. However, the market concentration
Figure 1: sales revenue by segment
ratio should also be verified before finalizing
the decision to enter the market. Nevertheless, the novelty of filtering polluted air should give
pollution eating bikes a competitive edge to enter the market. Also, Fotios and Castleton (2015)
warn that “despite market growth, the frequency of bicycle industry falls behind other European
countries such as Germany, Denmark and Netherlands.”
2. Risk Assessment of UK

Figure 2: Risk Ratings Source: coface

“The country’s risk rating and business climate rating are very good (see figure 2 above)” according
to Coface (2017). This can be partly justified by the absence of “restriction on the free flow of
capital and no approval mechanisms exist for foreign investment” (Deloitte, 2015). Moreover, the
Brexit decision has led to the devaluation of the pound which have attracted foreign investors to
the UK” (Radionova, 2016). This is a strong argument for pollution eating bikes to enter the market.

3. Currency Fluctuations

The bank of England and Bloomberg have recorded a further devaluation of the pound in 2017 as
shown in the graph below.

This should be considered

for the entry of pollution
eating bikes in the UK. For
business start-up it could
represent a big business
opportunity.

Figure 3: Currency fluctuations

4. Rate of Inflation
The inflation rate currently stands at 2.2%, compared to 2.7% last year which represented “the
highest in the last five years in as the price of petrol has increased”
(BBC, 2017). According to the Office for National Statistics report
the rise in inflation was due to the increase of global oil prices by
1.2%. Consequently, this has caused import of the oil prices more
expensive in the UK (The Guardian, 2015). Consequently, the
transportation costs have increased which is encouraging the British
citizens for alternative mode of transport and many swap cars for
bikes.
Figure 4: Rate of Inflation

5. GDP growth rate

According to Trading Economics website the UK GDP per capita has increased to USD 41602.98
in 2016 (see figure 5 below) representing a growth rate of approximately 3.19%. The real
disposable income per head should also see a slight improvement given a reduction in inflation rate
of approximately 0.5%. This is indicative of the buying power as well as the very high standard of
living of British citizens.
 Figure 5: GDP per head

The UK has an extremely favourable economic climate to allow pollution eating bike to enter
the bicycle industry. Pollution eating bike will benefit from the expansion of the bicycle
industry, business easing for foreign investors, currency post Brexit vote and the current
inflation rate. However, winter in UK is very cold and evening is darker which major
constraints are for cycling during these times. The snow makes the routes impractical
(McWilliams, 2010, p.6).

Social factors
1. Change in lifestyle
Grous (2012) asserts that “the growing awareness on health issues and rising focus on attaining a
good health are changing the lifestyle philosophy in the UK and has resulted in an increase across
the consumer health market in the UK.” There also has been an increase in the number of large
scale organised cycling events across the UK to promote health consciousness due to sensitization
campaigns such as ‘Get Britain Cycling’and ‘Love your Bike.’(CTC, 2018)
2. Change in buyer behaviour
The Nielsen Global Survey of Consumer (2016) reveals that the consummation trends in the UK is
opting for more eco-friendly products even though their higher price. The growing occurrence to
pay more for environmentally-friendly styles of products is due to aspects as the alarming pollution
level in UK and greater accessibility of ecological products (Nielsen, 2016).

3. Attitude of people towards technology

In a survey regarding the attitude of people in UK towards technology, 28% of respondents reported
they were prepared to pay for style and technology (Statista, 2016). However, the technological
development in UK is still slow in contrast to the United States of America.

4. Increase in use of bicycles as a mode of transport

According to TRA analysis, cycle in UK has significantly increased the last five years, the road
traffic statistics reveals that more than 3 million miles have been cycled in 2016 representing an
increase of 23% compared to the recent years. Also, cycling has increased in the urban areas, more
specifically in London where the cycle journeys have increased for more than 60% in 2015
compared to 2005 (Travel in London Report 9, 2016). The patterns in the UK have shown a
considerable interest of the youngsters for cycling activities. Whereas, in the urban areas the
importance for cycling is gender neutral and composed of a mixed category of people of different
age group, gender and ethnicity (Sidebottom, 2016).

5. Decrease in general crime rate

According the police recorded crime data in UK; there in a general increase in the bicycle theft
during the recent years whereas other forms of acquisitive crimes have decreased (Sidebottom,
2016).

The socio-cultural factors support the marketing of pollution eating bikes in the UK. The growing
concern over health issues, protection of the environment and the demands in new technology are
in favour the entry of pollution eating bikes in UK cycle market.
Recommendations
Pollution eating bikes should enter the UK market based on the following premises:

1. The bicycle industry is experiencing a growth rate of 5% and this trend is bound to
increase in the future to be a determining factor for pollution eating bikes to enter the
UK market

2. Environmental incentives, tax alleviation on technological innovations and policies to

combat pollution by the UK government.

3. To contribute in the reduction of the pollution rate, to increase road safety and decrease
congestion. The pollution eating bikes is also deemed to expand into an essential
transportation system in the UK for the coming years.

4. The UK is a very powerful technology driven economy. Hence, the development of

innovative, creative and technology products for the people of UK will add to brand
equity and loyalty.
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