Assessing the external macro environment with PEST analysis

PEST Analysis of Sears

In 1886, Sears, Roebuck & Company emerged, which now boats as the nation's fourth largest retailer with nearly 929 full-line and 1200 specialty retail stores throughout the United States and Canada. Recently, Sears Domestic and Sears Canada are experiencing financial losses due to poor customer service (Skariachan, 2011). It is a leading retailer of a diverse range of products, including home appliances, home electronics, lawn and garden supplies, tools, and automotive maintenance and repair (Sears, 2010). It sells these products and services through its proprietary brand names, such as the Kenmore, Craftsman, and Diehard brands, which allow Sears to capitalize on the popularity of these labels. The company is also a leader in clothing and apparel sales, with such brands as Joe Boxer, Lands End, Apostrophe, Covington, and Jaclyn Smith. With more than 12 million service and maintenance calls made yearly, Sears is the nation's largest provider of home services. Insomuch, the large diversity of products and services offered by Sears requires its management to have a strong understanding of the external factors that govern operations. To gain market share vs. their competitors, Sears must take advantage of political, economic, social, technological, and competitive factors in the world today. By evaluating the political landscape, economic conditions, social issues, and technological aspects, Sears may improve its competitive advantage in the marketplace.

Political Landscape

Some political realities that must be taken into account when for business operations are trade quotas and restraints, industry subsidies, investment incentives, trade agreements, economic treaties, and bureaucratic processes. Each factors plays a major role in business processes and profitability. The majority of Sears merchandise is manufactured overseas (Sears, 2010) leading to an increase in operating costs. When fuel costs increase, the cost of transporting goods increases, as well. Sears depends on political stability in the other countries in which its suppliers operate. Therefore, it is paramount to ensure this stability by keeping a pulse on the economic climate. Sears' management focused attention in merchandising in overseas markets through their brand management corporation. Sears Brands Management Corporation specializes in development of overseas business for export of Sears branded products such as Kenmore appliances, Craftsman Hardware and Lawn and Garden, and Diehard batteries. This focus toward globalization shifts most of Sears' products in home appliance to major overseas markets.

Economic Conditions

Retailers depend on the purchasing power of its customers, and when economic conditions are unfavorable, customers will feel the adverse effects regarding disposable income and credit worthiness. Such changes reduce their ability to purchase the large-ticket items that comprise a large portion of Sears' profits. Other economic indicators that affect Sears are consumer's spending propensity, unemployment, price indexes, tax rates, consumption patterns, gross domestic product trends, and interest rates. Insomuch, the company's ability to plan equitably across generations and cultures has fostered new development in globalization for the retailer. The retail industry is a seasonal business, which is subject to uncontrollable factors like poor climate conditions that affect sales. Moreover, Sears depends on economic stability in the U.S. And in other countries because of the direct correlation to consumer spending. The current state of the economy has caused Sears' sales to decline. Problems include understaffed stores, poor signage, closed cash registers, inconsistent inventory, and uncompetitive pricing. In 2008, Sears made their first gain in the market share in over a decade (NY Times, 2011). Today, U.S. consumers may have very little disposable income and credit criteria has more stringent requirements, making it difficult for consumers to obtain the necessary financing to obtain these items. Consequently, Sears operates its own credit card through Citigroup, thus offering a variety of benefits to the consumer.

Social Issues

Social factors relate to assessing the social, cultural, demographic, and environmental profiles of addressable markets (Sears, 2011). These trends are shaping the way Americans live, work, produce, and consume. Such a dynamic society gives Sears the opportunity to be a trendsetter in its various product categories. Sears currently faces many threats from many different retail chains like Wal-Mart and Target. These stores are beginning to offer customers a single store to fill all their shopping needs. Like Sears, such stores offer many of the same products at competitive prices, plus the consumer has the ability to conduct other shopping as well. Similarly, Lowes and Home Depot have been consistently garnering a large portions of Sears' appliance sales. Sears is able to influence how it does business with its partner vendors through environmental sustainable practices of recycling and offering products and services that promote environmental health for customer and employees. Sears' strategy is embedded in its progressive focus and commitment to diversity. The creation of the five pillars of diversity is an equal part of the company's culture to include: creating lasting relationships with customers by empowering them to manage their lives, attaining best in class productivity and efficiency, building brands, and reinventing the company continuously through technology and innovation.

Technological Aspects

Technological factors for Sears have a revolutionary affect on business processes. Embracing the Internet has helped with business productivity and efficiency: processing transactions, protecting customer information, summarizing shopping experience, and managing inventory & suppliers, and human resources. Chiefly, the Internet allows communication with consumers who prefer to shop virtually. Technological advancements require continuous innovation, not only for business operations, but also for the consumer experience. Systems are a double-edged sword. Its reliance and dependence on computer systems places Sears in a vulnerable position, in which patronage could be jeopardized should systems experience suboptimal performance. However, as Sears' technology expanded, its global reach expanded, as well. Hence, the online marketplace not only fostered ecommerce trends, but it also enabled a free delivery of online purchases that captured a new niche for the former order catalog process.