PEST analysis

Contents

1... INTRODUCTION.. 3

2... PEST ANALYSIS. 3

3... PORTER’S COMPETITIVE FORCES. 5

4... DEMAND/SUPPLY.. 7

REFERENCES. 8

INTRODUCTION

“Fiskars” Corporation is a Finnish metal and consumer brands company providing consumers with goods for Home, Garden and Outdoor. The Fiskars Corporation was established in 1649 at Fiskars Bruk (now it is the Raseborg city, Finland). The company is highly popular among the consumers due to its high-quality produce as spades, scissors, knives.

The company operates worldwide. For example, the company has offices in Asia, Australia, Belgium, Canada, China, Denmark, Finland, France, Germany, Hungary, Italy, Japan, Mexico, Norway, Poland, Russia, Sweden, UK, and USA. Moreover, Fiskars manufactures goods in Taiwan and China.

The company possesses 3 core brands:

Fiskars (knives, spades, axes), Iittala (kitchen tools), Gerber (various knives and multitools)

PEST ANALYSIS

Firstly, handling PEST analysis is one of the most essential tools to estimate the company’s internal and external business environment. There are four main factors which have to be taken into account (political, environmental, social and technological). Sometimes the additional factors as legal and cultural issues could be applied to the analysis. The business environment of “Fiskars Oy” has been analyzed with the help of PEST analysis.

Political factor

The political sphere is unstable these days. The world is divided into two forces (Russia and the partners; the USA and its partners). Correspondingly, some countries imposed the sanctions against Russia, others not. First of all, it affects businesses. Many entrepreneurs used to export the products to Russia but now they have to rethink the contracts. Fiskars is not an exception. The export of big Finnish corporations to Russia has dropped dramatically. Moreover, the tax policy and trade norms are different in all the countries of the world. It has been mentioned that Fiskars is a global corporation and operates in 60 countries on each continent on the Earth. The company faces some problems with custom acts, restrictions and taxes in every country of operations, respectively. This issue negatively affects the company’s business because the fluctuation in the tax rates leads to the fluctuations in profit for Fiskars. Also, the company could probably meet the problem with bureaucracy and bribery. It’s known that in Russia this issue is pretty widespread. The process of fast urbanization is the next global megatrend which affects company’s business environment. 50% of population live in cities nowadays. Consequently, the company has to adapt offerings to customers according to their needs and consumer habits. No doubt that gardening tools (one of the core products) are not relevant for city population. The company faces the challenge to adapt the business but to remain being profitable. These are the most relevant uncertainties and risks at this moment.

Economic factor

As I aforementioned, the population is growing simultaneously around the globe every day. Some natural resources are not everlasting that is why the world faces the huge problem of scarcity. Demand is getting higher and higher, resources are disappearing and all the businesses have to search for alternative ways to handle the production. Due to the Ukrainian crisis, the inflation rate has been changed in relation to euro and ruble, respectively. It causes the changes in import and export contracts for Fiskars. As the currency fluctuates, the prices are fluctuating too. It has an influence on the level of supply and demand.

Social factor

The Finnish families are accustomed to live in their own houses which have the surrounded field. In result, Finns are involved in agriculture actively. This lifestyle is one of the reasons for making high profit for Fiskars because people purchase all the gardening tools in the big quantities. This lifestyle is similar to Russian. Finland and Russia have the common border which is a competitive advantage for the company as it enables to export the products extremely successfully. The whole system of similarities among Finland and Russia is a key component for handling the stable and profitable business for Fiskars Oy.

Technological factor

These days applying the principles of “green” production is a global megatrend. Responsible manufacturing defines the overwhelming majority of company’s operations. Environmental concern is a cornerstone of the company’s work. First of all, Fiskars has decided to focus on particular areas: reduce CO2 emissions for 10% by 2016; improve material efficiency; find alternatives for any potentially harmful chemicals and substances in production; extending responsibility to supply partner. There is no doubt that smart use of raw materials is a common practice for Fiskars. By the way, Fiskars pays attention to the technological part of production by investing money into research and development department.

3 PORTER’S COMPETITIVE FORCES

Market structure is frequently analyzed with the system of competitive forces created by Michael Porter. This tool is aimed at defining and predicting all the possible risks and uncertainties which the company could probably meet penetrating new market or operating on the market already.

1. Bargaining power of suppliers. This term reflects the situation when the company has long-lasting relationships with particular suppliers. Due to this fact suppliers can vary prices for raw materials, change quality of supplied products, time of delivery, and availability of products, respectively. As a result, those aforementioned circumstances affect business environment of the company dramatically. What goes with Fiskars, the company has grown the network of external suppliers. All the suppliers are long-term partners for Fiskars and have been elected according to their ability to support Fiskars’ quality, supply chain, cost, and technical targets with flexibility. Fiskars’ employees from local offices and business areas work with the suppliers in a close and respectful manner.

2. Threat of substitutes. China is the leading production country around the globe as China produces everything for pretty much cheaper prices. As a result, Fiskars meets the products-substitutes from Chinese manufacturers. This condition makes a slight risk for the company.

3. Threat of new entrants. As Michael Porter said, the threat of new entrants refers to the risk of newly penetrated companies into the market which can replace the existing ones. As for Fiskars, that kind of risk is minimal because Fiskars produces the premium class quality products which consumers are willing to buy despite the price. All the Fiskars’ produce are unique ones, there is no analogues.

4. Bargaining power of buyers. When the company possesses a strong group of consumers with outgoing relationships, it affects the business environment of a company at all. Due to this fact buyers are able to lower prices. As a result, the company makes less profit. Moreover, consumers could probably demand to increase quality of products, services. All those aforementioned conditions lead to the price wars among companies. One of the indicators to estimate the possibility is sales revenue. Fiskars earned EUR 738 million for three business units (home, garden, outdoor) in 2011. There is no need to prove, that the result is quite high.

5. Intensity of rivalry within the industry. The intensity of rivalry among competitors in an industry reflects the extent to which companies within an industry put pressure on one another and limit each other’s willingness to make profit. If rivalry is high, competitors are trying to steal profit and market share from one another. According to Porter’s 5 forces framework, the intensity of rivalry among firms is one of the main forces that shape the competitive structure of an industry. As for Fiskars, the company does not have any strong competitors. Fiskars has the strongest position in the market place. Thirdly,

4 DEMAND/SUPPLY

As the products of “Fiskars Corporation” are the premium quality ones and have their own lasting design, the demand for this products is elastic (consumers do not need to buy it very often). According to the Fiskars President’s review, the company performed well in 2011 despite some instability in business environment. Moreover, despite the expectations net sales increased and the company was able to exceed the previous year’s EBIT excluding non-recurring items, setting a new company record.(Net sales increased 4% to EUR 742.5 million (2010: 715.9))

Moreover according to PEST analysis, there are several significant factors that influence Fiskars company’s business. Firstly, political factors, such as overall political situation (it affects the world’s economic stability and business of every international company). Secondly economic factors and trends, such as the growth of population and lack of natural resources. Thirdly social sphere is very important, because the life-style of people in different countries is different and it influences the business of company a lot. The last, but not the least is technological factor. It is important because of such megatrends as “green manufacturing”- it affects the business of company, because takes significant amount of company’s profit.

Overall, there are several risks and powers of Fiskar’s company, according to Porter’s competitive forces analysis. Firstly there is a Bargaining power of suppliers. Fiskars company has stable and reliable network of external suppliers. All the suppliers are long-term partners. Company’s relationships with the suppliers are based on compromise. Secondly, there is a treat of substitutes. Fiskars meets the products-substitutes from Chinese manufacturers. This condition makes a slight risk for the company. Thirdly there is a threat of new entrants but that kind of risk is minimal for Fiskars because Fiskars produces the premium class quality goods. Fourthly, there is Bargaining power of buyers. Fiskars earned EUR 738 million for three business units (home, garden, outdoor) in 2011. This means, that the Bargaining power of buyers is not very high. The last part of this analysis is Intensity of rivalry within the industry, but for Fiskars company it is not an important problem, because it does not have any strong competitors. In conclusion, Fiskars is one of the most powerful and profitable company in this field and the only real risk is the loose of market share and amount of customers because of the popularity of less expensive substitutes (for example from China)

REFERENCES

Fiskars Annual Report 2011. 30.03.2015

2011 Financial Statement release of “Fiskars Corporation” 1, January-December 31, 2011. 30.03.2015

Jim Wilkinson. 30.03.2015. The Strategic Developing Financial Leadership. http://strategiccfo.com/wikicfo/intensity-of-rivalry-one-of-porters-five-forces/

Picture attached. http://myphumanities.zischina.com/files/2013/10/porter-fiveforcesmodel.jpg 30.03.2015

Fiskars Corporation. Wikipedia. https://en.wikipedia.org/wiki/Fiskars 30.03.2015

Fiskars Group. http://www.fiskarsgroup.fi/sustainability/responsible-supplier-co-operation 30.03.2015

Entrepreneurial Insights. Strategy frameworks. Bargaining Power of Buyers | Porter’s Five Forces Model by Marc on August 24, 2014. http://www.entrepreneurial-insights.com/bargaining-power-of-buyers-porters-five-forces-model/ 30.03.2015

Fiskars Group. http://fiskarsgroup.com/sustainability/managing-sustainability 30.03.2015

Fiskars Group. http://fiskarsgroup.com/sustainability/long-term-profitability 30.03.2015

Fiskars Group. http://fiskarsgroup.com/about-us/introducing-fiskars/organization 30.03.2015

Fiskars Group. http://fiskarsgroup.com/about-us/business 30.03.2015

Fiskars Group. http://fiskarsgroup.com/sustainability/responsible-manufacturing 30.03.2015

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