1.

Environment Analysis-Political environment

The political environment of any country influences the business to a larger extent. This political environment is
influenced by the political organization, philosophy, government ideology, nature and extent of bureaucracy, the country’s
political stability, its foreign policy, defense and military policy, the country’s image and that of its leaders both locally
and internationally (Shaikh 2010). For example a country’s policy that restricts the growth of multinationals in the market
will automatically limit the business operations of the company hence its growth. Similarly, government policy that allows
licensing that is liberal, liberal exportation and importation, inflow of foreign capital and technology, affects the business
operation. Globalization as government policy too has influence on the business. Burberry was able to establish its first
foreign outlets in Paris, United States and South America, and export its first shipment of raincoat to Japan because of the
government’s globalization policy.

2. Economic environment

Economic factors that influence the business are the collective of the nature of the country’s economic system, its
structures, and economic policies, how the capital market is organized, and nature of factors of production, business
cycles, and socio-economic infrastructure. Any successful organization pictures out the external factors that affect the
business, anticipates the prospective market situations and work to minimize the costs while maximizing the profits. When
Burberry noticed the high demand of rainwear, it utilized this opportunity increasing its production in the market. Also,
due to Japanese and American craving for prestigious designer goods, Burberry export business increased dramatically
(Burberry 2012). Changes in demand are also one great factor that determines success and business performance. Still on
the economic aspect, it is undeniable that all business and non-business organizations felt the impact of the 2008 economic
crisis, which rocked the whole world. The trends on most business performances dropped during this period and Burberry
experienced a low just like any other business. Performance trends in Burberry are expected to at least have a flow of
returns that conforms to this trend.

In all economic situations low rates of interest encourage borrowing and the Federal government in a bid to improve
this lowered the Federal fund rate from 6.5% to 1%. This was meant to better business the economic situation after the
9/11. The demand for further lowering of the interest rates however, continued due to rising and high U.S current account
deficit as portrayed by the above graph. This deficit peaked alongside the housing bubble whose onset began in 2006. The
deficits elicited foreign borrowing to cushion effects by enhancing exports. The spin off led to a high demand of financial
assets and this lowered interest rates whilst raising prices of the respective assets. The high borrowing fueled high citizen
consumption in the period before the onset of the crisis and this consequently led to the raising of Feds fund rate which
turned things in the situation that resulted. This trend portrayed by the graph shows how the economic situation may affect
the economy and general spending and therefore the performance of any business within such an economy.

Similarly, the long-term view of the graphical representation below shows how the economic trends in business and
household debt to Gross domestic product change with times and it is easily notable that in the periods of peak moments of
the rate there is a high level of economic challenges such as the 1930s period and the 2000 to 2010 period. Therefore, it
can be concluded that economic trends are indeed significant determinants of general economic and business performance.

3. Social environment

The country’s social environment affects the functioning of the business since it determines the value system of the
society. Sociological factors establish the culture of work, labor mobility, work groups etc, hence, business operation of an
enterprise. These factors include cost structure, customs and conventions, cultural heritage, peoples’ view towards wealth
and income and scientific methods, seniority respect, mobility of labor (Shaikh 2010). All these factors have big impact on
the business. For example, peoples’ demand determine the kind of products to be offered for sale; this demand is
consequently affected by peoples’ attitudes, customs, cultural values, fashion and other related forces. The code of conduct
that is supposed to be followed by the business is determined by the socio-cultural environment.

The social changes in life also lead to new fashion trends that affect business in any part of the economy. For
example, fashion-based demands are social based forces that lead to changes or increase in demand. The higher the
demand as portrayed in line three demand, the higher the sales level as well as the business performance. The lower the
demand as portrayed in line two the lower the level of returns attained.

4. Technological environment

Technological factors affects business concerning technological investment, technological application and the effect
of technology on markets. Therefore, any technological advancement affects highly the business in a country. The type
and quality of goods and services to be produced and the type and quality of plant and equipment to be used in a company,
is determined by the kind of technology employed by that company (Mühlbacher, Dahringer & Leihs 2006). Burberry is
extending its web reach so that its customers worldwide can view its brands. For example, the company is targeting the
Chinese shoppers directly by launching a site in China. This is because this target market accounts for 30% of sales in its
London stores (Burberry, 2012).

5. Legal environment

The legal environment affects the business and its managers greatly. Legal factors involve how flexible and
adaptable the law and legal rules that govern the business are. It also includes the exact rulings and courts decision. Legal
provisions may also contribute to more or less income depending on the environment of operation. For example, Burberry
Limited makes a considerable portion of its income from licensing, which amounts to about £109 million pounds. This is
made possible as portrayed by the graph below because of laws and regulations in its foreign destinations of operations,
which allow it to charge licensing fee.

6. Demographic Forces in the Macro Environment

Demographic forces relate to people. The name refers to the term Demography. The latter refers to the
study of human populations. This includes size, density, age, gender, occupation and other statistics.
Why are people important? Because, on the whole, their needs is the reason for businesses to exist. In
other words, people are the driving force for the development of markets. The large and diverse
demographics both offer opportunities but also challenges for businesses. Especially in times of rapid
world population growth, and overall demographic changes, the study of people is crucial for marketers.
The reason is that changing demographics mean changing markets. Further, changing markets mean a
need for adjusted marketing strategies.
Therefore, marketers should keep a close eye on demographics. This may include all kinds of
characteristics of the population, such as size, growth, density, age- and gender structure, and so on.
Some of the most important demographic trends that affect markets are:
World population growth
The world population is growing at an explosive rate. Already in 2011, it reached 7 million, while being
expected to reach 8 billion by the year 2030. By the end of the century, it is likely to double. However,
the strongest growth occurs where wealth and stability is mostly absent. More than 70% of the
expected world population growth in the next 40 years is expected to take place outside of the 20
richest nations on earth. This changes requirements for effective marketing strategies and should be
kept in mind.
Changing age structure
The changing age structure of world population is another critical factor influencing marketing. In the
future, there will be countries with far more favourable age structures than others. For example, India
has one of the youngest populations on earth and is expected to keep that status. By 2020, the median
age in India will be 28 years. In contrast, the countries of the European Union and the USA have to face
an aging population already today. This may lead to harmful reductions in dynamism and challenges
regarding the supply of young workers who, at the same time, have to support a growing population of
elderly people.
Changing family structures
Also, families are changing which means that the marketing strategies aimed at them must undergo an
adjustment. For example, new household formats start emerging in many countries. While in traditional
western countries a typical household consisted of husband, wife and children, nowadays there are
more married couples without children, as well as single parent and single households. Another factor
comes from the growing number of women working full time, particularly in European nations. Together
with further forces, changing family structures require the marketing strategy to be changed.
Geographic shifts in population
One – and the most important – element of geographic shifts is migration. By 2050, global migration is
expected to double. This has a major impact on both the location and the nature of demand for
products and services. The reason is that the place people can be reached has changed, as have their
needs because of the new situations. Other important factors are the ethnic diversity that provides new
opportunities, as well as urbanisation.