Journal of Global Social Sciences September 2023, Volume 4, Number 15, 76-83

ISSN: Print 2735-9328, Online 2735-9336

PESTEL ANALYSIS AND PORTER’S FIVE FORCES AS MARKETING TOOLS TO

EVALUATE MORRISON’S PERFORMANCE AND STRATEGY

Chnar Abdullah RASHID,

Sulaimani Polytechnic University, Technical College of Administration,
Accounting Department, Sulaimani, Iraq, [email protected]

Abstract
This research mainly focused on evaluating Morrison’s performance and strategy by using
PESTEL analysis and Porters’ five forces. Company’s financial reports and statements have
used to achieve information regarding to their strategy in order to reveal whether PESTEL
analysis and Porters’ five forces can be applied for improving their performance or not and
making comparison with its competitors. Sainsbury concerned as its competitor since, they
have almost the same level of revenue and their activities are similar. The results show that
this company can apply both methods to improve their performance. More information has
been established in this research.
Keywords: PESTEL Analysis, Porters’ Five Forces, Strategic Management,
Financial Performance, Strategy Clock.
DOI: 10.58934/jgss.v4i15.187

1.Introduction

Porter's Five Forces is a model that identifies and analyses five competitive forces that shape
every industry and helps determine an industry's weaknesses and strengths. Five Forces
analysis is frequently used to identify an industry's structure to determine corporate strategy.
Porter's model can be applied to any segment of the economy to understand the level of
competition within the industry and enhance a company's long-term profitability (Rashi, 2017).
The Five Forces model is named after Harvard Business School professor Michael E. Porter.

Organizations are composed of group of people working together for a common purpose to
achieve desired goals (Rashid, 2018; Fatah & Sabir, 2023). Organizations are open systems
with subsystems and therefore paradigm shift is necessary which focuses on interrelationships
rather than cause-effects (Rashid, 2020; Budur et al., 2018). Organizational development
efforts are designed to improve the performance of organizations for businesses profit is
largely used to measure performance, while for non-profit organizations, performance is
Rashid

measured in terms of relevance, effectiveness and efficiency (Rashid & Sabir Jaf, 2023;
Budur, 2020). On the whole it’s therefore important to examine how the external environment
affects the organization’s performance (Budur et al., 2023). What happens outside the
organization’s precincts without a doubt influences organizational behaviour. Consequently,
organizational learning should constantly focus on the milieu to enable an organization to have
the ability to develop effective strategies to improve performance.

The article critically examines one of the models used in organizational analysis abbreviated
as PESTEL for political, economic, social, technological, environmental and legal dimension
of the external environment. Each of the dimensions is presented to provide justification for
the model. The macro environment analysed using the PESTEL is congruently important as
the micro environment. This paper is critically evaluating how key factors within Morrison’s
business environment might have affected the development of the company’s current strategy.

2. Literature review

PESTEL analysis serves two key purposes for businesses. The first is that it makes it possible
to pinpoint the environment in which the business functions. The second fundamental purpose
is that it offers data and information that will help the business anticipate future events and
circumstances. Therefore, strategic management should employ PESTEL analysis as a
precondition analysis (Yüksel, 2012). Although the current iteration of PESTEL analysis offers
significant conceptual groundwork for the analysis of the macroenvironment, it has some
measurement and evaluation flaws.

The lack of a quantitative method to measurement is the first issue with the PESTEL analysis's
measurement and evaluation dimension. PESTEL factors typically have a qualitative
framework, therefore measurement or other qualitative evaluation is not possible. Such an
appraisal prevents the variables that make up the company's external environment from being
objectively or logically assessed. As a result, the current technological PESTEL analysis
framework has to be developed in terms of measurement and evaluation. Another problem is
that while the conceptual dimension of PESTEL analysis recommends a holistic approach, the
measurement and evaluation dimensions do not follow suit (Budur et al., 2023).

The parameters under analysis are typically measured and assessed independently. In actuality,
though, it is unlikely that all aspects of the external environment will have an equivalent impact
on business operations. While some of the characteristics have a big or crucial impact on how

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PESTEL Analysis and Porter’s Five Forces as marketing tools to evaluate Morrison’s performance and strategy

well a firm does, others may only have a small one. As a result, the relative relevance of the
factors and sub-factors in the PESTEL study may vary. This necessitates the adoption of a
method that measures the relative weights of components and their sub-factors when assessing
the macroenvironment of the business. The connections and interactions between PESTEL
elements are another topic that should be considered from a holistic standpoint.

Each macro-environmental PESTEL element should be measured and evaluated independently

to avoid misrepresenting the situation. It is impossible, for instance, to separate political
circumstances from legal frameworks or economic situations. A political scenario may have
effects on the economy and society, according to Song (2017). An approach based on the
interdependence of the elements should be used in PESTEL analysis.

The aforementioned restrictions on the current PETSEL technique prevent a thorough and
impartial investigation of the macroenvironment. Prior research using PESTEL analysis on the
macroenvironment (Vojinović et al., 2022; Ortega et al., 2019; Pan et al., 2019) mostly focused
on identifying and classifying the components. PESTEL's technical foundation does not
support this technique, despite the fact that its conceptual structure and nature call for it. As it
is, PESTEL analysis primarily gives a broad overview of the macroenvironment and
circumstances around a corporation. To overcome these constraints, the study offers a
measuring and evaluation technique.

3. PESTEL Analysis vs Porter’s Five Forces Analysis

3.1. PESTEL Analysis

A-Political refers to the role of government. There are rules and legislations that entities can
use to comply with. As much as Morrison wanted to provide wealth for its shareholders, it has
to do the same for society. Hence, complying with concepts such as CSR (corporate social
responsibility), which involves listed companies to take responsibility about environmental,
social, employment issues, for example, by reducing the use of petrol to decrease the pollution
as well as costs, accordingly reducing the cost might help Morrison to move towards hybrid as
it mentioned before, because they want to provide their product/service in cheaper price.
Morrison can be affected by the political issues, such as tensions which have been existed very
recently about importing petrol from Iran (Ivory, et al, 2012).

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B-Economic highlights the macro-economic factors: exchange rate, business cycles and
differential economic growth rates around the world. Economic factors can have big effects on
the strategy of Morrison. In 2008 for example, they decided not to pass on increasing global
prices to consumers because this will undermine their purchasing abilities, and instead reduce
their own costs. Although, in 2009 the government's decrease in interest rates assisted to
minimise further grow in unemployment. This led to increasing the spending power of
consumers, because they were sure about their financial situation (Ivory, et al, 2012; Budur et
al., 2023). This might have an impact at that time on Morrison to be at route 2 because
customers care more about price and they sell product/service in a low price.

C-Social effects contain changing cultures and demographic for instance, aging populations.
There are a great number of elderlies in the society. Elderly tends to eat less which may have
influence on the sales growth. They are unlikely to go shopping in supermarkets compared with
the younger generation. Morrison should make the shopping more interesting and developing
online shopping (Ivory, et al, 2012; Noori & Rashid, 2017). This can have implication for its
strategy. Increasing demand for organic food has been accommodated by Morrison to mirror
the demand change. This may a reason why Morrison says we are different and they want to
be different to go into hybrid.

D-Technological effects relate to innovations: internet, nanotechnology. The use of the

Internet through online grocery retailing influences on the operation of supermarkets, which
shows a slightly growth. Online retail shopping has achieved a huge popularity owing to the
increased access to broadband internet in the UK (Ivory, et al, 2012; Rashid & Noori, 2017).
Thus, online shopping could be the big factor for improvement in the future and this could have
implication on its current and future strategy to be different. Consequently, they are more likely
to move on hybrid.

E-Environmental influence: pollution and waste. It has been found that by the Office for
National Statistics (2010) the percentages of customers using recyclable bags have increased
from 71% to 74% and those who attempting to reduce the number of plastic bags that they get
from the markets and shops have risen from 65% to 68%. This helps in decreasing the overall
cost and is better for Morrison corporate social responsibility image. Helping the environment
means, they are looked at as a fair business which is responsible, but they still have to do a lot
which could have implication on its strategy. Already as a reply to CSR they had invested in
assets which use less energy and fuel to reduce emissions (Ivory, et al, 2012; Rashid, 2019).

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PESTEL Analysis and Porter’s Five Forces as marketing tools to evaluate Morrison’s performance and strategy

Therefore, strategy can be changed when the world rules and regulation change and when the
business environment changes and it can mention that previous factors have had a considerable
effect on Morrison’s strategy.

F-Legal holds legislative constraints or changes: health and safety legislation. It has been
estimated that VAT would have to increase by 20% since the Government has to finance a
considerable budget shortage (Ivory, et al, 2012; Rashid, 2020). This will influence the non-
food sectors of Morrison and hence its strategy to continue selling non-food items.

3.2. Porter’s Five Forces Analysis

1-Threat of entry of new competitors

The threat of new competitors’ entry is low into the food retail industry because, it needs big
capital investments to be competitive and to make a brand name. Main brands like Tesco, Asda,
Sainsbury’s and Morrison have already taken the food retail market and they account for 80%
of all shopping in the UK. Thus, new entrant has to create something at an extremely low price
and/or high quality to found their market value. Achieving permission plan takes a huge amount
of time from local government and resources to find new markets and this will be a huge barrier
to new entrants (Ivory, et al, 2012).

2-Threat of substitute products and services

Substitution threat in the market of grocery retail is medium to high for non-food items and
considerably low for food items. In the market of food retail, a main food retailers’ substitution
of convenience stores are small chains, organic shops will not be seen as a threat to
supermarkets, for instance Morrison which offers a production in a high quality with extremely
lower prices. Although, the threat to substitute non-food items, for example store products, is
high. As long as the economic recession succeeds, customers will incline to discounted prices,
therefore Morrison is a threat to the speciality shops (Ivory, et al, 2012).

3-Power of buyers

The negotiating power of buyers is properly high. In situation where there are slight differences
between products, when the changing cost is low the buyers can easily go from one brand to
another. Low price attracts customers and with the online retail shopping availability (Ivory, et
al, 2012; Rashid, 2023).

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4-Power of suppliers

The negotiating power of suppliers is low. Suppliers are motivated to main food and grocery
retailers and feared missing their business contracts with huge supermarkets. Therefore, the
rank of the retailers like, Asda, Tesco's and Sainsbury’s is extra strengthened and negotiations
are positive to gain the lowest probable price from the suppliers (Ivory, et al, 2012).

5-Intensity of competitive rivalry

The intensity of competitive rivalry for both grocery retail business and food is considerably
high. Morrison faces more competition from its direct competitors, like Asda, Sainsbury’s,
Tesco and Waitrose, which are competing with each other on quality, price, and products
(Ivory, et al, 2012).

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