This analysis is a helpful tool to take a closer look at the general environment. Although the PEST analysis rely on past events and experience, it can be used as a forecast of the future (Wilson and Gilligan, 1998). Political factors The political environment is good. The government is stable and reliable, even if Britain fails to achieve total agreement with some EU policies from time to time. At the present no EU directives are known which will have a direct effect on the UK clothing retail industry in the near future.
Due to the EU membership a trend can be seen towards stricter environmental protection legislation. This may have a direct or indirect effect on NEXT or his suppliers. Economic factors Looking at the economic environment, it is somewhat tricky since on the one hand there is the strong sterling compared to the Euro. Euroland encourages imports and endeavours to hold domestic prices at an attractive level. But on the other hand it is difficult for the UK to be competitive outside its boundaries because of the high pound sterling exchange rate against the Euro.
As NEXT sells about 96% in the UK marketplace, this may currently only have a limited effect, but could be more important in the future when thinking globally. Fig. 2 This can also be seen on the "Big Mac - Cross Rates" table, where hamburgers sold in the UK are more expensive than in most other countries. So an investment outside the UK might be very attractive - also speaking of "reimports" to transfer the goods back into the domestic market. Source: see Chapter 7 Another issue is the falling unemployment rate. For the UK population this is good news but for companies like NEXT, this has different implications.
For NEXT it means higher expenditure on wages, as well as greater difficulties in recruiting good employees. Social factors Speaking of the socio-cultural future it should be mentioned that people retire earlier these days, as well as working shorter hours. Average working hours per week have decreased over the last 20 years. As a result many people have more spare time. This means they have time to compare prices in the High Street and the quality of goods and services from retailers. But as a result, they spend more time in the shops.
Another issue these days are the "Green environmental issues". Because people have more time and have ample access to the media via the TV, radio, as well as newspapers and the Internet, the consumer is better informed and therefore this awareness of environmental issues challenges him to care. He wants more than just a product. He is interested in the production process. He wants to know if the factories are environmentally friendly or not, where his product was build and under which circumstances etc. etc. So one problem in the clothing retail sector could be child labour.
There are companies who rely on it in order to be competitive in their domestic market, for example Marks and Spencer. Marks & Spencer had been accused of using child labour in Indonesia in 1999. But once the customers becomes aware of such practices, companies get into real trouble if they do not respond immediately. Consumers who are looking for a best price purchase, may however not be prepared to consider the economic price which their social conscience inflicts on those companies whose products offends their ethics and which they consequently shun.
Technological factors Another issue is the speed of technological transfers which also has an impact on the industry - it is not comparable with the fast growing internet business - but nevertheless it is important. New technology allows new products to be developed, e. g. Lycra®, Supplex® or other synthetic material. Existing materials can be produced quicker and cheaper. Adopting these technologies can be a decis ive factor as to whether a company is ahead of his competitors or whether it lags behind.