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Introduction
Herne Organics is currently rethinking its business strategy; the company needs to assure its stakeholders that it will continue to be successful upon expansion of the organic business and selling off of its restaurants and hotels. The feasibility of such a decision can be adversely affected by external market forces which will be analysed through a PEST analysis
Political environment
Taxation policies will actually serve as a disincentive if the government gets more involved in the organic industry. One cannot predict whether this will happen or not as all this depends on the type of leadership operating in the UK. Conservative governments tend to create situations in which small or medium enterprises find it difficult to operate. In close association with these is the VAT charged on goods. The company has stated that it intends to invest in restructuring its premises, purchasing new equipment and building a greenhouse complex. There may be tax changes and these may have to be involved in future estimations.
Additionally, international trade may pose a serious threat to the expansion of the company’s products because EU partners are operating on a level playing field with UK organic growers. Therefore the company must ensure that its commodities surpass those of other EU member countries.
Herne Organics is operating in North Kent and this has constantly been referred to as England’s garden. The government would therefore have no hesitation to offer support to this kind of production. Since organic farming is subsidized in the UK, then chances are that Herne organics will reap greater benefits from this subsidization once they expand their organic farmland as the government has acknowledged that the external benefits of organic farming are quite important to the UK population. (Gillman, 2009)
Competition laws have been put in place within UK and the wider EU region. Therefore, the latter company must ensure that it adheres to directives written by the Competition Commission as this expansion will lead to greater scrutiny by the latter group and the government in general.
Economic factors
Studies have shown that a substantial share of Kent’s agricultural resources have been turned into service and industrial ones. Consequently, the overall trend is towards other sectors of the economy. This implies that those who stick to agriculture may face less competition and making their names known will be an easy task. In 1995, the total amount of activities attributed to agriculture in North Kent was 3.1% and this changed to 1.7% and 1.6% in 2000 and 2003 respectively. On the other hand, the services sector accounted for 65.5% of the economy in this county in 1995 and it grew to 68.1% and 70.5% in 2000 and 2003 respectively. (Kent Country Council, 2009) Herne Organics will have more room to establish themselves as a national leader in organic products since only a small portion of its population still engage in this practice yet demand for the commodity is real.
It should be noted that prior to any expansion. A company needs to have a very strong asset base and a sound financial position. It is therefore likely that the latter group will do well in the recent future as it has a tenable financial statement.
Social factors
Recent demographics indicate that a majority of the nation’s population are married. This group would serve as a huge potential market for the company if it wants to establish a national presence for its produce. This is because each household has a substantial portion of members and when one member of the family is targeted then there may not be a need to do so for the others.
It is a given fact that the UK is facing the effects of the global recession. Furthermore, economic recovery has been much slower in this region than in other parts of the developing world. Consequently, consumers have tightened their spending belts and minimized their consumption of luxurious items. This implies that the demand for organic commodities has actually reduced as this cost more to the consumer than conventionally grown products. It will therefore be necessary for Herne Organics to invest in marketing of its products so as to make up for this reduced demand. Nonetheless, inflation rates have not been as high as they are in other countries hit by the recession. Consequently, most cost and sales estimates will still hold as the company pursues its expansion strategies.
Technological factors
Studies indicate that most people are moving towards online transactions as these groups have recognized that they can save a lot of time and resources when they market or purchase their goods in this manner. This implies that if Herne Organics embraces such a business model then it could be more profitable than before.
There are tremendous opportunities for Herne Organics in technology if it successfully expands. For instance, it could utilize new stock management techniques such as those available through bar codes. Aside from that supply chains can be optimized through the use of IT. (Gillespie, 2008) IT can also improve transportation of the organic produce by ensuring that this firm is in a position where it can monitor its cool storage properly and in an organized manner. All these alternatives would not yield substantial return on investment if the company maintained its size; however, because it has chosen to expand, then the ventures will definitely be worth taking.
Conclusion
Herne Organics is likely to be affected by regional laws after expansion and taxation changes. However, expansion will offer great opportunities in IT, marketing and also in government subsidization.
References
Gillespie, T. (2008). Foundations of Economics. Oxford: Oxford University Press.
Gillman, J. (2009). The truth about organic farming. London: Timber Press.
Kent Country Council (2009). About Kent. Web.
Pretty, M. (2000). “Assessment of total external costs in UK agriculture.” Journal of Agricultural systems 65(2): 136
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