The Amcor Limited Firm’s PESTLE (Strategic) Analysis

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Table of Contents

Introduction
Methodology
PESTLE Analysis
Critical Review
Conclusion and Recommendation
References

Introduction

American-Australian packaging giant Amcor PLC. creates flexible packaging, rigid containers, bespoke cartons, closures, and services for food, medical device, household, and personal care products. Australian paper manufacturer Amcor was formed in the 1860s (Amcor, n.d.). In the 1970s and 1980s, APM became Amcor Ltd. as its focus turned from paper to packaging (Amcor, n.d.). The firm’s objective is to be the world’s leading packaging company (Amcor, 2021). The company’s core values are safety, accountability, outcomes, and performance (Amcor, 2021). However, external sociopolitical factors may disrupt the company’s worth. Therefore, the company must pay particular attention to commercial activities. According to research, social and political factors account for or predict 34.8% of economic performance and stakeholder’s profits (Hamiza et al., 2020). This suggests that a favorable socio-political climate is a crucial prerequisite for commercial success. In order to succeed in business, entrepreneurs must thus be aware of the socio-political factors influencing their surroundings, such as rules and regulations, security, religion, education, taxation, family pressure, and governmental policies. Thus, PESTLE analysis determines which factors most affect a company, as Amcor’s growth depends on sustainability.

Methodology

PESTLE is an analytical method that tackles the strategic evaluation of the impact of external influences on corporate operations. The abbreviation PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental factors. This instrument has evolved from its conventional predecessor, PEST. Amcor Limited uses this method to examine the placement of its operations in connection to the examination of the company’s external production surroundings. By influencing the Porter Five Influences, macroenvironmental forces may affect a company’s strategy and competitive landscape. In addition to concentrating on competitive factors, this report includes a comprehensive examination of Amcor Limited’s problems based on the PESTLE framework. In addition to a company’s overall operational success, these factors also serve as a crucial foundation.

PESTLE Analysis

Political Factors

Political forces play a crucial role in developing procedures and variables that can affect the economic market’s long-term profitability. Amcor has used acquisition as a strategy for market growth, but the company is dependent on political stability to conduct effective business operations. Due to the widespread uncertainty created by the Brexit decision and ongoing military operations in Ukraine, there are fluctuations in the volatility of financial markets. Such dynamism directly affects supply chains, which in turn affects the profitability of the end product. Emerging markets represented 30 percent of Amcor’s worldwide sales, highlighting the company’s significance in new market opportunities (Amcor, 2021). The risk of relying excessively on such markets is that they are relatively fragile and in their developing phases.

Moreover, due to the sale of materials and products to jurisdictions with enacted sanctions, the organization needs internal mechanisms to mitigate against potential losses resulting from regulatory bodies’ sanctioning measures. Without such safeguards, the company runs the danger of committing legal infractions that have the potential to harm its operations and image. Perhaps the current diminishment in evaluating the company’s stocks is attributable to Russian facilities’ global political instability and sales. In 2022, the company’s basic earnings per share decreased to USD 0.074, while diluted earnings per share diminished to $0.073 from $0.166 in contrast to the previous year’s performance (Investing, 2022). This creates uncertainty for the company in the short term. However, selling Russian factories should be beneficial as it upholds the company’s safety value, creating a stronger brand image.

Moreover, critical stakeholders of the company, namely, customers across the western world, would support this decision since the continuation of the operations in the military region, which receives global criticism, may represent support of the company. This could deteriorate company stocks’ value and affect other stakeholders (company owners, partners, and business customers). Therefore, such organizational practice has a significant effect on stakeholders.

Economic Factors

Economic considerations revolve around the economic cycle and the determination of aggregate demand and investment based on savings, inflation, interest, and foreign currency rates. Consumer demand for industrial, personal care, health care, and other consumer packaging items substantially impacts the demand for Amcor’s products (Bumbudsanpharoke & Ko, 2022). Current economic challenges, including high unemployment rates, sluggish economic growth, high levels of mismanaged debt, poor risk profiles, and economic volatility in Amcor’s operating regions, exert pressure on the economic performance of the respective countries.

Consequently, this affects Amcor’s prospects by diminishing the company’s business opportunities. An important example of such shocks and impacts is Argentina in South America, where economic prospects have been mixed, and high inflationary accounting has been utilized to alleviate price shocks caused by the poor performance of the Argentine economy (Valdecantos, 2022). The company’s financial performance is diminishing in light of global instability. In 2021 net income was equal to 1.561 billion dollars which is a significant decrease compared to 2020 despite stable growth of sales (Amcor, 2021). The company’s underperformance in this aspect may reflect the consequences of losing the Russian market and represent a short-term decrease.

Sociological Factors

A company’s culture must adopt directly influenced by social norms and behaviors. Societal attitudes, beliefs, and consumption patterns significantly affect any business’s marketing strategy. The purchase intent and behavior of consumers lean towards green items. As a result, corporations must react to customer demand and fulfill their social obligation by releasing green goods to meet consumer requirements (Lin & Niu, 2018). The same applies to Amcor’s business and demonstrates that the company will endeavor to comprehend and adhere to socially acceptable norms, designing messages and materials that adhere to the newly approved aesthetics of society. In this way, the media interactions of Amcor seem to reflect transparent and positive relationships as the company performs well in managing social issues and upholding industry standards.

Technological Factors

A new disruptive technology in the hands of a rival would increase its capacity to attract clients at the cost of Amcor’s market share, which would likely hurt the company’s revenue streams. Due diligence should be performed since information technology failure might adversely affect the organization (Lu et al., 2020). The effects include production interruptions, which may result in financial loss. Such situations underscore the relevance of technology infrastructure consolidation. Additionally, the cost of technology dissemination rates and the technical effect must be evaluated.

In the last decade, substantial strides have been achieved in enhancing the gas barrier of polymeric films. Several multinational polymer firms, including Amcor, DNP, Kuraray, Mitsubishi, Printpack, and Toppan, have made substantial investments in research and development for polymer solution packaging for sterilizing operations (Sablani & Sand, 2021). Amcor employs SiO2 coating to manufacture high-barrier films appropriate for microwave-assisted thermal sterilization applications (Sablani & Sand, 2021). This decision is suitable for various markets, and with the decreasing price for raw materials, the production could benefit the company. However, this solution is not biodegradable, which may pose challenges in long-term operations.

Legal Factors

Within the many countries in which Amcor operates, distinct frameworks are in place to impact and preserve intellectual property rights. Amcor is committed to protecting its intellectual property rights while sacrificing efficiency and profitability in some areas. This operation ensures continual operations and innovation in a highly competitive marketplace. Amcor is the proud owner of several patents and trademarks around the globe and in its subsidiary regions of operation. In addition, Amcor PLC guards various industrial techniques and technical know-how as trade secrets. Collectively, these actions ensure Amcor’s competitive edge and have minimal unfavorable effects in the case of the loss of a single patent or license for the whole firm. The firm operates with transparency, and no scandals concerning legal matters could be found, which might be a positive indicator of the company’s performance.

Environmental Factors

Amcor is subject to varied environmental standards and regulations as a result of the diversification of its activities, which has a direct influence on its earnings as a result of different markets. Amcor’s environmental policy seeks to adhere to resource conservation and minimal wastage devoid of emissions and discharges that negatively impact the ecosystem and routinely conduct assessment audits on environmental impacts. In addition, Amcor vowed in 2018 to produce reusable and recyclable packaging material by 2025 to strengthen relationships between the firm and recycling organizations to minimize waste products released into the environment in an eco-friendly manner (Amcor, 2021). Consequently, displaying the company’s commitment to sustainable business practices.

Amcor’s owned or leased properties are subject to various environmental legislation. These regulations include conservation legislation regarding discharge, the remediation of polluted soils, and waste disposal. Infractions of such basic regulations result in obligations following compensations and remediation of polluted environmental components. It cannot be anticipated with the assurance that Amcor will always succeed without difficulty, but its current performance is satisfactory.

Critical Review

Developing the new packaging technology is an essential step for the corporate development of Amcor. The company announced in September 2022 a further strategic investment of up to $45 million in ePac Flexible Packaging (“ePac”), a pioneer in high-quality, digitally-based, short-run length flexible packaging (Amcor, 2022). Amcor’s minority stake in ePac Holdings LLC will expand due to this transaction (Amcor, 2022). Environmental concerns are putting pressure on the corporation to make a change. Therefore, this method is a wise strategic choice that might help it overcome impending obstacles. It also represents the company’s resolve to preserve its ideals of safety first and stakeholder prioritizing.

In addition, this choice creates new development potential for the organization as the market for sustainable packaging expands fast. The worldwide market size for sustainable plastic packaging is expected to increase from USD 89.0 billion in 2020 to USD 117.3 billion by 2025, at a CAGR of 5.6% over the same period (ReleaseWire, 2022). The market is anticipated to expand with the global expansion of sustainable plastic packaging end-users (ReleaseWire, 2022). Given the extent of its activities and existing financial standing, it is reasonable to anticipate the company’s growth in this direction.

Nonetheless, these expenditures demonstrate the company’s commitment to the long-term, but present progress on sustainability targets is modest. Consequently, it is determined that this part of the company’s strategy operates poorly. Nonetheless, the continued volatility in the company’s critical European and North American activities due to global instability resulting from Russian military actions remains uncertain. The company plans to sell its Russian facilities, and the deal is planned to be finalized in the second half of Amcor’s fiscal year 2023 (Packaging Europe, 2022). The three Russian facilities constitute around 2% to 3% of the company’s overall revenues (Packaging Europe, 2022). However, the implications of such alterations in the real world would not be established for some years. Currently, this action means losses for the branding and image of the organization.

Conclusion and Recommendation

The company is heavily affected by environmental considerations regarding packaging methods. Specifically, the company’s significant revenues depend on the plastic market, and with the increasing awareness of sustainability, it must adopt new technologies to progress its business operations. Unless the company can decrease its ecological imprint and increase the recyclable product options, the market is expected to stagnate in the future and may disrupt the company’s operations. Therefore, investments made in ePac technology are an essential step towards accountability of the company and are in line with essential company values that focus on delivering performance. This may become an essential step in the company’s future development towards green technologies.

Moreover, in light of the ongoing crisis in Ukraine, the company made an excellent decision to abandon the Russian factories in favor of political stability and a positive interpretation of the brand image. However, the effects of this decision are yet to be determined. However, it is plausible that after overcoming this challenge, the decision to leave the Russian market will bring positive results as it strengthens the brand image. Nevertheless, the company performs satisfactorily with PESTLE factors and aims to address each factor with the company values upheld.

References

Amcor. (2021). Annual Report 2021. Amcor.

Amcor. (2022). Amcor increases strategic investment in ePac Flexible Packaging. Amcor.

Amcor. (n.d.). Our History. Amcor.

Bumbudsanpharoke, N., & Ko, S. (2022). Packaging technology for home meal replacement: Innovations and future prospective. Food Control, 132, 108470.

Hamiza, O., Francis, T. M., & Rashid, T. (2020). The role of socio-political environment in business success: A case of small businesses in Uganda.International Journal of Academic Research in Business and Social Sciences, 10(10).

Investing. (2022). Amcor plc Financials (AMC). Investing.

Lin, S. T., & Niu, H. J. (2018). Green consumption: Environmental knowledge, environmental consciousness, social norms, and purchasing behavior.Business Strategy and the Environment, 27(8), 1679-1688.

Lu, V. N., Wirtz, J., Kunz, W. H., Paluch, S., Gruber, T., Martins, A., & Patterson, P. G. (2020). Service robots, customers, and service employees: what can we learn from the academic literature, and where are the gaps?Journal of Service Theory and Practice, 30(3), 361-391.

Packaging Europe. (2022). Amcor to sell factories in Russia. Packaging Europe.

ReleaseWire. (2022). Sustainable Plastic Packaging Market Current Trends and future estimations to 2025. Digital Journal.

Sablani, S., & Sand, C. K. (2021). Advanced Sterilization Technologies Unwrap Packaging Potential. Food Technology, 75(7), 62–65.

Valdecantos, S. (2020). Argentina’s (macroeconomic?) trap: Some insights from an empirical stock-flow consistent model(No. 975). Working Paper. Econstor.

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