Question

In chapter 3, we are introduced to 5 categories of environmental forces (social, economic, technological, competitive, and regulatory) that influence firms.

Indicate which of the five (Hint: there is more than one) environmental forces have led to the challenges facing brick-and-mortar retailers today (and have led to many of these retailers to close their stores)..

Answer 1

In chapter 3, we are introduced to 5 categories of environmental forces (social, economic, technological, competitive, and regulatory) that influence firms.

Indicate which of the five (Hint: there is more than one) environmental forces have led to the challenges facing brick-and-mortar retailers today (and have led to many of these retailers to close their stores)..

Brick and mortar stores are physical stores where a customer can go to see, check and buy products. Eg. Nike showroom. A number of products in these stores are limited.

They are having a tough competition from e commerce websites like Amazon. Amazon can bring a large number of sellers together and can enjoy economies of scale. Out of these social, economic, technological, competitive, and regulatory forces- The most impactful in last 10-15 years are economic and competitive.

In 21st century, technology changed a lot. This enabled smart phones and app based shopping. Consumerism increased and people changed economic habits which are more social impact oriented than need oriented. Ordering online to doorstep , changing if not suited reduced tension of spare time for shopping. Credit cards and E-wallets also enabled customers to spend beyond means. Economies underwent liberalization and globalization and online retailers expanded worldwide. As discussed earlier mobile based technologies made this shopping possible conveniently.

Due to competition, brick and mortar stores also followed price wars and ultimately revenues started to go down. However, a fact remains that brick and mortars still control 60 % of retailing business and has huge market and scope but competition is making it difficult. Eg. Amazon came up with its own brands that could be sold in very high amounts and highlighted easily using applications. Hence brick and mortar stores have to fight with e-tailers on price, variety, shopping experience and special offer days.