External Environment : Economic Segment

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PART1: EXTERNAL ENVIRONMENT 1 .General Environment Economic segment i) Consumer Confidence (Opportunity) Following the recession, consumer confidence index has risen to a two year high of 119.3 in September from 113.4 in August. This rise will potentially prompt an increase in retail spending for David Jones. ii) Rising Interest Rates (Threat) Interest rates are expected to rise to control inflation, reaching 5.5% by 2011. This will leave families with a mortgage with less disposable income for discretionary spending, hence posing a threat for department stores. (News September) iii) Steady Consumer Purchasing Power (Opportunity) Statistics show that luxury goods sold by department stores yield a relatively low change in CPI per annum –…show more content…
This will drive training costs up in an attempt to equip employees with the required skills, while qualified staff will be more expensive to hire. (RetailBiz June 09) Technological i) E-Commerce for Department Stores (Opportunity/Threat) In the internet age, nearly all retailers employ online websites to provide product information and loyalty program to customers, some even with an online shopping function. However, for up-market department stores, online shopping is incompatible as premium products require first hand scrutiny through store visits. This incompatibility may prompt some customers to shift to discount retailers. Global i) Rise of Ethical Consumerism (Threat)) Consumers all over the world are beginning to make their purchase decisions based on the social responsibility of product manufacturers. Hence, the success of department store sales may become brand ethic dependent. (Time Magazine) 2. Industry Environment Threat of new entrants (Low) New entrants have high barriers to entry due to high initial outlay and capital requirements. Moreover, new entrants will expect strong retaliation from existing dominant players David Jones and Myers. New entrants will find it difficult to compete against them without their economies of scale. As a result, new entrants are a low threat to the industry. Intensity of Rivalry among competitors (Moderate) There are only two up market department stores along with a few large discount retailers in Australia,
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