The United Kingdom is one of the most lucrative markets for most commodities. The British pound has performed well against major international currencies for so many years until Britain opted out of the European Union. British products compete favorably with goods from other countries both at local and international arenas. The smartphone industry has recently emerged as the most lucrative market. However, British manufacturers do not have a significant influence on the global market. A majority of the smartphone brands that the British people use are either from the United States or Asia. This report examines the macro-environment of the smartphone industry in the United Kingdom.
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The PESTLE analysis provides a comprehensive examination of the macro-environment of a particular industry. The political, economic, social, technological, legal, and environmental factors play a significant role in defining the business climate. They dictate the success or failure of the firm in the local and global markets (Baldwin & Evenett 2012, p. 23). In the United Kingdom, the smartphone manufacturing sector is subject to these macro-environmental forces.
The political atmosphere of the United Kingdom was thrown into uncertainty after the British government exited the European Union. Currently, the country’s political environment is undergoing transformations that are difficult to predict. The past political environment was suitable for business. However, some investors argued that it was rather stringent. The British labor policies have led to increasing the cost of production, thus scaring away many potential investors. Successive governments have pushed for an increase in wages, thus favoring employees at the expense of manufacturers (Andonova 2006, p. 31).
Such moves have affected the pricing of goods manufactured in the United Kingdom. In Britain, smartphone manufacturers have opted to outsource manufacturing processes as a way to remain competitive. The exit of the United Kingdom from the European Union was a major political decision that had serious ramifications on all sectors of the British economy (Dhingra et al. 2016, p. 4). The European Union as an economic block has defined British society for a long time. Moving away from the commercial block affected the manufacturing industries adversely.
The British economic environment has been stable for a long time due to sound economic policies. It has encouraged the establishment of mobile phone manufacturing companies due to the availability of capital and ready market. Dhingra et al. (2016, p. 4) maintain that the British economy is one of the strongest in Europe. It has contributed to the stability of the U.K. pound for an extended period. A strong economy means accessibility of capital for investment and a huge consumer base. Although predictions were made that the British economy would plummet after Brexit, the latest trend indicates a 0.5% growth since the voting took place (Statista 2016).
The smartphone manufacturing sector of the United Kingdom has benefited from a robust economic environment. There are six smartphone manufacturing firms in the United Kingdom. Four of the companies are new start-ups. The British economic environment is suitable for both local and international players who wish to establish smartphone manufacturing plants.
Social factors vary based on the cultural practices of society and the technological devices being used. British society has a penchant for knowing what is happening around the world. Thus, it prefers technological gadgets that are internet-enabled as they can facilitate access to news regarding politics and current affairs. Smartphones are internet-enabled. Besides, the devices are easy to use. Currently, a smartphone has become a household item for British families.
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The smartphone provides an interactive platform that friends and workmates can use to exchange information (Page 2014, p. 13). Social media platforms like Twitter and Facebook have contributed to the high demand for smartphones. The need for individuals to inform and update their friends on different news has triggered the demand for smartphones. Manufacturers are keen to exploit this market opportunity.
Currently, British manufacturers produce smartphones with several functionalities to meet the needs of different consumer segments. British manufacturers use a themed method to manufacture smartphones that meet the needs of distinct market segments (Peattie & Ringer 2009, p. 221). The necessity of society to be informed in real-time has also contributed to the growth of the smartphone market.
The smartphone industry can thrive in the British market because the country has invested in state-of-the-art technology. The British education system provides a curriculum that trains the students on how to use technological gadgets at an early age. Additionally, tertiary institutions equip learners with requisite skills that are invaluable in the manufacture of technological devices. Indeed, smartphone companies do not encounter challenges in the sourcing labor force in Britain. The British government has invested in research and development and equipped colleges with the latest technical tools (Revell & Rutherfoord 2003, p. 31).
Thus, the British workforce has experience in technology and can compete with workers from developed countries. Most recent smartphone manufacturing companies like Kazam, Vertu, and Wiley Fox use British technology to produce their devices. Individuals who established these enterprises are proof that the United Kingdom is in a position to manufacture smartphones that can compete favorably with gadgets from other giant companies. In Britain, the manufacturing sector enjoys some of the best innovations that are in high demand across the world.
The legal environment in Britain is friendly and undemanding. The laws that govern manufacturing processes encourage local and foreign investors to venture into the British market. The absence of stringent legal policies is an advantage to smartphone manufacturers. They can use this opportunity to establish manufacturing plants in Britain.
In Britain, smartphone manufacturers are encouraged to create gadgets that would not contribute to environmental pollution. Smartphones and other electronic devices have been cited as among the worst polluters of the environment. Smartphones are made using non-biodegradable materials. Thus, they pollute the environment when disposed of wrongly. The United Kingdom has enforced stringent measures on electronic waste management.
The government limits the material that can be used to produce electronic equipment (Drew 2009, p. 244). The move has made it very expensive for smartphone manufacturers to run operations in the country. The British government is keen to ensure that manufacturing companies do not pollute the environment. Thus, any company that wishes to invest in the United Kingdom must be ready to comply with the established regulations. Countries like China, India, and Brazil have become major destinations for manufacturers due to their flexible policies on the environment.
Effects of External Environment on Manufacturers
The internal and external environments enlighten a company on what steps it ought to take to thrive and to make profits. Organizations can easily control the internal environment. However, the external environment is beyond the reach of enterprises. A company can cope with the external environment by aligning itself with the conditions in the market (Andonova 2006, p. 37). The external environment requires that prudent measures are employed to sustain the business.
Organizations need to be conscious of the external forces that influence their performance. The external environment entails many factors. Thus, a business requires understanding the external forces that might affect its performance before making decisions. Globalization has intensified the situation. According to Andonova (2006, p. 37), globalization has resulted in the introduction of sophisticated technologies. It has also complicated the market. Countries have learned to protect their industries and markets from competitors as a way to balance the economy (Andonova 2006, p. 43). Such situations have forced the international business community to come up with rules and regulations that govern the business arena.
Political factors play a prominent role because they lay the foundation for hostile or friendly markets. The political class has a responsibility to defend what it believes can benefit the country and citizens at large. On the other hand, the adoption of free trade agreements has forced many countries to open their markets to goods from other states. Some foreign goods are cheaper than the local products because of disparities in the cost of factors of production (Baldwin & Evenett 2012, p. 36).
In the United Kingdom, the smartphone manufacturing sector faces competition from brands that are manufactured in other countries. Brands like iPhone, Samsung, HTC, and Blackberry dominate the British market locking out the locally produced smartphones. Political factors like labor policies have led to the British manufacturing sector becoming one of the most expensive industries in the world. The domino effect of such policies is that goods produced in the United Kingdom are costly and uncompetitive.
Technological factors also play a significant role in the manufacturing industry. Even though Britain has the necessary technology to manufacture smartphones, the country lags due to strategic reasons. The advent of mobile telephony that converted to smartphones took out most of Britain’s traditional telephone companies. The companies failed to invest in research and development. As a result, they could not compete with corporations from other countries.
The foreign companies own the best and latest patents that drive the market (Baldwin & Evenett 2012, p. 37). The situation has left the British companies struggling to dominate the local market. The external environment is quite intricate. Different interest groups influence policy decisions that have direct impacts on the business. Environmental organizations are among the interest groups that control manufacturing industries.
The current environmental policies force the production companies to use expensive technologies to manufacture goods that cannot pollute the environment (Drew 2009, p. 247). The cost of production varies across the countries due to the availability of resources and laws that govern the manufacture of different products. The political atmosphere affects the availability of the market. It dictates the accessibility of the global market.
A country’s manufacturing sector can suffer if the international community imposes sanctions on the market that it serves. On the other hand, social trends dictate the buying behavior of consumers. Today, the global market has different views regarding the features that a good smartphone must possess (Page 2014, p. 15). Indeed, variations in consumer preferences force manufacturing companies to implement changes that they have never envisaged.
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Political and technological environments are likely to impact the smartphone manufacturing industry. The political climate influences policies that govern the manufacture of smartphones. On the other hand, the technical environment dictates the viability of the gadgets produced. The exit of Britain from the European Union was a political decision that can affect the country’s previous relations with other economic blocks.
The state is bound to lose some of the privileges that came with being a member of the European Union. The European Union served as the second market for the United Kingdom. The reorganization of the European market will mean that Britain has to negotiate for new terms which might not necessarily favor the local companies. Such a move will have a direct consequence on the manufacture of smartphones because Britain will lose a significant market.
Technological factors are likely to affect the production of smartphones because Britain lacks new expertise. Giant companies like Apple and Samsung own modern technology that facilitates the production of superior smartphones. Besides, the companies have patented their products. Thus, British companies cannot borrow technological ideas from giant firms. Indeed, it is hard for British manufacturers to compete with Apple and Samsung. British companies that have ventured into the smartphone manufacturing industry have adopted a survival strategy that enables them to endure the market.
A company like Vertu has ventured into specific market segments whose needs it can satisfy without difficulties. Vertu positions itself as a company that manufactures smartphones that comply with contemporary fashion. As a result, the company has established an exclusive market. It does not encounter stiff competition in this market. On the other hand, Bullit Group manufactures smartphones that are best for industrial setups. The company’s smartphones are mostly used in the construction industry.
The move to focus on the building industry has given Bullit Group a competitive edge. A majority of smartphone manufacturing companies target the traditional market. An analysis of the smartphone manufacturing businesses which operate in Britain shows that most of them are new start-ups. The primary advantage is that individuals who head the manufacturing plants have vast experience in the production of smartphones because they are former employees of major companies like Apple and Samsung. The leaders can help the companies to develop smartphones that can compete in both the local and international markets. All that the leaders require is formulating the right strategies.
Andonova, V 2006, ‘Mobile phones, the internet and the institutional environment’, Telecommunications Policy, vol. 30, no. 1, pp. 29-45.
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Drew, S 2009, ‘Building technology foresight: using scenarios to embrace innovation’, European Journal of Innovation Management, vol. 9, no. 3, pp. 241-257.
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Peattie, K & Ringer, A 2009, ‘Management and the environment in the UK and Germany: a comparison’, European Management Journal, vol. 12, no. 2, pp. 216-225.
Revell, A & Rutherfoord, R 2003, ‘UK environmental policy and the small firm: broadening the focus’, Business Strategy and the Environment, vol. 12, no. 1, pp. 26-35.
Statista 2012, Market share of smartphone device manufacturers (OEM) in the United Kingdom (UK) from 2011 to 2012. Web.