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Sectoral Analysis of Avoca Handweavers -Part 2 – [3 Part Series]

Avoca Handweavers Sectoral Analysis

Blogpost Part 1 gives a high level overview of the sectoral analysis conducted to date on the business environment of Avoca Handweavers Ltd.

Blogpost Part 2 highlights the main points of the PESTLE analysis undertaken, and then guides you through a more detailed PESTLE analysis of the external business environment of Avoca.

Blogpost Part 3 covers the main findings derived from the analysis, how they may impact Avoca’s business and what steps they may need to consider in order to meet these challenges into the future.      _________________________________________________________________________

Sectoral Environment – Part 2

Avoca PESTLE Analysis

As Avoca’s customer profile is primarily in the ABC1 Female category, it’s likely that much of their customers enjoy disposable incomes that relate to salaries from higher paid professions. Professional fees remain high despite pressure from Irish Governments EU partners to cut some of the highest professional fees in the EU. This development would hurt Avoca’s domestic sales and would require Avoca to pivot their offering to either focus more online to customers abroad or the tourism market generally.

Political                                                                                                                                     ∙Services & Tourism Taxes                                                                                             ∙Staff Costs                                                                                                                       ∙German Pressure on Irish Corporate Tax Base Rate                             ∙Renewed Pressure by EU to focus on professional fees

Economical
∙ Positive Domestic Consumer Sentiment
∙ EU Banking Stress Tests in Quarter 3 & 4 of 2014
∙ Deferred Basel III Stress Tests until March 31st 201812
∙ Overall Domestic Economy Remains Weak

Social                                                                                                                                                 ∙ Increased Provenance Interest                                                                                     ∙ Sales Growth In Ecommerce                                                                                           ∙ Cultural Identity & Traditional Irish Brand                                                             ∙ Shorter Fashion Cycle – Faster Lead In Times                                                     ∙ Changing Face of Online Customer Profile – Irish, UK, Asian, U.S.         ∙ Privatization of Postal Services in EU may harm Ecommerce

Technological
∙ Digital Marketing
∙ Faster Internet Speeds Across Platforms
∙ Rise of Smart POS, MCommerce, NFC.

Legal
∙ Commercial Property Values Rising Sharply in Dublin Region
∙ Upward Only Rent Review Leases without breaks
∙ Company Structure Expansion &/ or Divestment

Environmental
∙ Changing Weather Patterns in Store Areas

wordcloud avoca points of difference

PESTLE Conclusion
Avoca will need to budget for any increase in VAT on the services sector as although lobbying through industry groups can help there is no certainty the tax rate of 9% will be maintained for the food arm of the Avoca business into the future.

They need to recognize the key drivers for change, especially in the technological areas. Given the research, it would appear there’s a strong case for greater investment in I.T. in order to meet the future needs, requirements and expectations of their customers and suppliers and other stakeholders.

Innovations in mobile point of sale and other 1 touch payment solutions in the retail sector means Avoca need to scale up their           Ecommerce capabilities in order to future proof the business.
Another key area that needs to be focused upon is the current legal structure of the company.Avoca Mag Mockup

If Avoca plan to scale the business and grow, then greater clarity is needed if they are to try and raise finances from private equity funds or venture capitalists.

A key driver for change is the resurgence of the commercial property market in Dublin especially. Avoca have some upwards only leases and the profits they have been using to expand the business organically may be soaked up once more in higher rents and rates.

They will need to prepare for this key driver by perhaps decoupling or divesting part of the overall business in order to minimize exposure to risk.         __________________________________________________________________________           Sources

Forfas – Cost of Doing Business in Ireland 2012 [ONLINE] Available at: http://www.forfas.ie/media/08042013Costs_of_Doing_Business_2012Publication.pdf. [Accessed 08 March 2014].

Basel III Wikipedia, the free encyclopedia. 2014. Basel III Wikipedia,
the free encyclopedia. [ONLINE] Available
at: http://en.wikipedia.org/wiki/Basel_III. [Accessed 08 March 2014].

True Economics: 1/12/2013: The Age of Great Stagnation: Sunday Times, 24/11/2013. 2014. True Economics:
1/12/2013: The Age of Great Stagnation: Sunday Times, 24/11/2013. [ONLINE] Available at: http://trueeconomics.blogspot.ie/2013/12/1122013ageofgreatstagnationsunday.
html. [Accessed 07 March 2014].

Grant Thornton – Good Food Ireland Survey 2013 [ONLINE] Available at:  http://www.grantthornton.ie/db/Attachments/GoodFoodIrelandSurvey2013.pdf. [Accessed 08 March 2014].

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One thought on “Sectoral Analysis of Avoca Handweavers -Part 2 – [3 Part Series]”

  1. Ronan & Team,

    Ouch! The impending EU Banking Stress Tests in Quarter 3 & 4 of 2014 had totally slipped my mind, and I do think that no matter what “spin” is used (and there will be spin – from all quarters), it will be difficult or this little Island of ours and all the businesses who depend on the availability of a “discretionary spend” – and by that time Angela will be calling the shots not our Government.

    We have all heard that the banks are “repaying” the bonds the taxpayers took out on their account…but I wonder….

    And if both commercial property rents, and house prices increase in the short term this will also reduce discretionary spend…..but of course the politicians (of all hue’s) will totally decline to describe this artificially induced increase as a bubble!

    Part 3/3 awaited!

    Déaglán de P.

    Like

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