PESTEL analysis of the Denim Industry !

Hello everyone,

Today we will analyse the macro-environmental factors (i.e. external marketing environment) that have an impact on denim industry through a PESTEL analysis.

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Lets look at each of these macro-environmental factors in turn.

POLITICAL:

  • Promotional activities are regulated in all countries by legislation.

ECONOMIC:

  • Global economic crisis context: the economic crisis of 2008 has affected the purchasing power of consumers, which is an important determinant of the size of a market.
  • The stage of the economic development of a country affects also the advertising campaign chosen by denim manufacturers.
  • Distribution channels may require adaptation in relation to the stage of development of each local market.
  • Competition in the denim market is very strong.
  • Increase in cotton prices: Beyond the decline in orders due to economic crisis, the industry has also faced rising cotton prices. Indeed, cotton price had flown in 2011, before falling back. In 2012, the average price of jeans imported into the European Union increased by 5.4% (7.70 euros), after rising 6.5% in 2011. Prices vary according to manufacturers. For example: Turkey and Tunisia (16,97€ ) China (5,5€).

SOCIAL:

  • Cultural differences are important: needs and fashions are different according to cultures. Brands have to adapt their products to these different needs.
  • Colors are a cultural dimension: for example, the white color is associated with death in China but black is the color of death in Europe.
  • Jeans are seen as second-skin: at the beginning, it was designed for workers and then for cow-boys.

TECHNOLOGICAL:

  • Development of online shopping.
  • Mobile applications for iPhone and Android: this strategy takes the denim market into an all new era.
  • Social-media marketing such as Facebook: Facebook enables to encourage consumers to connect to Facebook page of the brand and become fan. This strategy increases the sense of belonging to the brand.
  • Denim brands increasingly develop their advertising strategy.
  • According to Ademe (French Environment and Energy Management Agency), now there are new ways of producing jeans which enable to take care of the health and the environment.

ENVIRONMENTAL:

  • 52% of the damages relating to the jeans occur during the production step. From the cotton crop until its delivery and its clothing manufacture, one denim will have consumed the equivalent of 25 liters of oil and resulted in a rejection of 2 kg CO2 in the atmosphere. (according to ADEME).
  • The jeans industry is faced with consumers who are increasingly demanding on environmental matters. The industry must provide sustainable and ethical products that respect the planet.
  • Reducing consumption of forest resources by using recycled material and reducing packaging.

LEGAL

  • Some jeans have received the label « Confiance Textile ». These products are certified Oeko-Tex (www.oeko-tex.com) and guarantee textiles without risks to health.
  • Passed in 2005, the European regulation REACH (Registration, Evaluation and Authorization of Chemicals) is now one of the main levers to force the textile industry to be « clean. » Such substances known under the acronym SVHC (substances of very high concern) are allowed in textiles at a lower 0.1% rate, as in all other sectors of production.

Sources:

http://www.lesechos.fr/21/05/2013/lesechos.fr/0202776569717_les-ventes-de-jeans-reculent–une-premiere-en-dix-ans.htm
http://www.lefigaro.fr/environnement/2011/08/23/01029-20110823ARTFIG00634-l-industrie-textile-n-est-plus-epargnee-par-les-critiques.php
http://www.ecoconso.be/Planete-Jeans-planete-blues

by Céline 

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