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Discuss about the Role of Intelligence in Formulating Strategy.

Nowadays, business firms face a lot of problems in order to survive in today’s more competitive business scenario. They use numerous effective strategies to accomplish goals related to their businesses. Along with this, business organizations also conduct marketing research to collect all the important data and information related to the product, price, and competitors as well. Small enterprises face more problems than big or MNCs. It is because of they are new in the market. They are not aware about the marketing tactics that are essential to earn profits and accomplish competitive advantages over the competitors. Moreover, competitor analysis and customer profitability analysis are valuable to improve the productivity and profitability of the business organization. Both, competitor and customer profitability analysis play numerous significant role in the growth and success of the businesses. This research paper is useful to illustrate the methods and strategies used by the small businesses to set reasonable prices for their products or services. Furthermore, this research paper is also advantageous to illustrate the strategies and tactics used by the business firms in order to conduct competitor analysis and customer profitability analysis for the growth of businesses in the national and international market as well.

Being in the hospitality industry, the chosen business needs to ensure they are conducting regular competitor analysis. Current literature has found that competitor analysis is essential to the strategic management process. Scholarly researchers have found that most businesses adequately audit their internal environment, but that many lack the methodology to properly and accurately assess the external environment (Herring, 1996).  Current literature regarding competitor analysis in small business has found there are a number of businesses that lack a formal process for collecting, assimilating and converting information regarding their competition into knowledge and intelligence. Competitive intelligence has been found to be an effective strategic management process. Research has found that in the past, most small businesses do not realise the benefits that can be obtained from competitive intelligence (Narayanan, Pinches, Kelm, & Lander, 2000). The findings of a recent study found that small businesses are not concerned with gathering intelligence on competitors because of satisfaction with current intelligence (Groom & David, 2001).The research found that there was managerial implications that focused on the development of competitive intelligence systems. This is something the chosen small business should consider when analysing their competitors in the future.

Information on the Small Business

The chosen small business uses target costing to set their prices under the impression that target pricing gives a long term view of their profit margin and the ability to cope with market changes (Ong, 1981). Current literature has recognised customer value?based pricing as superior to all other pricing strategies (Ingenbleek, 2003). The increasing endorsement of customer value?based strategies among academics and practitioners is based on a general recognition that the keys to sustained profitability lie in the essential features of customer value?based pricing (Hinterhuber, 2008). There is a large number of benefits of customer value-based pricing approaches, however a recent study has found that over eighty percent of companies continue to price their products and services on the basis of cost and competitive price levels (Hinterhuber, 2008). Literature has found that this is due to the difficulties surrounding communicating with customers and perhaps this is the reason why the chosen small business has avoided customer value-based costing.

Chosen small business is established in 2015 with sole trader form of business.The nature of operation is service in the food industry which is selling food and drinks. The chosen business sell combination of Malaysia, Thai, Korean, Italian, and Australian cuisine. The drinks menus are specialised with their own recipe. They are doing table service to reduce uncomfortable of customers and provide better quality of service. When it started its business, the employee was 5 people but now it increased to 9 people. The reason why we choose this business as subject of our report is the opportunity, strength and its managing style of business.

We practiced primary and secondary sources to collect data. The primary sources are practiced to collect in-depth data which can not get from secondary sources. To supplement data, interview was practiced with 15 minutes long. The interview was practiced during chosen business’s break time to avoid damage from disturbing their business. Also, we visited competitors to collect data to practice further analysis. The data which is can not gathered from secondary sources are recorded with photo. The photographs are taken under agreements of the business.

Furthermore, the secondary sources are practiced to collect background information and support our analysis.We gathered basic information of chosen business and other businesses through online sources such as Instagram, Face book and its online website to figure out its pricing decisions, customer profitability and competitor analysis. Journal articles are referred to support our assertions in academic purposes and get guidelines from previous researches.

Competitor Analysis

Mostly satisfying requirements choose the top 3 competitors to compare with chosen business. The competitor must to have similar products or substitute for, and located in the same geographic area. The in-depth competitive analysis provided an understanding of how chosen business’s existing and potential customers rate the competitors (Jacobi, G 1992). Through competitive analysiswe recognize its strength, weakness, opportunity and treat. The chosen business can determine its competitive position with this information.

Chosen small business

Strength

-Open till late

-Variety options of menus

-Different style of cuisine (Malaysian &Thai-focused on demands of Asian food)

-Location (located in heart of dormitory village)

-Signature drinks menu

-Using famous coffee beans

-Coupons (1free coffee when you have 10 stamps)

-Fully licenced

-One hour free parking lots

- Warm and cosy atmosphere

Weakness

- 2 hours break

- Opening time is later than others

-Advertising (no inflow from outside) Only focused on UC Students or Staffs

Minimum amount for transaction

-Unstable (

-Can not handle lots of individual order

-Do not provide catering service

-Lack of number of employee (when 1person cannot work it hard to find the other person who can substitute

-Lack of information about customer

Opportunity

- Number of students are increasing

-New dormitories are open

-Increased interest in Asian food

-increasing number of customers during exam and assignment period

-Increasing number of international student

Treat

-New residences in the outside of dormitory village

-New entrants

-Break terms of university are almost 5 months in one year (can not secure customers)


Accordingto competitor analysis we recognised that chosen small business and its competitors having similar opportunities and treats because of geographic reasons and limitation of market. However, the chosen business show that it has better opportunities to attract customer.

Competitor A

Competitor B

Competitor C

Strength

-Optional coffee beans

-Franchise

-Biggest size

-Australian cuisine

-Inside and outside seats are covered

-Take away focused

-The size of drinks is bigger than others

-Located in heart of market

-Oldest caféin market

-Cheapest price

-Indoor and outdoor seats are available

Weakness

-Unable to get sunshine (cold-outdoor heaters are not available)

-Only inside seats are available

-Finger food only

-Smallest size

-Inside seats are small

Opportunity

-The number of students are increasing (Has possibility to secure new customers

Treat

-New entrants

-Locational (customers are limited to UC Students) Hard to secure customer from outside of UC

According to McCartan-Quinn and Carson (2003), in small business, direct interaction and close approach to customer and market is one way to achieve benefit, which is the significant difference from large business. Fortunately, the chosen business was conducting research about customer profitability, which indicates that the chosen business had been noticing the importance of the interaction with customer and market. On the basis of customer profitability, they are focusing on managing and creating customer loyalty by coupon, interior design that creates a relaxed mood, differentiated menu and so on. In detail, several ways the chosen business is operating to achieve customer profitability will be mentioned. Firstly, they provide loyalty coupon that gives free coffee if a customer buys nine cups of coffee, which attract customer to visit and purchase their product. Secondly, they are trying to remember the face and preference of customer to create a friendly relationship with the regular customer. Thirdly, the chosen business offers a variety range of drink and meal menu to break from the unified menu that their competitors provide. Furthermore, at the same time, their differentiated menu satisfies the high interest and demand for Asian food and beverage, which is the crucial finding from the research about the customer and the market. Fourthly, creating a relaxed and friendly atmosphere is highlighted to give a positive impression. In the same sense, they play songs and offer table service. As a small business, customer profitability is achieved more easily than a large business with their flexible and decentralized business structure, which allow them to reflect the customer’s need and to cope with their competitors’ moves (Pelham, 2000).

The table below shows the actual price of the chosen business and their competitors.

Chosen business

Competitor A

Competitor B

Competitor C

Coffee Size

Small

Large

Small

Medium

Large

Small

Medium

Large

Small

Large

Coffee Price range

$3.5

$4.0

$3.5

$4.0

$4.5

$3.5

$4.0

$4.5

$3.5

$4.0

Extra charge(extra shot, syrup, milk)

No extra charge

$0.5

$0.8

$0.5

Lunch price range

$12-17

$6.5-16

No food menu

$7-12

Dinner price range

$12-39

$12-21.9

$11-18

 As the table shows, the price range of coffee is narrow than the range of the competitor A and B, which can be adrawback for the customer who wants various choice ofcoffee size. However, the actual amount of coffee is larger than the competitors’ product. For example, small cups of coffee from the chosen business is bigger than any other competitor’s small size coffee and the amount is even similar to the medium size coffee of competitor A and B. Accordingly, the coffee of the chosen business has more value for the price. Furthermore, the customers who order extra shot, syrup and milk are able to save money as the chosen business doesn’t charge for the extra order. The chosen business sets their meal price ranges for lunch from $12 to $17 and for dinner from $12 to $39, which are expensive than their competitors’ price. However, the chosen business offers a large amount of food so that customer can share one dish with their companion. The chosen business used target pricing approach to set price more effectively than their competitors, because the target pricing gives long term view of the gross profit margin and able to cope with dynamic changes in the market, futhermore, the business can differentiate themselves from their competitors in the long term context (Ong, 1981). To achieve target pricing, the chosen business have 2 hours break to reduce wage cost and also using pre-cookedfood so that they can reduce cooking time and serve more customer at the same time.

Conclusion

On the premises of the above analysis, it can be concluded that, business firms make a ot of struggles to survive in the marketplce. Small business organizations develop effective strategies to enhane the productivity and profitability of businesses. Along with this, it is  observed that, small businesses use differnent stratgies to set prices to their products or services. They collect informantion relted to the competitors’ price strtaegies. They make use of the Internet and social media sites incuding Facebook, Instagram, Twitter, LinkdeIn, etc. to know the views and opinions of the custmers. Moreover, it is also exmined that, business firms conduct SWOT (Strengthes, Weaknesses, Opportunities, Threats) analysis to perform a competitor analysis in an effectual and an appropriate manner. SWOT analysis provide all the strengthes and weaknesses of the competiotrs; and also shows the opportunities and threats exist in the marketplace. Apart from this, it is viewed that, to undertake customer profitability analysis, business firms make direct interaction with customers. They offers uniue products/services to the customers at lower prices and also take care about the tastes and preferences of their customers. On the whole, it can be said that, small businesses do thieir best to retain existing customers and to attract new customers for the growth of their businesses.

Reference

Jacobi, G 1992, ‘Financial Tools for Competitive Analysis’, Competitive intelligence Review, vol.3, no. 2, pp. 14-18.

McCartan-Quinn, D. & Carson, D. 2003, "Issues Which Impact upon Marketing in the Small Firm", Small Business Economics, vol. 21, no. 2, pp. 201-213.

Ong, N. 1981, "Target Pricing, Competition, and Growth", Journal of Post Keynesian Economics, vol. 4, no. 1, pp. 101-116.

Pelham, AM 2000, 'Market Orientation and Other Potential Influences on Performance in Small and Medium-Sized Manufacturing Firms', Journal Of Small Business Management, 38, 1, pp. 48-67.

Groom, J.R. and David, F.R., 2001. Competitive intelligence activity among small firms. SAM Advanced Management Journal, 66(1), p.12.

Narayanan, V. K., Pinches, G. E., Kelm, K. M., & Lander, D. M. (2000, July). The influence of voluntarily disclosed qualitative information. Strategic Management Journal, 21(7), 9-18

Herring, J. (1992, September-October). The role of intelligence in formulating strategy. Journal of Business Strategy, 13(6), 54.

Hinterhuber, Andreas (2008) "Customer value?based pricing strategies: why companies resist", Journal of Business Strategy, Vol. 29 Issue: 4, pp.41-50

Ingenbleek, P., Debruyne, M., Frambach, R. and Verhallen, T. (2003), “Successful new product pricing practices: a contingency approach”, Marketing Letters, Vol. 14 No. 4, pp. 289?305

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