Write a reflective essay titled ‘Industry analysis and possible adaptations’.?
- Use the Porter’s 5 Forces model to identify and analyse the current environmental influences on the Apparel Retailers subsector within the UK economy.?
- Use the Value Chain model to analyse the internal business environment of a firm in the Apparel Retailers subsector within the UK.?
- Explain appropriate adaptations that your selected firm could undertake in response to the external business environmental forces.
- Based on the task ‘a’ above, reflect on the usefulness of the Porter’s 5 Forces model in understanding the business environment and describe its
Identification and analyses of macro and microenvironment influences
The aim of the paper is to reflect upon the industry analysis and possible adaptation of the Apparel Retailers subsector within the UK economy. This paper includes the identification and analyses of the macro and microenvironment influences that can affect the operations of the business organizations today. Further, the reflection upon the forces in the macro environment that can contribute in shaping the performance of the business is conducted which shows the limitation that might be faced by the company. The paper identifies and evaluates the strategic tools in conducting the analysis of the internal business environment. The internal analysis has been done on the Mark and Spencer which is an apparel retailer UK with the support of the Value chain analysis.
In the dynamic worlsd, the companies are performing their business operations in a common environment where they can face the influence from both the external factors. The external factors are determined with the help of the macro environment agents that play a pivotal role in identifying the decisions that are taken by the organization. The macro environment factors help the management to have the complete understanding of the external or bigger environment prevalent in the regions (Armstrong et al., 2014)
The market of UK apparel retailer is growing with the rise in the demand of the UK clothing marketing by 16.6% in the next five years to £51.2bn. The growth in the market is stronger by 3.9 ppts in the year 2012-2017. The market of UK is driven by the inflation staying more than 2.0% mark until 2020 owing to the weak pound that drives up the manufacturing and import costs (Cission, 2017). The rise in the clothing market in the environment affects the working of the company in the UK. Moreover, this has been found that the clothing is forecast to outperform total retail growth in between the year 2017 and 2022 as this is the third fastest growing sector. The macro environmental factors help in understanding the effect on the working. The major external factors are political, economic, social/cultural, technological, legal and environmental factors that can create an impact on Apparel retailer in the UK.
The political factors majorly include the government set rules and regulation for the companies that are essential to abide by the Apparel Retailers subsector in the UK market. The regulations like Health & Safety British Standards are required to be followed by the companies (Baker, 2014). It is essential for the company to implement all the regulations and rules that are applied to the industry. The economic factors that affect the working of company include the GDP, inflation rate and the purchasing power of customers. UK registered GDP worth of 2622.43 billion US dollars in the year 2017 which has reflected the decline from the previous year (Trading Economics, 2018). This creates an impact on the working of the Apparel Retailers subsector in the UK market because the customers won’t be able to purchase the products because of the low purchasing power.
Forces in the macro environment shaping performance of business
Further, the other factors like technology and social factors can also affect the working because in the competitive apparel industry the technology and social factors are changing according to the innovation and needs of the customers. Moreover, the environmental factors include the protection and safeguarding of the environment where the company is performing business operations (Chernev, 2018). The companies dealing their business in the competitive environment ensure that they abide by all the legal issues which can affect the working for which they need to follow the Fair Packaging and Labelling Act (1996) which helps them in meeting their obligations. Thus, I believe that entire external environmental factors can contribute in shaping the decisions of the company (David, 2011). This has been found that the decisions of the company depend on external forces which make the company form the decisions in the manner so that they can resolve the factors that affect their operations.
In the world, the companies also deal with the microenvironmental factors which might influence the working of the company. The analysis of the microenvironment factor can be done with the help of Porter's five forces of the competitive position analysis. The analysis of the microenvironmental factors is done for the apparel retailer’s subsector in the UK market.
The theory of Porter's five forces is a tool that helps in analyzing the competition of business. The analysis of Porter's five forces helps in understanding the forces that shape the competition within the industry (Dawson, 2014) The below given Porter's five forces analysis of the apparel retailer’s subsector in the UK market: -
Bargaining power of the suppliers: - This dimension shows the way through which the suppliers drive up the prices of the industry. In UK apparel retailer subsector this has been found that there is the presence of low bargaining power which is clear with the presence of the high number of suppliers. The suppliers are increasing the market due to which the large retailers are getting the opportunity to meet the needs of customers at low prices (Bush, 2016). The suppliers get to agree to offer their products at low prices because they want to form loyalty and increase their sales. In case the suppliers will not offer effective prices then the retailers will shift towards the other suppliers present in the market.
Bargaining power of buyers: - The buyer's force is one of the important forces who can choose to push down the prices. The bargaining power of buyers in the market is high and this is the reason due to which they dictate their rules and tastes in the apparel retailer (Grant, 2016). Moreover, in the UK there are many retailers who deal in the apparel due to which the switching cost of the buyers is low. Along with this, the bargaining power of the buyers is forcing to reduce the prices and to meet the needs by offering the quality products. In case, the retailers of apparel are not able to reduce the prices then they will switch (Ho, 2014). Thus, this shows the major influence on the Apparel Retailers subsector in the UK.
Strategic tools for internal business environment analysis
The threat of substitutes: - The threat of the substitutes shows the force when the product can be replaced with the other in the market. In the apparel industry of UK, the threat of substitutes is low because the substitute of the clothing is not present (CMGA, 2013). This provides the advantage to the retailers of the apparel industry due to which they can attain the high profit in the market which contribute in enhancing the economy.
The threat of New Entrants: - This drive includes the entrants of the other companies in the market. This has been found that the profitable markets generally attract the new entrants which mean that the new entrants in the apparel industry will be more. Though, the fact is that threat of the new entrants is low because the companies in the apparel retail industry need a large amount of capital which is required for establishing the company (Khan et al., 2011). Moreover, the UK market includes different retailers who are able to maintain the good brand value in the market due to which the new entrant will not be able to manage their position in the market in Apparel Retailers subsector in the UK.
Competitive rivalry: - The main driver is the number and capability of the competitors that are present in the market. This has been found that competitive rivalry in the UK apparel retailer subsector is fierce due to which the companies need to adopt different strategies that help them in dealing with the competition present in the market (Kotler, 2015). The competition is increasing and the major retailers that are currently present in the UK market include Topshop, Next, Zara and John Lewis. Thus, apparel retailers in the UK majorly influenced by competition which contributes in shaping the operations.
In the environment, the analysis of the external factors is not sufficient due to which there is a need for the internal analysis. The internal analysis is essential to be conducted by the companies which help them in evaluating the factors that can affect the working (Kumar et al., 2012). This analysis forces the companies to bring the changes in their strategy. The internal analysis is conducted with the help of the value chain analysis.
Value chain analysis is a strategic tool which is used by companies in analysing the interior actions of the business. The aim of strategy is to recognize the activities that contribute to the success of the business and to provide a competitive advantage (Hollensen, 2015). The company that has been selected for the internal analysis is Mark and Spencer. The value chain analysis of the marks and Spencer include the primary activities which are related to the creation and delivery of the services and product. These primary activities include inbound logistics, outbound logistics, operations, marketing and sales, services (Lovelock & Patterson, 2015). Further, there is the presence of support activities that offer the support to the primary activities. The support activities include human resource management, technology, procurement and firm infrastructure.
Major external factors: Political, Economic, Social/cultural, Technological, Legal, Environmental
(Source: (Lovelock & Patterson, 2015)
Inbound logistics: - The inbound logistics are the primary actions that are concerned with the storing, receiving and distributing the inputs to go with the creating of the products and services. Marks and Spencer won the GBS supply chain award. Further, the company is able to maintain the lead in the apparel industry because its sustainability program which is must create the steps that bring the changes in the global supply chain (Frynas & Mellahi, 2015). Further, the company has received the commendation from the EC that has given it European business award for the environment. Mark and Spencer is able to maintain its stronghold on the sustainability of the resources which is the major advantage for the company over its competitors in the apparel industry of UK (Rothaermel, 2015).
Operations: - Marks and Spencer major operation activity is to meet the needs of the customers which is essential to deliver the customer experience. According to the annual report of the company, it is working to enhance the customer’s visits and spend through inspiring and effortless experience. Further, it provides effective experience to their customer which is possible with the help of their trained and skilled experienced personnel that are present in the company (Wilson and Gilligan, 2012). Moreover, the operations of the company are also dealing with the security issues as 800 customers faced the leak of personal detail. Though, the company said that no financial data was leaked. This reflects that the online mode of shopping through website requires the high safety transaction which helps them to purchase the product with the help of the online website.
Outbound logistics: - Outbound logistics include the group, storage and supply of the apparel to the end users. M&S works with the in-store shopping as well as the shopping through the home catalogue, online shopping which helps the company to attain the maximum sales in the market. The company ensure that their potential customers and new customers get the delivery of products on time. The company deals with the issues in managing the online operations when the availability of the hi-tech distribution centre in Castle Donington is facing the issues. These issues affect the operations of the company and reduce sales by 2%. Considering this, the M&S is spending more towards the up-gradation of the IT system which helps them in improving the supply chain management.
Marketing and sales: - The marketing and sales of the company are just as it helps in making the customers aware of the products and services. Marks and Spencer work effectively with the digital marketing team which helps to generate awareness for the products. The company is generating the awareness with the help of the online modes which majorly include the use of social media. Further, the online sales through the website are another way which contributes to improving the performance.
Analysis of microenvironmental factors using Porter's five forces
Service: - The aspect of service includes the activities that contribute in enhancing and maintaining the value of the product. Marks and Spencer company knows the fact that they have to maintain customer loyalty by offering great customers service. The major services which are offered by the company include offering free delivery for orders above £50 with free returns by post for up to 35 days after purchase.
Human resource management: - Marks and Spencer is able to manage the skilled and experienced staff that has the knowledge of fashion and can contribute in forming the effective relationship with the customers. The company have a dedicated team who ensure that selection of the employees on the basis of the company.
Technology: - Technology contributes effectively in supporting the primary activities of the company. The company is effectively able to make use of the technology by increasing the online sales of the company which is essential to meet the goals of the company. Moreover, the company is making use of technology for promoting the products with the help of technology like social media channel and other platforms.
Procurement: - Company ensure that they are able to procure the goods and services so that they can meet the demands of products. M&S is also focusing on merging the smaller warehouses which helps them to make the distribution of goods efficient. Thus, this effective warehouse and distribution help the company in making the products easily available to the customers.
Firm infrastructure: - The firm infrastructure includes the strategy that is followed by the company which contribute in improving the operations. M&S is making use of the effective leadership style is used by the company which helps in managing the operations effectively.
Appropriate adaptations: - Considering the selected firm Marks and Spencer, the firm should undertake the different response to the external business environmental forces. One of the major responses is to adopt the strategy of Focus strategy. This has been found that the Marks and Spencer generally target the few markets because the products are generally for the people with high-income group and youth who consider these products as part of their lifestyle. According to this strategy, the company should extend their target market which helps in increasing the market share with this the company will be able to deal with their competitors.
Further, the company should make use of the diversification strategy as with the rise in the competition in the apparel industry the company should bring diversified products which can attract the customers towards their brand. Thus, the company should bring their new accessories (eg. watches, glasses, shoes and other) that can help them in attracting and gaining customers attention. The adaption of this technology will help the marks and Spencer in dealing with the competition, increasing market share, increasing global presence and many other factors.
According to my opinion, Porter’s model is based on the approach which shows that the corporate strategy should fulfil the opportunities and threats that are present in the organisation. The framework checks the effect of five forces on the industry which means that it evaluates the competitiveness of the industry. Further, I believe that the effective business manager needs to understand and analyse a model with the help of the analytical abilities and skills. I believe that the five forces analysis help the organisation to understand the factors that affect the profitability of the specific industry. Further, the analyses help to inform the major decisions like to enter into the specific industry, to increase the capacity, to develop the strategies that can help in competing. This is the reason most of the companies make use of this model for analysing the competitiveness present in the market. Thus, according to me, the company will get help while taking the future actions related to the decisions that are must to be taken by the company.
Bargaining power of suppliers
I believe that the limitations of the model are that while analysing the industry it assumes a classic perfect market. Moreover, this model doesn’t consider the account strategic alliances, the electronic interconnection of the information system of the company with the value chain and others. As per my understanding, the model assumes the relatively static market structure (Beattie, 2018). In addition to this, it has been assumed that the companies should aim to achieve the competitive advantage over the other companies in the market. Moreover, the competition exists among the suppliers and customers that are present in the market.
In the end, this can be said that marketing and management include different theory and models by the companies. The companies should consider the macro and micro factors that can influence in the market in which they are dealing and performing their operations. The Porter's five forces model can be used by the company with the motive to analyse the industry competitiveness. The industry on which the analysis is conducted is an apparel retail industry present in the UK. In addition to this, the value chain analysis has been used to analyse the internal factors which are based on the Marks and Spencer Company. Further, the appropriate adaptations in form of the strategies are discussed which should be used by the companies to overcome from the factors that can affect the working of the company. In the end, the views have been shared related to the limitations and benefits of Porter's value chain model.
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