Understanding Retail Essay
Organisations are effected by many different competitive factors that they are forced to face. Organisations will try to strike competitive advantages by marketing using the fours P’s; product, price, place and promotion. The four P’s will influence all organisations to analyse the structure of their marketing as it is vital that they override the competitive factors between all businesses surrounding them. By using strategy (what they are going to do) and tactics (how they are going to do it) the organisation will gain an advantage as it will give them a structured plan. An organisation will be influenced to confront the four P’s in a variety of ways depending on the competitive factor affecting them at that specific time. Competitive factors can and will arise in a variety of situations in both macro and micro environments. A macro environment a big environment which businesses cannot control easily. Businesses have to ‘roll with the waves’ and make compromises in order to control the environment.
Marco environment contains principle tools that can help them find solutions. A micro environment is the opposite. It is the immediate environment that surrounds the business therefore a smaller environment that is easier to control. Micro environments use Porters Five Forces as a tool. The tools that are used will depend on what is effecting the organisation. The tools that will be considered for use are PEST, STEEPLE, SPELT and PRESTCOM. All of these are important aspects to consider when competing. Political, Economic, Social cultural and Technological features of the businesses in both the Marco and Micro environments will all have to be reflected upon when in a competitive position. The other tools will also be used by organisations depending on what is effecting them at that specific time. It is vital for organisations to use these tools as they will help the business work on the progression of their ability to compete. These are the tools that businesses may have to consider using:
My chosen organistation; Topshop, can be effected by both Marco and micro environments. A political aspect may affect them. Business loans that the organisation have taken out may be increased due to the bank of England raising the interest rate. This will result in Topshop paying more than they bargained for. This will affect the rest of their business like the amount of stock intake they can manage financially and the speed that the bills get paid at; some may be overdue due to lack of money because of an increase in interest rates. Organisations in both Marco and micro environments will have to take the five forces in to consideration depending on their competitive position and how the five forces are affecting them.
Topshop may have to consider the PEST analysis during competing in order to allow their business to continue to run smoothly. The PEST analysis will encourage them to reflect on the external influences that are important and the significance of any changes for the future of your organisation.
Political refers to anything relating to or performed by the government that affect the supply and demand or business development in general. Government regulations and policies are the main sources that impact the business environment.
Economic refers generally to the macro-environment financial factors. These factors may possibly have a high impact on the business environment which cause the firm to be unable to control it. The worst affect it will have is adaptation. It can only adapt the businesses strategies and financial policies. These economic factors may include the currency exchange rate, interest rate, economic growth rate, rate of inflation.
Social refers to the social, religious and cultural aspects of the business environment. These may include features like age distribution, population growth rate, employment/income statistics, education/career trends, religious beliefs/social stigmas, and overall general attitude (conservative or liberal).
Technological environment refers to the technical aspects of the business environment and may include the level of automation available in the current times, technical facilities and infrastructure, rate of technological progress and research and development activities. These factors may assume decisive proportions and may impact the cost, quality and scope of innovation for a product, service or commercial utility.
The Five Forces
Organisations should always consider The Five Forces when competing whether they are in a Marco or Micro environment. The Five Forces are very useful for businesses as they help them understand the strengths of both their current position and their competitive position they are considering to move into. The forces are used to help a business understand the most powerful area in a business situation. This helps them gain an advantage and work on areas they are weaker in. Here are the five forces that organisations will need to consider.
The Power Of The Customer
The Power Of The Supplier
Barriers To Entry That Market
Treat Of Substitute Products
The power of the customer effectiveness will depend on the amount of customers supporting the problem. It would become a high leveled problem only if there was a large amount of customers supporting the problem. Topshop may experience loss in customers due to competitors promoting better deals. If there is a numerous amount of customers that notice these deals and decide to shop at the competitors store rather than Topshop itself, Topshop won’t make a good profit therefore may struggle paying off other business payments. They will have to consider an alternative if this was to occur which is where the five forces needs to be considered.
The power of the supplier depends on the amount of supplier choices customers have; the less suppliers available the more powerful your suppliers are. Topshops main suppliers provide a significant number of what they sell in store which is why they are dependent on them. Their main suppliers are powerful because they need the supplier’s regular costs and good quality of products to sell in their store; which will encourage their customers to carry on shopping at their store. Topshop collaborate with suppliers to share intelligence to ensure they are the most powerful and are getting the best service from their supplier. The suppliers wants to constantly find techniques to get things for as cheap as possible.
Barriers to entry that market questions the organisation as to whether they have the money, skills and a suitable premise. Topshop will have to ensure that they have the money and a suitable premise to successfully compete. They should also work on the skills they already have and try to gain more through organising.
Threat of substitute products helps examine any other products have been produce that are the same but cheaper. It is vital that Topshop examine any and all similar retailers to them in order to find any identical or extremely similar products for cheaper than any they sell. This will enable them to adjust their prices to something more suitable for their customers. This will encourage their customers to carry on shopping at Topshop rather than going to similar retailers that sell similar products (if not the same) for cheaper.
Internal rivalry highlights the natural behavior between competing organisations. Topshop have a large amount of competitors that are all very capable. These competitors are Newlook, River Island, Miss Selfridge and H&M. As these competitors often offer equally attractive products and services, Topshop have very little power in their hands. However if Topshop were to promote good deals and supply good quality products and services they will have remarkable strength.
This is how my chosen organisation; Topshop and other orangisations will work with The Five Forces and the tools. Topshop have both strengths and weaknesses to their business. In order to be the most successful out of their retailer type they need to consider the five forces. Once they have run through each of the five forces ensure that they are successful in all of them they should use a tool depending on the problem that has arose. This should them allow them to beat all competitive factors between retailers and make them the retailer with the most power therefore come out most successful.
Competition commission independently monitors fairness of competition between retailers. They regulate mergers and markets. Mergers are companies that choose to merge together into one. The monitoring consists of investigations. The independent group will explore cases of merges between retailers so they are then able to assess the impact it is having on the whole sector. When merges are established a market investigation will be carried out. If investigations lead to finding an area that dominates a sector of retail they will restrict the operators’ power so it is not a disadvantage to the market as a whole; operating unfair competition. Competitive commissions will then be able to reassure a balance of power between the sectors of retailers.
Planning permission is an acceptance from a local authority allowing extension or alteration of buildings; plus any similar developments requested. Many developing retailers now involve a negotiator to manage the process of the planning permission. This is expensive and time consuming. They will have to abide by building regulations in order to keep people and traffic safe while any approved building is taking place. In order to meet the needs of the community, the planning authorities have to ensure that the scale of products and service is the right mix. This includes careful segment considerations on economic activities and success of a retailer in an area of operation.