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RETAIL BUSINESS ENVIRONMENT 2
Ms Rosmin Iqbal Hussain
Boptom (UKM), CMBA (UNIMAS)
Alternating Strategies
Generating Alternative Strategies From SWOT
SWOT analysis is a tool for helping assess the current situation for the firm.
However, we need to be able to combine the information in the SWOT analysis in a meaningful way to generate alternative strategies that we might pursue
*Use TOWS matrix
The SWOT that we’ve been dealing with in the other slaid has been a useful tool to helping identify key characteristics of our businesses
But it doesn’t really help guide us to choosing strategies
For that there is the TOWS matrix which will integrate some of the things we’ve used to create the SWOT
SWOT Analysis
Opportunities1.2.3.
Strengths1.2.3.
Threats1.2.3.
Weaknesses1.2.3.
Internal Environment
ExternalEnvironment
That is the SWOT tool we introduced in the previous section. SWOT is a conceptual framework for a systematic analysis that helps organize the external threats and opportunities with the internal weaknesses and strengths of the organization. To use it you simply list the strengths/weaknesses you have in your business and the opportunities and threats you face
SWOT analysis is the simplest way to conduct environmental scanning. A SWOT analysis should result in the identification of an organization’s core competencies, and of opportunities that the company is unable to take advantage of due to a lack of, or insufficient, current resources
Let’s take this a step further and develop some useful strategies out of the assessments you’ve done, using the TOWS matrix
TOWS Matrix
The TOWS matrix is a tool designed to match external opportunities and threats with our internal strengths and weaknesses
TOWS Matrix
Technique used in strategy formulation for combining • External analysis
Opportunities Threats
• Internal analysis Strengths Weaknesses
TOWS Matrix
Weaknesses:1.2.3.
Strengths:1.2.3.
WO StrategiesUse Opportunities to
overcome weaknesses
SO StrategiesUse strengths to take advantage of opportunities
Opportunities:1.2.3.
WT StrategiesDefensive strategies
to minimize weaknesses and
avoid threats
ST StrategiesTake advantage of
Strengths to avoid
threats
Threats:1.2.3.
From Internal Analysis
(IFAS)
From External Analysis (EFAS)
Source: Weihrich
• The TOWS tool combines the ingredients of SWOT (our assessment of the internal and external environments, which used the EFAS and IFAS tables) in a way that can suggest some strategies. It matches external opportunities and threats facing a particular company with that company’s internal strengths and weaknesses to result in four sets of possible strategic alternatives
• - Therefore we got some strategies:
* SO Strategies
* ST Strategies
* WO Strategies
* WT Strategies
COMPETITION
Industry Analysis
Porter’s 5 Forces
Rivals
Business & Competition
Though a business does not want competition from other businesses, inevitably most will face a degree of competition
The amount and type of competition depends on the market the business operates in• Many small rival businesses e.g. a shopping mall or city
centre arcade *close rivalry• A few large rival firms e.g. in a small town / rural area• A rapidly changing market e.g. where the technology is
being developed very quickly & competitors adopting new techs
Competitor Analysis
Reacting to Competition
A business could react to an increase in competition (e.g. a launch of rival product) in the following ways• Cut prices (but can reduce profits)• Improve quality (but increases costs)• Spend more on promotion (e.g. do more
advertising, increase brand loyalty; but costs money)
• Cut costs, e.g. use cheaper materials, make some workers redundant
Weapons for Competing
Vigorous price competition More or different
performance features Better product
performance Higher quality Stronger brand image &
appeal Wider selection of models
& styles
Bigger / better dealer network
Low interest rate financing Higher levels of advertising Stronger product
innovation capabilities Better customer services Stronger capabilities to
provide buyers with custom-made products
Substitutes
Force of Substitute Products
Substitutes matter when customers are attracted to the products of firms in other industries / products of other firms• Eyeglasses and contact lens VS laser surgery• Eyeglasses and contact lens VS Ortho-K• Eyeglasses VS CL: cases where one practice doesn’t
offer variable products• MPs VS full regime cleaning: which do we carry• Hidrogen peroxide syst VS enzymatic cleaner: trend
How to Tell Whether Substitute Products Are a Strong Force
Whether substitutes are readily available and attractively priced
Whether buyers of ur market view substitutes as being comparable or better
How much it costs end users to switch to
Suppliers
Competitive Pressures From Suppliers
Whether supplier-seller relationships represent a weak or strong competitive force depends on • Whether suppliers can exercise sufficient
bargaining leverage to influence terms of supply in their favor
• Nature and extent of supplier-seller collaboration in the industry
When Is the Bargaining Power of Suppliers Stronger?
There are only a few suppliers of a specific input • Ortho-K lenses, Keratoconus lenses
They provide unique and differentiated products• Branded CLs, MultiFocalss
Customer is not important• Ex: Ortho-K lenses, Keratoconus lenses, Equipments
suppliers
Buyers
Bargaining Power of Buyers
Whether seller-buyer relationships represent a weak or strong competitive force depends on • Whether buyers have sufficient bargaining
leverage to influence terms of sale in their favor
• Extent and competitive importance of seller-buyer strategic partnerships in the industry
When Is the Bargaining Power of Buyers Stronger: ur profit amount is smaller?
Small number of buyers • Ex: daily disposal CL
Buyers purchase standard, commodity products• Branded SGlass
Possibility of backward integration• Departmental stores carrying Sglasses /
reading glasses
Implications
Strategic Implications of The Five Competitive Forces
Competitive environment is unattractive from the standpoint of earning good profits when • Rivalry is vigorous• Entry barriers are low and entry is likely • Competition from substitutes is strong • Suppliers and customers have considerable
bargaining power
Strategic Implications of The Five Competitive Forces
Competitive environment is ideal from a profit- making standpoint when • Rivalry is moderate • Entry barriers are high and no firm is likely to enter • Good substitutes do not exist • Suppliers and customers are in a weak bargaining position
Example: Therapeutic lens industry Orto-K, added services unavailable elsewhere (Visual Therapy), & those that can provide these service is limited (limited entry into ur service market)
Competitive Advantage
Resources & Competitive Advantage
*Resources refers to products / services
Sustainable Competitive Advantage
The Business Environment Model
The value of services/ products u create
that gives the end profit
END