1 Table of Contents

1.Introduction............................................................................................................... 2. What is Business Strategy......................................................................................... 3. Tools..................................................................................................................... .... 4. Ansoff Growth Matrix............................................................................................... 5. Market Penetration..................................................................................................... 6. Market Development................................................................................................... 7. Product Development................................................................................................. 8. Diversification....................................... ......................................................................... 9. PEST Analysis............................................................................................................. ... 10. Political Analysis............................... ......................................................................... 11. Environmental Analysis............................................................................................ 12. Social Factors............................................. ............................................................... 13. Technological Factors.................................................................................................. 14. SWOT............................................................ .............................................................. 15. Porter s Five Forces.................................................................................................... 16. The threat of new entrants...................................... .................................................. 17. Threat of Substitutes................................................................................................. 18. Bargaining Power of Buyers.................................................... .................................. 19. Bargaining Power of Suppliers................................................................................. 20. Rivalry between Competitors........................................................................... ....... 21.

2 Introduction

Strategy is known as the direction and the scope of an organization which brings a lot of positive change and advantages for the organization. This is achieved through the proper utilisation of its resources within the right environment and their ability to meet the expectations of their shareholders and markets. This is the method which allows them to plan everything in the long term.

What is Business Strategy

Business strategy is strategic planning developed by the enterprise management, the major planning and strategy the overall situation related with the starting point for future business to seek and maintain a lasting competitive advantage, the long-term development goals and tasks business set for itself, as well as the act line, principles, policies and methods established to achieve this goal (Valle& Martin& Romero& Dolan, 2000). In order for a business to function properly they need to make sure that have the right business strategy. Strategy is important as it formulates the direction required to steer the company through good and bad times. It is crucial for the organization to have a strategy which is different from other businesses as it will not help them to have similar strategies. An organization should have its own strategy so it can pursue its goals. It can also be an outlook on the direction the company is taking so that it can position itself and make decisions. A business needs to implement a strategy which will allow it to achieve their objectives by setting targets. There is no purpose for a business to operate if they fail to achieve their targets or strive to reach their goal. A good example of a goal or target is an increase in sales or reaching a growth in targets. The best strategies are those which are based on the long term basis. If an organization does not have a long term mission then it will not be able to survive for long. A strategy can only be formulated if an organization knows its strengths or weaknesses. The organization should be able to evaluate itself and base its strategy on those factors. This will give them a large variety of strategic options to choose from. A strategy is always based on environmental factors along with its power and resources. The world has changed so drastically throughout the years that organizations have to integrate faster.

There are various other names for business strategy which are competitive strategy, marketing strategies, development strategy, brand strategy, financing strategy, technology development strategies, talent development strategy, resource development strategy, and so on (Christensen & Evelina, 2008).

3 The type of strategy where businesses compete with their rivals by creating a competitive advantage is known as competitive strategy. According to Porter there are three competitive strategies which are classified as Differentiation strategy, cost leadership strategy and Decentralization strategy.

The Differentiation strategy is the sort where an organization innovates through the way they offer a service or some sort of product, technology which is a notch above the competition, a unique brand or some sort of product design which is different from the competition. A small business is able to offer these types of products or services which will make them different. There is no pre-requisite which demands that these types of services can only be provided via a large organization. There is another strategy which is known as the Cost Leadership strategy. This is the sort of strategy which an organization can adopt to make sure that there is a proper quality of products and services provided it reduces its production costs and sales. An organization is able to make sure they have priced their products less than their competitors. This allows them to win proper market share from their competitors.

The final strategy is the Decentralization strategy where the company effectively adopts the differentiation or cost leadership strategy so that they can get a proper competitive advantage. They can spread their goals across both cost leadership and differentiation strategies.

An organization needs to keep several factors in check before it goes about planningits strategy. They need to know what they are getting into during the long term period and what sort of direction they need to follow. A good example is Microsoft who decided to pursue its strategy of branching out into the Video games market besides breaking out into the search engine market. They know that they will be able to sustain themselves for the long term period if they keep investing and innovating. A long term plan is important and that s how they have prevailed when competitors with lesser resources have failed. They also need to know what markets to compete into and what sort of scope there is. A good example is AOL who realised that there was no more market for Dial up Internet and decided to break out into the content market. They abandoned the ISP market as they were unable to compete with the likes of Comcast and AT&T. There is also the factor where an organization has to make sure they are able to offer better services or better competition in the marketplace. A great example is the competition between Sony, Microsoft and Nintendo in the Video Games market. The intensity of the competition is so high that they have been lowered their prices, offered high quality games, online gaming networks. This has allowed competition to grow and the ability to offer better products.


4 There are a number of tools which allow a business to plan their strategies. These tools are:

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Ansoff Growth Matrix Porters Five Forces Market Segmentation Competitor Analysis PEST Analysis SWOT Analysis Competitor Analysis Critical Success Factor Analysis Directional Policy Matrix

The following section will only discuss certain tools which would help make strategic decisions for businesses and allow them to adopt strategies. There are a number of tools discussed ab but ove then only a few are discussed here. Ansoff Growth Matrix

The Ansoff Growth Matrix allows business to come up with a product and market growth strategy. The way it works is that a business grows only depending on whether it can market new or use their current products in the new or current markets. The Ansoff Matrix results in an output of growth strategies which are:
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Market Penetration Market Development Product Development Diversification

Market Penetration This is the strategy where a business focuses its needs on selling products in an existing market. They need to make sure they can maintain or increase their share of products. This can only be done if they play their cards well. A business can move into a market if they price their products in a competitive manner by undercutting the competition or if they spend more money on selling their products well. This also allows for them to have a secure hold over the market. If an organization needs to enter a market which has already peaked they would need to drive out the competition. This would entail them taking up a relatively large campaign to promote their services and products. The competitors are unable to sustain all the aggressive pricing and be unable to stay in the market for long. The company can also get their customers to flock to their products more by introducing loyalty schemes so that they can get good information on customers and get a competitive edge over their rivals. A great example of a good loyalty scheme is the Tesco Clubcard and the Boots Advantage Card which rewards its customers for buying from them.


Market development The Market Development strategy is part of a growth strategy where businesses sell their current products in new untested markets. A business can explore new markets in new regions, discover new ways of distributing their products, and introduce a new pricing plan to attract customers. A great example would be a multinational breaking into the Indian market and has to deal with a lot of competition there. They can price their products lower so that they can introduce people to their products.

Product development The product development strategy is effective if a Business introduces new products in existing markets. This strategy requires the business to introduce new ways of developing and promoting the products so that customers can go for it. A good example can be the introduction of the iPhone by Apple in 2007. The mobile phone already had smart phones available in the market but then Apple revolutionised the market by introducing a very intuitive phone with a touch screen. They changed the way how people thought about phones forever. The appeal of the iPhone caused it to be one of the highest selling smart phones ever.


The path a company takes when it markets new products in new markets is known as diversification. This can be a risky move because the strategy might fail as the business does not have much experience in the field. Diversification requires a lot of capital and a fallback plan in case things do not according to the strategy. In order for it to be a success the business needs to have a good idea of what gains they can make and to do a proper risk analysis of the whole thing.


PEST Analysis The PEST Analysis takes an in-depth look at the environmental influences of a business. It stands for the Political, Economic, Social and Technological issues which can play havoc with the strategic growth of a business. The environment consists of a number of elements namely the internal and external elements. PEST takes a look at the external environment of the business. According to Wilson & Gilligan, The macro-environment consists of the rather broader set of forces that have a bearing upon the company, including economic, demographic, technological, political, legal, social and cultural factors (Wilson & Gilligan, 2005, p.129). Moreover, the term macro-environment denotes all forces and agencies external to the marketing firm itself. Some of these forces and agencies will be closer to the operation of the firm than others, for example, a company s suppliers, agents, distributors and other distributive intermediaries and competing firms (Lancaster & Reynolds, 2005, p.23).

PEST stands for Political, Economic, Social and Technological factors. They are listed below.

Political-: This is the part of the general environment which focuses on the political and legal environment. An organization does not have any control over these factors as they are linked to the political system, political organizations, legal system, courts, and Political Philosophy. A great example would be the until recently lax immigration system in the UK which led to a large increase in migrants to the UK. This allowed big supermarket chains such as Tesco and ASDA to benefit as they managed to increase their sales. Another example is the rule of the government to increase the drinking age which also affected sales of alcohol at these supermarket chains which led to a dent in sales. A global example could be the Power plant planned by the now defunct Enron in Ind Political problems threw a ia. spanner in the works and the power plant was abandoned.

Economic environment:The economic environment is a by-product of the general environment. Elements such as interest rates, inflation, and unemployment are a major part of the economic environment. These are factors which affect the environment gravely and once again they are not under the control of the organization. Problems such as the Global Downturn has affected the global economy as it has led to

7 fluctuations in the stock market, increasing unemployment, inflation, etc. when the economy of a region goes down it affects everyone as people are unable to open their purse strings and the disposable income goes down. There are fewer buyers of products which results in organization cutting costs by firing workers. If there is a boom in the economy organizations spend more to get more. Inflation can prove to be a major problem for organizations as the prices of services and goods go up. This can affect demand for services and products as organizations have to charge more for them.

Social cultural factor: The social factor incorporates population, pressure groups, reference groups, lifestyle, social classes, religion, language etc. this is a tricky elemental areas as they can affect organizations more than anything else. There are many examples of protest or pressure groups who have applied pressure on organizations to cut down on their practices which they consider unethical. Organizations with mass appeal have to listen as they fear losing out. A good example is Pepsi who ended its sponsorship of Madonna in the 80s due to one of her videos which had offended people in the South Bible Belt in the USA. Another example would be most of the big giants cancelling their endorsement deals with Tiger Woods after his sex scandal as it went against their family values. The best example is when pressure groups applied pressure on McDonalds to introduce more healthy meals at their restaurants. This led them to introducing healthier alternatives and cooking their food in vegetable oil.

Technological Factors:These are the factors which affect the ecological and environment facts such as automation, change in technology etc. these can cause problems for the organization. Technology changes bring about problems such as innovation, quality, costs, etc


SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It is a tool used by business to analyse its position and the environment. The internal factors are represented by Strengths and Weaknesses while the external factors are represented by Opportunities and threats. The SWOT analysis is useful for allowing an organization to discover its strengths and weaknesses. This allows them to formulate a way to tackle their problem and find a solution. The SWOT allows them to check out what threats can affect them and how to counter their weaknesses. It is a pretty straight forward way of taking a look at root of everything.


Porter s Five Forces

In order to construct a competitive strategy, an organisation needs to know what is likely to happen in the markets in which the organisation delivers its products and services. It also has to know who its competitors are in a particular industry structure. Porter s five forces are the best way to analyse what company is doing in the market (Kermally, 2005, p.58). The best analytical model to analyse competition is Porter s Five Forces Model. The Five Forces model looks at five competitive forces such as : 1. 2. 3. 4. 5. The threat of new entrants Threat of Substitutes Bargaining Power of Buyers Bargaining Power of Suppliers Rivalry between competitors

Threat of New Entrants Threat of new entrants is one of the reasons why there is a new level of competition in the industry. There are a few barriers which can restrict entry of new entrants within a certain industry while it can be easier for some entrants to enter within a certain industry due to the lack of barriers. There could be barriers such as the companies not being able to withstand the economies of scale, the high amount of capital required to enter the field, the cost of switching to a new customer base, access to new distributors and the fear of retaliation from the current industry players. All these factors mean that there is always the possibility that there will be new pretenders to the phone and more competition.

Threat of Substitutes When there are plenty of substitute products in the industry it lowers the profit levels mainly because there are plenty of providers offering the same products. This has a deep impact on prices because if a customer can get something better from somewhere else then he will not buy from a supplier. If a buyer is willing to buy the same product somewhere it can be a big problem. The seller also needs to see what price its competition is offering the substitute product at. There is also the factor of the cost of switching to the substitute product.

Bargaining Power of Suppliers


The suppliers are the ones who supply the materials to a certain business. Suppliers are the businesses that supply materials & other products into the industry. If there is a problem with the supply it can have serious repercussions on the profitability of the company. Usually suppliers can dictate terms to the company mainly because they are the ones who supply all the raw material to them. This is only valid when there are loads of buyers and very few suppliers. Suppliers can also create problems if the buyers have to produce high quality products and when there is a limited number of suppliers who can supply. Suppliers can also benefit if they have different buyers and they are not dependent on one particular industry.

Bargaining Power of Buyers

The bargaining power of buyers proves to be quite useful when they want to turn the tables on the suppliers. They are the ones who can create an impasse in the industry. The buyer is more powerful if there are plenty of suppliers in the industry and not so many buyers. The buyer benefits if they are not focused on one particular industry and have a wide choice. They can also have an upper hand over the supplier as they can threaten them by not buying their products if they step into their industry.

Intensity of Rivalry The last factor is the intensity of rivalry between competitors in an industry. One of the most important factors to examine is the fact that the structure of competition has to be analysed. If there are plenty of rivals in the area then it provides for proper competition. The intensity of rivals is not so much if there is a proper market leader i.e. McDonalds versus other fast food chains. There is also the differentiation policy where organizations tend not to be rivals so much if they have different products. If there are similar competitors in an industry with the same type of products that means the rivalry increases. The other factor involved is the switching costs where there are lesser chances of a buyer buying a product from an alternate supplier. The last factor involved is the exit barriers where the barriers of leaving an industry are super high



Strengths: MIB got half of their mail order sales from online sales in 2002. A lot of their sales were from repeat customers which proved that they were doing something right. One of the other strengths of the business was that Cynthia had not drained any money from the business and the fact that they had a proper $100,000 line of credit to keep them afloat. The other strength of the business was the fact that they had good relationships with their suppliers. This enabled them to call in favours to delay payment of money if there was any cash flow problem. One of the other strengths of MIB was the fact that they had no no long term debt and they owned most of its own equipment. Some of the other strengths in MIB are in the staff members. Cynthia Riggs is the founder of MIB and her duties are to take care of the company as its chief executive officer. Her strengths lie in being good with planning the cash flow and inventory management as well as excelling in customer relations and coming up with the product in the first place. One of the other strengths of the companies is the General Manager of MIB, Bridget whose strengths lie in finance, computer technology and software. All these strengths allow her to get a better understanding of how the company runs and to be able to come up with technological solution. She was responsible for updating the MIB computer network, implementing a proper accounting package, introducing a proper CRM and mail ordering system as well as introducing a proper compatible system. The production Manager, Sharon s strengths lie in the fact that she has great people skills, has demonstrated loyalty in her job and has great analytical skills. JoAnn the Office Manager has great organizational and leadership skills. She can withstand the high pressure and work the fast pace in this job. Cindy (Retail Manager) is the one whose strengths lie in the fact that she is committed, resilient and has the drive to go for more sales.

Weaknesses There are a few weaknesses associated with MIB mainly in the shape of its staff. They do not have the necessary skills required for them to move ahead. One of the main weaknesses is with the CEO, Cynthia Riggs whose main weaknesses lies in the fact that she is not good with Circulation and marketing. She has difficulty coping with certain employees and keeping them on the roster. If she was good with marketing and circulation she would have been able to increase the sales of her business in a better manner. One of the worst bits about her is the fact that she has unrealistic expectations of people. The other weak link in the chain is Bridget, (General Manager) who was unable to cope with the marketing requirements of the organization. Marketing requires a lot of effort to get word around. Her flaw was that she was unable to take her marketing responsibility

11 properly. She also lacked leadership skills which did not let people take her seriously. A true leader is one who can influence others and is responsible for HR and hiring. If the leader is unable to influence others then there is no growth in the organization. Bridget also lacks looking at a long term picture or the possibility that there can be massive growth within the organization. Sharon has a problem where she is unable to delegate tasks properly to people as she does not want to upset them due to her great people skills. She also works too much to get her work done and is often tired by the end of the day. Her ability to do everything for everyone is holding her back and affecting her work. JoAnn also has the same problem as she is unable to delegate her tasks properly, takes on too much work on her shoulders, is a workaholic and does not give up easily due to the fact that she is stubborn. Cindy also has the same problem as Cynthia as she is unable to grasp the marketing methods required to promote the retail store part of the business. The main weakness of the shop is the fact that it was difficult to keep staff on the management and to retain them for a long period of time.

Opportunities There are plenty of opportunities in this business mainly due to the fact that the Apparel industry for women is very huge. Plus size clothing made a big splash in the women s apparel market in the early part of the noughties. Sales were projected to be in the double digit numbers. The fact that 35 percent of adult Americans are overweight should be a great opportunity for all apparel providers. There are opportunities for them to capture some sales as plus size sales accounted for one fifth of women s apparel in 2001. Around 60 percent of American women wore more than size 12 with around 16 percent of teenage girls reported to be overweight. It can also be said that over one third of plus sized women bought their clothes from people who specialized in large size clothing. The best part is that there are a large number of retailers who have been unable to cater to plus size customers. Even though there are 2000 manufacturers of large women s clothing in the US there aren t many who supply super size clothes. One of the biggest ones is Mast Industries which has revenues of over $ 1.5 billion dollars as they make large sized company at their own facilities, through partnerships and joint ventures. It would be a great opportunity for MIB to be able to form a partnership with a big company like that so they can make some more profits.

Threats MIB will face threats from bigger organizations such as speciality retailers who have a large customer base and distribution network. These big retailers are a threat to smaller independent retailers as they have been taking over a number of smaller retailers. One of the biggest retailers, Charming

12 Shoppes, Inc acquired Lane Bryant and Catherine s Plus Sizes so that they could make an entry in this area. The possibility that they have to compete with larger chains for a slice of the pie can make this tougher for them. They even have more money to spend on their CRM system so that they can understand the needs of their customers better. MIB will be able to compete with it as they have a limited budget and do not have the capacity to invest in such a big system. The big retailers such as Charming Shoppes can use a CRM system as well as use a system for their inventory control. The bigger retailers have the capacity to offer goods through catalogues and can opt for websites with customizable profiles for patrons. All these factors can cause their business to erode if they are unable to tackle this problem on time.

Q3. MIB has a lot to do before they can go from strength to strength within their area. There are classified as a small retailer and they have to face competition from other independent retailers, large retailers as well as the threat of funds running out due to other problems. They are quite experienced at what they currently possess but then they lack a few things which don t give them a competitive advantage. Some of these points are discussed below and explain how MIB can improve itself and make a big difference. MIB has tapped into a good market as the market for plus sized and super sized women have grown throughout the years. There aren t so many experienced retailers or vendors who specialise in this and yet it has taken off. The key is for them to get through to the consumers who are responsible for either making it a success or a failure. MIB gets around 50 percent of their orders from online sales which means that the rest of them are from traditional catalogue sales. It would be a great idea for them not to totally give up on catalogue sales as it also brings in a number of revenues. However printing catalogues and distributing them requires a lot of time and money. It would be a great idea to concentrate their efforts on their website which can be customized to allow customers to get a wider range of clothes. Catalogues require editing and printing before they can be sent out. A website does not require much time and effort as it can be edited and modified from any place. There are no costs associated with printing or distribution as anyone with normal web designing skills can update the website. This will be more cost effective for MIB. The other factor going in their favour is the fact that if they spend only 1/3 of the budget they have allocated for catalogues towards the website it would help them get more revenues. The key is to stop relying on catalogues as they are a concept which is only being used by bigger organizations as they have the budget to support such an initiative. Everything is digital nowadays and the costs of editing pictures and putting them are a fraction of the cost of putting together a catalogue. Consumers are very web savvy nowadays and would prefer to get all their information at the click of a mouse. Another good idea is for Cynthia to invest in a low cost training session for herself and the members of her management so that they can sharpen the skills they are lacking in. The training may cost a bit of money but then it is money well spent as they need to be able to enhance their skills and maximise on their true potential. There are a number of training programs which are not so expensive if they go for a group rate. An investment for the short term will lead to richer dividends in the long term.


Cynthia needs to get a refresher course in Marketing so that she can promote her business in a better manner. It is a great idea for her to learn the ropes again as she herself proclaims that she needs to do everything right. She needs to be able to understand what she is doing right or wrong. Any missteps can lead to dangerous consequences for her business. There is no need for her to hire a marketing director and pay an extra salary when she can do the job herself. She is good at making products and designs and she is the only person who knows how she can mar her stuff. The fact ket that she started the business herself gives credibility to the fact that she knows quite a bit. She also needs to learn how to be able to talk to people and it would be great if she could attend a group bonding workshop so that she can understand her employees and vice versa. She may think that her key weakness is in the marketing sector but then she does not realise that if she is unable to work well with her employees then there will be more problems in the flow of the business. Happy employees are what constitute how well a business can function. If the turnover of employees at an organization is high then it can lead to problems. For example if a company spends time with one employee and that employee leaves it can be a big setback as they would have to hire a new employee and retrain him/her. If Cynthia can master the art of dealing with employees she can have more stability in her business. The employees are the foundation of the business and if there is no harmony or unity amongst employees it can lead to problems. Miscommunication and improper delegation are two of the factors which lead to the problems. Cynthia possesses great customer skills but then she does not have any great employer skills. She is skilled in coming up with great products and there is no doubt that with a little bit of work she can deliver the goods. They also need to find a way to delegate tasks better to employees before they burn out with all the pressure. There are employees such as JoAnn and Sharon who are workaholics and love their work so much that they are always overworked. They possess all the skills possible but then they are unable to delegate tasks properly. A good suggestion would be to give JoAnn the additional task of HR duties because she possesses good personal skills. There will be no need to spend a lot of time and effort on her training as she will be able to handle her task really well. She just needs to focus on developing her delegation skills. There should not be two people at the workplace who both have the task of delegating work to others. Additionally it is crucial for Cindy to get some Marketing training as well so that she can understand can learn how to promote the business better. All these employees have some great skills and some flaws but then they can always be improved. They are all dedicated and they need to be inspired to get the right results.

Cynthia also needs to find proper IT officer so that they can stay up to date with the latest in technology and so that their systems are able to make changes to their website or to come up with new ways of tackling orders over the internet. It would be a great idea to invest in a low cost open source CRM system so that they can understand the buying trends, demographics and req uirements of their customers. There are a number of cheap easy available solutions which can be easily modified and tailored to their needs. This can lead to more opportunities for them in the future and can lead to understanding their customers better. MIB can also enter into a joint partnership with companies which need supplies from smaller suppliers. They can market their range under their own name with the collaboration of a bigger name. They are unable to compete with companies which are big enough but then they can at least sustain themselves and get a good piece of the pie for

14 themselves. It is better to work with one rather than compete with them. There is always the threat looming of speciality retailers who can cannibalise them.

Q4. Strategic tools based on academic models are a great way for formulating strategies to take care of the bigger problem and to formulate ways of taking care of strategies. However they are all not very well planned as they might not be useful for the right scenario. There is a difference between small businesses and big organizations. Critics believe that most of these academic models are more suited for big businesses rather than small ones. There are some who believe that the models can be duly adjusted for smaller businesses. We can take a look at some examples of academic models which might work or not work for small businesses.

We can analyse the Ansoff Growth Matrix which takes a look at product and market growth strategy. They depend on market penetration, market development, product development and diversification. This strategy will definitely not work for MIB because it is too vast for it though a couple of aspects of the concept may work. Market penetration is for businesses who can sell their goods in a current market if they can offer better prices. MIB will be unable to compete with bigger retailers who can afford to undercut prices so that they can get rid of the competition. They are unable to take on the big chains themselves plus they do not have the funds to move on to such a big market. Penetrating a big market requires a lot of funds and that is one thing which a small retailer like MIB does not possess. The same goes for Market Development as MIB does not have the capital to test their products in new markets. Product Development can work for small businesses if they are innovative enough to create a new product which no one has heard of. Plus sized clothing or super sized clothing allows for loads of options for its creators. There is the opportunity to create different types of products as there is already an existing market for it. If the business was not already in business in an existing market there would be no need for them to develop something. If they are already experienced in one segment of the market and have the expertise there is no harm I test launching a product which could prove to be the next big thing. Diversification is a strategy which can only be adopted by big organizations with plenty of seed money. They can afford to test new products in new markets as they can afford to take a loss. No small business can afford to throw all that money away on testing something risky.

Porter s Five Forces model may be good for complex analysis of an organization. It can be used well as an example for a small business in some of its aspects.

15 There is no restriction to entry of new players in the apparel industry. It is not an impossible industry to break into mainly due to the fact that there are a lot of players. However the threat of new entrants factor can be limited to a few small businesses which can break in only if there are no barriers. Industries which are difficult to break into such as shipping, private nuclear plants, oil industries would never face the fear of small businesses coming over and threatening them. The amount of competition and the relative ease of entering certain industries are quite easy for small businesses. An organization like MIB is able to fit in easily as they do not need to have a high amount of capital nor do they have to resort to a highly expensive distribution network. However the industry they want to get into already has big players on the scene so they are basically the new entrants in the scene.

The part about the threat of substitutes works in the favour of smaller businesses who can do the same amount of work and produce the same quality of products as compared to their business rivals. This is where problems can occur as their bigger rivals can always reduce the prices so that customers will not go in for cheaper alternatives. MIB can always make cheaper products but then there is always the danger of the bigger chains who want to reduce their prices so that they can still make a profit and cause damages to their rivals. Small businesses are also affected by the power of suppliers as they are at their mercy for supplies. They do not pose a big threat to them unlike the big industry players who can try and intimidate the suppliers. However there are scenarios where either the supplier can bargain with the buyer (big buyers) or cases where the buyer can bargain with the supplier. Small businesses can be affected if the supplier refuses to sell to them but then the chances of that happening are very slim. It also won t make a big difference to the suppliers if small businesses like MIB refuse to buy from them as they do not depend on them for the bulk of their orders. There is also no factor of rivalry between small businesses as it s all a matter of David vs Goliath (as in the small businesses vs. the big organizations). Small businesses are too small to compete with the likes of big organizations or to even create a dent in their profitability. The stakes are higher when it comes to bigger organizations. In a nutshell, the five forces are a bit suitable for a small business but can be a bit too complex for them.

The PEST analysis may be a suitable tool for a small business as it allows them to understand the external environmental influences of a business. The political, economical, social and technological factors affect small businesses as much as big businesses.

Political factors can affect small businesses mainly due to the fact that they are also affected by whatever happens in the political or legal environment. Changes in government policies will have the same effect on everyone. There may be exceptions as changes in tax law could either be in benefit of larger corporations or they could be in the benefit of smaller organizations. There may be a law which protects larger organizations from certain problems while there may be no protection for small businesses.


The economic environment affects everyone just like the political environment. If we keep this factor in check it can lead to the discovery of many problems which can cause problems in the growth of a business. Interest rates, inflation, unemployment will have the same effect on everyone and no one can escape from it. However larger corporations have the ability to sustain this for a longer time but then the smaller organizations are not always so strong against these factors. If there is no demand for a product or service the business can wind up.

The social factors will not affect the small businesses as much as it affects Big business. It can affect small businesses if they are up to no good but the effects aren t that great as compared to big business. The technological factors are not that bad as they allow small businesses to gauge the cost of automation and to add the costs of technology which can lead to changes within the organization.

The best tool of them is the SWOT analysis which will work for any organization regardless of their size and stature. Any organization can check out its strengths, weaknesses and threats within its current environment. It is easy to understand and use as an organization will only directly address the problems which it faces and will take a look at all the factors which lead to its strength, weaknesses, opportunities and prospective threats. It is the easiest way of measuring everything within a certain area.



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