Market Opportunities for Smartphones and Smart Home Appliances
PESTLE analysis is a popular strategy development tools which are used by marketers to identify various macro factors which have the ability to influence the operations of the business. The corporations analyse these elements since they have a significant impact on their effectiveness, and they create various opportunities and threats for the business (Srdjevic, Bajcetic and Srdjevic, 2012). The external factors include various aspects such as political, social, economic, technological, legal and environmental. These factors result in positively or adversely affect the operations of an organisation, and this tool enables the marketers to evaluate these factors at the same time (Zalengera et al., 2014). The management can keep them up-to-date by evaluating these factors which assist them in forming future business strategies.
Example: Tesco is an international food retailing enterprise which is the second largest retailer across the globe. Its head office is situated in the United Kingdom, and its stores are situated in 13 countries (Tescopoly, 2018).
Global political environment has a significant impact on the performance of Tesco and changes in policies such as tax rates, trade policies, legislation and others result in affecting the operations of Tesco. Although most countries in which Tesco serves have political stability, however, changes brought by Trump Administration affects the profitability of the enterprise (Gray, 2018).
The company has to keep aware of various economic factors such as inflation, profits and prices, leverage costs, interest rates and others. Any rapid changes in taxation policies result in affecting revenue of the enterprise and changes in interest rates affect accessibility of finance of the company.
As per social change, the customers in the UK prefer to purchase products in bulk, and they prefer one-stop shopping experience. In order to meet this demand, Tesco has increased non-food products in its stores.
Tesco relies on the latest technological advancements to improve its efficiency and overall customer experience. It has also introduced online shopping facilities along with home delivery for its customers.
Legal
Legislation and governmental policies directly influence the performance of Tesco, for example, Code of Practise issued by the Food Retailing Commission (FRC) issued various guidelines which result in changing Tesco’s pricing strategy (Butler, 2015).
Tesco has implemented environment protection and sustainability policies based on which it has pledged to reduce its carbon footprint by 50 percent by 2020.
This framework is used by marketers in order to identify and evaluate five key factors which result in affecting the attractiveness or unattractiveness of an industry. Based on the evaluation of these factors, the senior level executives decide whether to launch their products in a particular market or not (Pringle and Huisman, 2011). The five key factors include bargaining power of buyers, bargaining power of suppliers, competition rivalry, threat of substitutes and threat of new entrants. Each of these factors is linked to a substantial part of industry which results in affecting the business of an enterprise while operating in a particular market. The bargaining power of buyers results in driving the prices of company’s products because customers have the power to influence them. The bargaining power of suppliers defines their ability to increase or decrease the cost of their supplies (Vining, 2011). The threat of new entrants is the ease or difficult face by new companies while entering into the market. The threat of substitutes is referred to products which can customers choose that fulfil similar purpose as the company’s products. The competitive rivalry defines the intensity of competition between the companies operating in the same market.
Exploring SWOT Analysis for Tesco, Netflix, Samsung, and Zara
Example: Netflix operates in the entertainment industry, and its head office is situated in Los Gatos, California. It provides online video streaming services to its subscribers and also invests in producing original content (Netflix, 2018).
Threat of new entrants (low)
Netflix has gained competitive advantage in the industry due to its lower pricing strategy, value proposition and reducing costs (Adhikari et al., 2012). For its competitors, the initial investment is relatively high, and Netflix is already a strong player, thus, threat of new entrants is low.
Bargaining power of suppliers (high)
The suppliers in the entertainment industry are powerful, and they can change their prices which result in increasing or decreasing the prices of raw materials. Suppliers include cloud computing providers, software developers and others.
Bargaining power of buyers (medium)
Customers have substantial power in entertainment industry which assists them in seeking high discounts and offers in the industry. However, the original content of Netflix provides it a competitive advantage due to which buyer power is medium.
Threat of substitute (medium)
The substitute of Netflix include Hulu, Amazon Prime Video and television which provide similar content, however, original content provides the company a competitive advantage, thus, threat of substitute is medium.
Competitive rivalry (high)
The competition between Netflix, Amazon and Hulu is high. Organisations are investing heavily to capture the market share, thus, the competitive rivalry is high in the industry.
SWOT analysis is a popular strategy development tool which is used by marketers to develop business policies for an organisation. The tool is used by companies to evaluate its strengths, weaknesses, opportunities and threats based on which they develop future business strategies (Helmes and Nixon, 2010). The strengths and weaknesses of the corporations are affected by its internal factors whereas external factors influence opportunities and threats. Examples of internal elements include organisational culture, HR capabilities, leadership skills and others. Examples of external elements include changes in political policies, change in customer trends, competitive rivalry and others (Ghazinoory, Abdi and Azadegan-Mehr, 2011).
Example: Samsung is a multinational conglomerate which operates in different industries such as electronics, IT, consumer electronics, life insurance, and many others. Its headquarters is situated in Seoul, South Korea.
Strengths
The company invests heavily in research and development due to which it has one of the strongest patent portfolios. For example, it has spent US$12.7 in R&D in 2017 (Statista, 2018). In 2018, it has 20.9 percent market share in mobile phone industry. Samsung has established strong manufacturing, distribution and marketing facilities across the globe (Ahaskar, 2018).
PESTLE Analysis for Tesco
Weaknesses
There is fierce competition from Apple Inc. in terms of revenue generation and market image. Many customers did not prefer Samsung’s services over Apple or Google.
Opportunities
The market for smartphones is growing in developing countries such as India, Indonesia and Bangladesh which creates new opportunities for the company. The demand for smart home appliance and services such as Samsung Pay are getting popularity in major markets.
Threats
Small Chinese corporations are expanding their market in mobile phone industry. Apple’s reputation, market share, quality, and profitability are increasing continuously which poses new threats for Samsung. For example, recently Apple has become world’s first $1 trillion worth technology-company (Bogost, 2018).
It is a strategic development tool which corporations use to identify their key resources which provides them a competitive advantage in the industry (Terziovski, 2010). This tool evaluates the abilities of a resource based on VRIO model which identify factors that are valuable, rare, inimitable and organised. After recognising resources which have these capabilities, the corporations can rely on these traits to generate a competitive advantage in the industry (Progoulaki and Theotokas, 2010).
Example: Zara is a Spanish-based fast fashion retail organisation which operates in the directions of Inditex which is its parent company.
Based on VRIO framework, the corporation identified that its supply chain is extremely responsive based on which it generated a competitive advantage in the industry. Zara relies on both in-house and outsources manufacturing facilities which enable it to launch new products which are high in demand quickly. Due to its responsive supply chain, the corporation changes its display merchandise in just 24 hours in locations situated in Europe and 2-3 weeks in other places (O’Marah, 2016). Since the company relies on this resource, it only invests 0.3 percent on advertising whereas other competitors spend over 3.5 percent (Payton, 2017). Thus, by using this model, Zara has generated a competitive advantage in the fast fashion industry.
References
Adhikari, V.K., Guo, Y., Hao, F., Varvello, M., Hilt, V., Steiner, M. and Zhang, Z.L. (2012) Unreeling netflix: Understanding and improving multi-cdn movie delivery. INFOCOM, pp. 1620-1628.
Ahaskar, A. (2018) Xiaomi leads smartphone race in India, Samsung at second place: report. [Online] Available from https://www.livemint.com/Technology/W1a8NWlKkOUIjr29eaaE6I/Xiaomi-leads-smartphone-race-in-India-Samsung-at-second-pla.html [Accessed 20th August 2018].
Bogost, I. (2018) Apple Is Worth One Trillion Dollars. [Online] Available from https://www.theatlantic.com/technology/archive/2018/08/apple-1-trillion-market-cap/566672/ [Accessed 20th August 2018].
Butler, S. (2015) Tesco suppliers say retailer worst at following grocery code of practice. [Online] Available from https://www.theguardian.com/business/2015/jun/22/tesco-suppliers-say-retailer-worst-at-following-grocery-code-of-practice [Accessed 20th August 2018].
Ghazinoory, S., Abdi, M. and Azadegan-Mehr, M. (2011) SWOT methodology: a state-of-the-art review for the past, a framework for the future. Journal of business economics and management, 12(1), pp.24-48.
Gray, S. (2018) Here’s What the Trump Administration’s NAFTA Negotiations Mean for You. [Online] Available from https://fortune.com/2018/04/25/trump-nafta-canada-mexico/ [Accessed 20th August 2018].
Helms, M.M. and Nixon, J. (2010) Exploring SWOT analysis–where are we now? A review of academic research from the last decade. Journal of strategy and management, 3(3), pp.215-251.
Netflix. (2018) About Netflix. [Online] Available from https://media.netflix.com/en/about-netflix [Accessed 20th August 2018].
O’Marah, K. (2016) Zara Uses Supply Chain To Win Again. [Online] Available from https://www.forbes.com/sites/kevinomarah/2016/03/09/zara-uses-supply-chain-to-win-again/#4b1ab92d1256 [Accessed 20th August 2018].
Payton, S. (2016) How Zara Makes Billions In Sales With Minimal Ad Spend. [Online] Available from https://www.referralcandy.com/blog/zara-marketing-strategy/ [Accessed 20th August 2018].
Pringle, J. and Huisman, J. (2011) Understanding Universities in Ontario, Canada: An Industry Analysis Using Porter’s Five Forces Framework. Canadian Journal of Higher Education, 41(3), pp.36-58.
Progoulaki, M. and Theotokas, I. (2010) Human resource management and competitive advantage: An application of resource-based view in the shipping industry. Marine Policy, 34(3), pp.575-582.
Srdjevic, Z., Bajcetic, R. and Srdjevic, B. (2012) Identifying the criteria set for multicriteria decision making based on SWOT/PESTLE analysis: a case study of reconstructing a water intake structure. Water resources management, 26(12), pp.3379-3393.
Statista. (2018) Top 20 R&D spending. [Online] Available from https://www.statista.com/statistics/265645/ranking-of-the-20-companies-with-the-highest-spending-on-research-and-development/ [Accessed 20th August 2018].
Terziovski, M. (2010) Innovation practice and its performance implications in small and medium enterprises (SMEs) in the manufacturing sector: a resource?based view. Strategic Management Journal, 31(8), pp.892-902.
Tescopoly. (2018) Tesco Worldwide [Online] Available from https://www.tescopoly.org/worldwide [Accessed 20th August 2018].
Vining, A.R. (2011) Public agency external analysis using a modified “five forces” framework. International Public Management Journal, 14(1), pp.63-105.
Zalengera, C., Blanchard, R.E., Eames, P.C., Juma, A.M., Chitawo, M.L. and Gondwe, K.T. (2014) Overview of the Malawi energy situation and A PESTLE analysis for sustainable development of renewable energy. Renewable and Sustainable Energy Reviews, 38, pp.335-347.
and its stores are situated in 13 countries
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