Factors stimulatng the business environment
Discuss about the Competitive Strategy for Internal and External Factors.
The business environment comprises of a well-blended mix of internal and external factors that are held liable for stimulating the business of an organization. The internal and external factors can also influence each other and that will also stimulate the internal and external environment f the business organization. The below-presented report is focused on the analysis of external and internal environment of Amazon Australia.
A condition that exists in an economy as whole instead of a particular region or sector can be termed as the external environments. The external environment within an economy comprise of the factors that will stimulate the business environment.
The business organization is affected by the introduction of new technologies in the market (Pratap 2017). It is because the demands of customers begin to increase frequently (Pratap 2017). Environmental factors also affect the business corporation as the customers may change their buying decisions as per the changes in the environment. This decreases the overall profits achieved by the company.
This can be done by the strategy development tool that is PEST analysis. This will help to know the influence of technological, legal and political aspects on the growth of an organization.
An outline or the framework that comprise of the macro environmental factors and is also used in the scanning the components and variable of strategic management. Pest analysis is also considered as a strategic tool and is a part of the process of external analysis while executing the process of strategic management (Pratap 2017). The below presented is the PEST analysis that has been executed for Amazon Australia:
- Political- The local and international legislative authorities are the most important influencers for the business organization. The industries have to overcome this challenge by constructing new and better strategies. Regulatory agencies keep track of the economy spent by the business organization to know the financial details.
- Economic- Taxes, interest rates, trade cycles will also affect the Amazon Australia. The economic factors such as growing and declining rates on consumer-based services also affect the tourism industries. Companies look forward to completing their long-term goals which become difficult by such factors.
- Social- Social factors include the consumer’s behaviour, the perception of the communities and their beliefs when they choose a particular service. Sometimes this becomes a major issue for the business corporation to meet the challenges made by the consumers (Innovationtactics 2018). Since it is mandatory to complete consumer’s demands, the company also have to face loss. Moreover, advertising is also a social factor which needs the attention of company owners. Another is ethical issues that may also be faced with an issue and should be tackled properly. For instance, if Amazon Australia can organize promotional campaigns supporting any of the social cause or issue. This will provide a boost the brand recognition as more and more consumers will be attracted and connected towards it.
- Technological- The research and development and the advancements in technical aspects create chaos in the business operations of the industry. Automation of information systems helps on storing and managing a large amount of information but these also affects tourism industry as it is difficult to spend higher expenses on trending technology.
Competitiveness is the ability of a business organization of offering the products and services that is meeting the quality and desired standards of the local and national markets at the pricing range that are competitive and also provide appropriate returns on the utilized resources in the process of production (Economicsonline 2018). The dynamic changes that are occurring in todays have increased competition among the business environment. Interests of consumers change frequently, after the introduction of new product or service in the market and due to which there is an indirect increase in competition. The shift in consumer preferences largely affects the customer processes as the business entity will have to keep on changing their developed business strategies. The ever-changing demands and perceptions and preferences of the customer for the products and services that make it may be proven sometime difficult for the business firm while making provision of the required services and products (Economicsonline 2018). Secondly, companies have to manage their capabilities to respond to the consumer’s request. The small and medium-sized organizations also contribute to the growth and development of an industry. In such cases, relationships with suppliers have to be suitable to make adjustments in their business processes. Amazon Australia will also have to focus on improving their services to attract more number of consumers in the market (Mihajlovi?, 2014).
PEST Analysis of Amazon Australia
A well-blended combination of social, economic, regulatory and political scenarios that will affect al the participants in an individual market and also cannot be readily be influenced by marketing can be considered as the industrial environment (Researchguides 2018).
This model or approach is a framework that can be adopted by the business corporations for understanding the competitive forces at work within an industry and which also drives the way economic value is derived in the sector.
This tool is effective to analyse the competition in the market and also aids in developing awareness what are the strategies used by the competitors that will help the Amazon Australia to increase their profitability. Competitor’s position analysis gives the brief idea to the companies with the change in Government policies. The strength of Business Corporation can be easily identified by using Michael Porter’s Five Forces Model.
Figure 1: Porter’s Five Force Model
Source: (CGMA, 2013).
- Supplier Power- Most of the suppliers increases their prices during the unfavorable conditions of the business entity. They tend to make their profits by evaluating requirements of the market with the resources available with the business entity. And hence it will be difficult for Amazon Australia to simultaneously switch suppliers as they will cost more
- Buyer Power- It is compulsory for the companies to generate more and more leads as these only support the competitive value in the market. The cost of buyers is also as same as that of switching suppliers for a business (Remington and Pollack, 2016). It is not easy to attract the sufficient number of buyers for the particular product or service. It can be considered that the buyer power is high as Amazon is an online retailer.
- Competitive rivalry- Market attractiveness is reduced by the entry of new companies in the market. These have to be managed effectively by the company owners to maintain specific statistics for the success of their business (Innovationtactics 2018). For instance, Coles and Woolworths are the tow brand names that considered as the biggest rivals and that will be affecting the business of Amazon in the Australian regions.
- A threat of Substitution- A new entrant not only affects the company’s success but it also increases the threat of building better relationships with the suppliers (Jarzabkowski and Kaplan, 2015).
- A threat of new entry- The new entrants is considered as the biggest threats to the business entity and they will surely affect the profitability and productivity of the business corporations.
On the basis of the executed analysis by Michael Porter’s Five Forces of industry competitiveness model, it has been inferred that the Amazon Australia have is supposed to be careful while developing the pricing strategies of the products and the services. As the consumers are most affected by the prices of services, companies have to ensure that they deliver best quality services to their consumers (Tehrani and Rahmani, 2014). It has also been analysed that Coles and Woolworths are the competing brands tat are affecting and stimulating the business environment of Amazon Australia and required modifications and alterations in the strategies and plans are required to be done.
Organisation’s current strategies prudent
It can be recommended that the Amazon Australia have to increase their effectiveness based on the analysed competition level. Having right people with the required skills becomes profitable for the organizations (Gamble and Thompson, 2014). The main contribution for such organizations is done by the human resource managers. They examine the employees on the basis of skills, talent, and the desired salary. Planning to hire efficient employees is a great deal for the human resource managers. The strategic plans involve budgets and finance to conduct interviews.
- Strategic Planning- This involves skills of the team members to develop a strategic plan for attracting consumers. An annual business plan is created that include details about competitors, goals, and objectives of the company (Grant, 2016). The ongoing goals should be discussed within the team and also focus should be given to new achievable targets.
- Analysing the effectiveness of current workplace- Determining the efficiency of the workforce is the strength of the business corporation. Their effectiveness can be judged by the type of employees hired at the workplace by the human resource managers. This effectiveness also creates awareness among other competitors in the market.
- Action Plan- Action plan is developed by analyzing the performance of team members to handle the consumer request (Johnson, 2016). This contributes to managing productivity of the company. The action plans can be designed by firstly providing training to the other team members and then selecting efficient team members to handle the customers on the journey.
The business organizations are supposed to have an organizational change to make improvements in their business processes and to engage people. This is useful to evaluate potential problems of the company and thereby resolve them. Amazon Australia can apply this strategy by collaborating staff members to have an effective decision. The participation of each employee is important to design, develop and implement a business strategy (Lee, Yoo and Kim, 2016). Using different perceptions of people, the business entity can recognize the cause of their decreasing productivity. A change in strategies is important for the enterprise to contact with new suppliers, relocate or open local branches, companies can introduce new product or service in the market and an ERP (Enterprise Resource Planning) system can also be implemented.
Competitive Environment of Amazon Australia
This type of strategy is recommended for Amazon Australia so as to enhance their business operations and their productivity. A business-level strategy involves an action plan to resolve their potential problems (Lin and Wu, 2014). These help to analyze the core competitors of the business and the ways to market the essential product or services to the consumers. The most important goal of a business is to satisfy the preferences of a customer. This in turn results in managing customer relationships and increasing cost. There are four different business level strategies can be applied by Amazon Australia –
- Cost Leadership- This strategy is based on managing the overall cost or budget that the company spends. While accomplishing demands of consumers, companies have to reduce the cost of their services keeping in mind the profit statistics (Madsen and Walker, 2015). The company can manage this by reducing cost on sales, creating new opportunities for consumers to buy services and maintaining a perfect balance over production cost. The risks that are associated with this business strategy are technological advancements and imitation. Most of the companies could not afford the trending technologies due to their higher expenses (Paroutis, Franco and Papadopoulos, 2015). To overcome such risks, companies can implement the method of value chain analysis. This will help to determine the cost of resources and their capabilities.
- Differentiation- Value for a service can be created by improving quality, features, and its reliability. It is not always mandatory to reduce costs as this strategy can also be beneficial (Alstyne, Parker and Choudary, 2016). The risks are that companies have to attain a unique value by doing something different as this strategy can also be implemented by their competitive rivalries.
- Focused low cost- The tourism industries should not only focus on cost but they should also focus on selling their service to the market where they could earn profits (Albany 2018). For example, Government agencies are the best suitable option for such industries. The companies can run their business legally and can also protect their important asset under the Government rules and policies (Remington and Pollack, 2016).
- Focused Differentiation- Amazon Australia should focus on satisfying needs of consumers from different areas such as their target should be Federal Government.
Since Amazon is an online retailing business firm the business entity has adopted Low cost base and the reason for this is that the business entity is having more chances of achieving economies of scale with higher production volumes (Albany 2018).
References
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