Conducting an Industry Analysis - Essay Example

FOUNDATIONS OF GLOBAL BUSINESS   By         EXECUTIVE SUMMARY Starting a new business usually requires a detailed analysis so as to establish the viability of a business. This is therefore the reason for this essay as industry analysis and marketing mix have been discussed in details and the recommendations given are of great importance to those venturing in the new businesses. Table of Content EXECUTIVE SUMMARY 2 INTRODUCTION 5 BACKGROUND INFORMATION 5 PORTERS FIVE FORCES MODEL 5 Intensity of rivalry within industry 5 Threat of substitutes 6 The bargaining power of the buyers 6 Bargaining power of suppliers 6 Threat of new entrants 7 Purpose and benefits of porter’s model 7 MARKETING MIX 4 Ps 8 Product 8 Place 8 Price 8 Promotion. 8 Threats to the business 9 Competition 9 Financial threats 9 CONCLUSION 9 REFERENCES 10 INTRODUCTION 4 BACKGROUND INFORMATION 4 PORTERS FIVE FORCES MODEL 4 Intensity of rivalry within industry 5 Threat of substitutes 6 The bargaining power of the buyers 6 Bargaining power of suppliers 6 Threat of new entrants 7 Purpose and benefits of porter’s model 7 MARKETING MIX 4 Ps 8 Product 8 Place 9 Price 9 Promotion. 9 Threats to the business 10 Competition 10 Financial threats 10 CONCLUSION 10 REFERENCES 12 INTRODUCTION For the success of any the business,it is important to conduct an industry analysis.The analysis is used to establish the viability of the business.This helps the investor to make a better decision about his investment.In male grooming business, in particular shaving, a good study to the market forces will help to plan the business at the initial stage.This will ensure that starting of the business is easy as time and cost are saved since the industry analysis has been conducted well.In the analysis it is good to also identify the best marketing techniques so that the product can be in a position to acquire the market share easily. BACKGROUND INFORMATION Shaving is a routine for all men in the world, it’s therefore important to ensure that there are no discomforts after the exercise. Therefore the purpose of this essay will be coming up with friendly shaving equipment’s that can solve the problem of discomfort and hence attract a large market share. This creates the need to carry outan industry analysis using the porter five forces model so as to assess the viability of the new product in the industry and as well describe the best methods of marketing the products using the 4Ps of marketing. PORTERS FIVE FORCES MODEL This is a model of conducting the industry analysis: the model uses five forces that affect the industry that is being assessed. These forces are; the bargaining power of supplier’s, the bargaining power of buyers, the threats of new entrants, the threat of substitutes and the intensity of rivalry within the industry (Botten, p120). Intensity of rivalry within industry Competition among the rival firms reduces the firms’ profit. This is because if the firm is not strong enough, it is likely to lose its market share. Most industries strive to achieve a greater competitive advantage over its rival firms. Rivalry among different industries varies according to the interests and goals of each specific industry. In an attempt of gaining competitive advantage in the men’s grooming market, several competitive actions need to be considered. The industry can be entered with varying prices of the shaving equipment.This can be achieved by lowering the prices so as to gain temporary advantage and hence help to create a better public image that can attract more customer. The features of the shaving equipment’s can be improved so that they can be easier to use and to dispose, this calls requires coming up and implementing innovations in the manufacturing process and in the product itself. The entrepreneur can also creatively use the channels of distribution to reach to a broader market thatin turncan increase the returns. He can also buy high quality materials from suppliers and asking the suppliers to meet the demand for products specifications and price. The rivalry among firms is brought about by factors such as; existence of large number of firms that compete for the same customers and resources and intensifies if the firms have similar market share and this may further lead to a struggle for market leadership (Root,Visudtibhan,Botten p 87), slow market growth that can cause the firm to fight market share, high fixed costs that forces the industry to produce more products so as to attain the lowest cost per unit thus the firm must sell large quantities of products and this leads to fight for market share and results in increased rivalry. High storage cost can also force the producer to sell goods as soon as they are produced and this might intensify competition for customers if other producers are doing the same. When customers can switch freely from one product to another, this also leads to struggle to attract customers by firms. Threat of substitutes According to the five forces model, substitute’s product refers to products in the other industries. This threat occurs when the demand of a product is affected by the change in price of another substitute good. This happens because as more substitute’s goods are available, the consumers have more alternatives and this may lower the demand of the product. In the men shave industry, substitutes like the Gillette razors need to be considered. These substitutes will completely undermine the firms’ ability to raise the product price. The bargaining power of the buyers The ability of the customers to buy the firms product usually has an impact on the producing industry. If the bargaining power of the buyers is strong, the firm will make more profits and at the same time increase the price of the product (Kossowski, p, 220). However, if the bargaining power is weak, the demand for the product will be low and this will lower the firms revenues as well as undermine the chances of raising the price of the product. In the men’s glooming industry, the products and services to be produced need to be available to the target population at a price which they can afford. Bargaining power of suppliers The suppliers are the providers of raw materials of the firm like labour and other components. If the suppliers are powerful, they can exert a lot of influence in the firm such as selling raw materials at high price so that they can get some of the firms’ profit. As an entrepreneur venturing in the male grooming industry, a supplier who has the ability to supply the goods at fair price needs to be identified correctly. Threat of new entrants The possibility that new firms may enter into the industry poses a risk to be considered in the existing industry. This is because there will be competition for the same market, and thus lower the market share of the existing firm. In any industry, there should be freedom of entry and exit and this always leads to reduced profits. This is not always the case as some firms with high profits and strong market share creates entry barriers, thus preventing other interested firms from entering into the industry. The government creates the entry barriers by the use of laws and regulations to govern a certain industry. The entry barrier can also be because of the patents and proprietary knowledge that helps to reduce the entry in certain types of firms. These are the ideas and facts that are treated by some companies as secrets and others companies do not have them, but if they could get them they would enter into the business. The nature and complexity of the assets required to enter a certain industry may also hinder other new entrants from entering the industry because they might be too expensive to purchase and install and have high maintenance costs. This may make the new entrants reluctant to enter into an industry that requires high investment outlays. Purpose and benefits of porter’s model The porter model helps to analyse the industry factors that affect different firms within the same industry.This helps in planning as well as allocating resources efficiently so that the venture which promises to be more productive is taken. The model also helps the firms in decision making. This is because different manager will use the knowledge of the model to set the product price, as well as establishing the right methods of marketing so as to gain a competitive advantage over other firms as well as to increase the firm’s market share. The model is also a very useful tool in forecasting about the future of the firm and in budgeting. It helps different firms to forecast their expected levels of activity by first understanding the factors that may affect the firmsoperations and then budgeting for the forecast is well done. This greatly reduces the adverse variations in what is budgeted and the actual outcomes. The model helps the new firms analyse the market before entering and know whether they are able to enter. This is in terms of competition, entry requirements such as government laws and regulations as well as understanding the needs of customers and their purchasing power so as to produce quality products that meet the customer’s needs without incurring losses during production. MARKETING MIX 4 Ps The term marketing mix is generally used to describe the different types of decisions that firms have to make in the process of bringing its products and services to the market. The 4Ps are one of the best known ways that defines and explains the marketing mix. The 4Ps are; product, place, price and promotion. (Barker,and Angelopulo, p. 65) Product The product or the service should give the customers what they need.it should be able to satisfy their needs effectively. Therefore, high quality products should be produced and costly features that customer do not want should not be included in the manufacture of the product. The product should also be easier to use in different places according to the desires of the target population. The size,name, colour and the design of the product must appeal to the customers and not offending (Little and Marandi, p79) In the grooming industry, a well-designed shaving razor should be produced with quality materials that will meet the needs of the customers. It should be user friendly and easy to dispose without causing harmful effects to the environments and to other people. Place This will focus on where the customers want the product to be. It mostly includes where the target population goes to do their shopping. The product should be available to the consumers at the right place so that time spent when looking for the product is reduced. As an entrepreneur venturing in shaving industry for men, the product should be available in the shops and places that men frequently visit so that to ensure they gets them quickly. Price The price for the product should be equal to its value to customers. This is because if the customers will feel that they are paying too much for a certain product, they will shift to the substitutes. Also, when setting prices, a firm needs to consider whether there exists any established price point for the product, this will take into account discounts, if any. In the shaving business, the price should be set so as to be able to compete with the products of the rivals. Promotion. This is in terms of where and when your target market can get the marketing information. This will dictate the media for marketing depending on the target market because different markets may require a different type of marketing medium. It is also important to know the best time and season to market the product and also know how the competitors’ promotion affects your firms’ promotion. In shaving industry, the media for marketing should involve what men mostly watch like advertising in channels that air football matches. By using the 4ps marketing mix, the shaving equipment will of high quality, be available to customers at the right place, be sold at a fair price and use the right medium of promotion (Powell, p 134) Threats to the business Competition The competition with the existing firms will be a major challenge. This is mostly due to the fact that the existing firms have got a well-established market share and have the economies of scale.This will force the new firm to try to attract customers to their new products which may take time hence the company will have a slow growth. The competition may also require the company to use more resources that are scarce in promotion. Financial threats Starting of a new business is very expensive and the actions taken determines the success or failure of the business. New business faces serious financial risks mostly when new owners fail to plan for the required capital and the budgets. This will require the entrepreneur to know whether the products will be able to support the financial obligations of the new business. The business may lack start-up funds and possibly the entrepreneur may not be able to pay for his basic expenses until the business starts making profits. It is important to know that if a new business does not succeed, the owner may get into a financial ruin. CONCLUSION In the new business of men’s grooming, there is a potential market that promises high returns. By following the analysis in this essay, it is possible to start the business without any difficulties as all the factors that may make the business fail has been analysed.This will help the new business to save its resources and concentrate on the core of its business. It is my hope that this report therefore offers a solution for the analysis of a new market in mens grooming. REFERENCES Barker, R. and Angelopoulos, G, 2006, integrated organizational communication. Cape Town: Juta. Botten, N, 2009,  E3 - Enterprise strategy : strategic level. Oxford, U.K. Burlington, MA: CIMA Publishing/Elsevier. Kossowski, A, 2007, Strategic management: Porters model of generic competitive strategies - theory and analysis. München: GRIN Verilog GmbH. Root, F. Visudtibhan, K Botten, N, 2009.  International strategic management : challenges and opportunities. Washington: Taylor & Francis. Little, E. and Marandi, E, 2003, Relationship marketing management. London: Thomson Learning. Powell, G, 2012, Marketing Calculator Measuring and Managing Return on Marketing Investment. Chichester: Wiley. Read More