INDIVIDUAL APPROACH OF THREE MODELS OF BUSINESS ANALYSIS IN INTERNATIONAL BUSINESS THROUGH THE STRTEGIC ANALYSIS OF STARBUCKS, UNITED PARCEL SERVICE Inc. (UPS), FEDERAL EXPRESS (FedEx) Abstract Purpose – The aim of this paper is to provide a critique on the models of business analysis by considering two companies as examples, with the objective of understanding their key success factors and future opportunities.
Design/Methodology/Approach – Applying the SWOT, PESTEL and Porter models of strategic framework, and this paper identifies the current situation, power holdings, competitive rivalries and future movements of Starbucks Corporation (Starbucks), United Parcel Service Inc. (UPS), Federal Express (FedEx). Findings In the process of analysing factors for business growth, it is imperative to study the internal and external environments of the company. This can take the form of reviewing the internal value model to understanding the industry influences on the business.
The models of business analysis are deemed to be useful in determining the key strengths of the business while also pinpointing outstanding opportunities where further investments; resources, people, time, must be made. The SWOT analysis is used to analyse the internal environment of the company and the PESTEL, PORTER’S methods help in examining the external forces that impact organizational operations and long term sustainability. Keywords – Business Strategy, SWOT, PESTEL, PORTER, Business Analysis ++++++ Introduction In the current scenario of the business world, the analysis of the business has become a core aspect for any company.
The strategic approach by the companies in the industry made the competition to be at the peak. In spite of heavy competition, the companies got to change their strategy to survive in the business and to see the profits. A clear understanding of the models in the business analysis and their application in the business success is needed. There are different business analysis models such as value chain, VRIO, PORTER’S and PESTEL, SWOT analysis to evaluate the performance of the firm and also to explore the possibilities in making the business which cannot be imitate able by the competitors.
Though these models of business analysis are older in usage, they are the basic and key measures to analyse both the industry and a firm. In this paper, we discuss the approach of SWOT analysis to Starbucks and, PESTEL and PORTER’S analysis by applying them to the multi-national companies like UPS and FEDERAL EXPRESS. Research Methodology The core element of this work is to provide the comparative approach of the models used in the business analysis. As well as describe the progress seen by execution of these models in the real time business environment.
Models of Business Analysis – Overview 1. SWOT Analysis SWOT analysis is considered to be the basic measuring tool and model in the business analysis. But, theoretically it has many criticisms as well. Critics say that it depends on the subjective perceptions and has less predictive power. It is notable that managers still use it in the primary analysis of the business practice. The basic idea behind SWOT analysis is to perceive the internal resources of the company as well as the external environment that means the industry trends and threats to the firm.
Therefore, though it has got many critics the SWOT analysis has got more rigid and re-designed making itself the basic approach in the business analysis processes. This paper takes the rigidness in the SWOT analysis by applying the approach over the strategy of STARBUCKS. STARBUCKS started its operations in 1971 in Seattle with an intention to create a substitute between home and work. They position their each store to create an imitable atmosphere, matching the location. Here we will analyse the Starbucks current and International marketing strategy through SWOT analysis.
The main goal of Starbucks is to hold diversity through the high standards. Starbucks is having 16,858 stores worldwide in 2011 and is the market leader in the coffee industry. Hence it has several strengths in the industry. The SWOT analysis can be approached in the tabular form as below. SWOT ANALYSIS Starbucks is the dominant, market leader in the coffee industry. Its inimitable environment in stores attracts customers worldwide. The company’s trademarks and patents have further established its brand value and evolved the face of the Starbucks brand.
Since the business model does not include franchises and boasts a direct relationship with its customers; it benefits from removing many intermediary and overhead costs, hence realizing greater profits. The Starbucks brand is also synonymous to the quality of coffee it offers and its association with its fair-trade product set. The company has invested tremendously in an effective supply chain model, which is a key dependency for its operations and success. It has managed a strong supplier network across key parts of the world. The cost of a cup of Starbucks coffee is deemed relatively high in comparison to competitors.
This limits coffee consumption of middle and low income group customers who opt for other substitutes. Because the company operates globally, another key consideration must be made towards internal resource management through cross-cultural intelligence. The strengths of Starbucks far outweigh its cost disadvantage. Many consumers are loyal customers who support the company with repeat business. Starbucks is investing in a planned geo-targeted strategy where by individual locations are being incorporated with larger retail centres to attract on-the-go traffic.
The company is also investing in introducing complimentary products such as take home coffee beans and coffee accessories for customers. Apart from this, Starbucks is also partnering to sell their coffee through other intermediaries. The threats to the Starbucks Corporation are associated with competitive rivalries in the coffee market, rise in price of raw materials, cultural and political factors related international business. Thus, it is evident that the Starbucks is well positioned around its strengths, which far outweighs its weaknesses.
The company must maintain its supplier relationships, and continue to offer compelling and premium products to its customer base in order to stay relevant and compete against other coffee giants. 2. PORTER’S ANALYSIS The Porter’s analysis is a powerful tool in the strategy management. It helps to make decisions based on the external environment and the internal factors and to design the long-term goals of the company. Porter’s analysis mainly deals with the external environment of the firm which means the macro environment external to the company. The five forces of PORTER’S analysis includes * Bargaining power vested with the suppliers Bargaining power vested with the customers * Competitive rivalry * Entrants barriers * Threats of substitutes Porter’s analysis of United Parcel Service Inc. (UPS) The external environment of United Parcel Service Inc. can be understood by applying the Porter’s five forces framework. Since UPS Inc. is a parcel service company, it comes under the logistics industry. Thus the external environment comprises of the other companies providing logistics services, many other firms out of industry who require transportation. From the Porter’s five forces the macro environment external to the UPS is understood individually.
The threat of new entrants is one of the five forces of Porter’s analysis. As observed, UPS has international brand equity across the world and thus is having long term contracts with its customers including the corporate companies as well. Hence the new-entrants threat is low. The availability of substitutes promotes the competition and decline the profitability. In the point of logistics and supply-chain, an untimed service is expected to be done at lowest price as possible. Also, in the view of cost cutting, firms may even create their own means of out-sourcing. Thus, the availability of substitutes to UPS is moderate.
In the industry of Logistics and supply chain, UPS does not depend on any suppliers since they have their own operational unit. Hence, the bargaining power of suppliers is very low in the case of UPS Inc. The buyer power vested with the customer can be said to be from low to moderate level in case of UPS because the small customers cannot have the flexibility to bargain due to fixed prices. But, large companies and corporate customers can bargain as they use the complete service of the company. Competition from the other firms in the market is high when we observe in the supply chain market.
Fed Ex is considered to be the closest competitor to UPS which provides almost similar services and have equal brand value in the market along with UPS Inc. Due to comparable prices, and many local competitors in the international market, UPS is considered to have high competitive rivalry. 3. PESTEL ANALYSIS Various factors like governmental regulations, tax changes, new laws, trade boundaries, governmental policies are few instances of macro environment. These factors are categorized for better understanding of the external factors in an industry. This framework is an approach of * Political factors Economic factors * Social factors * Technological factors * Legal factors * Technical factors Strategy analysis of FedEx using PEST Analysis FedEx is a logistics services company, based in the United States. It has the strong brand value and is the second company in logistics. The external business framework of Fed Ex Company is explained by applying the PEST analysis. Political factors – As FedEx has operations globally, it is necessary to follow the international trade laws, regulations. FedEx has imposed strict shipping guidelines and customer rules to ensure the safety and trust in the customers.
Economic factors – As the business started to expand globally, it started to take advantage of the new markets and demands in the logistics and transportation sector. FedEx created a global network by offering the full service management tools and support. It also maintained strong and good negotiations with its corporate customers which even more raised the economic condition of FedEx to greater extent. Social factors – With the tremendous demand in the supply chain, FedEx provides value-added services which bought customer’s loyalty to the business and hence the same corporate strategy is maintained throughout the firm.
As part of the maintenance of ethical values, FedEx also participate in many volunteer programs to constantly maintain the relationships with the customers. Technological factors – The core business of FedEx is, Express Services and this was highly developed by the effective utilisation of the advancements in technology. In this type of service, FedEx aroused as a successful company in the logistics management by using various modes of supply chain including internet in the form of e-logistics.
Thus it provided the facility to its customers by receiving orders online and also updating the status of the order and its delivery online. Legal factors – The growth of FedEx depends on many factors such as, government deregulation of the laws in the air-line industry in U. S which lowered their operating costs tremendously. The free governmental policies on logistics in Asian countries also made FedEx to expand its business globally. Environmental factors – This is also one of the strategic aspects that FedEx implements in its business.
It has its own delivery truck system which maintains the standard values of emissions and in the fuel consumption. Also, the packages used by the FedEx are modified as re-cycled products which efficiently reduced the package costs. Thus from the analysis, it is clear that all the factors are favourable in case of FedEx and hence its position as a market leader is proved. Conclusion The internal value model of the firm has been understood from the frameworks of the three models of business analysis discussed above. The key strengths in the business are closely examined by the strategic approach of the firms.
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