Environment Scan Part A
The business world is full of a large number of uncertainties and both internal and external business environment factors contribute to it. If an organisation wants to thrive in the market, then it has to consider those factors. This report will be covering the effects of the external environmental factors on the business. The organisation taken for the study is Priceline. For that purpose, PESTLE and Porter's Five Force analysis of the organisation will be done. Once this will be done and problems will be identified, an appropriate framework will be provided in this report to resolve those challenges.
Priceline is one of the leading beauty and health product retailing organisations in Australia. The sub-division stores under Priceline are "Priceline Pharmacy" and "Traditional Priceline". The company is currently run by Australian Pharmaceutical Industries. Till July 2018, the company had 450 stores across Australia. The company deals in cosmetics, skin care, healthcare, and hair care products. The company recorded annual revenue of 63%.
External Environment in Brief
The external business environment is characterised by the outside factors that influence the business operations (Aithal, 2017). These factors are usually bifurcated into the micro and macro environment. The former is related to those factors that directly influence the business, whereas the latter comprises the general factors over which the business organisation has no control.
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Effect of External Environment on the Organisation
The external environment influences the demand and supply of the pharmaceutical market and further affect the organisation's revenue. The pharmaceutical market is a complex system in which there are many stakeholders involved. Therefore, there is a strong need for carrying out a detailed analysis of each factor comprising the external environment. It is important to note that changes in the external environment can have a direct effect on the organisation and other business players. These changes may impact the organisation's overall profitability and competitive advantage too. For that purpose, PESTLE analysis has been done to detail out the operating challenges due to external environmental forces (Ho, 2014).
Political Forces: These factors are crucial to being considered by the Priceline in order to maintain the long-term profitability of the pharmaceutical company. The company is currently running its operations in many countries around the globe. The business environment is directly affected by the political environment of a country. These factors include political stability, bureaucracy and government interventions, trade regulations, protection of intellectual property, legal framework, etc. Priceline might have faced forceful enforcement of standards by some countries. This might have interrupted the business modus operandi.
Economic Forces: these factors are characterised by the inflation rate, interest rate, foreign exchange, savings, employment rate, etc. These factors directly impact the demand and supply cycle of Priceline. In addition to this, they may have a severe impact on the competitive position of the organisation. These factors need to be considered while forecasting the future growth of the market and the organisation as well. These economic factors include stability of the currency of the host nation, efficient financial market, government economic policies, etc.
Social Forces: Societal forces also impact the profitability and the strategic planning of the business. These forces include culture, demographics, age, economic class, education level, leisure interest, and attitude of the customer (F. Raafat, 2013). Different countries follow different culture and their citizens might have a varying perspective for the product of the Priceline. Therefore, the company should work on its marketing messages while considering these factors.
Technological Forces: Technology is the most unpredictable factor for every organisation due to its ever-changing nature. These factors can help in achieving the competitive advantage for an organisation. Priceline should pace up with the transformation of technology in order to ride at the top level. Technological factors impact the product price, design, and product offering. In addition to this, they also impact the value chain of the firm and increase the rate of diffusion of technology.
Environmental forces: Nothing can be as important as the environment forces because these factors directly impact the revenue of the Priceline in the global market. The environmental laws at the local, state, national, and international level are different and sometimes conflicting. Companies have to consider each and every law at these level in order to keep their operations going and growing. For instance, European countries provide tax incentives to an eco-friendly organisation which may or may not be given in Sub-Saharan countries. Companies have to consider the factors, such as climate and weather conditions, pollution control rules, waste management laws, attitude towards renewable energy and endangered species.
Legal Forces: These factors have to be considered by each and every organisation operating in every part of the world. Some countries have a very stringent legal framework that are not suitable for Priceline to operate their businesses, whereas others may have a flexible legal structure. Priceline is dealing in drugs and other health hazard products. Therefore, it has to comply with the legal obligations of the countries to produce and sell those products. Failing to which, the company might face serious consequences and penalties. Apart from this, legal factors comprise anti-trust law, copyrights, patents issues, Data protection, consumer protection, employment law, health, and safety
Porter's Five Forces Analysis
Porter's 5f analysis can help Priceline in building a sustainable competitive advantage in the market. The management can employ this technique in developing the strategic position within the industry and explore the best profit-earning opportunities (Dulčić, et.al, 2012).
Threats from New Entrants: New entrants enter the markets with new and innovative ways of doing business. These would put a high pressure on the Priceline as they may reduce the customer base and overall revenue.
Bargaining Power of Supplier: Priceline purchases most of its products from a wide number of suppliers. If these suppliers are in a dominant position, then they can decrease the profit margin. Higher the negotiating power of the supplier lower would be the profitability of the company.
Bargaining Power of Customers: Priceline sells its products directly to the customers. To attract their attention, the products are designed based on their needs. Customers want the best products at minimum prices. This has put a great pressure on the Priceline's profitability. Higher the bargaining power of the customers, lower will be the profitability of the company.
Threats from Substitute: there are a large number of substitute for Priceline's products. These substitutes can fulfill the needs of the customer and eat up Priceline's revenue. The threats from these products are very high as they can reduce the company's customer base.
Existing Competitors: The intense rivalry in the market can drive down the prices of the products and ultimately affect the profitability of the company. Priceline operates its business in a very competitive industry.
Ways to Resolve the Challenges
These are not the challenges faced by the Priceline alone, but the whole pharmaceutical market faces the same issues. For Priceline considering these challenges while formulating the business plans and strategies are essential to gain competitive advantage and long-term profitability. These challenges would be important to analyze in order to set relevant business goals and objectives (Long, et.al, 2015). To tackle these challenges, Priceline can follow the following strategies and framework:-
- To gain the competitive position in the market, Priceline should make an investment in technology. This would increase their efficiency.
- The company should strictly adhere to legal obligations. This would make a strong contribution to the performance of the industry.
- The company should try to develop value in the mind of the consumer in order to mitigate the competitive rivalry and threat of substitute (Linand Wu, 2014).
- The company should work on promoting customers' relationship as it would increase the loyalty and revenue.
- The company should work on collaborating and acquisition of competitors in order to increase market size
- The company should promote customer-oriented approaches rather than organization-oriented (Lee and Yu, 2012).
- Priceline can work on increasing the switching cost for the consumers.
- Priceline should work on the rapid innovation of products and offer rebates and discounts on them.
- Priceline should also make efforts for developing a large supply chain with numerous suppliers.
- In order to lower down the fixed cost, the company should build the economies of scale.
This report discussed the number of uncertainties and both internal and external business environment factors. It highlighted that if an organisation wants to thrive in the market, then it has to consider those factors. This report covered the effects of the external environmental factors on the business (both macro and microenvironment). The organisation taken for the study was Priceline. For that purpose, PESTLE and Porter's five force analysis of the organisation was done. To conclude this report, an appropriate framework was provided in this report to resolve those challenges.
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