Analysis of Internal and External Environment of BOOTS Company

This report analyzes the internal and external business environment of BOOTS company with the help of various tools and techniques to gain better insight of factors influencing the business environment. The report includes VRIO analysis, PESTEL analysis, and Porter Five Forces analysis to determine the competitive advantage of the organization and the factors that shape the industry. The report also highlights the importance of innovation strategy in supporting business growth and profitability.

STRATEGY,
ENTERPRISE AND
INNOVATION

Table of Contents
STRATEGY, ENTERPRISE AND INNOVATION.................................................................1
INTRODUCTION....................................................................................................................3
TASK.........................................................................................................................................3
Analysis of internal environment...........................................................................................3
Analysis of external environment..........................................................................................5
Analysis of competitive forces within the industry................................................................7
CONCLUSION.........................................................................................................................9
REFERENCES.......................................................................................................................10

INTRODUCTION
Innovation strategy support business in forming decisions for achieving desired
organizational objectives, deliver value and build competitive advantage. An innovative
business strategy support business in gaining distinctive advantage, attract external
opportunities and minimize challenges (Innovation strategy, 2016). Such strategies also help
the business in analyzing comparative and technological environment in which they will
operate. BOOTS is a subsidiary company which was started by John Boot in 1849 and is
operating in several industries, such as- beauty, healthcare, pharmaceutical and photography
industry. The parent company of BOOTS is Walgreens BOOTS Alliance. The brand has
more than 2300 stores from local community to large destinations (About Us). BOOTS is one
of the lading giants in UK which is operating in retail industry. This report will outline the
analysis of internal and external business environment of the organization with the help of
various tools and techniques to gain better insight of factors influencing the business
environment. The project will also highlight the competitive forces within the industry which
create an impact on the operations of the company.
TASK
Analysis of internal environment
VRIO ANALYSIS
VRIO analysis is a tool which helps in determining the competitive advantage of an
organization. This framework can support business in turning their competitive advantage
into sustainable competitive advantage. This technique is used to determine the internal
resources and capabilities of an organization that can be a source of sustainable competitive
advantage (VRIO framework, 2021). In the acronyms of VRIO are- valuable, rarity,
imitability and organization. Barney, J. B. outlined four qualities that a firm's resources must
possess in order to become a source of prolonged competitive advantage in his article 'Firm
Resources and Prolonged Competitive Advantage.'
In order to analyze the internal resources and capabilities that enhances competitive
advantage of BOOTS company, VRIO analysis will be used. The VRIO technique in context
of BOOTS company is explained below:

Resources Valuable Rare Imitable Organization Advantage
Financial
resources
Yes Yes No Yes Sustainable
Competitive
Advantage
Workforce Yes Yes Yes No Sustainable
Competitive
Advantage
Research and
development
No No Yes No Competitive
Advantage
Distribution
network
Yes Yes No Yes Sustainable
Competitive
Advantage
 Financial resources- The financial resources of BOOTS company are highly valuable
and help them in investing into external opportunity. These resources also help the
company in minimizing the external threats which can be faced by the organization and
improve the operational activity of the business. The financial resources are also
considered as rare as strong financial resources are only processed by limited companies
and BOOTS company is one of them (VRIO analysis of BOOTS, 2018). The financial
resources of BOOTS are expensive to imitate, as these resources are acquired by the
organization from prolonged time and generate higher profit. With the help of financial
resources, the company make use of opportunities with the help of strategic investment.
This resource also offers sustainable competitive advantage for BOOTS company.
 Workforce- the employees are valuable resource for the organization as BOOTS
company offers them training which helps in enhancing their productivity and offers
better output of the organization. As employees of BOOTS company are highly trained,
such qualities makes them rare and differentiate them from other companies. The
employees of the company can be imitable as other companies can also train their
employees and enhance their skills.
 Research and development- This resource is not a valuable resource for BOOTS
company as this resource offers less innovative information and is highly expensive
(Antamoshkina and Zinina, 2019). The research and development aren’t rare and can be
imitable by other brand which can create an adverse impact on the business. Such

resources are not coined as the capability and do not drive competitive advantage to
business. Moreover, this resource can drive competitive advantage for business.
 Distribution network- The distribution network of BOOTS company is a valuable
resource which helps the company in reaching out to a greater number of customers and
ensures higher revenue. This also helps the organization in converting promotional
activities into sales through which higher profits can be generated (Hnatenko and et.al,
2020). This resource of the company is rare as BOOTS has made huge investment in
order to build strong and better distribution network which can process faster services to
their customers and such practices makes such business resources rare and inimitable. As
this resource has been strengthened with high cost investment, such initiatives are not
inimitable and makes brand operations unique. The distribution network of BOOTS is
highly organized which supports the organization in meeting customer demands on time
and this has been a source of sustainable competitive advantage.
From the above VRIO analysis, the internal resources and capabilities are identified
which supports business in gaining competitive advantage. This technique was helpful in
determining the internal resources and capabilities of the BOOTS company through which
they can manage to earn and maintain their sustainable competitive and maintain competitive
position of the fand within the retail industry.
Analysis of external environment
PESTEL Analysis
PESTEL analysis is a tool which supports business in understanding the macro
business environment. This tool helps in understanding various factors such as political,
economic, social, technological and legal factors which can influence the business operations.
In order to analyze the external environment, a detailed PESTEL analysis of BOOTS
company has been explained below:
Political factors- Political stability, change in policies, pressure groups, governance
systems, bureaucracy, corruption, taxation, trade restrictions and intellectual property rights
are some of the political factors which create an impact on the operations of BOOTS
company (Jin and et.al, 2018). Political stability, change in policy and pressure groups can
offer various opportunities for development and growth of the company. Whereas,

bureaucracy and corruption are some of the factors which can negatively influence the
profitability and brand image of the company.
Economic factors- Economic development, infrastructure development is responsible
to create positive impact on the organizational performance of BOOTS as this facilitates
business environment and increase growth potential for the company. With the help of incline
in inflation, employment, interest and exchange rate, this can support the company in
achieving their long-term objectives. However, labour market conditions are some of the
responsible factors which can eld to lack of continuity in the operations of the company.
Social factors- the change in demographic trends can influence migration and this can
be a high growth potential which can be helpful in attracting labor and increase employment
opportunities (SWOT and PESTEL analysis of BOOTS alliance, 2021). The societal norms
and class distribution are one of the factors which encourages organization to develop
partnership and adopt niche marketing strategies through which they can strengthen their
place and position within the industry.
Technological factors- The cost structure, research and development are some of the
factors which creates a negative impact in the organization. Whereas, social media marketing,
technological development can be helpful in enhancing operations and performance of the
organization through which BOOTS company can enhance their performance and strengthen
their competitive position within the industry. Such factors support organization in
maximizing their profitability.
Environmental factors- Waste management, recycling is some of the current
demand and this creates a significant impact on BOOTS company and promotes in using such
practices which can be more environment friendly. The excessive resource depletion is
responsible for drawing negative impact from media and others sources which can
manipulate brand image of BOOTS company. The investment in renewable energy can be
helpful in ensuring long term sustainability and will increase stakeholder satisfaction level.
Legal factors- BOOTS must follow employee protection law, antidiscrimination law
which can offer them health and other safety at workplace and this will support the company
in retaining higher number of employees and will also support in attract new and fresh talents
(BOOT alliance PESTEL analysis, 2018). The inability to protect intellectual property rights
can lead to hindrance of the brand image of BOOTS within the industry.

In order to give better insight of the external business environment of the BOOTS
company, a mind map has been demonstrated below:
Source: Created by self
Analysis of competitive forces within the industry
Porter Five Forces
Porter five forces is a model which is used to analyze and determine the five
competitive forces that can shape industry and supports in understanding strengths and
weakness of an organization (Porter Five Forces, 2020). Michael E. Porter coined this theory
which is used to determine the structure and corporate strategy of the organization.
A briefly explained Porter Five Forces in context of BOOTS company has been
discussed below:
Bargaining power of suppliers- There are frequently more providers than buyers in
the industry in which BOOTS Alliance operates. As a result, suppliers have less price control,

putting them in a weak negotiation position. The products of these providers are fairly
uniform, have minimal distinction, and have low switching costs. This makes it easy for
buyers like BOOTS to swap suppliers. As a result, the bargaining power of suppliers is
lowered. The BOOTS company is an important customer for its suppliers because of the
industry in which it works. This means that the profitability of the sector is closely linked to
that of its suppliers (BOOTS alliance Porter Five Forces, 2018). As a result, these companies
will have to compete on price. As a result, suppliers' bargaining leverage within the sector is
low.
Bargaining power of buyers- The number of suppliers in the BOOTS business far
exceeds the number the number of enterprises that make the goods. As a result, buyers have a
limited number of options from which to pick and so have no price control. As a result,
buyers' bargaining power inside the sector is reduced. Within the industry, there is a lot of
product differentiation, which indicates that purchasers won't be able to find the same product
made by other companies. As switching is difficult, customers' bargaining power inside the
industry is reduced. Buyers are concerned about product quality, and they make repeat
purchases. This suggests that buyers in the business are less price sensitive. As a result, the
bargaining power of buyers inside the sector is decreased.
Competitive rivalry- The competitors of BOOTS company are -CVS health,
Walmart etc. Only a few competitors hold a sizable part of the market. This indicates that
they will compete in order to get a competitive advantage and establish themselves as market
leaders. As a result, the industry's existing corporate competitiveness grows more powerful.
Fixed expenses are significant in the industry where BOOTS operate (Porter Five Forces of
BOOTS company, 2019). As a result, the industry's businesses are required to run at full
capacity. This also implies that if demand falls, these enterprises will reduce their prices. As a
result, the industry's existing corporate competitiveness grows more powerful.
Threat of new entrants- BOOTS alliance have a large market share and has
established itself as a strong brand which focuses on maintaining their market share and
brand reputation in the industry. The product differentiation is strong within the industry
where companies sell different products rather than a standardized product and also focuses
on advertisement and customer services offered by the organisation. Such forces are
responsible to create threat of new entrants on weak forces within the industry. The capital
requirement, research and development cost are high which creates a threat for new entrance

as a weak force within the industry (Xie, 2020). While operating in the industry, there are
various government policies, legal requirements and strict licensing which are required to be
met by all companies within the industry and this creates a challenge for new entrants to
make their space and position effectively.
Threat of substitution- BOOTS company offer products have a limited number of
alternatives available. Low-profit industries also manufacture the few replacements that are
available. This means that in the industry where BOOTS Alliance operates, there is no limit
to the amount of money a firm can earn. Alternative products have become a weaker
influence in the industry as a result of all of these concerns.
CONCLUSION
From the above report, it can be summarized that innovation is an important element
for business growth and profitability. An innovative strategy can support an organization in
enhancing their competitive position and generate higher revenues through which their
profitability can be maximized. It can be seen that in order to analyze the resources and
capabilities and their competitive advantage for organization can be analyzed with the help of
VRIO analysis. This tool supports in understanding resources which can drive competitive
and sustainable competitive advantage for organization. In order to analyze the external
business environment, techniques such as PESTEL analysis is used which supports in
understanding the dynamic factors that has influenced the business environment in positive or
negative manner.

REFERENCES
Books and journals
Antamoshkina, O. I. and Zinina, O. V., 2019, May. A methodology for assessing the
prospects of modifying business strategy of an enterprise in the external environment.
In IOP Conference Series: Materials Science and Engineering (Vol. 537, No. 4, p.
042023). IOP Publishing.
Hnatenko, I and et.al., 2020. An approach to innovation potential evaluation as a means of
enterprise management improving. International Journal of Supply and Operations
Management. 7(1). pp.112-118.
Jin, X and et.al., 2018. Knowledge source strategy and enterprise innovation performance:
dynamic analysis based on machine learning. Technology Analysis & Strategic
Management. 30(1). pp.71-83.
Xie, Q., 2020. Research on Enterprise Culture Innovation and Enterprise Technology
Innovation. Design Engineering. pp.685-690.
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