Porter's Five Forces Model and Value Chain Analysis

The provided report analyzes the importance of market analysis for company growth and sustainability. It discusses Porter's five forces model as a suitable option for analyzing external factors and identifies weaknesses using the value chain model. The document also mentions the advantages and disadvantages of Porter's model, providing insights into its adoption by companies like Topshop.

Business environment

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
A) Analyse the current environmental influences on the Apparel retailer sub sector............3
B) Analyse the internal business environment through value chain analysis........................5
C) Explanation of appropriate adaptations of selection firm..................................................8
D) Reflection on the usefulness of the porter's forces model.................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment is made with two factors such as internal and external which
affects the operations of organisation. In other words, sustainability of firm that is affected
through various factors such as interior or outside part of the firm. Internal consists employees,
suppliers, structure, value and belief of the organisation whereas, external includes economical,
political, legal etc. that influences the organisational culture in positive or negative way. The
chosen organisation for this assignment is Topshop which was founded in 1964 and based in UK.
It is a retailer company engaged in selling wide range clothing products. This report is included
porter five force model for identifying present environmental impacts on the organisation along
with its positive and negative impact. Value chain method for analysing the internal
environment. Appropriate methods which may helpful for the organisation in future period will
also covered in this report.
TASK
A) Analyse the current environmental influences on the Apparel retailer sub sector
In present scenario, there is a tough competition in the clothing sector among the various
players. Due to which, the UK economy is developing from past 5 years, as there are many big
brands established within the boundary and they are providing huge tax duty to the government.
It is very essential for an organisation to develop plans and strategies so that, they will get
sustainability in the market. There are various factors which can influences the operational
activities of a firm so that, it is necessary for identifying factors due to which, they will be able in
running their business activities. For analysing the current environmental factors porter's five
forces model can be used because with the help of this, organisation can analysing their current
position in the market and it also defines the profitability along with competitiveness of the firm
It is briefly described as under:
Bargaining power of supplier is the first force of model in which, the company is
providing their manufacturing goods in the marketplace through their suppliers. There are a large
number of suppliers are present in fashion industry so their power is low in terms of providing
threat to company (Adeoye and Elegunde, 2012). For e.g. if a supplier is charging extra margin
on supplying the product then company can chose other supplier for delivering their goods and

services to their customers. Therefore, it can be said that the bargaining power of supplier is low.
The suppliers for Topshop is huge, hence, it can choose one who will provide raw material at
lowest price. However, there is one obstacle, and that is that input should be as per the demand
of Topshop, in case, only some of the suppliers provide specific material, then costs will be high
and the entity will not have any other option.
Bargaining power of customer is the second determinant in this, the customers are the
king of the market so that, they can chose products as per their requirement. There are various
number of players located in the market of UK such as Topshop, Marks and Spencer, Ethel
Austin etc. so that, customer's have various options due to which they can select goods which
will fulfil their needs and expectations. For example if a retailer will increases its product prices
then its sale will be reduced because its rivals are providing same product in low price. So that, it
is essential for an organisation who is dealing in fashion sector that they have to sustain their
prices due to which, their growth will be maintained in the marketplace. Therefore, the power of
buyers is relatively very high. Topshop is a company offering variety of products in order to
remain competitive. Hence, there is always a pressure form its customers to introduce products
that will provide highest satisfaction and will help retaining its customers (Babatunde and
Adebisi, 2012).
Competition from existing players in clothing sector, companies who are providing their
products in the apparel sector therefore, they have to face lots of competition from the giant
players in the marketplace. There are various big players present in this industry such as M&S ,
Ethel Austin, Topshop etc. they are providing number of varieties in their products to the
customers due to which their sales is increases. In order to getting sustainability and competitive
advantage companies have to make changes and innovation in their existing products. With the
help of this, they can attain maximum number of customers towards their offerings. Hence, the
rivalry competition in clothing industry is very high. Topshop has close competition with ZARA,
which offers same products with similar prices. Topshop has to face cut-throat competition,
hence, it should target young people to by giving them discounts and attractive offers (Belás and
et. al., 2014).
Threat of New entrants are not providing adequate menace to the existing player in the
fashion sector. As UK's fashion sector is fulfilled from various giant players such as M&S, Next,
topman etc. and they are providing huge tax duty to the government due to which, their brand

image is maintained in the marketplace. For entering in this sector, a huge investment and
various permissions such as location, plant, employees, environment are needed if any player is
completed these requirements than it would have no power for facing challenges from existing
players which are already placed in the market. So that, new entrants do not become a threat for
the existing players in fashion sector. Topshop is operating at large scale and provides variety of
products, this calls for huge investment. A person can not enter this sector and compete with
Topshop without such heavy investment. Hence, this threat is low (Craig and Campbell, 2012).
Threat of substitutes is the last determinant of this model in it, there are lots of
customers present in the market and their needs are also different. Companies who are placed in
this sector providing products at low prices due to which their sale will be increased and they
will attain large number of customers. Substitutes may be defined as a similar product of original
which can be used by the customer in the case of higher price of original goods. For example- a
player has selling its products at high price therefore customers will attracted towards the product
which can be fulfilled their need at low price and present in the marketplace. As there is a huge
competition present in the market so, company have to make effective plans and strategies
towards their prices due to which, they will make products as per the demand of the customers
which will help them in attaining more number of customers at their stores (Gupta, 2013).
Topshop offers products at high prices as compared to other stores operating in the same
industry. There is a high chance that its customers have other shops from where they can
purchase similar items at reduced price.
B) Analyse the internal business environment through value chain analysis
In the current scenario, every organisation wants to provide more satisfaction to their
customers so that, it is very essential for an organisation to analyse their internal environment
because with the help of this, they can overcome their issues which are present in their
atmosphere due to which, they will get effective results from their employees. It is also providing
assistance to firm in getting competitive advantage in marketplace. For getting better results,
Topshop can use value chain analysis for analyse their internal environment which was
introduced by Michael porter. It can be further understood as under:
Value chain analysis is a tool which help the organisation in delivering valuable goods or
services for their customers. In other words, firm have to regulate and control all their activities
such as designing, producing and marketing because these activities provide contribution to the

firm in achieving organisational goals (Harrison, 2013). If management will not control
operational activities in their firm it will wrongly effect to the brand image of organisation.
Porter was divided the analysis in two parts such as primary and support activities which are
briefly explained as follows:
Primary activities is defined as the functions which are connected with transformation of
input into output in addition to this, it is concerned with making and supplying a good (Savrul,
2014). The primary activities are more explained with its included parts are as follows:
Inbound logistics are the activities which consists various activities such as
receiving,storing and distributing with the help of these, organisation can start production
process. It also include handling of material, transportation and inventory control. In this,
employees of Topshop will store the new stocks into their warehouses therefore, they can make
availability of their products to meet the needs and demands of the customers. This will impact
the internal management of Topshop which will increase the efficiency of whole process (Hilton
and Platt, 2013).
Operations is the kind through which company transforms raw material into final goods
for sale. In this, machining, labelling and assembling actions are included in this part. In the
context of Topshop, their staff members will mark their labels and prices on new products.
Topshop may have a effective team who understand the whole production process in order to
have timely production of goods. Further, team will also be liable to look after the delivery of
materials for their conversion into finished goods. This will reduce the waste, ultimately
reducing costs (Klem, 2013).
Outbound logistics are defined as a process in which the product is manufactured and get
ready for the distribution to the retailers. It is also called distribution of fattened products.
Managers of top shop will taking out their products from their warehouses in terms of sale new
products to their customers. Topshop may have its own delivery trucks and implement its own
process to avoid and minimise chances of delay. This will save the transportation cost.
Marketing and sales consists promotional tools such as advertisement, magazines, posters
hoardings and making strategies for managing the new products. In the context of Topshop, their
management will take necessary actions for promoting their new products in order to selling the
fresh products to their customers. Innovative and attractive advertisement will capture more
customers which will increase their sales resulting in more profits.

Services is defined as the functions which are needed for managing the performance of
the product it includes maintenance, repair, installation, after sale service etc. Manager of
topshop will providing after sale services to their customers such as 15 days replacement of sold
product. Topshop should have regular inspection of all its equipments and other tools used in
production to save huge costs which can incur due to delay in technical (Pulver, 2012).
Support activities are defined as the base of primary activities by which primary activities
can completed in effective manner. In other words, these functions provide assistance to the
primary activities so that, company can get competitive advantage in marketplace. It includes
various activities which are as under:
Procurement is serving the organisation, by providing all essential elements such as raw
material, machinery etc. which are required for performing primary activities. The Topshop will
uses employee's skills and strengths due to which, they will increase the sale of their products.
Topshop can not complete its activities without taking help from ancillary actions, though it will
increase its costing but there will be no delay in the delivery of final product in shops (Savrul,
Incekara and Sener, 2014).
Technology development is very necessary for every organisation as it requires heavy
investment thus, some of organisations can adopt it. Management of Topshop can adopt effective
IT systems in their transactions, billings etc. due to which, they will provide more effective
services to their customers. It is one of the most influential factors in whole value chain process.
A real time technology will increase the overall activities of business which reduce the costs.
Human resource management is the most essential section of every firm because it
controls all the operational and business activities. It also helps firm in providing young and
energetic employees through recruitment process. In the context of Topshop, their HR manager
has the responsibilities of holding the informations of employees along with their promotions,
transfers, appraisal, bonuses etc. Topshop will provide a list of required employees who are
efficient and replace the ineffective employees. This will save time and increase productivity.
Infrastructure is defined as a management system which gives their services to whole
firm that includes planning, finance, quality, legal etc. In the context of topshop their
management need to acquired an effective infrastructure which makes easy for them to reach
company's products to their targetted customers (Sena Ferreira and et. al., 2012).

C) Explanation of appropriate adaptations of selection firm.
In current scenario, organisation have to adopt various methods which can help them in
overcome the future barriers for reducing the risk in near future. Adaptations is defined as a
position in which company have to adopt some factors due to which, they can survive in the
present competition. There are some adoptions which can be helpful for the topshop management
they are as under:
Quality improve is an essential element because if an organisation can not satisfy their
customers through their offerings it may gave wrong result on the brand image of firm. For
example- an individual who is purchasing products from the stores of topshop on the regular
basis but someday a defective product is provided to it due to which, the attractiveness of the
individual is reduced towards the firm's offering. Therefore, Topshop have to maintain quality in
their products which will help them in attaining more number of customers at their stores.
Effective pricing policy is very important, as there are a tough competition in the
marketplace due to which, customers are attracted towards substitute products that are satisfying
their needs and expectations. Company have to make effective plans and policies for the prices
so that, they can easily attract customers towards their offerings. For e.g. if the market is falling
than company can not hike the prices of their product. It will gave wrongly impact on the loyalty
of firm. Therefore, company have to make effective pricing plans due to which they can get more
sustainability in marketplace (Smith, 2016).
Chose appropriate suppliers is an element which can impact positively and negatively on
the whole process of supplying products in the market. In the clothing sector, there are a large
number of suppliers due to which, company can replace their suppliers if they requires. For e.g. a
supplier who are providing products to topshop stores from a long time if it requires high margin
than management have to attract it through providing him profitable schemes or extra margins on
giving good quality products at their stores due to which, they will get better results in near
future.
Company need to retain their loyal customers. Because loyalty is builds the brand image
of the firm. If company is not providing the deals as per the requirement of the customers, it will
reduce the customers. For retaining customers topshop can provide cashback, recharge coupons
to their customers on heavy purchasing due to which, loyalty of customer will be increased. For

e.g. there are a lots of competitor who are selling the same products but topshop have to make
some changes which will help them in attracting more number of customers towards their stores.
Making plans and policies are required for achievement of organisational goals in limited
time period. Because if company will not making effective plans and policies, it will wrongly
affect on the position of firm due to which, their market share will low in near future period. For
example company have large number of employees who are providing their services in their
stores therefore, company can use their suggestions in decision making process with the help of
this employees will gave more contributions in their work which will help them in taking growth
and sustainability at marketplace.
D) Reflection on the usefulness of the porter's forces model.
Five force model was suggested by the Michael porter. This tool is used for analysing
competition of a firm. It will help company to bring long term advantages which help them in
achieving strong position at market. Along with this, there are various outcomes that can be
received by topshop through adopting such model which are given as under:
Strategy making is the essential element for completing a project in effective and suitable
manner. Strategies are defined as the direction and scope of a firm due to which, company get
competitive advantage in the challenging atmosphere of market by effective utilisation of their
resources. Topshop can used it in making effective strategies in order to getting growth and
sustainability in future time.
Define effective ways of analysing the environment, it provide guidance to management
in identification of weak areas which can be improved by making some changes in their
structure. With the help of this model, managers of topshop get more capabilities due to which,
they can take effective decisions according to the situations.
Analysing the competition, it is essential for assessment strength and weakness of a firm
for the competitors who are present in the market. This model helps the topshop in identifying
the opportunities and threats which can be useful for taking growth and remove the unessential
cost from the firm.
Best tool for evaluating the current position, through the help of this model organisation
will be able to know its current position in the marketplace. They can also know the competitor's
strategies and pricing policies due to which, they can make effective plans and strategies for the
betterment of the firm and they will easily increase their market shares in systematic manner.

Innovations in the existing products is very essential because every firm wants to taking growth
and sustainability in the marketplace. The porter's model provide assistance to management in
making modifications in their existing products due to which, organisation can easily attracts
more number of customers towards their offerings.
There are some limitations of using porter's five force model which are determined as
under:
It is suitable for the multinational organisations, small firms can not take advantage of
this model because it needs high skills of employees and managers who can take help from this
in effective manner. It can not be used in a single firm whereas, it is useful for the sector in
which a company is operating its business. It can be utilised when there is more than three firms
are present in the market. It is helpful for estimating the position of a company but it never
estimates the future growth of the company (Belás, 2014). This model is useful for the making
innovations in the existing products of a firm but innovations are not adopted by every firm
because it requires huge cost. This model is effectively used in analysing the simple market
structure but description of all forces become very difficult in complex structures such as
Multinational companies who have many relations with different industries. It cannot focus all
departments due to which, the risk can not be estimated through this model. This model is can
use in unchanging marketplaces but it is not helpful in current situations of the market.
Technological advancement is very necessary for every manufacturer but this can not adopted by
small scale industries due to insufficiency of funds. Porter's model can helpful in analysing
future situations but it can not gave preventive actions for the upcoming barriers. It is less
effective for company to adopt as it fails to analyse and understand complex and uncertain
market situations that will arises in near future and brings huge impact on their sustainability and
profitability.
CONCLUSION
It has been analysed from the above report that analysing the marketplace is more
essential because company's growth and sustainability is based on it. For analysing the external
factors Porter's five force model is better option because company can easily evaluate its position
and opportunities which are present in the marketplace. With the help of this model, Topshop
can easily find adoptions that are necessary for them in taking competitive advantage. Value
chain model is the internal analysis which is used by topshop for identification of weak areas of

the firm. Advantages and disadvantages of porter's model are also discussed due to which,
company can easily identify appropriate factors which can adopt by them in near future.

REFERENCES
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