Porter's 5 Forces Analysis of Arcadia Group

This assignment involves conducting a Porter's 5 Forces Analysis on the Arcadia Group Plc. The report explores the economic conditions of the United Kingdom and identifies the environmental influences that the group faces within these conditions. It also analyses the internal business environment of the organisation, including its value chain model. Furthermore, the document reflects on the usefulness and limitations of Porter's 5 Forces within the context of Arcadia Group Plc.

INDUSTRY ANALYSIS AND
POSSIBLE ADAPTATIONS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
a. Uses of Porter's 5 forces model in identification and analysing of the current environmental
influences in context of Arcadia within UK economy................................................................3
b. The usage of value chain to analyse the internal business environment of Arcadia in United
Kingdom within the apparel retailer sub sector..........................................................................6
c. The appropriate adaptations Arcadia can undertake in response to the external forces of
environment.................................................................................................................................7
d. The usefulness of Porter's Five Forces model in understanding the business environment
with its limitations in context of Arcadia....................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
The below report explores the Apparel retailer Arcadia's industry analysis. For any
organisation business environment is important. It deals with the various aspects of business that
appears within an organisation. The industry analysis showcases the Porter 5 forces which
explains the various bargaining powers of suppliers, bargaining power of customers, the intensity
of existing rivalry, threat of new competitors, threat of substitutes etc. Also, the report puts light
on the value chain model to analyse the internal business environment of Arcadia. Arcadia is a
clothing retail organisation which is headquartered in London, United Kingdom. The company is
one of the largest clothing retailers in the country. The model explains the various factors that
impacts the organisation internal environment of Arcadia's. Along with it, it explains the
appropriate adaptations that Arcadia undertakes in response to external business forces of
environment and the usefulness of Porter's 5 forces model to understand the environment of
business and describing its potential limitations. All of these models explains how Arcadia
manages to improve its business within its internal and external environment.

MAIN BODY
a. Uses of Porter's 5 forces model in identification and analysing of the current environmental
influences in context of Arcadia within UK economy
The model of Porter 5 forces is a strategic management tool that analyses industry and
understands those profitability levers which are underlying in a given industry. The below
mentioned five porter forces explores how these 5 competitive forces impacts the organisational
profitability and develops a strategy that enhances the organisations competitive advantage in
United kingdom and its long term profitability in the overall Retail industry.
The Porter's Five Forces are:
 Bargaining powers of suppliers
 Bargaining power of buyers
 Rivalry among the existing players
 The threat of new entrants
 The threat of Substitute products
Bargaining powers of suppliers: The suppliers which supply the raw materials to
Arcadia in United Kingdom tends to act more dominant in order to gain more profits from the
company. When suppliers ask for high prices while supplying their raw materials the company
tend to lose its profitability. To deal with this, Arcadia chooses to build efficient and effective
supply chains with multiple suppliers. (Aydalot and Keeble, 2018) Also, the company
experiments with various product designs in which it chooses a variety of materials. In case if the
price goes up of a raw material the company can always shift to another one. The organisation
also develops those suppliers which are dedicated to the company and whose businesses is
dependant upon the organisation. This makes them provide the raw materials in lower rates when
there is less demand and higher rates when there is a rising one.
Bargaining Powers of Buyers: The bargaining powers of buyers also makes the Arcadia
lose it profitability in business. The buyers tend to demand a lot and want to purchase the best
offerings in very fewer prices. It depends upon the customer base of Arcadia in which, if the
company is having a smaller and a powerful customer base the customers tend to have a higher
power of bargaining and along with it, this increases their ability to seek more offers and

discounts. To deal with this, Arcadia tries to build a huge customer base. It helps the organisation
to gain more consumers and to reduce its bargaining powers as well.
Rivalry among existing players: In case if Arcadia is having higher rivalry of its
competitors in United Kingdom then it will lower down the prices of Arcadia's products and
services. The organisation have its competitors such as Arcadia, Tesco etc. these are its one of
the biggest competitions. To deal with these competitors the organisation chooses to build a scale
in which it can compete better, also Arcadia collaborates with its competitors in order gain an
increase in its market size instead of competing in small market. (Bajari, Houghton and Tadelis,
2016)
The threat of new entrants: United Kingdom acts as one of the biggest countries of
Europe in terms of its economy and market reputation. There is a constant chance of the arrival
of new entrants for Arcadia. It can include a number of trends that the consumers are following,
better options available in its competitors base etc. (Bardach and Patashnik, 2015) These widely
impact the overall organisation and its profitability both. For this, Arcadia tries to constantly
innovate new products, it spends more money on research and development and builds it
capacities within the market of United Kingdom.
The threat of Substitute products: Arcadia is clothing retail company, and for a
clothing retail is becomes difficult to operate in the market when there is a threat of Substitute
products. The company tends to observe every possible aspect in which it can make its products
better and different from its competitors. Other retailers in United Kingdom such as Arcadia
develops the products with better prices and good quality which makes the organisation to
change it approaches entirely to produce new and better goods. In this case, Arcadia tries to be
service oriented rather than just being product oriented and it understands the customers needs
well to comprehend what they actually want.

Source: Arcadia Group Plc Porter Five Forces Analysis, 2012
b. The usage of value chain to analyse the internal business environment of Arcadia in United
Kingdom within the apparel retailer sub sector
The value chain analysis is a tool to understand and comprehend the importance of
internal factors that plays a major role within an organisation. It helps Arcadia to obtain an
understanding of how its competitors create value and help it to decide whether it should
outsource or extend its particular activities. In the beginning of any business the identification of
each part of production process is done, in which steps which can be eliminated are noted down
with other improvements. This helps the business to determine where the best value is situated of
its customers and later it can improve or expand its said value. It results in enhancing the
production or cost savings. At last, the consumers enjoy high-end products at low prices. The
primary activities of its includes marketing, operations, outbound logistics, inbound logistics,
and sales and services. (Cortimiglia, Ghezzi and Frank, 2016)
Illustration 1: Porter Five Forces

Below explored is the value chain analysis of Arcadia Group:
INBOUND LOGISTICS: The activities of inbound logistics are concerned with storing,
receiving, and distributing those inputs which are used in the creation of services and products.
Arcadia is the winner of GBS supply chain and is having significant leads in its program of Plan
A sustainability that creates step changes in its worldwide supply chain. Arcadia has also
received commendation from the EC which gave the firm European Business award for the
environment. This proves that Arcadia is having a good stronghold on sustainability where the
organisation is having a good advantage over its competitors. (Grant, 2016)
OPERATIONS: The internal operations are an important part of an organisation. As per
Arcadia's annual report of 2016, the organisation is working on improving its customers
experiences. The company is trying to provide its customers a good experience in which it is
making its employees more aware about the consumer behaviour, by providing them with better
training and education. Also, the organisation is making its stores more facilitating to impress its
customers and provide them with a good working environment. Arcadia is making these changes
to improve its operations all over the UK. (Hopkins, 2014)
OUTBOUND LOGISTICS: The outbound logistics are responsible for collecting,
storing and distributing of the products and services to consumers. Arcadia provides its
customers' with the options of both online and in-store shopping. The company has recently
brought a number of warehouses in all over the United Kingdom to make the organisations
supply chain and overall distribution better and efficient. By providing its focus on creating a
good outbound logistics solution Arcadia is set to provide faster deliveries than its competitors
and will earn overall market profitability as well.(Iglesias and Garrote, 2015)
MARKETING AND SALES: Better marketing and sales helps to make the consumers
more aware about the product and services and to convince them to purchase the sold
commodity. Arcadia in its digital division venture lab tends to work with the technologies of lean
start up to improve its customers excellent shopping experience. Customers can shop online,
from their mobile phones, store visits or through catalogue from multi-channel experiences.
Also, the use of high impact promotions has also helped Arcadia to improve its marketing
services.

SERVICES: Arcadia has chosen to provide better consumers services by increasing its
customers loyalty, in which the organisation is providing the best of the products with free
deliveries and discounts. The clothing retailer has also chosen to maximise its products
availability all over the United Kingdom to gain more consumers as well to make it reach where
is has not reached yet. Also, the organisation is trying to improve its delivery speed to deliver its
products as fast as possible. To improve its services the organisation has made big changes
which required huge investments such as buying more transportation services for better delivery,
incorporating new stores in local markets and promoting these stores and the overall brands that
serve into them etc. These investments have made its organisational profits suffer but Arcadia
has seen a rapid growth in its sales after making these changes in its services.
The above mentioned value chain model analyses the internal business environment of
Arcadia within United Kingdom.
c. The appropriate adaptations Arcadia can undertake in response to the external forces of
environment
Arcadia tries to examine the external forces of the environment and adopts necessary
measures to deal with them as well to avoid risk. The external environment forces can cause
greater damage to the organisation in some cases, which makes it important for the clothing
retailer to observe the environmental changes well and take actions accordingly. Below
mentioned are appropriate adaptations that the organisation undertakes in response to the
External environmental forces:
Forecasting: Forecasting helps the company to understand what overall changes the
macro environment is facing. These changes can be seen creating minimal impact in particular
places which later gains rapid growth. Arcadia tends to observe these changes before so that the
organisation is prepared with the necessary tools and strategies to overcome these challenges
effectively. The organisations marketing, sales and R&D department is responsible for
forecasting. Along with it, forecasting also helps the organisation in understanding the impact
created by its sold goods and services. It allows the organisation in advancing beforehand to the
changes appearing in technology, politics, social environment etc. While using forecasting
Arcadia tracks trends, changes appearing the political scenario of a country, weather forecasting
to observe environmental changes, along with it the organisation observes its competitors rivalry

and their profits to see their growth and in what ways it can make itself better to deal with the
external environmental issues. (Lin and Ouyang, 2014)
Proceeding with caution: Arcadia tries to proceed with caution in case if any of the
external environmental forces appears without providing any signal. The organisation takes its
steps gradually and with proper guidance from its leaders or managers to cope with the situation
in hand. For example, in recent trade war the company faced a huge loss when China cancelled
the company production permit and the organisation has to close its plants in China to deal with
the losses. To deal with it efficiently, the organisation chose to produce its goods in India and
shifted its overall Asian distribution in the Indian Subcontinent. This provided Arcadia with huge
benefits such as having less legal and political restriction than China, better ownership, and
cheap raw material access. This lead Arcadia to observe a rapid growth in its production and
sales as well. The trade war made the organisation suffer for a while but its effective response
created made the organisation better and increased its profitability.
Developing Strategic Plans: The company develops strategic plans to cope with the
situations that might happen in the future. Any of the situations such as a natural disaster,
terrorism, threat from legal entities etc. can make the organisation face bad outcomes and might
make it suffer. To deal with this, the company develops various strategic plans that can help the
organisation to face the difficulties well and run its operations smoothly. It is important for
Arcadia to have a hold on various strategies to deal with such issues. Separate departments of the
organisation try to build separate strategies in which they focus on the factors which needs to be
implemented when such issues occur. The marketing team builds strategies to cope up with low
sales and competitors better marketing. The sales team tend to create strategies to fight low
selling and to increase selling when required. The human resource team builds strategies to
recruit necessary employees when there is an immediate requirement.
Implementing a response team: Arcadia implements a response team to deal with issues
that make the organisation suffer while the time of crisis. The time when United Kingdom
decided to leave European Union, the organisation had to face various troubles in order to keep
its operations smooth in Britain. The company suffered to maintain a strong relationship with its
suppliers across Europe and because of this it was bound to find new suppliers. To deal with this,
Arcadia implemented a response team that included some of its high-skilled employees and
managers, which later with efficient teamwork managed to deal with the issue of Brexit.

d. The usefulness of Porter's Five Forces model in understanding the business environment with
its limitations in context of Arcadia
The tool of Porter's 5 forces explains the organisations competitive forces and how the
organisation manages to deal with them effectively. These forces are strong and weak as per their
market understanding of the organisation. Their impacts might hinder the organisational growth
and make Arcadia face difficulty in production, sales, marketing, etc. The below mentioned
reflective analysis explains the usefulness and limitations of Porter's five forces within Arcadia's
environment. (Pelling, O’Brien, and Matyas, 2015)
Introduction: The bargaining powers of suppliers in Arcadia explains that the supply of
raw materials get effected when its suppliers act more dominant. This affects its overall profits.
The bargaining powers of buyers explains that the organisation face issues regarding its
profitability when consumers asks for best offering in fewer prices. In rivalry among existing
players it can be seen that the company is having high competition in United Kingdom which
tends to create pressure on the organisation to do more market research, build better products etc.
Arcadia constantly have to keep an eye on new entrants to deal with the threats they might come
up with and the threat of substitute products is another one that the organisation faces which
make the organisation constantly develop products that are new and different in case if the
consumers shift to its competitors.(Potts, 2017)
Feelings: I feel the organisation is having high pressures in managing both of its
suppliers and buyers. Also, it is very easy for Arcadia to lose its market share when it loses those
suppliers which provide the organisation with required raw materials. The buyers tend to ask for
best offerings in low prices and the organisation face losses in providing them the asked
offerings, it makes it difficult for the organisation to cope up with this issue of buyers. Again,
Arcadia faces hurdles in dealing with its existing rivalry as they tend to make better products and
provide better services. The threat of new entrants and substitute products is another one that
makes the organisation face hurdles in managing smooth operations. (Shapira, Klochikhin and
Sensier 2014)
Evaluation: The organisation is facing a lot of threats from its overall market
competition. Its suppliers and buyers has increased the pressure on the organisation to earn
profits. Its competitors are making it look for more options that are fresh and better than them in
terms of quality and pricing. Along with it, there is a constant threat of new substitutes from

these competitors and of market new entrants such as trends, new products etc. These factors are
making its growth suffer and hindering its capabilities as well.
Conclusion: From the above evaluation I have observed that Arcadia is facing major
threats in its overall organisation growth. Factors such as new entrants in market, its rivalry from
its competitors are making the organisation weak in producing its goods smoothly and
efficiently. The threat of substitute products in the market is making Arcadia spend its resources
on Research and development to bring new products.
Action: I believe Arcadia should observe its competition more. If the organisation is
aware of its competition it will help it to gain a perspective on how its competitors are dealing
with same problems. This can make the organisation free from the issues of dominating suppliers
and buyers. Along with it, to deal with new entrants Arcadia should produce unique products that
will increase its consumer base and will reduce the threat of substitute products and new entrants
as well.
The above mentioned reflective analysis of Porter's five forces explores what problems
Arcadia is facing in keeping its operations smooth. Also, the measures that needs to be adopted
to gain overall improvement and business profitability for Arcadia. (Swanson and Creed, 2014)
CONCLUSION
The above report explores the organisational environment of Arcadia Group. The usage
of Porter's 5 forces model in the identification of the environmental influences that Arcadia
group faces within the economic conditions of United Kingdom. Also, it explores a value chain
model where the report analyses the internal business environment of the organisation. The
adoptions that Arcadia undertakes in response to external environmental forces. Also, it reflects
the usefulness and limitations of Porter's 5 forces within Arcadia.

REFERENCES
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Potts, R., 2017. Early Hominid Activities at Olduvai: Foundations of Human Behaviour.
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Shapira, P. and et.al., 2014. Probing “green” industry enterprises in the UK: A new identification
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Online
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