Business Environment Report

This report analyzes the business environment of ASOS, an online fashion retailer, using Porter's Five Forces model and Value Chain analysis. It examines the impact of external factors like competition, suppliers, and technology on the apparel retail subsector. The report also explores the internal environment of ASOS, including its value chain activities and how it adapts to external changes. It concludes by discussing the usefulness and limitations of Porter's model in the context of ASOS's business environment.

Business environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
a) Current environmental influence on Apparel Retailers sub sectors...................................1
b) Value Chain model to analyse internal business environment of Apparel Retailers industry
................................................................................................................................................3
c) Adaptations of firm in response to external business environment....................................6
d)Usefulness and limitations of Porter's forces model in business environment...................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................8

INTRODUCTION
Business environment is an aggregate of all internal and external factors that directly or
indirectly affects operations of company. These two factor can influence each other for instance,
health and safety regulation is external factor that can affect internal environment of a business
organisation. Business environment include factors like, competitors, suppliers, technology,
government activities, economic trends and consumers. In this report, chosen organisation here is
ASOS which is an online fashion retailer. This company mainly sell mix of their own brand
products across the globe. This company is having 156,000 employees working under them and
they contribute around £4.8 in UK economy (Chetwood and et. al., 2014). In this project
discussions have been made on porter's five model in order to identify and analyse current
environment on taken business sector, value chain model to analyse internal business
environment of company and appropriate adaption of a firm. In addition to this, reflection of an
academic model has also been included in this report.
TASK
a) Current environmental influence on Apparel Retailers sub sectors
Business organisation functions can adversely affect by macro and micro environment.
Porter's Five forces is a business tool that can help an organisation to improve their competitive
position. This model effectively analyse the source where the power lies in a competitive
situation. This model is especially designed in order to help managers and financial professionals
to examine macro and micro factors to take best advantage of situation and overcome
weaknesses in order to avoid and mistake.
Porter's five forces of competitive position analysis:
Supplier Power:
There are various sector in power like, power of supplier and ways in which their
activities affect cost and supplies of an organisation. Meanwhile, there is a large amount of
power in the hands of supplier, that is they can easily switch to other. For example, there are few
suppliers in a market and large number of buyers then power is in the hands of supplier (Crane
and Matten, 2016). They can easily drive up prices of a product and services according to their
wish. Therefore, it is necessary for Apparel Retailers industry to examine and evaluate
uniqueness of their products, their strength and relative size in order to gain competitive
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advantages. It is also essential for this company to evaluate cost of switching from one business
supplier to other.
Buyer Power:
Buyers have most important power in their hand which can directly affect functioning of
business. For example, if there are few buyers in market of a product then they have power to
bring down prices (Gharajedaghi, 2011). Therefore it is essential for Apparel Retailers industry
to consider each and every buyer important to their organisation. It is necessary for company to
evaluate numbers of buyer present in market for a product. In addition to this, it is most
important for this organisation to examine cost of each buyer from switching one supplier to
other. Buyer power can affect functioning of business to lower down their product prices. For
this is very essential for Apparel Retailers industry to improve quality of their products and
services and create more attractive offers.
Threat of Substitution:
It is situation where a close substitution of a product available in a market, it increases a
situation where a consumer can easily switch their alternative from one product to another. There
is various factor which influence a consumer to switch these are, price and quality for a related
product. This will affect company in order to reduce their power to attract buyers towards their
products and services. This factor can easily affect Apparel Retailers industry to achieve
effective probability and increase the threat of switching consumer's. Availability of substitutes
can create more competition in a marketplace and reduce profit potential of an organisation.
Therefore, it is essential for Apparel Retailers industry to make their products and services of
superior quality and maintain affordable range of price and analyse each and every situation of
market in order to reduce this threat (Gilboy, 2016).
Threat of new entry:
It is a situation when profitable market attracts different types of new entrants. But there
are barriers which can hamper entrance of new entries these factors are, capital requirements,
economies of scale, government policies and patents. This will decline profitability rate of
company. It become more easy for any new entrants to enter in a market when there are less
barriers. This factor can adversely affect Apparel Retailers industry productivity as more
composition results in more production without increase in number of consumer this results in
overproduction and wastage of their products and services. Therefore, it is essential for Apparel
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Retailers industry to make proper capital investment, access effective channels of distribution,
ascertain profitable locations and use latest technology in their production process and analyse
every structural environment of micro and macro factor to determine efficient growth (Li and et.
al., 2011).
Competitive Rivalry:
All the above forces come together to create this force. There are two main factor in this
situation and that are numbers and capabilities of competitor present in market. This factor
affects competitive environment of a business and their ability to achieve profit. For instance,
high competitive situation means when rivals are continuously and aggressively target each
other’s product pricing. This is a hazardous situation when rivals try to steal each other profit and
market share. Therefore, it is essential for Apparel Retailers industry to determine and evaluate
number of competitors and their position in market. Hence, Apparel Retailers industry need to
examine size and number of competitor, their market share and then ensure their product are
effectively differentiated.
Micro and micro environmental factor can affect internal functioning of Apparel
Retailers clothing industry. As owners have less control over these factors therefore it is essential
for this company to adopt effective technology, consumer characteristics and government
influence to ensure their overall success. In addition to this it is essential for them to sell their
products in lower price bands to compete with generic brands. It is a fact, that costumer's often
go for cheap product with effective quality. Hence, it is necessary for Apparel Retailers industry
to make proper strategies in order to produce new clothing lines and fulfil the needs of
consumers. For this company have to examine resources, production and demand of certain
product in market and make sure that they pay their manufactures more because if a situation
arise when there is a shortage of raw material then they are the first one to get served by them.
They need to adopt effective technology to change fashion of their clothing lines and meet
advanced needs of their consumers (Meiners, Ringleb and Edwards, 2014).
b) Value Chain model to analyse internal business environment of Apparel Retailers industry
Internal environment of an organisation consists of various elements that include
management of employees, their value system, mission and objectives of company, resources
and their organisational culture. All these environment impact functioning of business activities
moreover all these factors are easily controllable because organisation have control over these
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factors. ASOS can take advantage of Value Chain Analysis to improve their functions in order
to gain competitive advantages (Sekaran and Bougie, 2016).
Value Chain Analysis:
It is an effective strategic tool which includes different types of activities like,
production, distribution and marketing. It is a process that be very useful for a company to utilize
in their production function that starts from the raw material that are going to use till the end of
product making. For this company have to consider everything related to product before they sell
them to consumers. Value chain management is an effective process to analyse all these activities
and properly arrange them according to function of business. This process can help ASOS is to
develop effective commination between leaders and every stage of production process to make
sure that products that are placed in the hands of consumers are as per their needs and demands.
Overall Value chain analysis is a systematic process where an organisation identify their primary
activities that can add value to their final product and effectively analyse activities in order to
reduce their cost and increase demand. This tool is designed by Porter to analyse internal
activities of a firm (Saleem, 2017).
Porter's Value Chain Model:
Michael E. porter introduced the concept of value chain in which activities related to
product designing, production, marketing and delivering takes place. If each of these activities
need to be effectively analyse by business firms because every activity contributes in company
cost position. Porter splits these business activities into two categories that are:
Primary Activities: Primary activities directly add value to the production process. They are the
major source of cost advantages it is a situation where cost can be easily analysed and managed
for each and every activity. Some of the factors include in these activities are briefly describe
below:
Inbound Logistics: This process is related to receiving, storing and distribution of raw
material that are going to be use process related to production. ASOS need to make proper
ensure in this process because in clothing sector is is essential to use good quality of raw
material. This will benefit company to meet needs and demands of consumers in effective way
and generate good profit.
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Operations: It is a stage in which raw material are converted into final product. ASOS
need to make sure that each and every activity related to form gathering raw material and turning
them into final goods are properly done. This will help them to reduce their wastage.
Outbound Logistics: It is a stage in which distribution of final product to customers takes
place. ASOS need to adopt effective channels of distribution in order to effective distribute their
products to potential consumers. This will benefit company to generate better profitability
(Tayur, Ganeshan and Magazine, 2012).
Marketing and sales:In this stage activities related to advertising, promotions, pricing
and managing of final products takes place. It is essential for ASOS to make sure that company
is using effective technology in marketing and distribution of products. It will help them to
ensure that they are selling their products to targeted and appropriate groups of consumer.
Services: Activities included in this factor is related to services that are given by a company after
selling their product. Some of these activities are, maintaining product performance after its
production like, repairing, installation and warranty. ASOS must ensure that they are effective
provide services to their after selling their product. This will benefit company to maintain
consumer loyalty.
Support Activities: In order to gain more competitive advantages, it is essential for company to
take advantages of these support activities. There are various factors mentioned below that are
include in support activities:
Procurement: In this evaluation of all those sources are done on how a company can obtain raw
material. ASOS need to examine various sources and manner in which they can obtain their raw
material for production process.
Technology development: With the help of this activity company can able to find various
designs that they can use in the process of manufacturing new goods. ASOS need to take
effective and advanced research and technological tools in order to develop and design their
products (Türetken and et. al., 2011).
Human resource management: This stage consists of activities related to hiring and retaining
employees. ASOS must ensure activities which they use in hiring process. This will benefit
them to attain effective and potential employees.
Firm infrastructure: This situation defines organisation structure and their management. In this
company need to effectively analyse their company infrastructure. ASOS need to make sure that
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their management process like accounting, financing, planning and quality control mechanisms
are properly done. This will help them to make their internal managing functions strong
(Vaiman, Sigurjonsson and Davidsson, 2011).
Therefore, primary role of taking value chain analysis is to create and strengthen
company business competitive position. By adopting this system ASOS can capture more
competitive advantage and can increase their overall profit. Value chain analysis help this
company to identify those areas where they can optimize their efficiency. After examining all
these sector, it is essential for ASOS to formulate effective strategies related to cost advantage
and differentiation advantage to add more value to their products and services.
c) Adaptations of firm in response to external business environment
In an organisation to expand its market share and to grab large customers there is need to
understand psychology of customers and staff members with community so that organisation can
fit into global environmental. Organisations have to adopt many changes that are necessary for
organisational development and enhancement according to different situations such as Political,
environmental and social, legal, technological environment that are main attributes of external
environment in ASOS. In organisation there are many changes have to adopt to get success in
global environment and to understand deeply about consumer perception and their purchasing
behaviour of consumers so that they can easily survive in competitive environment and for that
employees have to become mentally and physically fit to adopt changes (Wack, 2017).
` When ASOS expand its market share they have to adopt eco-friendlier products and
services according to country code of conducts in different spheres. When they expand their
business in different environment, they have to build products which compensates employee
needs and demands completely and invest more money on CSR activities so that consumers
become loyal for them and ready to accept changes. ASOS while operate in different market
sphere have to follow legal laws and regulations that according to organisation legal
requirements. In UK different laws applicable according to that they have to adopt labour laws,
employment laws so that they adopt according to legal environment of country and employees.
In fierce competitive world organisation have to understand deeply about consumers wants and
needs that changes according to their taste and preferences of consumers in Apparel limited. In
organisation have to understand the psychology of employees and consumers so that they can
give their best in organisational development and their enhancement. In organisation social
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environment affect business proceedings that taste and preferences of consumers so that they
make products according to consumer’s requirements and grab large consumer base in current
market condition of organisation. Sometimes economic stability affects business proceedings in
organisation while operate in business environment. In other condition of country in which
fluctuations and other economic crisis affects business proceedings and its revenue in
organisation effects on its investment capacity and development of organisation. According to
organisational development there is need to understand market scenario, consumer needs and
their taste and preferences with economic stability of market and other considerations which
contribute in market development and consumer satisfaction (Yu and Ramanathan, 2013).
d) Usefulness and limitations of Porter's forces model in business environment
ASOS is a fast growing retailer industry in United Kingdom. Recently, output of this
industry have declined and productivity have raised. Moreover, clothing process have fallen
down because performance of large suppliers in fashion and luxury brands have increased.
Apparel Retailers industry have nearly around 2000 designing consultancies working with them.
In which 42% of their employees are male. This company can take advantage of Porter's Forces
Model in their business functions to gain profitability in order to enhance their quality in
production and designing of new products. It is essential for company to formulate effective
strategies in relation to find their competitors, and determine ways how government policies can
affect their working. Apparel Retailers industry can apply this model in their emerging business
industry to evaluate more developed markets. This model contains various factors that is
essential for a company to examine. For example, ASOS is a small business industry who need
to compare their business functions with a large organisation like ZARA and H&M. ASOS need
to evaluate sources where these large organisations are investing and what regulations they are
following to cope with tensed market situations. These are some measure through which this
industry can create their own brand name (Zeng and Duan, 2012).
There are certain limitations to this factors that are, this model did not consider forces
that are included in non-market sector. Without regular updates of technology and various
market factors it is hard for ASOS to adopt this model because as the technology is dynamically
changing this model can be quickly outdated (Porters Five Forces – content, application, and
critique, 2019). In addition to this, if an industry is engaged in more product line then it is hard to
separately identify all their functions. For example, Mark and Spencer's deals in various product
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lines such as clothing, food, cosmetics and other house hold accessories so it is hard to separately
define each of their market functions.
Despite some of these major factors, ASOS can implement this model in their
organisational strategies which will help them to perform their management functions
effectively. It will benefit them to make proper research of all factors in internal and external
market and take best competitive advantages (Zsambok and Klein, 2014).
CONCLUSION
From the above mentioned report, it has been concluded that porter's five model helps a
business entity in gaining competitive advantage in a business environment. On the other hand,
value chain analysis helps a business entity in effectively monitoring its business activities,
which leads in achieving organisational aims and objectives. Along with this, it is necessary for
human resource department of a business entity to perform their activities effectively in order to
make an organisation's workforce productive in a competitive business environment. In addition
to this, it is essential for a business entity to monitor their primary and secondary activities in
order to provide best in quality products and services to their potential customers. This will help
a business entity in increasing their customer's reach in a global market.
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REFERENCES
Books and Journals
Chetwood, M. K. and et. al, 2014. Transforming a legacy IT infrastructure into an on-demand
operating environment. U.S. Patent 8,775,232.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Gharajedaghi, J., 2011. Systems thinking: Managing chaos and complexity: A platform for
designing business architecture. Elsevier.
Gilboy, G. J., 2016. The myth behind China's miracle. In SEEKING CHANGES: The Economic
Development in Contemporary China (pp. 1-16).
Li, Q. and et. al., 2011. Towards the business–information technology alignment in cloud
computing environment: anapproach based on collaboration points and agents.
International Journal of Computer Integrated Manufacturing, 24(11) pp.1038-1057.
Meiners, R. E., Ringleb, A. H. and Edwards, F. L., 2014. The legal environment of business.
Cengage Learning.
Sekaran, U. and Bougie, R., 2016. Research methods for business: A skill building approach.
John Wiley & Sons.
Saleem, M. A., 2017. The impact of socio-economic factors on small business success.
Geografia-Malaysian Journal of Society and Space. 8(1).
Tayur, S., Ganeshan, R. and Magazine, M. eds., 2012. Quantitative models for supply chain
management (Vol. 17). Springer Science & Business Media.
Türetken, O., and et. al., 2011, June. Enforcing compliance on business processes through the
use of patterns. In ECIS (p. 5).
Vaiman, V., Sigurjonsson, T. O. and Davidsson, P. A., 2011. Weak business culture as an
antecedent of economic crisis: The case of Iceland. Journal of Business Ethics. 98(2).
pp.259-272.
Wack, P., 2017. Shooting the rapids. Historical Evolution of Strategic Management, Volumes I
and II, 1, p.121.
Yu, W. and Ramanathan, R., 2013. Business environment, employee competencies and
operations strategy: anempirical study of retail firms in China. IMA Journal of
Management Mathematics. 24(2). pp.231-252.
Zeng, L., Li, L. and Duan, L., 2012. Business intelligence in enterprise computing environment.
Information Technology and Management. 13(4). pp.297-310.
Zsambok, C.E. and Klein, G. eds., 2014. Naturalistic decision making. Psychology Press.
Online
Porters Five Forces – content, application, and critique. 2019. [Online]. Available Through:
<https://www.themanager.org/2015/11/porters-five-forces/>.
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