Comprehensive Business Environment Analysis: Urban Industry Case Study

This report presents a comprehensive analysis of the business environment of Urban Industry, a UK-based apparel retailer. It begins with an introduction to the concept of the business environment, highlighting the influence of both internal and external factors. The main body of the report then delves into a detailed examination of the macro-environmental influences affecting Urban Industry using PESTEL analysis, assessing political, economic, social, technological, environmental, and legal factors. Following this, the report utilizes Porter's Five Forces model to analyze the micro-environmental factors, evaluating the threats of new entrants, the bargaining power of suppliers and buyers, the threats of substitutes, and the rivalry among existing competitors. Subsequently, the report analyzes the internal business environment of Urban Industry using the value chain model, examining primary activities like inbound and outbound logistics, operations, marketing and sales, and service, as well as secondary activities like procurement, human resource management, technical development, and infrastructure. The report concludes with a reflection on the usefulness of the academic models employed, summarizing the key findings and their implications for Urban Industry. The analysis is based on identifying the competitive forces influencing the profitability of the company and developing strategies to enhance its position within the apparel retail sector. The report highlights the importance of adapting to changes in fashion, government policies, and technological advancements to ensure the company's continued success.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Identification of appropriate macro environmental influences...............................................1
2. Analysis of the micro-environmental factors using 5 forces..................................................2
3. Analysis of the internal business environment of a selected firm...........................................4
4. Explanation of appropriate adaptations of selection firm.......................................................6
5. Reflection on the usefulness of an academic model...............................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment is the sum of all external and internal factors that influence
business of a company. The internal factors are employees, workers, structure, rules and policies,
customers, suppliers and these factors affect the company internally. The external factors are
social, legal, geographic, demographic and psycho graphic factors which affect the organisation
externally. Business environment help in identifying the business opportunities and help the
organisation to improve its technology, laws and government, market, social and economic
trends. This essay is based on the Urban industry and it is a appeal retailers sub sector. The
business of it was established in 2002 and still continued to be an independent retailer based
Eastbourne in the UK (Alqahtani and Saba, 2013). Urban industry carries over 3000 different
products lines and stock products from over 90 worldwide brands. In this essay, Porter's 5 Forces
model are explained to identify and analyse the current environmental influences on the apparel
retailers sub sector and value chain model or the analysis of internal and external business
environment of a firm also described.
MAIN BODY
1. Identification of appropriate macro environmental influences
Macro environment refers to those factors which externally affect the business of a firm.
In Urban industry, the management of the company can use PESTEL analysis for it. This
analysis is as following:
PESTEL ANALYSIS : This is an analytical tool which is used by industry for analysing the
external forces that can affect the business performance.
1. Political : This is one of the most powerful external factor that can affect the working and
profitability of a sector. It is very important for apparel sector of UK to analyse the
government policies, so that they can reduce their problems.
2. Economical : For working in efficient manner it is very important for every sector to
analyse the economical condition of the country. As this is a external force that can affect
the business performance. If a country has goof economical condition then the
performance of business goes high, other wise it will go down.
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3. Social : Apparel sector is a sector which is very much depends on the fashion. If some
clothing designs are not according to the society then, it is not possible that business meet
the success.
4. Technological : Technology is a factor that can lead a business to success. Apparel sector
is highly demanded sector, for meeting the quantity of demands, manufacturers can use
latest technologies in their production.
5. Environmental : Apparels are made of cotton, which is a natural product. Manufacturers
of this have to keep in mind while producing that, they make production in natural way
so that environment do not get affected.
6. Legal : Every country have different legal polices for different business sector, which
they have to follow for reducing the legal problems.
2. Analysis of the micro-environmental factors using 5 forces
It is a tool for analysing competition of a business and it is developed by Michael E
Porter in 1979. The theory of this model is based on the concept of five forces that determine the
competitive intensity and attractiveness of a market. It is broadly used model in business and
refers the importance of these five factors that drive a firm's competitive position within an
industry. This model is useful in understanding the strength of an company's current competitive
position and the strength of a position that an organisation may look to move into. These five
forces help Urban industry in identifying and analysing the current environmental influences
(Deasy and et. al., 2015). The manger of Urban apparel store do this analysis to understand how
the five competitive forces influence the profitably and develop a strategy for enhancing urban
store.
Threats of new entrants: In Urban Apparel stores, new entrants bring innovation. The
company generate new ways of doing things by lower pricing strategy to enter into new market
and providing new value propositions to the customers. Government policy, capital
requirements, Brand equity, customer loyalty are some factors that affect new entrants. By
innovating new products and by building capacities or spending money on research and
development, Urban apparel reduce the competition of new entrants so there are low threat of
new entrants.
Bargaining power of suppliers; It is describe as the market inputs. Suppliers supply raw
materials, components, labour and services to the the firm. In Urban Apparel retailers stores,the
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industry buy their raw material from numerous suppliers. So the bargaining power of suppliers
are low cause of number of supplier in the industry and they provide material to this firm.
Bargaining power of buyer: In Urban Apparel it is related to the customers. They want
to buy the best offerings available by paying the minimum price as possible. This help the
company to earn profitability in the long run. Buyer's power is high if buyers have many
alternatives and it is low if they have few choices. The new products of Urban Apparel will also
help in reducing the defection of existing customers to its competitors.
Threats of substitute products or services; There are various apparel retailer store in
the UK and they also provide various kinds of product. If one apparel which is available on
Urban store and other stores also have the substitute product of that, it also affect the business of
the company and price is also matter here (Deasy and et. al., 2016). Apparel is a product which is
basic need of a person and it is very easy for any one to deal in this sector. In this industry, the
copy and substitutes of products are easily available in retailing of products, which increases the
competition for dealers and reduces the profitability.
Rivalry among the existing competitors: This factor is related to the competitors.
Urban Apparel must be aware of its competitors and their marketing strategy and pricing.
Herein, the company should know competitors strategy so that it increase the market size rather
than just competing for small market. There are number of competitors in the market and they
provide various products and services in the market similar to this firm so there are high risk
related to rivalry among the existing competitors.
There are two kinds of external and internal marketing environment micro and macro.
Micro environment are the small forces within the company that affect ability of a
organisation to serve its customers. In Urban Apparel, these factors can be suppliers, resellers,
customers and competitors that affect the growth of the company internally.
Macro environment, these are larger social forces that affect the external factors of the
company. These factors can be demographic force, economic factor, technological factors and
social or cultural forces. These both factors impacted the success of marketing campaigns of
Urban industry (Sørensen, 2012).
The retail sector is also affected by the sustainability concerns. Packaging, waste
reduction, renewable energy and several other concern related to the sustainability of the
business. The big brand have already invested a lot of reducing their carbon footprint and
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renewable energy. Current environmental influences are barriers to entry and force of change.
The rules and regulations of government affected negatively new entrants and the United States
EPA's Resource Conservation and Recovery Act has accelerated the rate at which apparel
manufacturers have left the US. The trends and fashion change daily and the customers demand
are also change according them. (Epifanova and et. al., 2015).
3. Analysis of the internal business environment of a selected firm
Value chain is a process where a company identifies its primary and support activities
that add value to its finished goods or product and analyse the activities which are helpful for
reducing costs and increase differentiation. This model is developed by Porter in 1985 and this
model or analysis represents the internal environment activities a company. Value chain analysis
is a strategic tool that is used by Urban Apparel stores to analyse the internal firms activities. The
main purpose of this analysis is to find out those activities which are valuable to the firm and
capable in improving competitive advantage. The value chain analysis of Urban Apparel retailer
stores are done on the basis basis of primary and secondary activities. In this model inbound
logistics, operations, outbound logistics, marketing and sales or services are categorized as
primary activities (Gupta, 2013).
Primary
Inbound logistics, in Urban style it is related to the materials, parts and finished
inventory from suppliers to manufacturing or retail store. In simple words, it is a activity of
receiving, storing and disseminating incoming goods or material for use. The quality of raw
material impacted the business of the company. There were around $2.4 trillion fashion
industries in UK by year 2017. It refers to goods being obtained from the organisation's suppliers
and to be used producing the product. In Urban apparel industry, the firm purchase raw materials
from different suppliers for manufacturing unique products.
Operations, In Urban style stores, it is related to the machining, packaging, assembly,
equipment maintenance, testing and all the activates which are helpful for value creation of the
products and goods that transform the product in to the final product or as a finished good. Better
packaging and designing affect the business of the company positively. When the product is on
final stage than it added value as it moves through the production line.
Outbound Logistics, in Urban Apparel store it is the process of storing, transporting and
distributing goods to customers. This process start with a customer sales order, moves on to
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warehouse packing or ends with the delivery of the products. When, once product have been
produce, they are ready for distributing it to the distribution centres, whole sellers, retailers,
customers etc. and the distribution of finished goods is also known as outbound logistics.
Marketing and sales, this process is related to the the selling a product and service and
process for creating, communicating, delivering and exchanging offerings that have value for the
customers and satisfied their needs and demands of a client, partner and society. In Urban
industry marketing is basically based on marketing strategies and techniques which the company
make for the growth of the company. Sales is related to delivering and exchanging offering of
the products which are provide by the apparel store. Marketing help in making sure that product
is targetted towards the erector customer group. With the help of marketing mix, thuis firm can
gain competitive advantages.
Service, It is an important factor and include all the process and activities that are
required to make a service or product effectively so that it can be capable to satisfying the
customers desires after it is sold and delivered. Secondary activities are known as support
activities and include procurement, human resource management, technical development and
infrastructure. In Urban style store, it related the services or product which are provided by the
company.
Procurement, here it is related to procurement management that is responsible for the
acquisition of supplies, services and construction. In the context of Urban Apparel, this support
operational requirements such as understand business requirements, procurement of raw
materials, manufacturing, to provide required services, materials and ensure the quality or safety
of the products (Hilton and Platt, 2013). It help in identifying the company's needs according the
customers needs of product and demand or help in fulfilling the consumers demand by providing
the clothes according them. During the delivery process, it help the customers that they get what
they had planned to buy in the form of quality and price.
Human Resource Management, it is a strategic approach to the effective management
of the people which are doing job within the organisation. The main purpose of it is to ensure
that the organisation is able to achieve success through the employees and employers. In Urban
Apparel store, it is related to the growth of the company. The manger of the store focus on the
growth of the company. The company make strategies and policies to run the business of it
properly and do analysis of the organisation to identify the issues. If the company find issues
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related to recruitment, training, employees relation benefits and others. They can organize
recruitment process and use various modes of recruitments process such as by giving
advertisement through newspaper, by social media and with the help of consultancies. Removing
training problem the company can organize training sessions, online training or by using other
sources. It is also related to the external factors such as political, social and environmental.
Political factor affected by the new threats of entrants, for example Urban style make clothes and
there are various company which provide substitute products of Urban style. Company can
remove this threat by making change in the design and the price.
Social and environmental forces affect the business of the company like, if the company
do not provide product according the customer's needs and their culture then it affect these
factors. By doing market research and identifying the customers needs it can solve this problem.
The main purpose of HRM is to ensure that the organisation able to achieve success.
Technology development: In Urban Apparel it is related to the research and
development. The company do research for identifying the customers needs because the trends
and fashion change daily and customers demand for new designs in costumes. So this
department do research and provide apparel according the trends or their demands (Kew and
Stredwick, 2017). By using different kind of technologies the firm can make improvement in its
business strategies. For example, by using promotional technologies the firm can make growth in
its business.
Infrastructure: It consist of activities such as accounting, finance, public relation and
quality assurance. In Urban Apparel it is included to the pricing strategy of the company,
customer relation and quality of the product. It also related the planning strategy for the growth
of the company. These strategies can be related to market research, research & development,
recruitment of staff and training and development.
4. Explanation of appropriate adaptations of selection firm
In context to organisation, the external factors are those factors which effect an
organisation externally. Such as social, legal, technological changes and economic and political
environment. Its is important for an organisation to recognise its potential opportunities and
threats outside company operation.
There are several external factors which can impact the revenues and market shares of a
business organisation such as change in economy, financial variations, infrastructure, varying
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laws and trends, changes in customer preference and other aspects. To overcome these external
barriers, it is vital for an organisation to adopt various measures and strategies in order to reduce
the impact of these factors. Appropriate adaptations which Urban industry can adopt in response
to external business environment forces depends upon the extent which these external factor
posses on the business operations.
Global economy is considered as one of the largest external aspect which posses a
considerable impact on the business. Effect on businesses due to economic variation is visibly
seen at regular time interval. Impact on business activities and operations of Urban Industry due
to economic change can take place because of terrorism attacks, currency devaluation, wars and
political instability (Portugal-Perez and Wilson, 2012). Urban Industry needs to keep a record of
economic indicators and monitor & control them over time. Economic forces involves factors
like income, inflation,recession, exchange rates and interest rates. To resolve issues associated
with income, company needs to fix their price according to the spending ability of people. For
example, if economy in UK is facing recession and interest rates are high, in this case it is not
possible for people to purchase expensive products. This can impact the sales and revenue of
company. To avoid this situation, Urban Industry can use technologically advanced machines to
reduce their costs and lower the rates of clothes and related products to an extent at which people
can easily purchase them and company can maintain it revenues & profits.
Change in federal, state and local laws leads a direct impact on the working of an
organisation. This happens in cases where the product or service offered by a firm became
outlawed or highly regulated. To overcome problems associated with changing laws, company
can regulate and monitor their policies time to time. This will help Urban Industry to upgrade
their production methods and distribution patterns. For example, if government in UK passes a
new law in which a company needs to pay fixed tax on luxurious items and products. This will
results in increment of costs and expenses for company (Pulver, 2012). To avoid this situation
Urban Industry, can produce bulk quantity of expensive clothes. By this revenue and profits of
company will increase and tax paying will not have major impact on the capital of company.
Trends regulates the purchasing behaviour of customer. Every customer wishes to
purchase those products which are stylish, modern and advanced according to the latest trend.
Changing market trends will also have considerable impact on the business of urban Industry.
For example, if Urban Industry is spending a large part of their profits in promoting and
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advertising their clothes in hope that they are stylish and will generate huge profits. But rival
company has introduced same product in less price. This can results in loss of revenues for
company. To overcome issues like this, marketing manager of Urban industry needs to analyse
market in an appropriate manner through social media, surveys and feedbacks. By this, company
can easily upgrade their clothings and other products by identifying the market trends and
expectations of customers (Savrul, Incekara and Sener, 2014).
Demographic factors posses a considerable impact on the sales and revenue of business
organisations. These factors include aspects like gender, race, location, ethnicity and other
aspects. Adaptions to reduce the impact of demographic factors is vital as people constitute
markets and shape the changes associated with business patterns. Different aspects of
demography can impact the business environment of Urban Industry in a negative way. For
example, people between 35-45 age have different choice then people below 35 age. If company
will produce cloths and other apparels according to the taste of people below 35, customer base
of company will reduce and profit margins will get affected. To overcome these aspects,
company needs to analyse the strength of targeted customers and produce commodities in the
required quantity (Sena Ferreira and et. al., 2012). By this company can reduce the impacts of
external factors in a desired manner.
5. Reflection on the usefulness of an academic model
The usefulness of Porter's model coved in some points in the context of Urban Apparel.
Easy to use: The key advantage of the model is that it is very easy to use as it is used in
the starting point to get an idea about the level of competitiveness of the industry. As this will
help both business and environment to attain profitability and moreover grow economically over
all.
Determining the profitability: This model helps in determining the profitability level of
the industry as it takes consideration on the competition level in the company for ascertaining
the degree of competition. So that an organisation can continue their business effective and grow
according to an environment laws in order to achieve profitability.
The limitation of the Porter's five force model is explained some points in the context of
Urban Apparel store.
Works at broad level only: This model consists of several disadvantages among the
very first is that it works only in the broad and wide sector so the small industries will not be able
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to get benefit from it. And if the smaller organisations will use this Model in assessing the
Profits, they will get wrong results.
Uncertainty:it also lacks from the future prospects of the company as it only tells about
the present day itself not about the future prospects of the company. It means that where the firm
is currently standing or the it gives the answer of the question that where the firm is standing at
this time ? There is no information that what the company will perform in the near future ( Klem,
2013).
Deals only in qualitative aspects: another limitation is that it only deals with the
qualitative aspects of a firm or industry. It does not give any information regarding other view
points which are also important for growth and development of the company.
Avoids non-market forces: these forces also affect the industry whether in a positive
way or in a negative way. But the Model also avoids this term and the results appeared on the
evaluation may be wrong or irrelevant.
CONCLUSION
This essay concluded the Porter's five force model to identify and analyse the current
environmental influences. In porter's five force model, all the 5 factors like new threats entrants,
bargaining power of supplier, bargaining power of customers, threats of substitutes products and
rivalry among the existing competitors are clearly explained. The value chain model of Porter is
defined with its primary activities such as logistics, operations, outbound logistics, marketing
and sales and services. Secondary activities such as procurement, human resource management,
technical development and infrastructure. The explanation of appropriate adaptions that Urban
Store could undertake in response to the external business environmental forces are clearly
defined in the essay.
REFERENCES
Books & Journals
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Online
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