Business Environment Analysis: Topshop's Strategies and Challenges

This report provides a detailed analysis of Topshop's business environment, focusing on the apparel retail sub-sector. It begins with an introduction to the concept of the business environment and its impact on operations. The report then delves into the external factors influencing Topshop, using PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors. Following this, the report applies Porter's Five Forces model to analyze the competitive landscape, including supplier power, customer bargaining power, competitive rivalry, the threat of new entrants, and the threat of substitute products. The study also conducts a value chain analysis to examine Topshop's internal environment, covering primary activities such as inbound and outbound logistics, marketing and sales, and services, as well as supportive activities like procurement. The report concludes by synthesizing the findings and providing insights into Topshop's strategic responses to the analyzed business environment. This comprehensive analysis aims to provide a clear understanding of the challenges and opportunities Topshop faces within the fashion retail industry.

Business environment

Table of Contents
INTRODUCTION...........................................................................................................................1
Task ............................................................................................................................................1
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment refers to a combination of all the internal and external forces
which have influence over the business operations. This assignment will discuss the
environments of Apparel Retailers Sub sectors which means those retailers who deals in single
line chain only. Topshop company is a multinational fashion retailer which sells clothing, shoes,
make-up accessories in all over the world. The study will describe porter's five forces model
along with its usefulness and limitations for the company. The study will also show the value
chain analysis for analysing internal environmental factors. The assignment will describe a
detailed PESTLE analysis for the purpose of external factors analysis.
Task
Adoption of appropriate model in response to the external business environmental forces
External environmental factors are those who have impact over the business operations of
any business organisation but are not in control of the business (He, Brouthers and Filatotchev,
2018). According to my opinion, these factors are necessarily analysed by the Topshop in order
to know their major impact over the business which may help the business in making future
plans and taking effective decisions.
External factors can be analysed efficiently in the following way. First and foremost,
company needs to analyse political, environmental, social, technological, legal and economic
factors (Machmud and Sidharta, 2016). Political factors includes the change in political parties,
political rules and regulations, etc. all the government's rules and regulations which are related to
the fashion retail industry, can effect the profitability of the business. These factors effects the
business in many ways like international supply chain, selling in foreign market, etc. when the
country have a political stability, businesses can grow smoothly because, in my opinion, political
disruption effects the business at most as it may result in effecting the normal course of business
and company's business plans and objectives as well(Poon, 2014). The second factor can be
economical factors which refers to economic fluctuation in all over the world. This factor has a
great influence over the business as it directly effects the business of every organisation no
matter whether it has a business within a nation or working internationally. This factor also
includes inflation rate of any country as it decides the purchasing power of the customers. A
fashion industry is highly depends upon the purchasing power of the population. As any person
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will invest its money for purchasing a fashion accessories only if he has extra money with
himself after expending its money in its necessities.
The next important factor of can be social factor which refers to values and culture of the
country in which the Topshop is performing its business activities and in which the company is
selling its product. Social factors include change in taste of the customers, socio cultural effect,
seasonal effect. In short we can say that all those factors which can influence the taste and
preference of the customers can be termed as social factors (Martino, 2017). These factors need
to be taken into account by the organisation as they influence the consumer's preference which
directly effects the business sales and the profitability of the business as well. For analysing the
next factor, technological change in the market needs to be analysed by the company. Today,
technology have a great impact over every business. I think, if a company wants to succeed and
sustain in the market for a long period of time, it has to compete with the technological change.
Topshop can bring innovation into its business by bringing some technological changes like start
doing online business or bringing some innovative and effective changes in its way of doing
online changes in order to attract more customers and increase market shares as well (What is
PESTLE Analysis- Definition, 2014).
The next most important factor is environmental factors for a fashion industry which
includes weather, culture, season etc. all these influences the buying decision of a customer. For
example if weather changes into winters, the customers will prefer to buy sweaters instead of
cotton cloths. Seasons like festive seasons also effects the buying decision as customers will
prefer to purchase fashion accessories as per the current season in the region (FASHION, 2018).
The next factor to be analysed can be legal factors. Legal factors like consumer protection laws,
intellectual properties' law, environmental laws, anti trust laws, etc. majorly effects the fashion
business. For example, If the Topshop company does not consider the anti trust laws of the
country before selling its product in that country, any performance not accordance with the law,
can result in a huge penalty to be paid by the company.
As per the above description it can be analysed that every aspect of all the above
mentioned factors have to be analysed by the Topshop company. Because every factor have a
major influence over the business. Like economic change in the country effects the buying
capacity of the country, which directly influences the profitability of the company. Also,
technological development that influences the fashion industry most as nowadays fashion
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depends upon the internet. Every customer changes its needs as per the Internet's trend (Vesey,
2018). Hence, this factor has to be analysed deeply in order to satisfy the consumer's need
effectively.
Analysis of apparel retailers sub sector by porter's 5 forces model :
Porter's five forces model can be resulted as the best model for the purpose of analysing
current environmental factors having influence over the business operations of the Topshop
company. This model provides five factors that need to be analysed in order to assess the
external environmental factors and their impact on company. The first force of this model is
Supplier power. Supplier power represent that how supplier can effect the price. There are many
suppliers available in the market. It is upon the company to select best supplier because buyer
can switch the supplier anytime (Pine and Davis, 2013). A supplier supply the raw material,
labour, etc. If there is only one supplier in the market for their product so they charge high prices
for their product and sometime they may refuse to work therefore company need best supplier
who take low charges and help the company for growth. Topshop can reduce the power of its
supplier by either find maximum substitutes of suppliers, it may increase the bargain power of
company. Further, by planting its own machinery for raw material generation, it can also reduce
this threat.
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The second force of this model can be termed as Customer bargain power. It is very
important thing that how many customers the company has. Sometimes customer switch the
company only because of high price or low quantity. There is presence of numerous companies
in feshion retail industry, which increases the customer's bargain power. Topshop need to
maintain their product according to the Customer need, to sustain customers with it. Customer
plays big role in company's growth. In a competitive market, Topshop try to give their product at
best quality and low price. Further, recently, Topshop has also brought clothing of the latest
trends which makes the customers sustain with company's product and reduce their bargain
power as well.
Competitive rivalry, In a competitive market Topshop company try to control price of
product and their services(Keiningham, Perkins-Munn. and Evans, 2013). There are many
companies are available in the market and every company try to make position in the market for
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Illustration 2: Porter's five forces model

their growth. Competitive environment influence the ability of company. If company wants to
achieve the targets and higher sales it is necessary to apply good strategy for sale and promote
their product from a different way. Topshop Company has a great power to achieve their targets.
For company growth Topshop must be aware of competitor strategy and their price. For stability
in the market, company should focus on market place, customers needs, competitor. Presently,
new technologies are available where any customer can buy their product without going
anywhere, by using internet on their phones. Topshop can develop its own application or can
provide the products on internet to customers, it may also reduce the threat of competitors in
market by maximum attracting customers. Many competitor makes different type of product to
attract their customers Therefore Topshop also need best ideas in order to offer innovative and
high quality product in market. Threat of new entrants is the next force of the Porter's model.
Treat of new entrants refer to the new companies which are entering in a profitable market. New
entrants effect the existing firms and for achieve profit many companies are entering in profitable
market. New entry in the market, reduces profitability of existing company.
Topshop Company need to have great ideas for maintaining its existence in market for
longer term. It is very difficult for new entrants to compete with existing companies . Company
needs to have great strategy in order make their position. New industry also face many problems
in terms of government policies, capital requirement, network effect and many other things.
New entrants can take the advantages like brand loyalty. Many substitute product exist in the
market. Substitute product is the similar product from another company.
It is totally upon customer what they want. Customer can choose a product from lot of
products. All companies try to give their good quality at reasonable price. Customer choice is
depend on brand name therefore every . In order to attract customers, Topshop company also
switch cost of their product. Topshop company has also effect from the competition Therefore
company need to good strategy to make its strong position in market.
Analysis of internal business environment of a firm in Apparel retailer sub sector
Internal business environments is composition of organisation's condition, events, etc.
within the organisation which may influence the normal business operations of the company
(What is Business Environment Factors- Definition,2013).
Internal business environment needs to be evaluate properly with a view to perform
business operations smoothly and efficiently. For the purpose of analysing internal
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environmental factors, value chain analysis model can be used. A value chain refers to all the
activities like designing, production, marketing, selling, etc. in other words value chain can be
termed as combination of all the activities done by a business organisation.
Porter split the business operations into two broad categories namely primary activity and
support activities for analysing internal business activities by value chain(Huq, Chowdhury and
Klassen, 2016).
Value chain analysis of business can be done as, Primary activities are, Inbound logistics,
It includes receiving, storing and distribution of goods for the purpose of making it available for
the final sale. The Topshop needs to be performed efficiently because, all the further activities of
business are based on this activity. The second activity can be termed as Outbound logistics. This
activity involves distribution of product received in earlier step for the purpose of selling them
into the market. The next activity is Marketing and selling. Marketing refers to a combination of
different like advertisement, selling, distribution, pricing, management of final product, etc. All
these activities are done for the purpose of ensuring that targeted customers are getting
satisfactory results from the company.
And the last activity namely; Services are the post production activities. These activities
need to be performed in order to maintain the produced goods. It includes installation, providing
training, maintenance of goods, repairing the defected goods etc. Topshop needs to store the
products received from the suppliers until they are sold to any customer (Kennerley. and Neely,
2013). Also in case, any product got damaged, the company needs to repair them before selling it
to customers. The next category is Supportive activities. These activities are performed by the
business to support its primary activities. Procurement is the first supportive activity. It means
analysing how the goods are obtained by the business for selling them into market. Toshop needs
to make analysis of how many products were ordered from each suppliers and in what quantity it
received the products. The next activity namely; Technological development is the activity
which involves researching about bringing innovation in the business and developing it, and for
maintaining Topshop's current business operations. Human resource management is also a
supportive activity, this activity includes hiring the proper employees for the business. This
activity needs to be performed properly .
As all the activities of a business organisation is done by its human resources. A proper
recruitment of efficient employees will help the Topshop in building an efficient work
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environment and grabbing maximum market share along with enhancing the profitability of the
company. The last but not the least activity is Firm infrastructure. It refers to building a proper
organisation's internal structure and also managing it properly through planning, accounting,
financing and adopting proper quality control mechanism within the organisation.
Four basic steps can be used by Topshop for conducting analysis. In the first step,
company needs to Identify the sub activities for every primary activity. For the purpose of
creating value of the organisation, Topshop needs to determine sub activities for every primary
activity. Sub activities are divided into three categories, namely: direct activities, indirect
activities, and quality assurance activities. Topshop needs to determine perfect sub activity for
every primary activity in order to perform them more efficiently. At the second stage, The
Topshop needs to make Identification of sub activities for every supportive activity. In this step,
after identifying sub activities for primary activities, now Topshop needs to identify sub
activities for the supportive activities of its business organisation. Mainly this activity gives an
idea to the company that how its supportive activities can help the organisation in adding value
in the primary activities of the business operations. Topshop needs to identify that how its
selling, advertising, technological development etc. activities can help its activities of collection
of goods, distribution, marketing, etc.
Identifying links is the next step. This activity provides help to the business concerns in
enhancing the competitive advantages in the firm. I think, Topshop may adopt customer
relationship management activities for the purpose of enhancing and maintaining a good
relationship with its customers in order to provide them maximum amount of satisfaction and
increase its market share. Looking for the other opportunities and solutions for optimizing and
create values as well is the last step. This activity is performed by the Topshop after analysing
value chain properly. The company needs to determine all the qualitative and quantitative
investment opportunities that can contribute in enhancing the value of whole organisation. Along
with enhancing profitability, competitive advantage, and market share as well. In this way by
using porter's value chain, Topshop can analyse all its internal factors, in order to run its all
business functional operations effectively.
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Usefulness of the Porter’s 5 Forces model in understanding the business environment and
describe its potential limitations.
Porter's five forces model provides a critical analysis of 5 main the macro environmental
factors which are beyond the control of business but have a great influence over the business
operations of a company namely; supplier's power, buyer's power, competitive rivalry, threat of
substitutions, threat of new entry (Vesey, 2018). The model also suggests that how the company
can work for reduce the threats arisen from these macro environmental factors in order to
increase efficiency and profitability of the company as well.
Porter's five forces model is useful for every company. As Porter's five forces model
provides the simplest way to analyse the organisation's external factor's influence over the
business operations (Five Forces Analysis of the Fashion Retail Industry, 2018). This model can
help the Topshop in understanding the factors that shapes competition in clothing industry.
Through porter's five forces model, it can able to systematically analyse various ways to identify
the actual condition of its business which enables the Topahop to compare it with its pre decided
goals and find the reason of non achievement of any organisational goal if any. This model also
suggest the company to make its future objectives (Binet, 2018). And finding out the problems
regarding non achievement of organisational objectives along with their solutions. Supplier's
power force of the model enables the Topshop to analyse its own strength for increasing the price
of its product and also suggest the company to bring some uniqueness in the business in order to
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Illustration 3: Porter's value chain
source: (Value

build its power of enhancing the price. As per my study, this modal also makes Topshop to
analyse a major threat i.e. its customer's power to reduce the price of product of the company.
The model also helps the company to finding out the solution in this regard and reduce this threat
effectively (Campos, 2017). If Topshop uses this model for analysing the macro environmental
factors, it can identify its competitors strength Which may help the it in making decisions and i ts
future plans accordingly. So that the company can increase its profitability.
Although, along with a lot of usefulness of Porter's five forces model,This model also
have some limitations as this model does not enable the Topshop to analyse all the macro
environmental factors (Thompson and McLarney, 2017). But the company can analyse only
some major elements of macro environments having influence over the business operations of
the company. The major limitation of this model is that this model was developed in early
eighties and this model has not modified yet. Hence, this force may not work efficiently for each
type of organisational structures in order to analysing the macro environmental factor's
analysis(Schiffer. and Weder, 2011).
All the big industries don't change their structure And some industries are not capable to
follow this models and also it is too difficult to define any industry. The models based on
competition and strategy but some companies can use this types of model because of a large
amount of expenses and the small companies can not afford (Lee, 2017). This models may not be
the best for Topshop, as when new entrants entered the market then they model does not help to
identify sources of advantages.
Hence, porter's five forces model is useful for a business organisation but it also has some
limitations. The Topshop should apply this model only after evaluating all the impacts,
advantages and limitation as well in order to enhance the efficiency of decision making and
business plans of the business.
CONCLUSION
From the above study it has been concluded that Topshop has good organisational
structure as the company has analysed all the factors effecting the business operations. It has
analysed porter's 5 forces model along with some more external factors influencing the normal
course of business of the company. Which has helped the company in analysing external factor's
influence over the business through which company has made the best organisational plan and
strategies for the company in order to enhance the profitability.
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REFERENCES
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environment. International Journal of Operations & Production Management. 23(2).
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Poon, S., 2014. Business environment and internet commerce benefit—a small business
perspective. European Journal of Information Systems.9(2).pp.72-81.
Schiffer, M. and Weder, B., 2011. Firm size and the business environment: Worldwide survey
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multinational buying firms and their emerging market suppliers: An exploratory study
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FASHION, C., 2018. A HISTORY OF WASTE: FASHION, CULTURE AND LUXURY ASA
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Vesey, A., 2018. Playing in the Closet: Female Rock Musicians, Fashion, and Citational
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report usage.
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