PESTEL Company Strategic Analysis

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Introduction

This is a strategic analysis report for Tribe Stout Company. To begin with, an overview of the Tribe Stout Company and its detailed business specifications. Two models will be critically analyzed; the Five Forces by Porter will focus on the external environment and the PESTEL analysis will be used to quantify the internal aspects.

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TSC is a small family-run company that makes traditional Irish stout for the local Galway market. John Murphy set up the business after realizing that tourist’ demands for local beers in Galway pubs and hotels were unmet. Locally produced beverages were unavailable in the market. After inheriting money, he set up TSC and the organization has grown from a very small three-person company with sales of €20,000, to 20 employees and sales of €1,500,000 this year. The company positions itself as a manufacturer of ‘traditional’ Irish stout (named Tribe) sold in two bottle formats; 250ml and 500ml (both 5% alcohol content). The primary market of the company is the hotels and pub sector with large numbers of foreign clients. TSC’s reputation has been built on a high quality product and quick delivery but its reputation has suffered recently due to rumors of insolvency in the local business community. TSC has been operating without any systematic management or financial controls as Mr. Murphy felt that this would involve extra unnecessary costs as he felt he knew what was going on in the organization.

Environmental Scan

Implementation of PESTEL analysis

The PESTEL analysis will put a spot light on the major concerns especially the external factors that will have a negative effects on the business, such factors are; political, economic, socio-culture, technological, environmental or ecological and legal factors.

Political

In their studies (Bradford &Tarcy, 2005) state that political issues will relate to the industry, in this case the beer industry, and the legislative processes that may impact negatively on the taxation policies and the country’s laws that may restrict certain activities. This will specifically focus on the utility of the business. There is need to look into the possible barriers that may be created by political forces in the present and in the future.

Economic

In his studies (Philips, 2009) conclude that The economic analysis mainly focuses on the people’s economic situation because the spending power of the consumers is directly proportional to their pecuniary situation, the current crisis that directly affects the economy and the real Gross Domestic Product (GDP). This will be imperative in determining the direction of the innovation process in the company (Christensen, 2004).

Socio-cultural factors

They focus mainly on the changing cultural trends which have a direct effect on the changing consumer needs, it will thus be important to analyze issues like incorporating outsiders in the company other than the family members only and also issues like gender balance in the company by for instance, considering women employment and its effect on the company’s needs.

Technological factors

In his book (Wells, 2007) states that there is need to change with the times and consider improving on the changing technology. This may include changing the machinery which is mostly manually operated, to the current systems that are automated and computer monitored. This will improve the overall performance of the company by increasing its production efficiency and the safety and welfare of the employees. Technology will go beyond the machinery that helps the company in stout production, to the marketing of the company through the use of technology. Technology and marketing go hand in hand through what we call e-marketing. Internet marketing is one of the growing trends of spreading information cheaply and getting back feedback without any hesitation. Technology will go further to manage accounts of the business and can give you indications of market trends and your business performance. Manual operations are surrounded by human errors, and thus the company may continue to experience losses that had not been foreseen or are too small to be actually visible. The gateway to the world of business has been made and controlled by increasing technological advancement that has seen many company’s thrown out of the market and new ones came in.

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Environmental/Ecological

This majorly focuses on how eco-friendly the company is and what schemes is it putting in place and their effects on the environment in order for the company to be socially responsible with regard to the environment. A company must demonstrate good business conduct which is essentially the birth of gaining competitive advantage over the other companies that will give less consideration to environmental issues. With the growing global warming concern a company has to trend carefully. For instance the company has to be careful on its policy on bottle disposal and other wastes and does it have a recycling policy so that not everything to the dumping site? Other environmental factors that may affect the company include Cultural changes. Culture refers to the norms and values shared by a group of people in a particular setting. The company needs to fiddle with its cultural views in order to fit into every unique culture in a way that will promote the cultural values which will then lead to their market increase. A culture is something deeply rooted and embedded in an organization. It can be said that the culture of an organization is the organizational character.

Legal

In their book (Hill & Westbrook, 2006) stat that health safety laws and the insurance concern especially to the company’s workers is an imperative concern in promoting a sound environment to innovation (Anthony, 2008). It will therefore be the conscientiousness of the company to guarantee that there is a proper scaffold which ensures that the legal procedures are strictly followed to the letter.

Model by porter

Power from supplier

Customers view TSC as a company that provides fast service and negotiates on price and payments out of desperation. Murphy himself is seen as a disorganized man who was very good at making a quality product but may not be able to keep the company going much longer. Indeed, some customers are reluctant to make large long term orders out of fear that the company will be unable to fulfill these orders. TSC has failed to invest significantly in the promotion of the stout’s image relying on the quality of the beer to act as the company’s selling point. This should not be the point especially with the entry of new competitors. The company can even set up subsidiaries in other places either within the country or outside the country. Subsidiaries show the world that a company is able to manage it self even outside its mother organization. Customers will build more confidence in it.

Relevance of new competitors

Competition has also increased significantly from both domestic and international beer and stout companies who have invested heavily in their brands. The strategy to fight new entrants in the market is to avail the product to the customers at a real time. In this case, the products are delivered to the bars and hotels by an old company truck that will sometimes even break down. The company has to change its view and buy new delivery vehicles while at the same time increase more delivery employees to maximize on delivery. Adverts and promotions are also key aspects of a strategy to fight competitors in the field (Rothman, 2007). Branding is important when marketing a company’s supplies. The brand name makes a distinction between the products of your and those from other companies in the market.

Threat of substitute products

A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose (Dagmar Recklies, 2001). The market has been infiltrated by other stout producers. They could possibly catch the attention of a significant percentage of the market and therefore trim down the potential sales volume for TSC. The treat of substitutes will be determined by factors like how loyal are your customers to your product, how does the company relate to its customers; closely or loosely, what pinch will that customer feel in his pocket while shifting to that other product, the price and performance of the substitute and the current market trends of the substitute product.

Ability of the buyer

Consumers of such a product must be able to choose between many alternatives in the market. The cost of a product is left to the market forces such that it is always at equilibrium. Communication is of essence at this present age, thus it is unlikely that the company misses out on sales (Grant, 2005).

Competitive aggression

This force describes the intensity of competition between existing players (companies) in an industry (Dagmar Recklies, 2001.

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SWOT Analysis

TSC is a company that is well established and known for its unique stout. Strengths for the company include the fact that its stout is made from natural ingredients, a fact that has won the company a number of international quality awards and therefore preserving the culture of the place. This fact has sold it well such that the residents and those abroad were great funs of the drink. The primary market of the company is the hotels and pub sector with large numbers of foreign clients. Its other strength is that it has a reputation which has been built on a high quality product and quick delivery.

The company’s weakness is that it operates without any systematic or financial controls. Mr. Murphy is everything in the company, from directorship to sales.

Its opportunities are that the company has a specific niche i.e. the community around it which appreciates high quality brew for enjoyment and refreshment. The visitors have already spread the word out there about the quality of the beer. This fact, coupled with the awards, give the company very high chances of re-establishing itself and proving itself even to the outside world again.

TSC faces certain major threats one being the new players in the market who have come with new products and new strategies with a bid to convince their customers. Secondly, a financial threat is imminent because the profits that the company had made may not be enough to bring it back on its feet again and therefore it may require pooling of resources from somewhere else.

Innovative Strategy of Clicks and bricks

TSC can incorporate this strategy when carrying out its marketing. This involves conducting sales online while the customer takes an initiative of picking it from any distribution branches. The company makes use of software to trace transaction and locates it to the customer. This strategy is effective since time is saved for other business activities (Brendan, 2006).

The management of the company should be able to follow the growth of the product by following the life cycle of the product.

The life Cycle of a Product

This has to do with generation of ideas about a product, its introduction to the market, how it grows and finally the reduction. Therefore the time that a product takes to reach the final consumer while taking into consideration the related costs and time is of much importance. At the initial stage, the firms focus is on promoting the product in the market through advertisements and use of distinctive features on the website. The pricing mechanism is such that it attracts many customers since this is an initial level. The distribution mechanism is such that only the identified place is supplied with the product.

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At the growth and development stage, the firm main focus is on increasing the distinguishing features. The price is held at a fixed rate since demand is on the increase. At this stage, it is relevant to increase the number distribution agents like subsidiary companies. To promote the product at this level, Telstra considers a wide society.

To enter maturity stage, the product is modified such that it can be identified from other product in the market. It is the advisable to reduce the prices of the product so as to check on the competitors. Market coverage is enhanced such that it is easy to find the product at any place. Telstra seeks to ensure product discrimination since it is evident that there are many products in the market. This is a measure to ensure distinction

At the final stage, it is evident that output to the market declines. The management has to consider introducing another competitive product or adding specialized features to the product. The focus market is the local market segment.

Recommended strategies

Competitive strategy

The structure that guides and centers these decisions is strategy. Competitive strategy will help us define the company today and tomorrow. It also helps us in making the decision about what fields or markets will we compete in. It also helps us in laying down our elemental approach to attain competitive advantage, may it be through low prices, differentiation or even the niche. Competitive strategy helps us consider the size of the market that we plan to achieve. The solution to strategy formulation is found in understanding and conquering the system barriers that hinder the realization of organizational goals. An effective strategy identifies these barriers and comes up with decisions and choices that thwart them.

Strategic Approaches

In his studies, (Simmers, 2008) mentions that there are three basic strategic approaches.

One is the offensive strategy, which deals with beating the barriers to goal achievement by changing the universal relationships that created them. This strategy requires major investment which includes altering the competitive environment in your industry through forward or backward integration or even acquiring competitors. It also includes predicting the competitive structural change in the market and arming your organization properly to exploit this change before the others get familiar with it. This you can do by developing substitute products or changing the form in which you sell or distribute. It also includes branching out into more good looking markets.

The second strategy is the defensive strategy, which involves welcoming the industry’s competitive forces as they come and placing your company well to best defend against them.

Every business has a competitive strategy but most are inherent, having advanced over time, instead of being unequivocally invented from a thinking and planning process. Inherent strategies will lack focus and finally give birth to contradictory decisions, and inadvertently become superseded.

Directional Strategy

In the paper (Guiltinan , 2007) asserts that every corporation must decide its point of reference towards growth. The company should make considerations on whether to expand, cut down or continue its maneuvers without making any changes and the effects of doing so. It should also consider on whether to concentrate on its current activity, in this case beer production, or can it diversify itself into other industries, like for instance, production of non alcoholic beverages. To compete favorably, a company needs expand whether nationally or globally. Before doing so, it should consider whether to do so through internal development or external acquisitions or through mergers with other companies or by forming strategic alliances.

A company’s directional strategy is may comprise of three grand strategies. Firstly, growth strategies, that expand the company’s activities. Secondly, stability strategies, which make no changes to the company’s current activities and thirdly, retrenchment strategies that, will reduce the company’s level of activities.

Factors to consider in implementing these strategies

Two factors will be most important for TSC while implementing the above two strategies. These are; the cost that the company will incur in entering the market and its profit potential in the market.

Cost To Enter Market

In his book (Simmers, 2008) notes that these factors will influence your costs to accomplish noteworthy market infiltration. Firstly, consider your marketing strength i.e. how good you are in advertising your company. Then, ask yourself whether you have good access to materials at a low cost and how effective is your production. Also consider the experience of your enterprise.. Another factor is the distribution effectiveness which will be measured by the history of relations, the degree of channel exploitation, economic strength, the company’s reputation, access to other prospects and awareness of your contribution.

Check whether technological efforts are likely to be successful. This you will know by the strength of the development organization. And finally and most important is the availability of adequate operating capital.

Profit Potential

Firstly it is the potential for competitive reprisal which will be based on the competitors funds, dedication to the market, cash position and inevitability as well as the status of the market.

It also includes the intensity of competitive challenge calculated by the size and number of competitors, confines of exiting the market, demarcation between offerings and the speediness of market growth. Another factor is how the company is able to silence or reduce the suppliers bargaining power.

References

Bradford, R, Duncan, P, &Tarcy, B. (2005) Simplified strategic planning. 7th ed. London, Mc-Graw-Hill.

Guiltinan , D.(2007) Marketing Management: Strategies and Programs.4th ed. New York, The Thomson corporation.

Hill, T. & Westbrook, R. (2006) SWOT & PESTEL Analysis: It’s Time for a Product Recall. 8th ed. Prentice Hall, California.

Philips, P.(2009) Strategy and Marketing: Designing Missions, Building Audiences, Generating. 8th ed. Dallas, Monks publishers.

Robin, C. (2004) Knowledge Management. New York: CRC Press.

Simmers, C. (2008) The Internet and Workplace Transformation. London: Sharpe.

Wells, H. (2007) Theories of Knowledge Management. New York: Springer.

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