Understanding The Business Environment †MyAssignmenthelp.com

Question: Discuss about the Understanding Business Environment. Answer: Introduction Environmental analysis is the systematic process through which the business marketers identify the business environment. The location of the business operations are often surrounded by enormous challenges posed by the potential competitors, political factors, and other environmental issues. It is thus essential to conduct the complete market research prior to establish the business or develop any initiative. The utilization of the simple framework for the environmental analysis would be fruitful for the business marketers. According to Matzler, Veider and Kathan (2015), the simple framework used for the presenting the environmental analysis helps in understanding the business environment more precisely. It not only identifies the external business environment, it generates the ideas about the relevant strategies to be used for the business to cope with such environment (Angulo-Ruiz et al. 2014). It is essential for a business manager to manage the basic step to analyze the external e nvironments. Firstly, the environment is needed to be scanned for identifying the major factors that create influence on business. Secondly, each of the factors is required to be monitored and culled. Thirdly, it is essential to understand the impacts of these factors on the business functions (Perlow and Kelly 2014). Finally, the complete forecast of the scenario is needed to be presented for identifying the necessary strategies to be implemented further. Accordingly, the study would present the strategic analysis of Best Buy Co., Inc., which is a renowned electronics retailer company operating in the global environment. The study would present the PEST analysis to recognize the environmental feasibility to operate the electronic business. The study would also discuss the global competitiveness by using the porters five forces model. The identification of internal strength and weakness of the company would also be presented in this study. Accordingly, the preferable recommendations would be presented in this research paper. Evaluation of the Trend in the Macro environment (PEST Analysis) Best Buy Co., Inc., is a electronic retailer company that offers the commendable electronic services for computing, gaming, and telecommunication gadgets. The company has established the operational activities over 1,100 stores in United States (Bestbuy.com 2017). The focus of the company is to ensure the best offers on the technological gadgets for fulfilling the customers expectations and enhance the customer base. The major purpose of developing the mission is to enrich the lives of the people by providing the advanced solutions to the technological gadget use. In order to accomplish such mission, it is essential for the company to identify the major environmental factors that have the significant impact on the business operations (Lee and Grewal 2013). In this section of the study, the PEST analysis would be formulated to recognize the impact of the external factors, such political, economical, social, and technological aspects. The PEST analysis provides the in-depth ideas about the external factors that have the clear impacts on the business activities. The influence of the external market is necessary to be identified to ensure the probably of the business sustainability. The basic demands of the external market would measure the success of the business. The analysis is presented further: Political Factors Political scenario is one of the most important factors that create impact on the business operations. It is notable that the political environment has been influencing the company for creating the long term profitability in a country. Best Buy Co. Inc., has been operating over 1100 locations that have the diverse political preferences and risks. In United States, best Buy complies with the local, state, and federal laws that are concerned with the corporate contributions to the ballot initiatives and the political candidates. However, it has been observed that the federal law is prohibited in order to eliminate the direct funding to the federal candidates (Cao and Li 2015). Therefore, it is allowing the corporations to establish the political actions for facilitating the contributions from the voluntary employees to particular committees and candidates. In order to accomplish this purpose, the Best Buy Employee Political Forum PAC is established to encourage the eligible employees t o participate. It is noticed that the company pays the taxes by maintaining the applicable laws that are consistent with the goals and transparency of the company (Aithal 2017). This PAC Forum is federally registered under the non-partisan political action committee, which is governed and controlled by the Federal Elections Campaign Act (Corporate.bestbuy.com 2017). Economical Factors The unfolding of the current credit crisis and the housing system is decreasing the chance of the fruitful rebound in the immediate future. The disposable income rate was strongly felt in the retail sectors of US. After the economic crisis in 2008, the world economy was completely shaken. It is reported that the year-on-year (YOY) retail growth rates have been hovering between 4% and 9% from the year of 2003 to the third quarter of 2008. However, it is also recognized that the fourth quarter of 2008 experienced the decrease of 4.57%, which created the significant shrink in disposable incomes. Apparently, the electronic goods and appliances are perceived as the luxurious goods. It is noticed that the current economic structure in US is quite challenging for Best Buy Co. Inc. due to the constant decrease in the income rate. Social Factors The company maintains the effective CSR policies for offering the best products and services to the consumers. The social atmosphere in US and Canada reflects the preferences for the higher sophistications (McArthur, Weaven and Dant 2016). People in these countries are much inclined towards using the luxurious goods with high quality and reasonable prices. The electronic apparels and gadgets offered by Best Buy Co. Inc. are considered as the luxurious goods that are sold by considering the price-consciousness. The company concentrates on building the effective relationships with the consumers to gain the effective customer base (Thursby and Berbari 2016). The price consciousness is the major factor for the company to sell the electronic goods to the potential consumers. Hence, concentrating on the pricing strategy is important to ensure the sustainable position in the market. Technological Factors The portfolio in the private brands is one of the distinct elements for the electronic retailers. The company offers the different brands, such as Platinum, Dynex, Rocketfish, and Insignia. The advancements in the technologies are quite demanding among the consumers. United States is a country that welcomes the technological advancements and innovations in the retail goods (Hodges et al. 2015). Moreover, the consumers are willing to consume the luxurious and sophisticated apparels for the improvement of their lifestyles. Hence, it can be implied that the company can avail the opportunity of the technological acceptance for ensuring the future growth in the business. The obtained ideas from the above PEST analysis indicate that the company may face the obstacle in managing the prices of the electronic goods. The technological advancements require more capital investment that may create the impact on the customers minds (Blackwell and Eppler 2014). However, the utilization of the useful pricing strategies would be helpful enough in attracting more customers towards the products and gain profitability for longer time. Competitive Environment Analysis (Porters Five Forces Model) Best Buy Co. Inc. aims to provide the high technology deliver to the potential customers. The company has already captured the high market share for exclusive product quality of the electronic goods. However, in order to accomplish the purpose of serving the better technological gadgets to the customers, the company requires concentrating on the competitive environment (Blackwell and Eppler 2014). Porters five forces analysis helps in identifying the market competition to determine the preferable strategies for the company. The porters five force analysis would present the ideas about the external market competition and business potentiality to operate in a location. Bargaining Power of Buyers (Low) The power of buyers is considerably low for Best Buy Co. Inc. the competitive pricing tools are the major focus of the consumers while purchasing the electronic goods. Apparently, the electronic goods are perceived as the luxurious products. Therefore, consumers buy these products in small quantity (Porter and Heppelmann 2014). It also relies on the repeat purchases due to which it can be assumed that the prices for the products would match with the potential buyers. Bargaining Power of Suppliers (High) The power of the suppliers is generally higher. It has been observed that the company receives the products direct from the manufacturers due to which it pays low prices for the raw material. This price is generally passed on to the customer benefits. However, if the company does not comply with the conditions raised by the suppliers, it would create the negative consequences (Martnez, Galvn and Alam 2017). If suppliers increase their rates, the USP rates of the company would not be feasible anymore to the customers. Threats of Substitutes The threats of substitutes are considerably low. It is noticed that the customers seek the highly improved and good quality of the electronic apparels (Lee and Grewal 2013). However, there are no such product variations available in the market. Hence, the company requires focusing on the improvement quality parameter more specifically. Threats of New Entrants The threats of the new entrants are moderate in case of Best Buy Co. Inc. It is noticed the electronic retailers need a huge investments to sustain the competitive position for a longer time. Moreover, the parts of the electronic apparels are quite expensive for the manufacturers. However, it is noticed that the well investments on such industry helps in building more customer loyalty due to which the other entrants will be automatically restricted (Cao and Li 2015). Rivalry Best Buy Co. Inc. has the direct competition with Wal-Mart, Radio Shack, and Circuit City. However, it is noticed that Best Buy Co. Inc. provides the best quality of the electronic apparels. The prices of the electronic goods are also quite appreciable to the customers. However, it is noticed that the rival companies are maintaining the balance in managing the price, quality and variations more than Best Buy. Hence, the competitive rivalry is considerably higher for the company. The above analysis of porters five forces indicates that Best Buy has the potentiality to improve the customer base and strengthen the sustainable position. However, the high competition in the market is quite challenging for the company. The rival companies are focusing on the continuous improvements by availing the technological advancements (Matzler, Veider and Kathan 2015). Hence, it is necessary for the company to identify the most preferable strategy to improve the business scenario. Accordingly, the functionalities would be determined. However, it is even necessary to concentrate on the capital investments and generating revenues for improving the customer base. The further section of the study would provide the insights about the strengths and weakness of the company to utilize the opportunities and deal with the potential threats from the external environment. SWOT Analysis The SWOT analysis presents the ideas about the internal strengths and weakness of the company to determine the opportune potentiality in competing in a challenging scenario. The identification of the strengths and weakness of the business determines that whether the company has the potentiality to conduct the business and maintain the competitive position. The business often seeks the fruitful opportunities that would be beneficial for establishing the long term positioning of the company. Moreover, it is also important to recognize the potential threats that may affect the business activities. The complete SWOT analysis provides the ideas about the opportunities and external threats that create impact on the business. The analysis is presented below: SWOT Analysis Strengths Best Buy Co. Inc., maintains high quality service, best products, effective inventory management, reputation development, and niche marketing. In order to develop the brand reputations, the company maintains the remarkable efficiency by managing the large domestic and global distribution channels (Pestleanalysis.com 2017). The strong brand name is quite effective for retaining the customers and making them more loyal. The company is maintaining large footprints in the United States with almost 1,731 stores. The effective relationship with the larger brand like Apple is also quite commendable (Hill, Jones and Schilling 2014). The growing market of the consumer electronic products, such as smart phones and games is also the considerable strength for the company. In addition to this, it is also notable that the company keeps record of the e-commerce business, which is quite helpful in increasing the online sales ratio. Weaknesses The company is highly dependent on the brick-and-mortar location while the online sales increase in a considerable rate. In fact, in the year of 2015, the company made the limited profit margin of 1.92%. One of the major weaknesses of the company is the higher dependency on the supplier credit. It indicates that some of the items in the stores are not much necessary for the customers (Angulo-Ruiz et al. 2014). The operating expenses inside the stores are often higher than the online retailers. High costs of the in house stores are the major weakness for the company. In addition to this, the extreme dependence on the luxury items, such as video games can be the reason for the downturn of the economy. Opportunity The growing market for the electronic apparels is quite opportune for the company. It includes the different electronic devices, such as video games, and smart phones. The constant stream of the innovative smart phone types increases the sales and interests of the customers. Moreover, the growing concerns about e-commerce are also quite opportune for the business development. The continuous improvement in the technological field is quite helpful for the business growth in the future (Angulo-Ruiz et al. 2014). The advancements in the technologies are also quite a remarkable opportunity for the company. Moreover, the growing popularity of the electronic media is quite opportune for the business development in future. Threats The sudden digital delivery of the electronic media is reducing the foot traffic, which is the major threat to business. The online mediums like Amazon, Netflix, iTunes, and Google Play are treated as the primary source of the entertainment. Therefore, the company has been facing the considerable threats from the external market. The aggressive discounts from the retail giants are attracting more customers and posing challenges for Best Buy Co. Inc. The continuous changes of the demands of the new generation customers are quite threatening to the company (Angulo-Ruiz et al. 2014). In addition to this, the direct sell to the consumers by the manufacturers can be challenging for the company. Table 1: SWOT Analysis of Best Buy Co. Inc. The above SWOT analysis of Best Buy Co. Inc. presents the ideas about the major obstacles of the business. It is noticed that the company has the remarkable capacity of adapting, surviving, and making profits in a high competitive market place. However, it is still necessary for the company to make changes in the operational process for ensuring more profits in this competitive scenario. Conclusion and Recommendation The study provides the insightful ideas about the market scenario in which Best Buy Co. Inc. operates. The internal and external analysis of the company provides the knowledge about the huge market competition, which is the major obstruction. Therefore, it is necessary for the company to utilize the preferable strategies that can help the company to develop the market position. The restructure of the operational process would be much preferable for the company to adjust the prices and quality of the products. The company needs to develop the promotional activities to gather more customers towards the brands. Understanding the potential threats and opportunities is quite helpful for the company to gather ideas about the market potentiality for sustaining the business. The identification of the internal and external market influence suggested that the company requires improving the operational activities to attract more customers. Moreover, it can also be suggested that the company can provide the effective value propositions to gain the attention of the potential customers. When the customers receive the value based products that are superior to other companies, it becomes easier for them to select the suitable product for their use. In addition to this, introducing the product variations and developing more innovative products would be much attractive to the customers. The company can even develop their customer base by improving the organizational functionalities and customer services as well. Lastly, the continuous monitoring and total qualitymanagement would be helpful for the company to strengthen the competitive position for a long run. References Aithal, P.S., 2017. An Effective Method of Developing Business Case Studies Based on Company Analysis. Angulo-Ruiz, F., Donthu, N., Prior, D. and Rialp, J., 2014. The financial contribution of customer-oriented marketing capability.Journal of the Academy of Marketing Science,42(4), pp.380-399. Bestbuy.com, 2017. [online] Available at: https://www.bestbuy.com/ [Accessed 30 Oct. 2017]. 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