Strategic Planning and Management - Assignment Example

Complete and in-depth analysis (external environment) of the target organisation (Booktopia) Introduction An in-depth external analysis of an organisation looks at how the factors that exist outside the organisation affect its strategy. Organisations operate in two types of environments: the macro-environment and the industry environment. The macro-environment is made up of different factors such as economic, political, social, technological and environmental (PESTLE) which affect the growth prospects of companies in different industries (Stead, 2014, p. 64). On the other hand, the industry environment is composed of different factors such as the bargaining strength of buyers and sellers, the threat of substitute products and the threat of entry of new companies into an industry. This form of analysis is known as Porter’s 5 forces framework and is used to analyse the level of competitiveness in different industries (Porter, 2008, n.pag). These factors usually affect the level of competitiveness that is being experienced by companies operating within a particular industry. Therefore, their competitive positions are shaped by the factors of the industry environment. This paper will conduct an external analysis of Booktopia. For this to be done, the external environment in which the business operates will be taken into consideration. Analysis of the factors that exist in the macro-environment of the organisation and how they influence different business organisations in different industries will be done using the PESTLE framework. Analysis of the external environment for Booktopia will be followed by an analysis of industry environment in which the company operates. This will be done by the use of the Porter’s 5 forces framework. The paper will then discuss the strategic options that are open for Booktopia and recommend key objectives and a mission statement that the organisation should pursue going forward. For this to be done, the paper will make use of the 5Qs model. Booktopia’s in-depth external analysis Macro-environment analysis In general, the economic factors that prevail in the macro-environment may have a positive impact on the growth prospects of the industry in which Booktopia operates. This is because of several reasons. To begin with, the total revenue in the book industry in Australia has been increasing steadily over the recent past (Ewart, 2012). This increase has been in accordance with the growth in the gross national product (GNP) of the country. The economy of Australia expanded by 0.9% during the first quarter of 2015 (Trading Economics, 2015). This increase in GNP is likely to translate to higher levels of disposable income that individuals in the country will have. The positive prospect of economic conditions in Australia is likely to affect the growth prospects of the book industry in interesting ways. First of all, it is observed that the Australian industry is largely dependent on the services industry (Reserve Bank of Australia, 2015). This is likely to contribute to the growth of different industries as many individuals will have extra amounts of money to spend on non-essential goods and services. Secondly, it is indicated that Australians are among the individuals who spend a lot of money buying books (Book Industry Strategy Group, 2015, p. 17). This is reflected in the performance of the book industry over the past and its projected growth. Therefore, with a generally positive economic outlook, this number is likely to increase. This will have a positive impact on the growth of the industry. There are different ways in which technological factors affect the growth prospects of the industry in which Booktopia operates. According to the Book Industry Strategy Group (2011, p. 25), technological changes are affecting the manner in which the industry is organised. On one hand, the emergence of new technologies provides an opportunity for organisations to access new and emerging markets such as e-books. On the other, technological advances enable organisations to realign their operations and develop business models that are more effective, sustainable and profitable. Therefore, changes in technology are likely to have a positive impact on the growth prospects of the industry. Furthermore, technological advances tend to change the consumption patterns of consumers. The emergence of the Internet and its associated e-commerce system changes the way consumers buy goods and services. This is likely to open new and innovative ways in which organisations like Booktopia that are in the retail industry can serve their customers. Another factor in the macro-environment that is likely to affect the growth prospects of the industry is changes in the political scene. According to Levine (2015, p. 29), the manner in which political factors affect business organisations in Australia can best be understood when the factors are considered within the context of how they create economic pressures in the region. Therefore, the manner in which political changes take place in the country affects economic conditions. This not only affects industries in the domestic market but also those that operate or sell their products and services to other countries in the region. The changes may be in the form of new legislations, policies and regulations. These effects are demonstrated in terms of different measures. For example, the level of consumer confidence is an important indicator of how consumers perceive the economic performance of the country as a function of the political events taking place. The perception of business organisations is indicated by the measure of business confidence. What is important to note is that although these measures change over time, the level at which they are currently is lower than that of the other countries neighbouring Australia (Levine, 2015, p. 30). This has several implications for business organisations in Australia. The first one is that individuals consider that political changes are having a negative impact on economic performance in the country. The second one is that business organisations in Australia are less confident than those organisations in neighbouring countries about the impact that political changes have on economic progress in the country. Therefore, it can be concluded that political factors have a negative impact on the growth prospects of the industry in which Booktopia operates. Environmental issues are important to many business organisations in Australia (Levine, 2015, p. 28). This state of affairs is as a result of increasing awareness among individuals of the impact that business organisations can have on the environment and how this can affect their lives. This has led to the development of regulations which make it necessary for business organisations to include detailed reports on their impact on the natural environment in their financial reports (Bhattacharyya, 2014, p. 34). Therefore, although environmental issues are quite important for business organisations in Australia, they are likely to have a positive impact on businesses in general. With regard to legal issues, according to the World Bank Group (2015), Australia is currently ranked at number 10 in the world with regard to the ease of doing business. However, according to the report, it is relatively easy to start a business in Australia and get credit to finance operations. However, it is relatively difficult to pay taxes, get construction permits, trade across borders and protect minority investors. According to (Ewart, 2012), the book industry in the country is experiencing the negative effect of the current taxation legislation. Generally, books that are imported into Australia from different markets are not subjected to the tax regime that the books which are produced in the country are subjected to (Ewart, 2012). This trend affects the performance of the local publishing industry as well as other organisations such as booksellers and distributors that operate in the book industry in the country. Therefore, legal factors have a negative influence on the growth prospects of business organisations in Australia. Lastly, social issues are likely to have a positive impact on the growth of business organisations in Australia. This is because of different reasons. However, the most important one is that the government has put in place social protection measures that ensure that individuals in the country work longer and retire late (Goldie, 2015, p. 54). This ensures that individuals who retire maintain their purchasing power. Therefore, this protection net, as well as other similar measures, ensures that the economy of the country does not slow down. This has a positive impact on business organisations in the country. Industry analysis Analysis of the level of competitiveness of the industry in which Booktopia operates is done using Porter’s 5 forces model as follows. The industry is facing a high bargaining power of suppliers. This is because of several reasons. First, booksellers entirely rely on book publishers for their stock of published books before selling them to their customers. Currently, booksellers in Australia obtain books from publishers at an average discount of 40% of the recommended retail price (Ewart, 2012). What this means is that for bookselling companies to make a profit, they have to cover their operational costs by factoring them into the price that is charged to the retailers. Secondly, the publishing industry is facing its own challenges. One common challenge is that the time that it takes for publishing firms to make new titles available in the market is long (Ewart, 2012). This makes it necessary for book retailers to plan their inventories around the schedules of publishing companies. Thirdly, the publishing industry in Australia, which is worth $2.5 billion, has been growing in the last few years (Fisher, 2010). This has been the result of many factors, the most important one being the manner in which the government encourages the development of the publishing industry in the country. Another factor is the rapid rate at which publishing firms are adopting new technologies that make their operations efficient and more productive (Fisher, 2010). Therefore, these factors increase the bargaining power of the suppliers. There is a high threat of new companies entering into the book retail industry in Australia. According to Book Industry Strategy Group (2011, p. 24) the book retail industry in Australia is characterised by two types of business organisations: those that operate physical shops for clients to purchase books and those that sell books entirely via online sites. Further, the business organisations that sell books to consumers using physical facilities are divided into department stores, chain stores and independent retailers. In the past, it was not easy for new organisations to enter into the book retail market (Fisher, 2010). This was because of the high costs that are associated with setting up the physical facilities that are required for an organisation to successfully retail books to consumers. In addition to this, the industry was known for experiencing inefficiencies in its supply chains (Fisher, 2010). These difficulties worked to make it difficult for new companies to enter into the industry. However, following technological changes, things have changed. The advent of the Internet and e-commerce has made it possible for retailers to sell books to clients online. This makes it easy for new organisations to enter into the book retailing industry. Furthermore, the Australian government is offering financial assistance to organisations in the industry as a way of helping them to build online networks to ensure that they are able to distribute their books fast (Ewart, 2012). Therefore, many new companies, local and international, can easily enter into the book retail industry. The book retail industry is also faced by a high bargaining power of buyers. There are several factors that have contributed to this state of affairs. The first one is the advent of e-books. According to the Book Industry Strategy Group (2011, p. 31) the sale of e-books in Australia is set to increase in the next few years. Although it is estimated that the rate of growth of sales of print books is set to increase at an average rate of 3.5% over the next few years, this rate is set to reduce as the sale of e-books increases (Book Industry Strategy Group, 2011, p. 31). Therefore, as customers are able to access more e-books in Australia, book retailers are forced to develop the right mechanisms of meeting this emerging trend in consumption behaviour. In addition to this, customers are now able to access different products and services via online sites. The growth of e-commerce has made it necessary for book retailers to develop online distribution networks. Swift (2013) observes that the business model of Booktopia takes advantage of this trend. This is because the company uses its website to sell different types of books to consumers. This helps it to not only reduce its costs of operations, but also to be flexible enough to respond to the changing needs of customers. Another point is that the book retail industry in Australia is facing a low level of the threat of substitute products. In general, the number of books that are bought in Australia remains high (Fisher, 2010). This is because no other strong product that can substitute books has so far emerged in the industry. Individuals still favour books for leisure reading. Furthermore, the use of books for educational purposes ensures that individuals in Australia will continue to rely on books, either printed or e-books, in the foreseeable future. This is because the propensity of the buyers to substitute books remains low. Lastly, there is a high level of competitiveness in the industry. In general, there are about 1,500 outlets selling books in Australia. Booktopia is facing stiff competition from many other retailers of books in the Australian market. According to Swift (2013) the most formidable competitors of Booktopia are book retailers who sell books to clients via their physical stores that are located in different regions across the country. Although the traditional bookstores like Dymocks and Collins have higher costs of operation in terms of maintaining their retailing outlets, they are located near to where the customers are. Further, general retailers such as Target present the company with formidable competition because they also sell books among other types of consumer goods (Book Industry Strategy Group, 2011, p. 24). These factors make them quite effective in competing with Booktopia. The second set of competitors that Booktopia faces is from booksellers that operate via online platforms. The most formidable competitor under this category is Amazon, an international online retailer of different types of consumer goods. However, Swift (2013) observes that although Amazon has been in the business for a long time, its level of competitiveness against Booktopia has been reduced by the brand loyalty that Booktopia enjoys. Discussion and conclusion From the analysis of the macro-environment and the competitiveness of the industry, there are several recommendations that can be drawn. The recommendations are about the strategic options that are available for Booktopia going forward. These are provided in the form of answers to the five questions that are used to develop the recommended organisation strategy, key objectives and mission that the organisation should pursue. The first question is about the amount of growth and level of profitability that Booktopia seeks to achieve in the near future. In the recent past, the company has managed to double its revenue to reach about 30 million Australian dollars in 2013 (Swift, 2013). What this implies is that the company has managed to undergo rapid growth in profitability. This has been fuelled by the ability of the company to leverage its internal resources of technological advances, good customer service and efficient business practices to achieve this level of growth. Therefore, going forward, the company should seek further growth in terms of an increase in sales revenue and profitability. The second question is about the products and services that the company plans to produce in the future. Currently, Booktopia sells a wide variety of books to different market segments in Australia. There is a segment for children, adults, fiction and non-fiction. There are also segments on education and Australian stories (Booktopia, 2015). The books are divided into categories that are based on subjects. On the other hand, the organisation sells e-books, audio books, DVDs, magazines and general gifts (Booktopia, 2015). Therefore, the company has developed a diverse portfolio of products since its sells both print and e-books. The company sells these different types of books to its customers through its website. Thus, it is recommended that the company maintains its current product mix in the near future. The third question is about the customers and geographic markets that the company plans to serve in the near future. Booktopia was started on the platform of the first online bookstore in Australia (Booktopia, 2015). The company sought to provide a wide range of print books, e-books and DVDs to all customers in Australia. Therefore, the company should maintain the approach of serving the Australian market. This is because from the analysis of the macro-environment, it is clear that the prevailing social and economic factors are likely to have a positive impact on the growth of business organisations in the country. Furthermore, Booktopia has managed to compete effectively in the market by use of its approach. Therefore, the organisation should maintain its focus on the Australian market. The fourth question is about the generic strategy that an organisation plans to follow to position itself uniquely against its competitors. From the analysis of the level of competitiveness of the book retailing industry in Australia, it is clear that there are several competitors that Booktopia is facing. The traditional bookstores and convenient stores that sell books along with other consumer goods have the advantage of being located close to customers. Online book retailers like Amazon have the advantage of having been in the business for a considerable length of time. In general, there are four different types of generic organisational strategy: cost leadership, differentiation, focus that is based on cost and focus that is based on differentiation. The suitability of these strategies depends on the prevailing conditions in the macro-environment as well as the industry of the organisation in question (Thompson & Martin, 2010, p. 42). From the macro-environment and industry analysis that has been done, there are several issues that should be taken into consideration when selecting the generic strategy that Booktopia should pursue. The first one is that the nature of the business model of the company makes it difficult for the organisation to pursue a focused strategy. The organisation provides both print and e-books to customers. The books that are provided are of a wide variety and are meant to appeal to different segments of the general market in Australia. Furthermore, Booktopia combines the aspects of a traditional bookstore and a fully online book retailer. This is seen in the company’s investment in a highly effective book distribution centre in Sydney and the use of technological advances to help it distribute its books fast. Furthermore, it is not possible for the organisation to pursue a differentiation strategy since it is not offering any new products in the market. Print books, e-books and DVDs have been in the market for a considerable length of time. This therefore leaves only one generic strategy option that the organisation should pursue: cost leadership. The organisation should take advantage of its internal strengths of use of technology and effective distribution systems to reduce its overall costs of operations. By pursuing this strategy, it will be able to position itself so that it effectively competes with other online bookstores and traditional book retailers. Lastly, the company should seek to hold the position of the largest book retailer in Australia. By pursuing the cost leadership strategy and leveraging on its Australian heritage and traditional customer service, the company is likely to control the book retailing market in the country in the future. Therefore, Booktopia should be guided by the following mission statement: to avail all types of books across Australia within the shortest time possible. References Bhattacharyya, A. (2014). Factors associated with social and environmental reporting of Australian companies. Australian Accounting, Business and Finance Journal, 8(1), 26-49. Book Industry Strategy Group (2011). Final report to government. Retrieved from http://www.afr.com/rw/2009-2014/AFR/2011/11/09/Photos/85f2f988-0a81-11e1-a0ff-c5b248f8645a_BISGFinalReport.pdf Booktopia (2015). Australia’s fastest growing online bookstore. Retrieved from http://www.booktopia.com.au/ Ewart, J. (2012). Australian book industry 2011. http://www.booksellers.co.nz/book-news/australian-book-industry-2011 Goldie, C. (2015). 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