IKEA’s internal and external

IKEA’s internal and external

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An external analysis is a crucial strategic management tool for any business to gain long-term competitiveness. The key why business’ are successful long-term is because they are consciously aware of what is going on around them and continually revising their strategy to remain competitive within a rapidly changing international environment.

Physical         Saturation of gyms across Australia and internationally
Economic         High GDP ? people with a higher disposable income are more likely to spend their money on healthcare centres
2013 Australian election saw uncertainty within the Australian economy, but economist expect it to pick up and have an almost normal 3.5% growth (James, 2013)
Sociocultural         Australia declared as ‘one of the fattest nations’, 14 million + people being overweight or obese (Monash, 2013)
Increase awareness in society for healthy living
People are increasingly becoming more health conscious
Individuals with higher levels of education are more likely to exercise and live healthy (ABS, 2013)
TV programs like The Biggest Loser increase the populations awareness of healthy living
Technological          Technology has enabled people to train in the comfort of their own homes
Nike + Kinect Training (Sawers, 2013)
Apps for Healthy Living e.g. pedometers: counting individuals steps

A.    Threat of New Entrants
Over recent years the fitness industry has seen a rapid increase in the establishment and expansion of gym centres. VA has separated itself from the typical gym centre and differentiated itself into a health club, although Fitness First is still a strong competitor. VA differentiated approach and strong brand presence enables them to remain competitive and minimise the entry of new competitors.

B.    The Power of Suppliers
Within the fitness industry, suppliers are not able to gain as much power due to the fact the supplies these facilities require are not purchased on a frequent basis.

C.    The Power of Buyers
This industry is predominately dictated by buyers/consumers. Consumers are able to demand the features and requirements gyms must have to gain their membership. In this type of industry, businesses have to continually exceed consumer expectations and remain at the forefront of fitness and health trends/concepts to retain and generate memberships.

D.    Threat of Product Substitutes
New concepts and methods of keeping fit are continuously entering the market and this gives consumers alternative options to gym memberships. Such options include:
Outdoor Fitness Classes
Private Personal Training
Health Fitness ‘Apps’

E.    Intensity of Rivalry Among Competitors
Despite the vast abundance of gyms within the fitness industry, there is not a dominant intensity of rivalry for VA. This is due to the nature of which VA has established their business; it is not an ordinary gym but a health club that provides members premium facilities with cutting edge technology.

VA’s relies heavily on their tangible resources, as these are instrumental in delivering the strategy. Their most heavily focused on tangible resources is the equipment and technology they place within their clubs. VA uses the latest fitness equipment that uses advanced technology to give their members the exceptional service and environment they VA prides themselves on.

The three key areas of intangible resources are human resources, innovation resources and reputational resources, which are all applicable to VA. The Virgin brand is VA’s most valuable intangible asset. The Virgin has extremely high brand equity, which means that without the name Virgin behind the health club it may not have been as successful. The brand has enabled VA to almost self promote, as globally Virgin is recognised as being premium quality, having outstanding customer service, high levels of innovation and being reliable. This globally recognition is instilled in consumers minds and psychologically allows the brand to be associated with positive connotations.
VA uses their capabilities to build their core competencies and achieve a competitive advantage within their industry. VA has several capabilities, majority of which stem from the sound knowledge, expertise and dedication of their employees in regards to their innovation. The Virgin brand encapsulates everything about innovation; their entire management strategy and business strategy all come back to generating and being innovating. This concept of ‘innovation’ is what allows Virgin to be different and constantly spark consumer attention and loyalty. Virgin is about offer the newest services in the best possible way, which in turn creates their competitive advantage. (Refer to Appendix 1.3. Core Competencies of Innovation)

More example of Porter’s factor model

. Porter’s Five Forces analysis

Threat of New Entrants: Low to Medium
There are a number of significant barriers to entry. These include the need to acquire the legal rights for copyrighted films and TV shows, as well as having the capability to develop and deliver high quality online platforms and services in an already competitive market. Obviously corporations with large capital bases and/or the requisite experience could compete, but most small businesses would struggle in this market.

Threat of Substitute Products: Very High
There are a number of other options and products that could be used as an alternative to that Netflix offers, such as going to the cinema, On-demand movies, DVR (Digital video recorder), Movies and TV shows that can be illegally and very easily downloaded and streamed online, as well as Pay-per-view.
The Bargaining Power of Buyers: Moderately high
The customer has a variety of options to pick from to watch their favorite movies or shows, with the likes of Apple TV and Hulu offering similar services to Netflix, as well as the large proportion of substitute products available. If the vast majority of customers are not satisfied with what Netflix is providing them, such as subscription costs, variety of movies and shows available, the speed at which their content is being streamed, they can easily switch services for a very low cost, so in this market it is important to please your customers.
The Bargaining Power of Suppliers: High
Providing quality content is key for Netflix to stay competitive and stay operational. Businesses such as Netflix rely heavily on licensing deals from their suppliers, such as Time Warner and CBS. Copyrights are controlled by few companies and they are able to choose which company will get their movies. Therefore the power of suppliers is big because they can negotiate directly with them.
Rivalry Among Existing Firms:High
This is an extremely competitive market, with the likes of Amazon, Apple, Microsoft and YouTube all competing for market share, and even illegal downloading is making it difficult for these businesses to attract customers, with some viewers not wanting to wait months for movies and shows until they are available on Blu-ray or DVD or when companies like Netflix have acquired the licensing deal for the movie 1 month after it is released. What Netflix has done to get a competitive advantage in this market is create exclusive content such as the ‘House of Cards’ that is distributed through Netflix, as well as signing actors like Adam Sandler to exclusive deals to allow Sandler to release his next four films via Netflix (Child, 2014, para. 1).