Competitive Environmental Analysis A Case Study On Toy Industry

Introduction

Business environmental analysis is necessary for the entrepreneurs to evaluate the external and internal business setting for successful establishment of the firm. The study aims at analysing the external business atmosphere, through the PESTLE and Porter’s five forces analysis. The study provides a scope to analyse the external business environment of the toy industry in the UK, where Cristina aims to establish the toy business in Oxford. It is necessary to analyse the business environment of the UK so that Cristina can develop the business and make the firm profitable by retaining the customers for the organisational toy products. The major strengths of the toy business in this context are such as Christina has start up capital of £75000 and she knows the suppliers in the toy industry from where she can manage the stock of the toy products in the company. These are the major strengths of the start up business of Christina where she can establish the business efficiently by understanding the external business environment.

External environmental analysis

For external business analysis, it is necessary to conduct PESTLE analysis, where the factors such as political, social, economic, technological, legal and environmental can be evaluated for understanding the external environment of the business. In this regard the economic and the technological factors are suitable to analyse the toy industry in the UK, where the entrepreneur can understand the economic growth and market demand as well as evaluate the technological advancement in the gamin and toy industry so that it is possible for the entrepreneur to establish the firm efficiently (Song, No and Rhee, 2017).

Economic:

Economic growth in the UK is one of the contributing factors that affect the business of Christina positively. The business can influence the buyers and raise the demand of the customers through innovation and creativity as the personal disposable income of the people in the country is increasing year by year. Economic stability and growth is also positive driver to establish the business, where the gaming industry in the UK is generating revenue (Díaz-Campo and Fernández-Gómez, 2019). In the last year of 2019 approximately more than £603 million and annual growth of the toy industry is 1.1% where the numbers of employees are also increasing at a rapid rate and thus these are the major contributing economic factor to influence Christian for successful establishment of the business (LI et al., 2018).

Technological:

There is technological advancement in the toy industry, where huge variety of products and latest innovation in digital gaming activities further attract the customer in the toy industry. There is significance investment for research and development of diversify products and latest innovation and technological up-gradation further attracts the buyers and influence their decision making practice which in turn helps the business to generate profitability (León-Cabezas, Martínez-García and Varela-Gandía, 2017). Additionally, technological advancement and creativity in designing the toy and gaming products would be beneficial for the business of Christina to improve product differentiation strategy and increase stock of huge variety of toy products to attract the customers and strengthen their customer’s base for long run.

Industry environmental analysis

In order to analyse the position of the industry and the forces affecting the business, it is necessary to evaluate Porter’s five forces model, where the five forces are such as threats of new entrants, threats of substitute products, competitive rivalry, and bargaining power of the customers and the bargaining of the suppliers (Lin-Hi and Blumberg, 2017). For the toy company, it is necessary to mitigate the threats of the new entrants and threats of substitute products as there are many toy products available in the industry that can attract the customers. It is also important for the toy manufacturer to analyse the competitive rivalry in the industry, so that it is possible for the firm to develop string corporate strategy for successful maximisation of profitability and sales volume. In this regard, the bargaining power of the customers and the supplier are also important factor that affects the business activities of the organisation (Fernandes, Cavalcanti and de Andrade, 2017). In this regard one of the major forces as per the Porter’s five forces model is competitive rivalry, which needs to be analysed to support the business of Christina with appropriate strategy.

Competitive rivalry:

There is high competitive rivalry in the UK toy industry, where Christina aims to establish the toy business (Michalitsi-Psarrou et al., 2019). There are other competitive toy companies in the UK for which there is intense competition in the toy industry. The other competitive rivals in the toy industry are such as Lego, Hasbro, Hot Wheels, Mobile Suit Gundam, Mattle, Nerf, Barbie and Fisher Price as well as Bandai Namco. There are other substitute products which also raise the threat of substitute products in the toy industry where there is the variety of toy products and this further increases the threat of substitute products (Kontzinos et al., 2018). As per the overview of the toy industry, there is a high threat of substitute products due to existing products. In this regard, though the firm would face challenges in establishing the business in the UK, it provides a scope to influence the entrepreneur for developing effective strategic planning for successful establishment of the business (Veloso, Hildebrand and Sresnewsky, 2017; Khajeheian, 2018). The selection of the force is good to analyse the internal competition in the toy industry of the UK, where the analysis provides a clear view about the toy industry and it further influences Christina to develop strategic tactics to establish the firm efficiently and retain the customers in long run.

Conclusion and recommendations

The toy industry of the UK is growing at a rapid rate and the variety of products and services, attractive design of the products, technological advancement are the factors that influence Christina to develop strategic planning to establish the business and generate profitability in long run by strengthening their customer’s base. For successful establishment, Christina can strengthen the supply chain and distribution network and attract the customers, who are in need of innovative gaming products and toys and the product differentiation strategy further will help the business to gain high competitive advantage over other competitive toy companies in the market.

Reference List

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