A Comprehensive PESTLE Analysis of the External Environment
PESTLE is a technique through which businesses can measure their exposure and preparations for external factors that directly affect the enterprise’s health. The factors affecting health can be in terms of revenue growth and disruption of internal corporate governance systems, among others. It stands for the following factors: political, economic, sociological, technological, legal, and environmental factors. Each of the above factors has a specific bearing on the relevance and strategic performance of any firm. The report will seek to analyze how each subsection affects Works and Joyous Asia’s performance, which are Joyous Group Holdings’ two arms (JGH).
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The 5-Force Analysis of the Industry JGL Operates In
JGH operates in the photography industry, which has significantly changed over the past few decades because of technology growth. The company has focused on the industry’s specific sectors, such as graduation regalia rental and portraiture services. The industry has faced challenges over the past decade as people have become more reliant on their phones or cameras to take such pictures. Mobile phones have significantly improved, and they have high-quality cameras which can take great pictures. The photography industry has also transitioned and adapted to these changes, increasing its demands. A significant percentage of the world’s population usually wants professional pictures, especially during some specific moments or events in life. Some of these moments include graduation pictures which Werkz, the subsidiary of JGH, has focused on primarily. Editing of pictures has been one of the photography industry revolutionaries as people love these edited photos. Porter’s five-force model describes the significantly influential factors that determine a company’s success in a market segment. Therefore, the report will use the porters’ five forces model to assess the photography industry and how it has transitioned.
|Number and influence of competitors||The number and types of competitors in an industry might highly affect the business of JGH. Some of the challenges JGH face include stiff price wars, which further drives down revenues for each firm. For JGH, there are at least five other companies which mean it has to operate strategically to avoid being outshined. These companies include Ashley Low Photography, EO Digital Studio, RS Photography, and The White Space. |
It is difficult to operate in an industry with strong competitors that have highly successful brands. Smaller companies struggle to set a foothold in the industry because of the wide reach of some of the competitors. It means that smaller photography companies have to contend with a low market share which commands unattractive revenue levels.
|Potential number of new entrants to the segment||If a market has high turns and low barriers, it will be easy for several players to enter. For JGH, there are staggering barriers, such as the high costs of setting up a fully functional studio. There are other common barriers to entry, including special tax benefits to existing firms, patent protections, strong brand identity, customer loyalty, and high customer switchingcosts. Other barriers include the need for new companies to obtain licenses or regulatory clearance before operation. It is advantageous because the firm can compete through price and innovative customer services such as picnic photography to effectively compete in the market. It also frees up time to venture into novel ideas such as app-based customer interaction because they do not have to worry about disruptions brought about by new market entrants.|
|Suppliers||These are the providers of raw materials such as quality printing papers and tools such as printers which are critical to JGH in attaining the company goals. |
A good relationship with the suppliers ensures a reliable stream of the needed materials, especially during the peak season in which they are necessary for large and consistent quantities. It ensures that value is delivered to the client on time which boosts satisfaction and increases the possibility of a repeat service or a referral. When this strategy is applied consistently, it leads to overall revenue and hence profitability growth.
|Customers||Customer satisfaction can therefore not be gainsaid as they are among the most important stakeholders. |
An outreach program is instituted to make the firm’s services known to customers and how the company delivers and exceeds the expected quality. An effective customer liaison and outreach program will make the products both popular and competitive, leading to overall revenue growth and profitability.
|Availability of substitutes||There are several substitutes for services offered by Joyous Group Holdings (JGH). These are, for instance, on-site offerings of gowns by schools. Therefore, the company should concentrate on its differentiated products with a competitive edge, such as portraits. It means that they will maintain their profitability while seeking to grow it further. It will help to expand the company’s market base and profits.|
The PESTLE analysis shows how each of the external forces represented can affect the firm’s success in terms of profitability in the given market segment. Some of the factors that can affect the firm’s operations and profitability include the number and influence of competitors, the potential entrants of new players in the market, suppliers, customers, and substitutes.
- Number and influence of competitors – the political soundness and stability of a country mean that it is unlikely to see unsupervised monopoly dominance in any segment. It is important because it underwrites the survival of other competitors for the benefit of the consumer. The economic prospects such as those in Singapore mean a market for the industry players to compete. Market players can compete on other fundamentals such as quality rather than price. Changing consumer behavior is also critical to determine the companies posturing to counter competition in their core segment by incorporating technology into their interaction with their clientele.
- The potential number of entrants to the market – A liberalized market ensures freedom of entry and exit of different players in an industry. However, the rigidity occasioned by clients’ unwillingness to engage new and inexperienced players means that existing companies are cushioned from the potential competition, which would reduce the prices. This situation maintains a status quo that guarantees the continued profitability of the business enterprise.
- Suppliers – Established legal tenets ensure that the law guides the relationship between the firm and suppliers. These legal tenets will reduce the time wasted solving disputes and improves the overall efficiency and reliability of the market segment. With order and peace established, this gives room for the firm to deliver real value to its clients to reap handsome profits.
- Customers – Consumer behavioral trends are essential for the success of the business as they inform new product lines for the company. It ranges from incorporating technology in service delivery or ingenious marketing techniques such as online influencers.
- Availability of substitutes – Modern consumers have access to information through digital forms, and they can access cheaper and better substitutes. It means that the company should always be knowledgeable about offering their potential customer better offers and adjust their catalog accordingly to optimize sales and maximize gains.
- Use of technology to have new interaction channels for clients. The avenue could be through the use of modern studio technology, social media, and mobile application interface.
- Venturing into emerging markets such as Malaysia to expand the footprint of the brand.
- Diversify into other important segments to clients, such as picnic photos or photos with sentimental value like those taken within a hostel.
- New trends where institutions prefer to offer the gowns internally. It could signal a similar future shift in the other offering in portraits, for example.
- Price rigidities are foreseen in the future and hence require other strategies to ensure revenue growth.
- It is the ineffectiveness of technology in delivering the promised returns for the organization. For example, the social media influencers did not deliver what they promised, which threatens the business’ brand.
The Strategy That Would Best Suit JGH
The best strategy that is in unity with the needs of the company is the analyzer strategy. Prospector is for infant market segments that do not apply to any particular analytical posturing. Low-cost defenders and differentiated defenders are mainly for market segments that are in decline. These markets are characterized by diminished growth and return customers primarily drive revenue. JGH is in a market segment that is slightly well developed with potential for growth in yet to be explored sub-segments. It translates to the study’s logical needs, which are best captured in the analyzer strategy, which espouses all these tenets. The model will focus on four broad analytical categories, namely: business strength, competition, technology, and industry and market.
In this strategy, the parent company can invest in research and development. The company possesses the capability to create new ideas and products on top of its current catalog. Further to this, the firm has a relatively comprehensive understanding of the market which means that it can proactively respond to changing consumer behavior, tastes and preferences. In taking this posturing, the firm can make investment decisions based on credible data. It ensures that they don’t shoot in the dark and hence guarantees returns on investment. In this strategy, the business concentrates on accumulating valuable data relevant to investment decision-making.
There are many market players, with some holding more significant stakes than others in critical market segments. However, a possible future shakeup means with the right strategy, JGH can better its fortunes by leapfrogging the competition by investing more in targeted advertising. Targeted advertising will help JGH reach broader audiences and carve a niche in a highly competitive market. Competition is expected in all industries; however, the best companies need to implement strategies that help them become the best in their sectors.
Technology has evolved from a basic to a slightly complicated nature. It leaves more room for investment in more sophisticated types, which will deliver even more value for the company and guarantee more profitability in the segment. It is possible to carry out product modifications to mirror the changing consumer behavior, tastes, and preferences. It allows the company to be agile and avoid revenue loss due to structural rigidities. There is the emergence of technological alternatives which provide the firm with cost-efficient substitutes to deliver the same or more value than before. It provides headroom for cost reduction, which in return leads to increased earnings for the firm. The resultant efficiency boost is also critical in reinforcing confidence in the financial fundamentals of the firm.
Industry and Market
The industry is either moderately developed or almost maturing. It means that there is room for developing new ideas, making it possible to tap into new market frontiers to boost Joyous Group Holdings (JGH) earnings. These new segments include online marketplaces from where exceptional portraits can be auctioned or sold, as the case may be. This potential for growth in this industry or market is suitable for JGH because it is currently not a dominant player. It allows it to strategize and compete robustly and aggressively with dominant players such as Sarangoon.