Since private business is the area of entrepreneurship where capital investment is a significant aspect of work, many development strategies involve creating individual ventures through large expenditures on production, technical, transport, and other bases. However, in some cases, small business owners do not have an opportunity to expand their sphere of influence at the expense of financial resources. In addition, a high level of competition in certain areas forces the owners of private companies to adapt to the current conditions and suffer losses due to insufficiently high demand for goods. As a result, there is a risk of the unprofitability of business activity under the influence of certain factors, and some enterprises cannot withstand sufficiently high requirements imposed by the external competitive environment. Thus, many start-up enterprises are forced to stop development and be content with small incomes.
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In relation to the TSA Tech store that specialises in selling accessories for cell phones and repairing such equipment, the aforementioned threats are also real for this business. The lack of an appropriate financial base for expanding and purchasing high-quality components hinders the development process and is an obstacle to hiring additional personnel. Also, attendant complications worsen sales figures, in particular, the small size of the room and not a very busy area. In order to predict the productive model of growth for this business, it is essential to take into account all the aforementioned conventions and pay particular attention to such factors as a competitive level, and the ratio of price and quality of goods offered based on current market indicators. The result of analytical work may be the preparation of a suitable plan for the development and expansion of the business in order to increase the share of sales and, as a result, to receive more profit.
As tools for assessing the current situation in the business in question, such mechanisms will be engaged as Porter’s Five Forces analysis, as well as the visual means of reflecting data in the form of a positioning map and a strategic marketing grid. Based on the data found, it will be possible to draw appropriate conclusions regarding the position of TSA Tech in a competitive environment and its growth indicators. As a justification base for certain theories and hypotheses, relevant scholarly sources will be involved. In general, the business of TSA Tech has problems, but the detailed analysis of the factors affecting the productivity of work may allow compiling an optimal development plan in accordance with modern growth models.
Porter’s Five Forces Analysis
TSA Tech’s comprehensive business assessment may be based on Porter’s Five Forces analysis, where several valuable variables are examined in order to obtain adequate information about the competitiveness of the venture. In particular, according to Huang, Dyerson, Wu and Harindranath (2015), firms that occupy a leading position in the current period have a temporary advantage over their rivals since demand is a dynamic indicator, and new enterprises can be ahead in terms of customer interest. In order to analyse the activities of TSA Tech in a contemporary business environment, it is possible to apply this technique and trace how strongly this or that threat or force affects the operation of the store. As an evaluation base, corresponding scores will be set on a 10-point scale. Accordingly, at the end of the analysis, the overall result will be summarised, and the indicators will be displayed based on 50 possible points.
Based on the assessment of the current activities of TSA Tech, the store is not located in a busy area, which cannot be considered a success factor. However, clients from nearby houses come here during the day periodically. In addition, there are no similar firms and shops hereabout, which expands the capabilities of the site under consideration and allows its owner to increase the range of services so that as many customers as possible could order repairing their telephones or acquire corresponding components. One of the limiting factors is the small size of the sales area, and not all products are available for review, unlike large retail outlets where buyers can explore the entire range in detail. Shops with such services and goods may be found often enough. Therefore, in order to overcome a competitive barrier, it is crucial to offer new services and expand opportunities for interaction with the target audience. At the moment, based on the aforementioned features, competitive rivalry can be assessed as 5/10.
Such an indicator as customers’ power is a significant aspect of business practice. As Huang et al. (2015) note, clients respond to price changes, discount programs, and other selling techniques, and the level of buyer interest allows making competent opinions about the strength of a particular firm. Based on data that TSA Tech’s monthly cash flow is NZ$18,000 and gross profit varies from NZ$8,000 to NZ$10,000, it can be noted that the income of the shop is negligible. Moreover, the store owner has to not only purchase the necessary equipment and components but also pay wages to two employees. In this situation, the power of consumers is an extremely important element, which, however, is not implemented properly. Therefore, based on the rating scale, this indicator can be defined as 4/10, and additional development work should be done in this direction to strengthen TSA Tech’s market position.
The suppliers of raw materials may have no less impact on the activities of a firm than consumers. With respect to TSA Tech, the owner faces the choice as to which procurement option it is better to prefer – local distributors at a higher price or suppliers from China who offer components at a lower cost but with no guarantee of refund and longer delivery. Repairing cell phones is the most profitable activity; nonetheless, in addition to a qualified employee, it is essential to have reliable channels for obtaining relevant materials. Since the store owner doubts whether he is willing to pay 20% less compared to the cost of local raw materials, this means that his budget is quite limited. Accordingly, neither of the two principles of supply chain management can be called predominant. Regarding the assessment of suppliers’ power, this indicator is a significant aspect and may have a value of 3/10.
The threat of New Entrants
The emergence of new participants in a certain area of business may be fraught with serious changes in the market structure. As Huang et al. (2015) argue, profits can decline if identical businesses start to appear, and the prices of product differentiation and cost control will inevitably increase. In the context of the store in question, which is located not in a busy area, the threat of new entrants is significant. The emergence of a similar venture with identical goods and potentially better service is fraught with not only the loss of profit but also a complete bankruptcy. In order to avoid dangerous outcomes, it is crucial to take into account the likelihood of business reorganisation in such a way as to keep loyal customers and continue development. In addition to the aforementioned threats, this aspect is highly relevant to TSA Tech due to the obligations that may be imposed on the owner in case of new entrants. Therefore, from the standpoint of significance, it can be assessed as 5/10.
Threat of Substitutes
Substitute products that may appear in the market as a result of technological advances and developments in the field of cell phones also carry a serious threat to the store’s business. If more modern components emerge, the owner of TSA Tech will have to either spend more on acquiring them, which will entail an increase in costs, or abandon innovations and continue working usual, which is fraught with the loss of customer interest. The elasticity of demand largely depends on the fullness of the market, and in case of updating the technical base, more developed ventures may suppress TSA Tech’s business. Huang et al. (2015) state that a firm can “sustain its competitive advantage by erecting entry barriers for competitors” (p. 621). However, in relation to the store in question, which does not have a rich assortment of goods and benefits more due to repairs, the threat of substitutes is significant. Accordingly, regarding its influence on competitive power, this indicator can be assessed as 5/10.
Market Attractiveness Score
When assessing the analysed results, it is possible to assume that TSA Tech’s business is sufficiently exposed to the threats of competition, new entrants and substitute products. It can be noted that out of 50 possible points, the store deserves a rating of 22. This indicator is not high enough to count on complete superiority in the market and overcoming all the barriers created by rivalry. However, having a well-thought-out strategy for developing and promoting the business, the owner of the store can influence the current results and achieve higher demand so as not to become bankrupt and have too high production costs. As a follow-up mechanism for analysing the business in question, positioning maps will be built, and a strategic marketing grid will be developed in order to identify the key vulnerable areas and determine the optimal growth strategy.
The analysis of TSA Tech, which is a company but not an industry and does not have an extended sales network, can be supplemented with a positioning map. According to Moon and Kamakura (2017), this assessment tool allows determining how successful a particular type of production is while taking into account elementary and valuable criteria – price and quality. Such a scheme will help to reflect the current situation that the store owner has encountered and will provide an opportunity to identify the best steps to improve work efficiency. In Figure 1, an example of such a map is displayed where TSA Tech does not have a sufficiently high position.
At the moment, due to its conscientious work, TSA Tech has not the lowest position in the market. However, the unreasonable policy of importing raw materials and the lack of a sound marketing strategy create obstacles for the company, and the store cannot compete with some rivals. As a result, a market gap arises, which has a negative effect on income. At the moment, the gross profit is in the range of NZ$8,000 to NZ$10,000. However, in case the correct model of growth and development is applied, this indicator may be doubled due to the expansion of the client base and the range of services provided. Today, the market share that TSA Tech covers do not allow it to have as many buyers as is required for stable work, hiring and training qualified personnel and other nuances of business practice. Nevertheless, the situation can improve, and drawing up a strategic marketing grid may be a productive way of analysing the situation and overcoming a competitive barrier by visualising the strengths and capabilities of the company.
Strategic Marketing Grid
In order to substantiate a potentially successful development model for TSA Tech, it is possible to display a traditional strategic marketing grid and determine which course is best to choose to bridge the market gap and expand business opportunities. As David, David and David (2017) note, a special matrix is used as a tool for analysing the most urgent needs of a particular firm that is at the planning stage for further growth policies. Considering that TSA Tech is a company but not an industry since it does not manufacture any product line and is more focused on services rather than goods offerings, this approach is a good solution. In Figure 2, key areas are indicated with corresponding scores.
Based on the previously used Porter’s Five Forces analysis and scores that each of the forces received, it is possible to see that TSA Tech is in the middle of market attractiveness. This indicator is not the worst; nonetheless, in order to continue business growth and confront competitors, it is crucial to promote a new operating policy. When taking into account the specifics of the company and the store in question, it can be assumed that the product development model is optimal from the point of view of potential profits and covering the existing market gap.
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This strategy may be the most successful due to the peculiarities of the market in question. Since repairing cell phones is quite a demanded activity, it is crucial to not only improve the production base by hiring qualified employees but also expand the range of products without going beyond this business. This policy is justified because the threats of new entrants and substitutes are significant.
Innovations in this area may lead to the loss of customer interest in the store business due to irrelevant services provided by TSA Tech. According to Bocken, de Pauw, Bakker and van der Grinten (2016), “technology or products by themselves do not guarantee business success,” and their competent implementation should be ensured (312). The owner of the store can purchase new components not only for the most common models of cell phones but also other products of this profile, for instance, tablets and laptops. In this case, as Ayob and Hussain (2016) argue, it is essential to take into account that consumers prefer reliable and proven products made in countries with highly developed economies, “while goods from developing countries are viewed as less expensive alternatives” (688). Thus, business growth through product development is the most appropriate strategy for TSA Tech due to the constant updating of an innovative base and increasing interest in advanced computer and mobile phone products.
The analysis of the store’s activities makes it possible to understand that, despite some barriers that impede all-around business development and sales growth, clearly defined strategic decisions may help improve the current situation and promote the company among consumers. All the factors affecting profits and buyer interest imply assessing from the perspective of relevant evaluation techniques. The principle of product development is the most optimal business growth policy in the face of the existing threats.
The following business assessment tools were utilised when analysing the activities of TSA Tech:
- Porter’s Five Forces analysis is necessary for studying the threats that pose a danger to a particular business and the forces that can withstand them.
- A positioning map where the level of the company in question is displayed in the market and a market gap is indicated in accordance with the current and potential incomes.
- A strategic marketing grid that demonstrates the company’s position in relation to market attractiveness and is a tool for determining the most successful path of development.
The outcomes of the complex evaluation through business assessment tools are the following:
- The threats of new entrants and substitute products are the most significant.
- TSA Tech is inferior to some companies, but it has enough potential for growth.
- The level of marketing attractiveness is average, which stimulates the development of a suitable operational policy.
A suitable competitive advantage strategy aimed at increasing market position is as follows:
- Product development to increase customer interest and increase gross profit.
- The detailed analysis of the import of raw materials, which is assumed in accordance with the growth model.
- The compliance of the company’s activities with the interests of the market, taking into account constant technological innovations.
Ayob, A. H., & Hussain, W. M. H. W. (2016). Buying local or imported goods? Profiling non-income consumers in developing countries. International Review of Management and Marketing, 6(4), 688-695.
Bocken, N. M., de Pauw, I., Bakker, C., & van der Grinten, B. (2016). Product design and business model strategies for a circular economy. Journal of Industrial and Production Engineering, 33(5), 308-320. Web.
David, M. E., David, F. R., & David, F. R. (2017). The quantitative strategic planning matrix: A new marketing tool. Journal of Strategic Marketing, 25(4), 342-352. Web.
Huang, K. F., Dyerson, R., Wu, L. Y., & Harindranath, G. (2015). From temporary competitive advantage to sustainable competitive advantage. British Journal of Management, 26(4), 617-636. Web.
Moon, S., & Kamakura, W. A. (2017). A picture is worth a thousand words: Translating product reviews into a product positioning map. International Journal of Research in Marketing, 34(1), 265-285. Web.