Question 1: Consider You Are Opening A New Business, So To Know The Market Trends of The

Question 1: Consider you are opening a new business, so to know the market trends of the
present market situation perform PEST analysis, which factors you are assuming favorable or
unfavorable for your business?
PEST analysis
PEST analysis "Political, Economic, Social, and Technological analysis" and describes a
framework of macro-environmental factors used in the environmental scanning component of
strategic management. It is a useful strategic tool for understanding market growth or decline,
business position, potential and direction for operations.
So, what are some of the variables within the analysis that might impact your new small business
opening? In answering this question, we’ll review each one of these individual variables in
detail. After each description, we’ll review the types of things your new small business should
pay attention to.
Political:
When thinking of political factors, think of how some political parties have an affinity for
lowering or raising taxes. This is ultimately why the economy seems to stand still during an
election cycle. Businesses are all waiting to decide what actions to take once the election has run
its course.
New small Business Impact: While each of the aforementioned variables are important, they
often pale in comparison to much smaller events
Economic:
Inflation rates and interest rates are often the main concern with the PEST analysis, as is the
current economic climate. Companies that operate in multiple countries often deal with the
uncertainty of fluctuating exchange rates. Understanding the impact of these variables on your
business is critical to reducing their effects.
New Small Business Impact: The costs to borrow money are fairly low in today’s economy. That
is of course if you are able to borrow money. A lack of available credit altogether makes it nearly
impossible to run operations. Your plan should be to pursue alternative financing options during
periods where credit is hard to come by.
Socio-Cultural:
When thinking of these factors, think of the impact of an aging populace. Think about how a
changing demographic means changing preferences and an adjustment in lifestyle choices. While
the healthcare industry may benefit from longer life expectancy, a company that focuses solely
on an aging customer base is one that is often left scrambling to pick up the pieces.
New small Business Impact: An aging customer base is a serious issue for small businesses if
they do nothing to appeal to a younger demographic.
Technological:
Companies must always be aware of the impact of emerging technologies. This includes tracking
technological advancements on the part of a competitor’s product offering and competing
technologies from external market threats.
New small Business Impact: Focus on identifying how your new business can use technology to
increase the speed of your response. Today’s mobile devices, handheld computers and enterprise
hardware solutions allow companies to reconcile inventory counts in a fraction of the time
compared to manual approaches.
Again, the analysis itself is fairly straightforward. However, your company should use the tool
with the idea of setting up those aforementioned triggers in order to enact a specific plan or
strategy to deal with any unwanted occurrence.
Question No 2: For the same hypothetical business mentioned in question 1, use porter five
forces to analyze competition for the same business.
What is Porter’s Five Forces?

Porter’s Five Forces analysis was designed to help businesses evaluate the competitive forces at
play in their industry and engage in strategic planning that accounts for the specifics of their
industry structure and the relative power of suppliers and buyers.
Porter’s Five Forces Can Help when you’re starting a new business:
Before you take the leap and decide to start a new business in an unfamiliar industry, conduct
Porter’s Five Forces analysis to get the lay of the land. Understanding the potential for industry
growth, the existing distribution channels, and relative price sensitivity will give you a full
picture of the level of competition you can expect and the capital requirements you need to start
a viable business. Be realistic about the amount of stability you require and factor in how the
threat of new entrants can affect your market share and sustained profitability.
Porter named five forces that determined the competitive intensity of a given market, which are:
1. Competitive rivalry: This category is where you evaluate the level of competition in
your industry based on the number of competitors you have and their relative power. If
you have a large number of direct competitors, there’s incentive for companies to lower
prices and spend considerable amounts of money on marketing in order to maintain a
competitive position. These tactics can affect your bottom line. A large number of direct
competitors also gives your buyers and suppliers a large degree of choice in who they
decide to work with. A small number of competitors means that you have more power in
setting your prices and sustaining profits.
2. Supplier power: What’s the bargaining power of suppliers in your industry? How easy is
it for them to raise prices, and what is the cost of switching from one supplier to another?
The more quality suppliers you have, the easier it is to keep your costs down. Conversely,
having fewer suppliers to choose from takes your power away and decreases the
likelihood of you finding a long-term low-cost supplier.
3. Buyer power: How much power do your buyers have to dictate your price? How easy is
it for them to switch from one company to another? The bargaining power of buyers has a
massive effect on the prices at which you’re able to sell. If you only deal with a handful
of buyers, the power of your customers increases. If you have a wealth of customers, you
have greater power to set your own terms and maintain profits.
4. Threat of substitution: The threat of substitution refers to the possible alternatives and
workarounds that customers can use to replicate your services. Say you developed a new
proprietary payroll software: How easy and cheap is it for customers to continue using
existing methods or hire a different company to handle payroll for them? If it is easy to
substitute another product or service for yours, your profitability might suffer.
5. Threat of new entry: How easy is it for new competitors to enter your industry? If
overhead costs are low and expertise is easy to come by, then the competitive
environment of your industry can quickly be upended by a new entry.
Question 3: For the same hypothetical business mentioned above, explain how would you
position your business, how is your positioning strategy different from competitor?
Positioning Your Business

When discussing market strategy, it's inevitable that positioning will be brought up. A new small
business positioning strategy is affected by a number of variables that are closely tied to the
motivations and requirements of target customers within as well as the actions of primary
competitors.
Before a product can be positioned, you need to answer several strategic questions such as:
 How are your competitors positioning themselves?
 What specific attributes does your product have that your competitors don't?
 What customer needs does your product fulfill?
Once you've answered your strategic questions based on research of the market, you can then
begin to develop your positioning strategy and illustrate that in your business plan. A positioning
statement for a business plan doesn't have to be long or elaborate. It should merely point out
exactly how you want your product perceived by both customers and the competition.
Positioning Through Competitive Comparisons
The objective of competitive comparisons is to reposition a competitor's products in the minds of
consumers. This strategy is helpful when a market has two strong competitors. One company
focuses its advertising on showing how its products differ from its competition.
Marketers must determine where and how to position their products in the marketplace. They
need to know who is going to buy their products, and why. How significant is the price? Do
consumers perceive that the product has sufficient value to justify paying a higher price – or do
they simply want the lowest price possible? These are all questions that a marketer must answer
to have a successful positioning strategy.

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What is Porter’s Five Forces?

Positioning Your Business

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