Amy's Fashion Boutique
Section 1 - The business description, product description, customer story and mission statement
Section 1 focuses on the profile of your business. You will be required to describe in full detail the:
Business Description: You will be required to describe what your business will do, as well as why your business is unique. Your business description should touch on the target market, and the pricing of your products.
Product Description: Describe what your products/service will do, and provide a detailed reason as to why your product will fill a customer need.
Customer Story: Describe what a customer would experience purchasing their products from you. (write a story from the point of view from the customer). (FAKE Customer Story)
Your customer story should answer the following:
• What sort of situation would your product or service be useful?
• What would motivate a person to choose your product or service?
• What benefits would the customer receive from using your product or service?
Mission statement: Your mission statement should include what your business will do for your customers, employees or owners. Furthermore, describe what difference you are trying to make in the world.
A company's mission statement is your opportunity to define the company's goals, ethics, culture, and norms for decision-making. The best mission statements define a company's goals in at least three dimensions:
• what the company does for its customers,
• what it does for its employees
• what it does for its owners.
The -mission statement- of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth.
Another example is of Nike's -mission statement- -
-To bring inspiration and innovation to every athlete* in the world. *If you have a body, you are an athlete-
Required to apply Porter's rules in establishing and adjusting your objectives for my business:
Amy's Fashion Boutique
Porter's 3 rules to positioning
Positioning refers to -capturing the customer's head space- or in other words the image of your product or service in the mind of your existing or potential customer.
So, the question arises - why is -strategic positioning- important-??.
Aha, let us look at this more closely. Basically it is important because -An effective positioning strategy considers the strengths and weaknesses of the organization (this is our own organisation), the needs of the customers (comprising our target market) and market and the position of competitors (we come to know about our competitive position - how strong or weak are we in relation to our competitors)
Now let us look at the specific model by Michael Porter that we are going to analyse called the Porter's Three rules to strategic positioning
The three rules are as follows:
1.Perform activities which satisfy customer needs
2.Perform activities differently then rivals do in order to satisfy customer needs.
3.Activities should be limited by trading off
Rule 1: Perform activities which satisfy customer needs
Porter's first rule focuses on the positioning the organization to the market or to focus on what the target market needs.
positioning strategies include the following:
1.Variety- based positioning – distinctive products/services e.g Coles/woolworths (Include AUSTRALIAN examples products)
2.Needs- based positioning – targeting a segment of customers e.g people between the ages of 18 - 35, Toys R Us
3.Access-based positioning– access customers by eg Geography. For example Dell for years had a online based business model
Rule 2 : Perform activities differently then rivals do in order to satisfy customer needs
We are going to look at this rule in terms of South West Airlines, which you are already familiar with.
SWA provides the following activities which correspond to rule number 2 (Essentially do not do simply what your competitors are doing)
• Low cost flights from small airports with direct flights,
• Self booking,
• Fast turn arounds,
• High frequency of flights
• No meals
• No agency bookings
• It satisfies customers who would normally take the Bus or Train.
Rule 3: Activities should be limited by trading off
So what do we mean by -trading off-. In simple language it means giving up one thing to achieve another.
•When an organization chooses its strategy it may need to give up activities to achieve its goal.
EXAMPLE: SWA gave up meal services and agency bookings to achieve a Low Cost positioning.
Learning: Remember a trade off is something that the organization gives up or sacrifices to achieve its goal.
Essentially, Porter's Matrix is used to analyse organisations from the point of view of generating a -competitive advantage-
Any organization has to ultimately choose a competitive strategy that fits its competitive strengths. These competitive strengths are the resources and capabilities of the organisation and the industry it is in (for example IES is in the “education industry”).
No company can be successful by being “all things to all people” according to Michael Porter. Now, Let us think about this for a minute. Mercedes Benz cars are very high quality – strong and equipped with the best gadgetry, leather seats etc. So why can they not be cheap so that more people can get them???
This is exactly what Michael Porter is saying – Mercedes Benz had to make a choice. They could not manufacture cars that were high quality and also very cheap.
• Section 2B:
• focuses on Porter's 5 forces and the SWOT analysis of your selected business. Essentially section 2B focuses on external forces that can affect your business. (Amy’s Fashion Boutique )
You will be required to apply Porter's 5 forces by identifying in detail the threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and competitive rivalry on your business, and providing relevant examples. Furthermore, you must also identify in detail the strategies to reduce the impact of the 5 forces, alongside examples that are logical.
Lastly, a SWOT analysis must be conducted with examples that are relevant and are connected to specific business activities.
Porters five forces - Threat of new entrants
How easy or how difficult is it for a new competitor to enter your industry?
One key factor that determines this is -economies of scale-. Ok, let us then look at what -economies of scale- means.
Economies of Scale: How many products do you need to sell to break-even. Does your company have a High Economy of scale that is difficult for a new entrant to match?
Other factors here of importance are:
Capital requirement of entry: Does your industry require a large amount of capital to enter the market?
Access to distribution channels: Does your company have a large number of retail outlets?
Government action and Legislation: Does your government protect your industry through patent protection?
Experience: Does your company have long experience that is difficult to match?
Porters five forces - Threat of substitutes
Ok, now let us look understand the next force - -threat of substitutes-.
Think about this scenario, if you do not find your brand of batteries in your local supermarket on a particular day, you would quite easily buy batteries of another brand (assume you need them for your torch). But would this be that easy if your preferred massage therapist decides to leave?
So, the moot question here is -how easily can the product or service you provide be replaced-?. This is indeed the key to understanding this particular force. Some important aspects to consider here:
Product with similar functions limit the prices firms can charge
Keys to evaluate substitute products
Products with improving price/performance trade- offs relative to present industry products
Porters five forces - Bargaining power of buyers
Let us move on to the next force. Aha, the buyers refer to -YOU-. Now that you are happy that the focus is on you - How much power do you as a consumer have?.
Well, consider this scenario - If you do not like the service provided by your local coffee shop barista, you can always go to the one of the other local coffee shops, but if your grandfather has a specialist medical problem which requires a particular type of doctor, you do not have much of a choice in terms of changing the doctor. Right?
Buyer Power is high when:
?Industry has a large number of small operators.
?There are many sources of supply due to an undifferentiated product.
Porters five forces - Bargaining power of suppliers
Ok, let us now move to -suppliers-.
Suppliers provide raw materials/products to businesses. Think of your local phone shop - they probably stock Apple / Samsung phones. These companies are suppliers for your local phone shop.
Supplier power is high when:
?Cost of changing suppliers is high – suppliers may produce highly specialized products.
?Supplier Brand is powerful – E.g. a retailer requires a particular brand.
Porters five forces - Competitive rivalry
When does “competitive rivalry- happen?
Well, it happens when organizations with similar products or services target the same customer group or groups. Therefore if there are more organisations, this will be higher. Let us look at some other factors that decide the intensity of “competitive rivalry-
Balance of Competitors: More competitive if same size of companies. Less competitive if dominant companies and smaller companies.
Market Growth Rates: Effect of the Product Lifecycle. Low market growth at product maturity stage means more competition
Fixed Costs: High fixed costs means lower competition.
Differentiation: Low differentiation means more competition
A study taken by a business to identify strengths, weaknesses, opportunities and threats.
It is also used to assist business in making strategic decisions
My Business (Amy’s Fashion Boutique)