INGLOTs micro and macro Environmental Factors facilitating Competitive Advantage.
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1. Outline firm-level (micro) and country-level (macro) factors contributing to the development of INGLOT’s competitive advantages and discuss their sustainability.
2. Develop INGLOT’s strategic plan for the next five years with a concrete outline of recommended geographical expansion, business model evolution and product diversification.
SAMPLE ANSWER
INGLOTs micro and macro Environmental Factors
Contents
Micro and Macro Environmental Factors facilitating Competitive Advantage. 4
INGLOT Five Year Strategic Plan (2014-2018) 7
Executive Summary
Internal and external environmental factors are very important for an organization which needs to explore new markets and facilitate growth. This project looks at the case of INGLOT, and analyses how it can enhance its growth as a result by strategically planning and looking at its environmental factors that have so far given it its current competitive advantage. In the micro environmental factors, suppliers, customers, and consumers are considered. These are the major contributors to its competitive success so far. Economically, INGLOT has also been at an advantage because it is financially stable, a factor which many companies have been longing for. There is a sample five year strategic plan for INGLOT, which will be effective in ensuring that its goals are met.
Introduction
The competitive advantage of a company is usually supported by many factors available in its internal and external environment. Some companies are blessed with some features that are not present in others. If these factors are used effectively, the company will be in a better position to be at an advantage. INGLOT, from the case study, is one company that has had the opportunity of being at an advantage better than its competitors. Unfortunately, this competition is very stiff, and to ensure that it is not overthrown from its position in the market, INGLOT will have to adopt a few changes by engaging in geographical expansion, evolving its business model, and diversifying its products. These are some of the measures, which will ensure that INGLOT’s competitive advantage is maintained or improved, but not any other way. Therefore, this paper champions the thesis that geographical expansion, business model evolution and product diversification are major players in enhancing a company’s competitive advantage.
Micro and Macro Environmental Factors facilitating Competitive Advantage
Micro Environmental factors
The micro environment of a company is represented by the suppliers, customers, employees as well as the competitors. These are the factors which can have an effect on the performance of a business. INGLOT is a company which managed to greatly benefit from such factors as their competitive advantage was increased due to their presence. The company’s cosmetic products were in high demand, as a result of this great presence of customers; the company had a better competitive advantage since it could chose to either extend its presence in one of the over 40 countries, or penetrate a new market anywhere in the globe (Fox 2010). This micro factor presents an opportunity for better competitive advantage since it provides many opportunities for the company to increase its profit margin. When there is a very high product demand, the company may decide to increase prices and act as the price setters since it is already clear that the loyalty of consumers is achieved. This advantage it has over its competitors makes it difficult for the latter to price their products higher than that of INGLOT (Ming-Jer, Kuo-hsien & Wenpin 2007, p. 104).
The company has managed to appear as one of the best in producing quality and most innovative cosmetics. This factor has resulted to a high number of suppliers who want to be associated with INGLOT. Suppliers will want to become partners with a company which is performing at its peak as this will also mean a high profit margin on their part. If a product is in high demand and is among the top in the industry, the suppliers see a great opportunity for high sales with bigger returns (Fox 2010). This high number of suppliers who wish to be partners of INGLOT has also enhanced the company’s competitive advantage since it has the chance of having more than enough suppliers, most of the other companies struggle to find suppliers who are willing to take their products to the consumers. The availability of many suppliers gives INGLOT an opportunity of choosing from the best performers, so that it can be guaranteed that the products will sell and not just be stored (Matwiejczuk 2013, p. 268). From all the applications received from suppliers who want to be franchisers for INGLOT, approximately 95% are declined. Unsuitable experience is one of the many reasons why suppliers are turned down (p.1). New stores whose owners are not experienced in the industry may not perform so well since it takes time for them to catch up with issues such as effective decision making and marketing strategies.
INGLOT requires a distributor who will also take extra steps to market the cosmetic products so that the consumers will increase. INGLOT is a global business whose products are distributed far and wide. Some new markets may not be well familiar with the products, which is why the supplier needs to have the necessary skills to facilitate effective marketing so that the sales are increased (Mizuki 2014, p. 78). Underfinanced business plan also contributes to an application of franchising being declined. It is worth ensuring that the supplier has financial security as this is what will guarantee that they can deliver as expected. It can be frustrating to realize that the supplier who a company relied on has gone out of business for financial reasons. This is a major setback as the company will have failed its consumers by not providing the products needed. Some suppliers are declined because the position of their stores is not appropriate. Products need to be within easy reach for consumers so that they can be displayed as well. INGLOT also gained its competitive advantage as a result of the media. INGLOT never paid so much attention to media advertising as this was considered expensive and ineffective. Fortunately, the products of this company still became famous and were positively discussed over many forms of media.
The competitors also contributed to its competitive advantage through various ways. In this industry, the customer segment is characterized by a desire to acquire high quality products at affordable prices. There were many innovations which were facilitated by the introduction of novel products which ensured skin comfort, unlike the previous products. Hence, product differentiation is very important for a company to get a competitive advantage over the others. A factor that puts INGLOT at an advantage is that it knows of all competitor activities. By knowing what the competitor is planning, how it plans to react to certain changes in the environment, and some of the challenges it faces, INGLOT will always be a step ahead.
Macro Environmental Factors
As an international business, INGLOT is also faced with various political macro environmental factors. Fortunately, despite all these factors, INGLOT still manages to be at the top since it has many stores all over the world. The taxes charged for the distribution of these products to other parts of the world will therefore be recovered through a sale of products at a profit (Henrekson, Johansson & Stenkula 2010, p. 278). Not all countries have similar policies, therefore, it may be expensive to distribute in one country, and very cheap in another. This is a step which INGLOT has chosen to take so as to benefit from all angles. This company has always financed its growth from internal cash flow only. Therefore, it does not depend on stakeholders to any extent. This is also a benefit which improves its competitive advantage since most of the competitors depend on stakeholders for financial support. This is a proof that this company is financially stable and can therefore deal with economical challenges effectively (Şeitan 2014, p. 77). This stability is very important for any company which wishes to grow and prosper. This is why, whenever INGLOT wants to open up a new store or simply grow its product base, nothing financial will stand in the way.
INGLOT Five Year Strategic Plan (2014-2018)
Executive Summary
INGLOT is a cosmetic company which was started in communist Poland back in the 1980s by a young chemist, Wojciech Inglot. At this time, the vision of this young chemist was to offer consumers a range of affordable cosmetics prepared from the highest quality ingredients. This factor was completely absent in Poland even after years of centralized socialist planning. Today, after many years of operations and supplying quality cosmetic products, this company still finds the need to try and make various changes here and there. There are three major factors which are required: geographical expansion, business model evolution and product diversification.
Mission Statement
To always be the leader in the production and distribution of highest quality yet affordable cosmetic product all round the globe.
Vision Statement
Within the next five years, this organization intends to become one of the most treasured innovative leaders in the industry, creating dynamic partnerships that will enhance the growth of beauty in vibrant communities.
The mission and vision statements were created along with the participation of company staff and stakeholders as well. A factor which was unexpected was how overwhelming the response was. Generally, the mission statement translates to mean that when INGLOT achieves the highest rank in the industry, the position will be maintained at all costs. The products provided must always be of high quality and still be made affordable to all different communities in the world. Not all countries are of the same social status, hence when offered the products with the same level of expense, it may not work. The vision statement, on the other hand, is a look at how INGLOT hopes its future will turn out to be. This company hopes to be the best when it comes to innovation. It hopes to be the producer of new yet comfortable products for consumers. With the help of dynamic partnerships, the company will be in a better position to offer the products directly to the consumers.
Values
These are the company principles that are meant to govern staff behavior and how business is conducted. The authority of INGLOT is expected, in the next five years, to demonstrate the following values, internally and externally in equal measure.
- Customer focused: Products must always be delivered to the customers on time. Employees are required to treat each other, as well as each and every customer with respect. If a customer presents a customized idea which may seem off, the employee is expected to politely offer suggestions without ruining the company’s reputation.
- Integrity: All the activities of INGLOT must be ethical, trustworthy, and honest. There must be a clear indication on each cosmetic product and the type of customer it suits. This may be in terms of skin color, skin texture, and other similar factors. The ingredients used in the production of the cosmetics must also be honestly indicated in the packaging so that the consumer will be aware of what is present in the content.
- Initiative: The Company must always be willing to take risks. For example, expanding stores by entering into a new market is a good example. It may be unclear of the performance but if there is potential, then a risk needs to be taken. In every organization, problems are bound to occur. This company will always address such issues by dialogue and coming up with solutions.
- Teamwork: Collaborations will have no restrictions, and can therefore be internal and external. Strategic partnerships and relationships will be encouraged as these will eventually benefit INGLOT.
SWOT Analysis
To be able to plan for the future effectively, this company must also acknowledge its strengths and weaknesses.
Strengths
The first point is how the company depends on its internal cash flow to grow and develop. Financial stability is efficient and advised for any company. The current economic conditions affect almost all companies, and the few who have the chance to become stable must treasure the factor (Şeitan 2014, p. 78). The recession has really affected many countries; hence many are still struggling with it. INGLOT, on the other hand, benefits since it can easily access adequate resources to run its business operations. For example, inventory needs to be maintained so as to ensure a timely supply of the required goods. A company which is not stable, but instead relies on stakeholder support cannot do so become it is not clear when the finance will be available. Business requires sufficient funds to make payments to their employees and managers. Without enough payments, employees will feel underappreciated and thus the company will have trouble maintaining its skilled human resource. Without employees, the performance of a company is also affected, and this may lead to great losses.
Another strength of this company is its differentiated products which are also in high demand. When a product is in high demand, it is clear that it will definitely be appealing to consumers since they are the ones who need it. A high product demand gives the company a better opportunity to charge fairly higher prices without affecting its customer base. This increases the overall profit margin which will be beneficial for the company. INGLOT has already expanded its operations to the international level. This is also another reason why it has a better opportunity than other companies. By going international, it means that the company will be dealing with more customers than in the usual country level. Hence, there will be more sales which will ensure a faster return for the products.
Weaknesses
Weakness for this company is that is that it does not pay much attention to traditional methods of advertising. Advertising is a marketing strategy which has proved effective for many companies. This is because it continues to inform the public of the product along with its benefit which is unique to what other companies have to offer. Not investing in such an option is really affecting the performance of INGLOT because the numbers of people who know about it are not as much as it should be if advertising is used.
Opportunities
This company enjoys opportunities presenting themselves daily. With the availability of a large customer base, this company enjoys an opportunity for growth in any country it prefers. Along with the presence of financial stability, this company has a better chance of actually exploring these new opportunities in the unexplored markets. Many regions around the world have not yet been exposed to these products. Since they are of high quality but are offered at cheap prices, chances are high that it will prosper. Therefore, there is a better opportunity for INGLOT to continue its growth and cover all of Europe. Africa also has a lot of growth opportunities. INGLOT is already established in countries such as South Africa and Libya.
Threats
One of the threats of this company is the presence of taxes, which may be required during the process of distributing its products to other countries. Then again, not all policies are similar in the countries. Certain types of products may be very expensive compared to others. Such a difference in product taxation can pose a great danger to the profit margin of this company especially because policies change from time to time.
Goals
The goals of this organization are numerous; however, the major ones within the next five years are three. One, INGLOT hopes to have achieved a geographical expansion by around 50% of the untouched regions. A properly managed geographical expansion ensures that a company reduces costs, gains a better access to new untapped markets, gains a better position in acquiring required talents, and fuels a company’s growth (Etgar & Rachman-Moore 2010, p. 8). This is why INGLOT will strictly follow this plan. The scenario will be assessed to ensure that all factors are clear. Not all scenes, which present an opportunity for the business, will be successful. To ensure that the project does not fail halfway, it is better to first look at various important factors, which will affect the company products. If everything seems to be under control in the chosen destination, then the project can now take place.
Second, INGLOT hopes that its current business model will have evolved into something that is more sophisticated and effective. Although the current business model is profitable, it is still important for it to evolve so that its profitability is maintained. During this evolution, a business can easily fail if it was not well prepared. There are three reasons, which may cause a business model to evolve, including technology disruptions, commoditization, and competition (Nisa & Ravichandran 2013, p. 94). Competition is the major player and contributor to the other two reasons. When competition is very stiff, a company finds an urge to evolve so that it is always at the top of its competitors. This is why INGLOT wants to evolve. Therefore, the first step for this evolution may be by enhancing product differentiation. Although this is already effective, it needs to be taken to the next level by ensuring a diversification of all available products (Hutzschenreuter & Horstkotte 2013, p. 710). Thus, consumers who have unique desires will frequently find what they need. Another way is by creating room for a start of the creation of new kinds of products which are not yet handled by the company. There is a very wide range of cosmetic products which can also sell better when associated with the other products of INGLOT (Makadok & Ross 2013, p. 510).
Conclusion
With the help of the strategic plan, INGLOT will be better prepared to act accordingly so as to ensure that the focus is not lost. A SWOT analysis is also important because it ensures that the company is aware of the factors making it be at the top, and those which are threatening that position. The operations of a business need to be in line with its mission and vision statement
References
Etgar, M, & Rachman-Moore, D 2010, ‘Geographical Expansion by International Retailers: A Study of Proximate Markets and Global Expansion Strategies’, Journal Of Global Marketing, 23, 1, pp. 5-15.
Fox, JJ 2010, How To Be A Fierce Competitor : What Winning Companies And Great Managers Do In Tough Times, San Francisco, CA: Jossey-Bass, eBook Collection.
Henrekson, M, Johansson, D, & Stenkula, M 2010, ‘Taxation, Labor Market Policy and High-Impact Entrepreneurship’, Journal Of Industry, Competition & Trade, 10, 3/4, pp. 275-296.
Hutzschenreuter, T, & Horstkotte, J 2013, ‘Performance effects of top management team demographic faultlines in the process of product diversification’, Strategic Management Journal, 34, 6, pp. 704-726.
Makadok, R, & Ross, D 2013, ‘Taking industry structuring seriously: A strategic perspective on product differentiation Taking industry structuring seriously: A strategic perspective on product differentiation’, Strategic Management Journal, 34, 5, pp. 509-532.
Matwiejczuk, R 2013, ‘Logistics Potentials in Business Competitive Advantage Creation’, Logforum, 9, 4, pp. 265-275.
Ming-Jer, C, Kuo-hsien, S, & Wenpin, T 2007, ‘Competitive Tension: The Awareness-Motivation-Capability Perspective’, Academy Of Management Journal, 50, 1, pp. 101-118.
Mizuki, K 2014, ‘Relational View: Four Prerequisites of Competitive Advantage’, Annals Of Business Administrative Science, 13, 2, pp. 77-90.
Nisa, S, & Ravichandran, N 2013, ‘Business Model: Concept and Evolution’, Amity Global Business Review, 8, pp. 92-98.
Şeitan, S 2014, ‘Administrative Aspects of Ensuring Financial Stability’, Economic Insights – Trends & Challenges, 64, 1, pp. 75-82.
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