The purpose of the situation analysis of the external environment is to find what is happening in the company environment now and in the future and how these factors will influence the activities and existence of the company. Environmental Threats Often, certain factors in a company’s external environment pose threats to its profitability, competitive well-being, and growth prospects.
Threats can stem from the emergence of cheaper or better technologies, rivals’ introduction of new or improved products, the entry of lower-cost foreign competitors into a company’s market stronghold, new regulations that are more burdensome to a company than to its competitors, vulnerability to a rise in interest rates, the potential of a hostile takeover, unfavorable demographic shifts, adverse changes in foreign exchange rates, political upheaval in a foreign country where the country has facilities, and the like (Thompson, Strickland & Gamble, 2010).
An environmental threat is an external element that can develop into anon crisis or crisis problem and potentially prevent the organization from achieving its goals. It is management’s job to identify the threats to the company’s prospects and to evaluate what strategic actions can be taken to neutralize or lessen their impact (Thompson, Strickland & Gamble, 2010). The threat faced by Sweet C’s Cupcakery that can hinder its profitability is the existence of competitors. The threats coming from these competitors should not be taken lightly.
In tough economic times all businesses are trying to attract customers. Firstly, Sweet C’s has to find out what our competitors are doing. Even if our competitors are not doing anything different, we have to consider the types of threats they can pose. You then need to create a plan as to how you are going to deal with this threat upon your business circumstances. As a new business, it is important that Sweet C’s Cupcakery has a competitive advantage over the competition. In order to respond to this threat, we will lower their prices and offer discounts.
In addition to our store, Sweet C’s Cupcakery serves customers via online orders. More and more small businesses are using the Internet to conduct business. There are many online threats that small businesses can face and so should be prepared for. Viruses, malicious codes or hacking are all threats that some small businesses have already faced (Bi, 2011). To respond to online threats, we will always keep back-up of important files and have regular computer maintenance. Anti-spy-ware and anti-phishing software can act as preventative measures to combat such threats (Bi, 2011).
There are many threats that small businesses face that are beyond their control. Natural disasters, accidents or terrorist attacks are very real threats that some small businesses can face. While you are not able to control these threats there are preventative measures that you can take. Insurance to cover damage caused to business premises is something that small business owners need to think about. Being prepared for all types of threats that your small business could potentially face will help you to cope and recover better.
An honest assessment of threats to your business will help to highlight areas that could cause damaging effects to your business (Bi, 2011). Strengths A resource strength is something a company is good at doing or an attribute that enhances its competitiveness in the marketplace. A company’s resource strengths represent its competitive assets and determine whether its competitive power in the marketplace will be impressively strong or disappointingly weak (Thomas, Strickland & Gamble, 2010). Customer service is Sweet C’s Cupcakery’s greatest strength.
Customer service is critical for every successful business. Since cupcakes usually are served at significant events such as birthdays and weddings, you have to be ready to deal with customer concerns and complaints in a targeted and effective manner. Adopting a policy of customer advocacy is an excellent way to keep customers coming back, even if something goes wrong with one of their orders (Bowerman, 2012). Sweet C’s will use their customer obsession to gain a competitive advantage over our competitors.
By delivering exceptional customer service to each consumer we serve, not only do we increase the number of consumers that return, but it also brings up new customers. It is a known fact that word of mouth is the best form of advertisement. Whether customers are satisfied or not, they will tell others about their experience. Another strength of Sweet C’s Cupcakery is our creativity. Creativity fuels innovation in every department of your business. Creative employees may help come up with your next great idea, new ways to market cupcakes, and cutting-edge methods for preparation and decoration.
If you want to land more clients, creating cupcakes that cannot be found anywhere else in your city is one way to build your reputation (Bowerman, 2012). At Sweet C’s we pride ourselves on offering unique cupcakes. We believe it is our innovative cupcakes that keep our customers coming back. In our quest for innovation and improved business, we still place a great emphasis on the quality of our ingredients and the appeal of our recipes. Better cakes will net you better business. Competing Against Competitors to Maximize Profits and Create Value for Stakeholders
The tight connection between competitive advantage and profitability means that the quest for sustainable competitive advantage always ranks center stage in crafting a strategy. The key to successful strategy making is to come up with one or more strategy elements that act as a magnet to draw customers and that produce a lasting competitive edge over rivals (Thompson, Strickland & Gamble, 2010). Neapolitan Cupcake & Gift Shoppe is the only bakery in the CSRA to exclusively offer gourmet cupcakes. Additionally, hey design cupcake towers for weddings and events, as well as custom design cupcakes for birthday parties and other special occasions. In order for Sweet C’s Cupcakery to compete with Neapolitan Cupcake, we have to offer more services for our customers. Adding catering to our list of services is a good way to maximize profits. It will require a larger number of cupcakes per order, but we will be able to charge accordingly. We will be using supplies and ingredients from our inventory, so it will not require the purchase of additional supplies.
The concept of corporate profits means that the value of goods and services created and sold on the open market is greater than the costs of creating this value. More specifically, to maximize profit is to squeeze as much value out of resources, machines and labor as possible, so the surplus value will go to the firm's owners (Johnson, 2012). Decline in Economy Requires Strategy Modification A decline in the U. S. economy can create challenges for businesses. In times of financial stress, small companies should look to slash costs and recover sunken expenses.
With a decline in the economy, Sweet C’s may have to let go of unnecessary employees and consider outsourcing or contracting services to reduce overhead and decrease the cost of benefits. To make up for the lack of laborers, we will have utilize machines to assist with producing our cupcakes. Global Competition Impact Although a bakery is essentially a local that serve a limited geographical area, competition within the industry has gone global. Global competition can impact the business strategy. Bakery owners may be tempted to utilize new product segments.
Suppliers do not have much negotiating power in the bakery business due to the well developed markets for their products and the commoditized nature of what they are selling. Bakeries can be affected by price swings of the raw inputs, but the changes are a result of global supply and demand determinants rather than suppliers' negotiating power. Sweet C’s Cupcakery will utilize only products that can be obtained locally. This way, we will avoid unnecessary overhead costs and high cost for having ingredients shipped.