Stage 2 Assignment for Prof Tutor

Haircuts Business Environment Analysis

Name: Danielle L. Robinson

Instructor: Prof. Diana Hill

Course: Information Systems in Organizations

Date: 31 May 2015

Haircuts Business Environment Analysis

Introduction

The aim of every business is to make profits and gain competitive advantage over similar businesses in the market. This sentiment is shared by Myra Morningstar, who heads the UMUC Haircuts, and intends on improving her operations through the introduction of technology that will provide a solution to her scheduling problems. This paper includes an analysis of Porter’s Five Forces, how the analysis supports Myra’s strategy for competitive advantage, and the business process for improvement through the use of technology.

Five forces analysis

As stated by Dobbs (2012), the five forces consist of buyer power, supplier power, threat of substitute products or services, threat of new entrants, and rivalry among existing competitors. The effects of the forces on the business are described below.

FORCE	EXPLANATION (Minimum 2 good sentences)	IMPACT (POSITIVE, NEGATIVE, or NEUTRAL)	AFFECT STRATEGY? (YES/NO)
BUYER POWER	It refers to the ease in which customers can affect the firm’s operations. It is quite high, as the buyers can make the firm to change its strategy, such as the cost leadership strategy that is being currently pursued.	Negative	Yes
SUPPLIER POWER	It refers to the ease in which suppliers can affect the firm’s operations. It is low as there are many substitutes for inputs.	Neutral	No
THREAT OF SUBSTITUTE PRODUCTS OR SERVICES	It refers to the ease in which customers can switch to substitute services provided by similar businesses. It is high as customers can easily switch to the hair cuttery, the spa, and the manicurist offering her services at home.	Negative	Yes
THREAT OF NEW ENTRANTS	It is high as it is easy for other businesses to offer similar services. This is due to the fact that the initial capital required is low, as depicted by the opening of the manicure business at home.	Negative	Yes
RIVALRY AMONG EXISTING COMPETITORS	It refers to the number and capability of competitors. It is quite high as the business’ competitors are offering quality services, and they are all operating within a small area, therefore competing for a small number of customers.	Negative	Yes

Justification of the cost leadership strategy

Myra has selected to implement the cost leadership strategy so as to enhance her business’ competitive strategy. According to (Kaliappen & Hilman, 2013), providing services at lower prices than those offered by competitors provides competitive advantage as the business attracts cost-conscious customers. The Porter’s buyer power identified the impact of buyers on the business as being negative. As such, the company should adopt the cost reduction strategy so as to attract more buyers, which will lead to customer satisfaction. The supplier power is neutral, as there are many suppliers providing inputs for the haircuts business. Myra can therefore select a supplier who provides products at the least price. The threat of substitute products or services has a negative impact on the business, and this has resulted in the reduction of prices so as to prevent existing customers from switching to substitute businesses that offer better services. The threat of new entrants has a negative impact on the business, and the cost leadership strategy is effective in ensuring that the number of customers does not decline due to their absorption by the new entrants. Finally, rivalry among existing competitors has a negative impact on the business as there are many businesses operating within a small geographic region. As such, the cost leadership strategy will give the business a competitive advantage over other businesses by giving UMUC Haircuts competitive advantage.

Business process

The customer and employee scheduling business process supports the strategy for competitive advantage. Myra has discovered that there are customers who prefer certain employees, and scheduling their appointment with their favorite employees will increase customer satisfaction, therefore resulting in an increased number of visits. There are times when the business is outstretched due to a high number of customers, forcing some of them to be turned away. There are also times when the employees stay idle due to lack of customers. According to Hebert and Deckro (2011), scheduling resolves operations issues as the needs of customers are met in a satisfactory manner, while the employees’ output is maximized. Currently, Myra does not use technology while scheduling, but using technology will help mitigate issues regarding the availability of employees, customer demands, and inventory control. The scheduling technology sheds light on the type of supplies to be ordered and when to do the purchasing of supply. It can also identify days when customer demand is quite high, so as to organize for more employees to be available to meet the demand. It will also improve on the process for replacing absent employees through the identification of available employees. In conclusion, the implementation of the cost leadership strategy and the introduction of technology in scheduling will enhance UMUC Haircuts’ competitive advantage.

References

Dobbs, E. (2012, January). Porter's five forces in practice: Templates for firm and case analysis. In Competition Forum. American Society for Competitiveness.

Hebert, E., & Deckro, F. (2011). Combining contemporary and traditional project management tools to resolve a project scheduling problem. Computers & Operations Research.

Kaliappen, N., & Hilman, H. (2013). Enhancing organizational performance through strategic alignment of cost leadership strategy and competitor orientation. Middle-East Journal of Scientific Research.