Analysis of AO Retail Agency - Paper Example

In the examination of AO, there is a need to employ various strategic management tools among them being SWOT analysis, PESTLE analysis, and Porters Five Forces and apply the same in the examination of the company (Hill, Jones and Schilling, 2014, p102). AO is a retail agency that plans to create an overhaul in the retail of electronic and electrical product through ensuring that services that clients receive are exemplary and that other companies learn from the service provided thereof. In this regard, there are various plans that the company has outlines that would help in the improvement of the quality of services and create a good experience for customers (Eden and Ackermann, 2013, p32). The company plans to be the leading online retailer for electrical products in the whole of Europe, change the world of retail and create innovation in the online platforms of sales and marketing of electrical products.

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Through innovation that the company plans to create, it also plans to excite clients to demand more superior service from the sellers and champion the improvement of quality of services being sold in the society (Rothaermel, 2015, p212). In this manner, there would be improvement in the quality of services that sales and marketers provide to the society, and treat them in a more excellent manner which would necessitate that clients raise the bar of service provision. The company holds the thought that clients need to be intolerant to poor services and that retailers need provide more superior services. It is apparent that retailers do not provide the best quality services to clients thereby establishing the need to change strategies of dealing with the clients (Freeman and McVea, 2015, p10). AO plans to be the heart of driving change for the retail industry thereby proving the need to take a closer look at the models used to check quality of services provided to clients.

SWOT analysis

In the SWOT analysis of the company, there is the examination of strengths, weaknesses, opportunities and threats of the company. The first strength of the company is that it provides exemplary customer service to the clients which leads to increase in the number of customers thereby helping to fulfill organizational objectives (Slack, 2015, p66). Secondly, the company is hassle free and customer friendly as evident in the manner which makes it to record high sales. Third, the company has free delivery for metros and suburbs thereby enabling it to expand the market segment in such areas. The best prices at which the company sells its products and the availability of online payment systems is another strength that the company has and the same leads to increase in efficiency in the provision of services (Barney and Hesterly, 2015, 78). Additionally, the company has good communication and delivery arrangements thereby making the company to register success in its marketing and promotional strategies. Finally, there is free delivery across location in addition to the good customer support.

Despite the strengths, there are two main weaknesses at AO and these are that the brand is limited in few locations when compared to global players, and the low geographic presence leading to the limited market share and revenues (Simons, 2013, p150). On the other hand, there are various opportunities at AO which include the technology that the company uses promotes delivery systems, and the ease with which the company has in the acquisition of online stores lead to leverage on systems (Morschett, Schramm-Klein, and Zentes, 2015, 56). The final opportunity that the company has is that there is an expansion of the market into newer forms of marketing and retailing thereby making online selling of products to prove to be having the future in the modern market. Finally, operations of AO face various threats in its operations, and one of such is that there are low entry barriers making it easy for other companies to join the market and increase competition. Secondly, there is the easily replicable business model which makes it for other companies to operate with the same business setting which then negatively affects competitive advantage of the company (Renz, 2016, p139). Finally, there is a general increase in competition and higher costs of operations.

Porters Five Forces Analysis

In the examination of Porters Five Forces analysis, there are five main factors to examine and these are competition in the industry, potential of new entrants into the industry, power of suppliers, threat of substitutes, and the bargaining power of the buyers (Goetsch, and Davis, 2014, p22). One factor that affects the company heavily is the rivalry in the industry, and this is because the introduction of online marketing has been easily incorporated into the society and firms use it to market their products on daily basis. It is in the manner that rivalry in the reduces profits of the company as there is competition to acquire clients (Morden, 2016, p60). Secondly, the threat of new entrants is of great effect to AO in that there are high numbers of new entrants into the market and the same leads to the reduction of market segment of the company thereby leading to the reduction in its profits.

Third is the bargaining power of suppliers and this is not much of a challenge as suppliers do not have much freedom in their bargaining power (Frynas and Mellahi, 2015, p40). It is because the prices at which products are bought from the suppliers is constant and standardized making it challenging for the suppliers for AO to bargain for the increased in the prices of electronics and electrical product that AO buys from them. Moreover, the threat of substitutes is not much of a challenge to AO because the company provides a wide range of products for sale. Finally, the company suffers less from the effect of bargaining power of buyers in that there is the online retail does not offer an opportunity for buyers to bargain for a reduction of prices of products (Rothaermel, 2016, p43). The prices of all products are set with no room for reduction through bargaining from clients, only discount can be provided.

PESTLE Analysis

In the PESTLE analysis which is the analysis of political, economic, social, technological, legal and economic factors. There are various political factors that affect the company in various ways (Carroll, Primo and Richter, 2016, p315). Some of them are income tax and other taxes with reduce profits and revenue that AO receives, the minimum wage laws also ensure that employees are paid minimum wages leading to the decrease in the profits of the company and exposes it to additional taxes. Other factors that affect the company are union influences and federal, state, and local environmental policies which require that the company conforms to union laws and environmental policies thereby leading to expenses incurred by the company (Stead and Stead, 2013, p89). The economic factors, on the other hand are such as the inflation rates, company debts, incomes of potential customers within the area, and the employee salary trends in the service business industry. The inflation rates and the company debts reduce profit margins as a result of the increase in the cost of production and payments made to offset debts; they affect operations of the company negatively (Chen, Delmas and Lieberman, 2015, p95).

The social factors, on the other hand include the ages of the customers, cultural norms and traditions, growth of population or decline of the same and diversity which affect the amount and types of products that the company sells to the clients (Bergh et al., 2014, p33). Such affects business aims and objectives of the company. With regards to technological factors, issues that prove to be of great concern are such as the automation of opportunities, where there is a need to automate activities to improve efficiency of online services and expansion of business. Other technological factors to consider are technological incentives such as tax credits, better equipment into the market, service business software updates and improvement to the mobile devices and other communications (Hubbard, Rice and Galvin, 2014, p100). Such factors lead to the increase in efficiency but at the same time lead to increase in the cost of doing business. Fifth, the legal factors to consider are such as consumer protection laws, insurance laws and mandates, OSHA policies, and antitrust laws which the company has to conform to and leads to the increase in the cost of doing business. Finally, there are environmental factors because operations of AO have to conform to environmental policies (Trigeorgis, and Reuer, 2017, p45). The environmental factors to consider include the geography of the land, attitudes of the population towards pollution, and waste management.

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