Welcome Home Company Analysis
Introduction
Welcome Home business looks to set up a business that enable innovation be acquired in the home sector. The company looks to create, sell, use and keep a system that will be viable in the homes. In this paper, we look to analyze the operating environment of the business and we will use the PESTEL and the Porter’s five forces.
PESTEL Analysis
PESTEL model is modeled so as to offer managers a tool to note varied macro-environmental aspects which may impact the business strategies, and assess the varied ways environmental aspects may impact business performance presently and in the coming period (Steplearn 2004). This analysis is composed of six environmental aspects: political, economic, social, technological, environmental and legal. These factors of the PESTEL model will be used to analyze the Welcome Home Company.
Political Factors
The government may opt to alter the laws and regulations that are based in planning and building. Such guidelines may hinder emerging buildings and significantly lessen the number of houses created and therefore the need for home security systems.
The industry similarly has the chance to get financial support from the government through subsidies. This states that a share of the public housing that are build are fully fitted with the products. It is hence through the allocation of this backing in the more affluent parts of the country, the company is able to elevate the market share and guarantee sales of the goods after a deal has been reached with the government and company.
Economic recession may however make the government be unwilling to pay for a product that they perceive as not essential. The decision as whether to buy or not is laid onto the buyer with a section of them not willing to pay an added amount.
Economic Factors
The company faces a high cost when setting up the structure. The time period is bound to take two years before profit is acquired. This means that the company will face loss before this period is over. The fixe cost for Welcome Home Company is high in regard to the revenue of sales (Steplearn 2004, 1; Businessmate 2012). The budget is difficult to maintain only f enough money is available. In addition to this, the economic aspect of UK will improve through the provision of several chances for people to do security operations; installation, maintenance among others.
Social Factors
With the installation of the automation security system in the homes, the level of population that will need education on the use of the system will dramatically increase. With the installation of the systems at home one will have to know how use the system appropriately. The lifestyle will improve with the use of the systems. It will be easier to set on and off the systems with limited anticipation of insecurity.
Technological Factors
With the introduction of the automation system as a security tool product by the Welcome Home Company, it is an innovation that makes it possible and easier to keep homes safe from intrusion (Steplearn 2004, 1). This step will fasten the pace of innovations from other competing companies.
Environmental Factors
The automation security system as a product of Welcome Home Company has no harm to the environment. It does not harm the environment, though it has noise pollution that alerts the owner in case of a breach (Businessmate, 2012). There are no waste produced or a lot of energy consumed hence it has no harm to its surrounding.
Legal Factors
Regulations on the houses being built may regulate the use of the home security system in the UK. This is in attempt to accommodate more houses though it may cut down on the need for security due to the presence of a high population. The product may be regulated by policies which aim to control the product.
Porter’s Five Forces
The porter’s five forced work together so as to know the form of competition that is there in a company, this case it is the Welcome Home Company (Roy 2011, 41). They include; the threat of new entrants in the business, the bargaining ability of supplier, the bargaining ability of the clients, the threat posed by substitutes the level of competitive rivalry.
Threat of New Entrants
The use of an automation security system in the housing industry is bound to be affected by the entrance of new security industries that are bound to acquire market share and increase rivalry (Goss, et al 2012, 3). There are several barriers to entry into this market hence the threat is low. The amount of money needed is high hence most companies will shy away from getting into this business. Additionally, the distribution channels are not many vast hence limiting the distribution of the product.
Bargaining Power of the Suppliers
The Welcome Home Company has a higher bargaining power as it is the supplier. This is the reason as to why it sells the product at a higher price. The power of Welcome Home Company is due to the uniqueness of the product; it is vital to the clients and no substitutes are there (Roy 2011, 42). The companies supplying the product are not many hence according powers to Welcome Home Company. Additionally, competition is higher hence according power to the supplier in UK. Moreover changing to another product is expensive.
Bargaining power of the Customers
The bargaining power of the customers is high this can be based on the high number of clients who need the product who are small hence high power to them (Roy 2011, 45). Additionally, the quantity of orders is in big sizes, though the government aims to regulate this. The companies supplying this product are less hence according power to Welcome Home Company. Additionally it hard to switch to another product though others may opt to use dogs and police stations building hence not a complete power is accorded.
Threat of Substitute Products
The level of substitute products is quite moderate considering that a large portion of the houses that need the security system are huge houses while the smaller houses have other options; dogs and police officers. The need of the clients is hence met with these other options available to them.
Degree of competing rivalry
With a high case competition, companies are bound to get involved in price wars, high level promotions and high investing in innovation and emerging products. These steps are bound to bring about high cost and lower revenue acquired (Roy 2011, 49). The number of competitors available is not that high hence limited rivalry, adding to this, the size and advancement of the market is not that big hence in case other companies join competition is bound to be high. In terms of brand loyalty, customers are no loyal to this product to much considering the availability of substitutes and the high cost of the product. Moreover, the cost of the structure of the company is high hence bringing about high profit due to the volume (Goss, et al 2012, 3). Competition is bound to be high over the market share in case of competition from other firms.
Conclusion
The porter’s five forces and the pestel analysis has provided an analysis of the Welcome Home Company on its product; the automation security system. The paper has focuses on the all of the factors related to these aspects and has shown that the automation security system is viable system but may be affected in case there is entrance of new products that will substitute it, it is however a profitable business in the UK market.
Bibliography
Businessmate, 2012. What is the PESTEL Framework. Acquired from: http://www.businessmate.org/Article.php?ArtikelId=16
Goss, A et al 2012. Welcome Home. U58074 Entrepreneurial Business Management.
Roy, D. 2011. Strategic Foresight and Porter’s Five Forces: Towards a Synthesis. New York: GRIN Verlag, 41-52.
Steplearn, 2004. PEST Analysis. A level of achievement business studies A level Resources, Issue 3, p1. Acquired from: http://www.steplearn.net
