Strategic Analysis and Decision-Making for Day Spa in a Competitive Business Environment

Introduction

In the current highly competitive business environment, it has become essential for the business organisations to evaluate the key issues and challenges with the objective to identify and implement the most appropriate strategies (Dash, 2013; Majeed, 2011). This objective of this essay is to evaluate the strategic issues and choices faced by Day Spa. For the evaluation purpose various strategic models and frameworks are being employed.

Key Issues

Economics: Economic factors are the most powerful external force for any business which can have long term impact on the performance of the business. The economic factors takes into account inflation, rise/fall in the price of products and services (Johnson, Whittington Scholes, Angwin, & Regner, 2013). Since spa and wellness industry is often associated with luxury products and services, and thus any economic downturn can have severe impact on the performance of the industry. It can be ascertained that the current economic condition is weak particularly due to the fact that economy is still struggling to overcome the challenges caused by the recent financial crisis. Consequently, one of the main issues faced by the organisation is that people do not have sufficient disposable income to spend on spa and wellness treatment. Correspondingly, it is crucial for the organisation in developing new products/services that would draw the attention of the customers towards the new product/services.

Technological: Technology within the PESTLE framework usually deals with new and advanced system and platforms that can have potential influence in the operation of the businesses (Johnson, Whittington Scholes, Angwin, & Regner, 2013). Notably, the advent of social media has offered business including spa and willingness industry with strategic marketing tool and has been used by different businesses to reduce the marketing cost and to generate awareness among the target customers. Correspondingly, social media can be argued to have potential impact particularly on the marketing premises of Day Spa which it can use to reduce the cost associated with marketing and reach the large base of potential customers in new markets.

Legal: Legal factors are associated with legislations, rules and regulations including national and international that might have the potential impact on the operation of the businesses (Johnson, Whittington Scholes, Angwin, & Regner, 2013). In the recent years, there has been considerable amount of rules and regulations being implemented by the government to protect consumer rights as well as to preserve the employee rights. In this regard another major challenges faced by Day Spa is to comply with these laws and regulation so as to ensure uninterrupted and smooth functioning of its business. The company can overcome these challenges by formulating appropriate policies and strategies that would create an organisation environment where in every individual associated with the organisation are well aware of the established procedures and policies related to consumer safety.

Environment: Environment or ecological factors in the recent times has gain immense importance particularly in the light of climatic change and the dwindling environmental condition excessive exploitation of the natural resources by the businesses (Rastogi & Trivedi, 2016). At the same time consumers in Spa industry are ascertained to prefer organic products instead of chemical products. Correspondingly, Day Spa should promote the use of organic and natural products instead of using dangerous substances made from variety of chemicals.

Porter’s Forces

Threat of new entrants: The threat of new entry is relatively high in the spa industry, particularly due to low investment required by the new entrants to enter into the industry. Besides, customer loyalty in spa industry is quite low with minimum switching cost which makes it difficult for the existing firms to create barriers for the potential entrants (Magretta, 2011). Day Spa can take the advantage of low entry barriers to enter into new market to create new customer base and increase its revenue capacity.

Rivalry among existing firms: The rivalry among the existing firm within the Spa industry is high. This is because the spa industry is largely fragmented in nature and there are numbers of small and large firms operating in the market. At the same, time it is quite difficult for the firms to differentiate their services with the rival firms and are largely engaged in offering similar kind of services which further intensify the level of competition among the existing firm (Magretta, 2011). Market development through introduction of new products/services can be recognised to aid Day Spa to effectively overcome the challenges posed by the increase competition in the market place.

Bargaining power of buyers: The bargaining power of buyers in the spa industry can be identified to be high owing to the fact that there are numbers of small and large spa firms engaged in offering homogenous services. The customers are offered with the huge choice to select the type of service providers which makes it hard to retain customers for the firms in the spa industry (Magretta, 2011). Product differentiation can be ideal strategy for Day Spa to retain its customer base and attain increased competitiveness at the given market place.

SWOT Analysis

SWOT Analysis is considered as an effective strategic tool for evaluating the internal capabilities of the business organisation (Osita, Onyebuchi & Justina, 2014). SWOT analysis framework applied in the case of Day Spa is illustrated below.

It can be observed from the above table that major issues faced by Day Spa is predominately associated with increased competition, reduced disposable income, out-dated technologies and financial crunch in the economy. Correspondingly, the subsequent section presents the strategic options available for Day Spa that would aid the company to overcome these issues.

Strategic Choices

Having determined the key issues faced by Day Spa, it is crucial to identify the strategic choices available for the company to address these issues. In this regard, it is worth mentioning that company undertakes strategy with the objective to maximize customer’s value by offering them with quality products and services in accordance to the needs and wants of the customers at the competitive price (Weil, 2005). The following models are applied to explain the strategic options for Day Spa for the next three years.

Porter’s Generic Strategies

Generic strategies are usually characterised by the company’s response to the industry structure (Pulaj Kume & Cipi, 2015). For Day Spa to acquire greater competitive advantage in the next three years, it can follow one out of the three generic strategies proposed by Porter. In this regard, it can be argued that often several organisations get stuck in the middle of the three generic strategies due to their attempt to follow all the three strategies. In the case of Day Spa, it is not appropriate as the company has clearly defined business strategy and is coupled with coherent market segment. Day Spa can focus on increasing its internal efficiency by offering quality products and services to its customers to withstand the threat imposed by the external environment and to attain cost leadership. At the same time, the clearly defined market segments can also be identified to allow Day Spa to target differentiated products and services to specific target market. Besides, it can also position few exclusive services and products to the broad markets.

The Ansoff matrix is recognised as an effective strategic planning tool which aids the businesses determine the most appropriate strategies for their growth and expansion. This matrix is based on four different product-market combinations that include market penetration, market development, product development and diversification (Hussain, Khattak, Rizwan & Latif, 2013). It can be observed from the above discussion of generic strategies, that Day Spa is more likely to employ two strategic options that include cost leadership and differentiation. Correspondingly, it is not feasible for Day Spa to follow market penetration or diversification by introducing new products as it becomes quite risky for the company. Thus, the strategic options for Day Spa for the next three years include:

Market Development

Market development strategy is predominately related with entry to a new market while offering the existing products and services (Watts, Cope, & Hulme, 1995). Over the years Day Spa has been quite successful in expanding its business and operation. Correspondingly, Day Spa can enter new markets by following the internationalization strategy that includes forming alliance so as to tap the opportunity existing in the global arena. In this regard, Day Spa can enter into alliance with renowned resorts and hotels with the objective to enhance its global market share as well as increase its cash flow and revenue generation capabilities. However, internationalization of the business for day Spa would not be an easy tasks, it would require the company to engage in extensive market research for acquiring knowledge and understanding regarding the needs and preferences of the customers in the host economy.

Product/ Service development

Product and service development included in the Ansoff matrix deals with offering of new products and services to the existing market. Correspondingly, this strategy requires the companies to diversify their products lines with the objective attract new and potential customers in the current location of their operation (Audu, Sampson, & Umar, 2014). Diversifying Day Spa product/service mix can be ascertained to profitable strategy for Day Spa. However, it is worth mentioning that this strategic option creates a greater requirement for Day Spa top invest and R&D activities and hire expert and trained professionals who can positively contribute in reaping the benefits arising from the current market.

Evaluation of Strategic Choices to Select the Most Appropriate Strategies

Once the strategic options are identified, it is important to evaluate these choices so as to determine the most appropriate strategies that can be implemented by the companies. At the same time, it is crucial to determine suitable assessment criteria to evaluate these strategies. Correspondingly to evaluate and assess the above identified strategic choices, criteria that involve suitability, feasibility and acceptability are applied (Harrell, 2016).

Suitability: The criterion of suitability is considered as an effective tool for assessing the firm’s environment and measuring the implication of the strategies on the firm in the given environment (Kavale, 2012). Day Spa operations are regularly up-dated with the objective to deal with the challenges imposed by the environmental forces. Correspondingly, the current environment of Day Spa offers it with suitable platform to implement and follow the strategies of cost leadership and product development to a considerable extent.

Feasibility: Feasibility criterion is related with the evaluation of the available strategic options based on its financial viability and other related aspects such as availability of required human resource (Kavale, 2012). Notably, Day Spa has been able to achieve strong and stable financial background and it has also been investing in recruitment of potential talents and their development through training programs. Hence, it can focus on development of new product/services by adopting cost leadership strategies.

Acceptability: Given the strong financial position of day Spa and the increased global opportunity for the spa treatment, it would be less risky for the company to undertake product/service development and cost leadership. The company through the implementation of these strategies can be anticipated to attract and create loyal base of customers in various geographic locations of its operations (Kavale, 2012; Martin & Tomáš, 2012).

Conclusion

To conclude, the evaluation of the organisations environment postulated that Day Spa is faced with certain challenges but has also offered with numerous opportunities. In order to deal with the challenges and to exploit the opportunities, the various strategic options were analysed. Correspondingly, product development and cost leadership strategies were ascertained to be most suitable, feasible strategies for the company.

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