Business environment analysis

Businessenvironment analysis

BusinessEnvironment Analysis

Kelly’sSalon is a business that has been in operation since 1995. Thebusiness has experienced increased competition from several upcomingbusinesses such as Hair Cutlery which is likely to initiate itsoperation only five miles away (Fleisher&amp Bensoussan, 2015).This assignment analyzes the business environment for Kelly’s Salonso as to determine how it can be improved. The paper also appliesPorters Five Forces Model to analyze and justify the selectedstrategy for competitive advantage. Additionally, the paper explainsthe identified business process that could be improved with the useof technology.

FiveForces Analysis

Porter`sFive Forces is pragmatically a framework that attempts to analyze thecompetition level within an industry and the business strategydevelopment (Louis,2014).This particular technology is important to Kelly’s Salon because ithelps the business understand both the strengths of the currentcompetitive positions and the strength of a position that thebusiness is moving into.




Impact on strategy

Buyer Power

Buyer power is considered to be one of the Porters Five Forces market analysis factors that affect prices as this is often forced by the number of buyers.

According to Kelly’s Salon, there is low bargaining power of purchasers because the customers are mostly individual and a big number of purchasers

Low impact.

Negatively impact the business because customers typically make little purchases (Healy &amp Palepu, 2012).

Yes, it has an impact on the strategy since the deals with few dominant buyers.

Supplier Power

Supplier power is often determined by the quantity of suppliers of each key element in the business. Kelly’s Salon purchases large amount of products from its contractors as a result of medium-low bargaining power of contractors

Medium-Low impact.

Positively impact the business because the goods have a lot of substitutes. Low switching of prices from one contractor to another.

Yes, it has an impact on the analysis strategy because almost all the products are not significant for Kelly’s Salon business.

Threat of substitute service or product

Substitute is referred to as a product or a service that execute similar function as an existing product or service.

Quality and cost of substitute’s products are very spirited.

Performance of substitute products is similar.

High impact.

Negatively impact the business because the buyer switching costs are very small (Fleisher &amp Bensoussan, 2015).

Yes, it has an impact since it helps Kelly’s Salon business understand both the strengths of the current competitive positions

Threats of new entrants

Power is often impacted by the ability of firms or people to enter into the market. Kelly’s Salon experiences high capital need and large economies of scale.

Customers primarily look for products with low prices as well as standard advantage.

Medium towards High impact. If the business has a strong obstacle to entry, then Kelly’s Salon can uphold a positive position and take fair benefit of the entire situation.

Yes, it has an impact because of low switching costs between firms for purchasers (Louis, 2014).

Rivalry among existing competitors

Rivalry has a significant impact on the aptitude to generate sufficient margin because the intensity of competition depends on several factors.

The industry development is slow

Rivals have parallel sizes

Kelly’s Salon shows the 2% share of the salon industry.

High impact

Competition among the business may lead to Kelly’s Salon exiting the industry because of the slow development of the industry.

Yes, it has a significant impact that may lead to Kelly’s Salon business exiting the industry.

Justificationof the selected strategy for competitive advantage

Costleadership strategy

Kelly’sSalon can regulate the amount paid by its customers so as to enablethem continues with their respective services. Offering of smalldiscounts on its pricing that will attract both new and existingcustomers because the business procures its products across the worldin larger quantities for profits satisfactions and enjoy the overalleconomies of scale.

Relationshipwith each of the Porters Five Forces


  • Kelly’s Salon operates worldwide with a wide variety of products that attracts more customers. In this aspect, offering a wide variety of products often increases the confidence of the customers and its shareholders (Fleisher &amp Bensoussan, 2015).

  • The business has a wider range of processes that enhances its profits and industry control


  • Kelly’s Salon experiences more workers turnover (Louis, 2014). According to the case study, Kelly has recognized that probable scheduling of employees and her customers will cause problems.

  • High capital requirements and the employees connected lawsuit that may arise if she decides to schedule the employees and her customers.


  • Enlargement of the business online shopping which offer a neutral impact on the strategy based on the assessment of the Porters Five Forces


Thebusiness applies unrelated tactics in explaining customer andemployee scheduling problems difficulties such as logistics problems.The company employs cross docking technology which is pragmaticallyconsidered to be a well-organized approach where goods are reconciledwith the store list thus supporting the competitive advantage Kellyselected.

Thebusiness applies Radio Frequency Identification technology thatembraces the success of their supply chain (Healy&amp Palepu, 2012).The technology improves transparency in the business supply chain asit helps the business to reduce prices and labor as they toughentheir records control.


Fleisher,C. S., &amp Bensoussan, B. E. (2015).&nbspBusinessand competitive analysis: effective

applicationof new and classic methods.FT Press.

Healy,P. M., &amp Palepu, K. G. (2012).&nbspBusinessAnalysis Valuation: Using Financial Statements.


Louis.(2014). ContemporaryMarketing.Retrieved from