Business Environments Flashcards
1
Q
What are the 3 business environments? How much control does one have in each, and what analysis system would one use for each?
A
Macro: no control; PPEESTLE
micro: Full control; SWOT/TOWS
market: Little/no control; Porter’s 6 Forces
2
Q
What are Porter’s six forces?
A
- threat of supplementary products
- threat of competition
- threat of complimentary products
- threat of new entrance in the market
- power of the supplier
- power of the buyer
3
Q
What is competitive advantage?
A
How the business has an edge in the market over competitions and enables the business to exploit the advantage to sell more, attract more customers and reduce expenses, thus generating more profit.
The business should create a unique selling point (USP) that sets their products apart from those of their competitors. For example, at MrPrice sport you can buy both sports clothes and sports equipment at the same store.
4
Q
What should a business do when conducting an environmental scan on the market environment?
A
- Identify issues that need to be addressed
- Look at opportunities and threats in the market environment
5
Q
What are the internal business functions (within Micro environment)
A
- purchasing
- production
- human capital/resources (HR)
- financial
- public relations (PR)
- administrative function
- general management
- marketing
6
Q
The Pestle analysis explores…?
A
The:
- physical
- political
- environmental
- ethical
- social
- technological
- legal, and
- economic factors
7
Q
Define ‘ environmental scanning.’
A
The process of obtaining information about possible current and future events that may have an impact on the performance of the business (making use of the S and W to overcome T and W in SWOT/TOWS). It is done to ensure that the business is ready for developments in the internal and external environments by adapting timeously to realign resources (especially as resources becoming scarce). This is done in order to take advantage of opportunities and overcome threats.
8
Q
What is the purpose of environmental scanning?
A
- to identify possible challenges/opportunities
- adjust existing plans to deal with factors or events
- to develop contingency plans and strategies
- important in order to gain a better understanding of the nature of changes in the external environment and the pace these changes take.
- helps business to respond quickly to crises and opportunities
9
Q
Crisis vs trend?
A
Crisis: quick/unexpected change that the business did not anticipate and probably doesn’t have a contingency plan to deal with.
Trend: Changes that occur over a period of time, business is forewarned and can adapt its current strategies to default with changes taking place and adapt more easily.
10
Q
The internal and external environment are each made up of what?
A
External - market and macro environments
Internal - micro environment
11
Q
Give examples of a tangible vs intangible hypothetical strength of a business.
A
Tangible: for example, a well functioning till system
Intangible: for example, a positive reputation of a business
12
Q
What are a business’s strengths?
A
Tangible/intangible factors that add value to the performance of a businesses and give the business a competitive advantage within the marketplace when compared to competitors. The business should develop strategies which will enable it to use its strengths to overcome weaknesses and threats and to take advantage of opportunities.
13
Q
Give examples of strengths in a business.
A
- competitive pricing
- good location and clean store
- unique product(s): patents (know-how)
- workers skill
- business culture
- good marketing and brand
- operational efficiency
- employee skills/motivation/morale/attitude
-strength of management team
14
Q
What is a competitive price?
A
When the business sells the product or service at a better price than competitors, thus differentiating itself within the market. Consumers may be price conscious and will usually prefer a more reasonably priced product.
15
Q
Expand on location as a factor that can determine the success of businesses.
A
- Some businesses depend on impulse purchases (such as socks/hair accessories/cosmetics). These businesses need a lot of foot traffic (e.g MrP in Cavendish)
- The location needs to be easily accessible to the target market. The business needs to pay close attention to the demographics for the target market when choosing the location. E.g, age/income/gender
- Manufacturing businesses (e.g, a factory) - business must consider transport (is it better to transport raw materials or finished products, for example?).
- Transportation of finished products: if the business wishes to transport finish products they must establish a business close to the target market. (E.g. WW Clothing in Cavendish). In the clothing industry, because clothes aren’t perishable, it’s generally better to be close ot the target market rather than the raw materials.
- Transportation of raw materials: (usually within the food industry where stuff can go bad)
- better to have the business close to the raw material site (e.g. sheep = wool in the Karoo - It could be more beneficial for the business to transport the wool into the cities. Or, distribution centres close to harbours if importing clothing.)
16
Q
What should a business consider when choosing a location?
A
- The business must fit into the area. Don’t establish a nail salon in an industrial park.
- Proximity of complimentary businesses (e.g, having a sports shop (MRP Sports) near an indoor sports facility)
- Easy access to the business
- Security - customers must feel safe
- Future developments in the area?
- Trading hours of malls (for example - increased shopping hours would increase sales)
- Surrounding businesses… are there competitors nearby (can be good or bad thing - good because it encourages innovation, bad because losing customers)?
17
Q
What are patents?
A
A unique product can be offered to the target market - a patent is registered by the business to give it legal exclusivity to produce a product in a certain manner. It’s a strength for the business and limit competitors from entering the business.
18
Q
What is product differentiation and why is it useful?
A
Product differentiation describes when a business makes their product different to their competitors and thus creates competitive advantage. They can do this by creating a unique selling point (USP).
E.g: selling a shirt in 5 different colours and cuts, etc
19
Q
Why is a skilled workforce a strength for any business?
A
If employees know how to perform, there is less wastage and improved productivity.
20
Q
How can a business attract skilled and motivated workers?
A
- paying a fair salary
- treating employees in a fair manner
21
Q
What is business culture? Why is it important?
A
Business culture describes the way things are done in a business. Can be the biggest strength or weakness of a business, increasing or decreasing motivation within it respectively.
In order to have a positive business culture and increase overall productivity and motivation in the business, the business must:
- foster a culture of meeting deadlines
- Strong CSR culture (relating to CSR and the 3 P’s, People/Planet/Profit)
- a corporate culture of life long learning (pertaining to fast changes in tech for example)
- culture of honesty
22
Q
Is brand equity tangible or intangible?
A
Intangible
23
Q
How can good marketing and a strong brand help a business?
A
- people will have a positive association with the business
- leads to higher sales, reduces marketing costs, allows business to charge more for their products/services
24
Q
What is operational efficiency?
A
Minimum input —> maximum output
25
Why should a business try to be an efficient as possible?
The more efficient the business = less wastage = more profit
26
Why is good quality important for a business in the market?
Differentiates the business from its competitors, enabling greater profits.
27
What can happen to factors that are considered strengths if they are not managed correctly?
They can become weaknesses, that may debilitate the businesses if not addressed.
28
What is an opportunity?
External forces which present the business with the chance to outperform competitors, especially if the competitor is weak in a particular area. Opportunities could include:
- offering a better product (perhaps more trendy/higher quality)
- getting products to consumers sooner than competitors (convenience)
- having access to larger markets (larger market = more products sold)
When analysing opportunities, consider P6F’s and PESTLE elements.
29
Give an example of a business turning a weakness or threat into a strength.
Threat/weakness: loadshedding
—> turning into opportunity…
—> investing in solar power
—> selling electricity back to Eskom using excess solar panel energy
30
What is a threat?
External factors that could hamper the success or growth of the business. The business must put contingency plans in place in order to deal with these factors. It is important that the business assess the impact opportunities and threats can have on the business, and deal with them quickly with effective strategies in place to address them.
Use PESTLE analysis in macro environment, and P6F’s in market environment.
31
Discuss the inter connectivity of SWOT elements.
SWOT matrix is used by businesses to develop business strategies (contingency plans/trend analysis/risk strategies etc). The business will try to link different elements.
32
What must one list in order to perform a SWOT analysis?
- the specific strengths that add great value to the business or give the business a competitive advantage
- the areas where the business is weak and how this hampers the progress/success of the business
-the external opportunities for the business
- external threats the business is/might be facing.
33
Where does the value of a SWOT analysis lie?
In how the business uses the information that it has given them.
34
What is a PESTLE analysis?
A tool used to understand the macro environment. It gives the business an overview of the impact from different elements in the macro environment. PESTLE helps to align the business to forces of change and by adapting to those change, businesses can take advantages of them and is therefore more likely to be successful due to competitive advantage. PESTLE gives businesses an idea of the immediate influences its 8 factors could have on the business, and help the business consider what the future would hold in terms of each element. Each factor could potentially threaten the business . The business may use it as an opportunity to create or strengthen the competitive advantage.
35
Discuss political factors as a factor under a PESTLE analysis.
- Important in relation to the local political situation of the country (e.g, South Africa is in economic recession = slow economic growth) and the political situation of other countries the business may operate in (for example, the war in Ukraine/USA elections/war in Gaza).
- Closely related to legal factors - such as the political party running the country making the laws and determining what is acceptable/allowed.
36
What factors should be considered when reviewing the political factors that may impact a business?
- likelihood of government interference in the economic functioning of a country and business - free market vs socialism vs communism for example
- degree of political stability (e.g. previously this year, due to oncoming elections, markets on the Joburg Securities Exchange have temporarily withdrawn until the results of elections)
- degree of media freedom / freedom of speech (may be used to criticise political parties in a country when they are guilty of corruption).
- Attitude of different political parties (for example, local banking and mining sectors would have to watch out for parties that want that sector to be nationalised… business should look at views of other political parties since they may potentially shape the future political orientation of the country).
- process followed when government tenders are allocated if the business is interested in tendering for government contracts
37
What does BBBEE stand for?
Broad Based Black Economic Empowerment
38
What is economic recession?
Slow economic growth.
39
What economic elements should a business consider when conducting a PESTLE analysis?
- economic growth and development rates (SA is in a recession at the moment)
- inflation rates (the higher the inflation rate, the lower the purchasing power of the monetary unit)
- interest rates (11.75% Prime rate as of 3/7/2024)
- exchange rates (when the rand is weaker, imports cost SA more, when the rand is stronger exports make SA more money)
- unemployment rates (high in South Africa - 30 percent in Q1 2024)
- taxes (e.g. income tax, VAT, import duties)
40
How can high unemployment rates in a country negatively affect a clothing retailers’ profits?
Higher unemployment rate —> lower average disposable income —> fewer customers —> lower profits
41
How does the progressive tax system work?
The more you earn, the more tax you pay
42
What are ethics?
The principles and/or values that will determine if decisions and actions are acceptable.
43
Why should a business have clear ethics?
They provide a guideline for the person or employe to evaluate how to act in the right way when faced with a moral dilemma or difficult situation. Businesses should form a strategy and train employees and management with proper implementation of the business’ Code of Conduct and Code of Ethics.
44
What elements should be considered when looking at ethical factors under the PESTLE analysis?
- Ethical vs Legal: something may be legal but not ethical (e.g, tax avoidance). A person business’ set of principles may be ethical, but it may not be legal in a country (e.g, tax evasion).
- Fair Trade: Respect and transparency of business dealings. Partially relates to dealing with stakeholders (suppliers/employees/customers/regulators).
- CSR: responsibility towards shareholders to make a profit and toward giving back to the community.
- Employees privacy: E.g, Employees use of the internet vs. The business expecting the employee to behave ethically and responsibly.
45
What social elements should a business consider when conducting a PESTLE analysis?
- the impact that social trends have on the economy and the role players in the economy such as consumer’s behaviour and lifestyle (e.g, trends, levels of disposable income, LSM groups etc)
-the business must adapt to changes in social trends (e.g, social media has a big impact: businesses must adapt by changing their marketing and sales tactics to utilise opportunities related to mobile devices, for example reaching the customer digitally via email or something similar).
- the business must consider the average age of the population (life expectancy, especially as people become more health-conscious).
46
What technological elements should a business consider when conducting a PESTLE analysis?
- the equipment the business uses to buy/make/sell/advertise products
- rapid development for issues surrounding social media
- automation of processes - requires lower skilled and cheaper manual labour
- online shopping
-advance in online monetary transfers (like online banking)
- quicker sales transactions through EPOSSE
- product innovation through Research&Development (R&D)
47
What does EPOSSE stand for?
Electronic Point Of Sales Scanning Equipment.
48
What legal elements should a business consider when conducting a PESTLE analysis?
- All laws that may impact the business
- labour legislation
- environmental laws
- criminal justice laws (protects the business against piracy, for example)
- tax laws, business registration laws, health and safety laws
49
What physical and environmental elements should a business consider when conducting a PESTLE analysis?
- growing awareness to protect the environment (environment is one of the 3 P’s: Planet)
- …in order to prevent negative consequences such as global warming and changes in weather patterns).
- generally moving towards more environmentally friendly products (such as electric/hybrid cars)
- placing emphasis on recycling
- heightening tax on air travel
- the interrelationship of SWOT elements (they all impact one another profusely).
50
What is a TOWS analysis?
Examining the interplay between the different elements of SWOT. Strengths are combined with opportunities and threats. Weaknesses are examined in light of possible opportunities and threats respectively.
51
In a TOWS analysis, how can S and O interact?
Strengths + Opportunities
The business should develop strategies created by thinking about how the business could utilise its strengths in order to take advantage of opportunities as well as create them for themselves. For example: A CSR project to teach farmers to farm cotton- increases positive brand rep for business but also becomes a reliable resource for them.
52
In a TOWS analysis, how can S and T interact?
Strengths + Threats
Strategies are created by assessing how the business’’s strengths could be used to eliminate threats (for example, a strong brand —> reducing competition levels)
53
In a TOWS analysis, how can W and O interact?
Weakness + Opportunity
These strategies are created by a business overcoming its weaknesses in order to be able to take advantage of opportunities (for example: if employees can’t get to work because of taxi strikes, business could offer staff transport).
54
In a TOWS analysis, how can W and T interact?
Weakness + Threat
These strategies assess how a business could avoid threats by reducing or eliminating its weaknesses (for example, customer service is bad —> threat of customers going somewhere else. Solution: train employees).
55
What tools should be used to analyse the micro environment?
TOWS/SWOT and the 8 business functions (8BF).
56
What are the 8 business functions?
- marketing
- general management
- Human Resources
- public relations
- purchasing
- finance
- production
- administrative
57
What is a balanced scorecard?
It describes the key outcomes that the business would like to measure/evaluate to improve these outcomes where possible. This forces management to focus on the issues that are important, creating value. Plans and strategies must be developed to create/maintain/improve the competitive advantage of the business.
Elements of the balanced scorecard:
- finance perspective
- customer perspective
- internal business perspective
- learning and growth perspective
58
What is the financial perspective in the context of a balanced scorecard?
- focusing on max utilisation of assets
- minimising costs
- creating shareholder value
59
What is the customer perspective in the context of a balanced scorecard?
Focuses on how the customers see the business (reputation/brand)
60
What is the internal perspective in the context of a balanced scorecard?
Focused on innovative products and services, with use of the management of operations and social investments to improve the business.
61
What is the learning and growth perspective in the context of a balanced scorecard?
- relates to how employees in the business can continue to improve and create value through leadership, accountability, culture and teamwork.
62
What does a porters six forces analysis reveal?
The attractiveness of a market
63
What elements make a market attractive for a business?
- high barriers of entry (hard to enter market ∴ harder for competition to enter market ∴ more profit)
- low levels of competition
- few substitute products/services
- weak supplier bargaining power (more suppliers)
- weak buyer bargaining power
- many complementary products
Due to all of the above, the business will earn higher profits, thus deeming it an attractive market.
64
What elements make a market unattractive for a business?
- low barriers of entry
- high competition
- many substitute products/services
- strong supplier bargaining power
- strong buyer bargaining power
- fewer complementary products
Due to all of the above, the business will earn lower profits, thus deeming it an unattractive market.
65
What is meant by ‘threat of new entrants’ under P6F?
How easy or difficult it is for new competitors to enter the current market , based on the number of entry barriers to the market.
Many competitors = shared market = fewer customers = decline in profits
66
What barriers potentially make it difficult for a business to enter a market?
- capital required
- pricey equipment
- existing businesses that have strong and established brand reps (especially if they have trademarks/patents protecting their goods or services).
- strict govt legislation
- when customer switching costs to change to a new type of product is high
- high level of customer loyalty (e.g, Woolworths)
- economies of scale are not easily achievable
- bigger retailers in shopping malls
- registering patents - deters potential new businesses from selling a similar product
- a large expense on advertising
- taxes on imported goods ( a deterrent the govt imposes to protect the local market from cheap/mass produced products from overseas. For example: SA is part of BRICS and imports from China (Shein, Temu etc), which destroyed the local textile industry.)
67
Rivalry among competitors is high when…?
- there are many competitors in the market
- competitors are more or less of equal size
- exit barriers are high - getting out of the market is difficult, or its expensive to stop selling a particular product, especially if huge capital investments have been made.
- there’s limited potential for market growth and all competitors have to compete for the same market share
- products in the market are homogenous (e.g, T-shirts/jeans/socks)
- low levels of customer loyalty
- goods can be easily substituted for another product (for example, clip on earrings/pierce earrings, polyester clothing/hemp/wool/bamboo clothing, slippers/non-slip socks, lipstick/blush)
68
What factors require review when the business is compared with ones competitors?
- market share
- size and financial resources (e.g, comparing MRP clothing to a fashion boutique)
- quality of the products/services
- consumer brand loyalty
- pricing of goods or services (quality must not be compromised when lowering prices to compete!)
- convenience of location and distribution channels
- trading hours (note: challenging for brick & mortar stores to compete with online stores due to them being open 24/7).
69
Give examples of substitute products within the clothing industry.
- clip earrings / pierce earrings
- non slip socks / slippers
- blush / lipstick
- polyester clothing / wool/bamboo/hemp clothing
70
Why may substitute products make a business feel threatened?
- increasing availability of substitute products generates more indirect competitors
- business may feel threatened if a customer is able to find a substitute product at a better price / quality
- more threatening if customer can switch at little to no expense
- NB: a different brand or trademark is NOT a substitute product!
71
Discuss the bargaining power of suppliers.
- suppliers can have a negative impact on the business as well as the quality of the product/service offered, thus effecting the overall image of the business. ∴ important to have a reliable supplier
- a business sends on a supplier to be successful
High bargaining power allows:
- allows supplier to sell products or raw materials for higher prices due to fewer suppliers in the market.
-offer low quality good to the business (dodgy)
72
Suppliers must deliver..?
- good quality products
- at the right time
- in the correct quantity
- at the right place
- at a reasonable price
73
What happens if a supplier sells goods to a competitor at a lower price?
It could put the business in a weaker competitive position and cause the business to be less successful. This may be prevented if the business builds good relationships with the suppliers.
74
What costs are associated with unavailability of stock?
No material = manufacturer cannot produce = no sales = no profits.
Also, no material = machine and labour cannot be utilised to full capacity and production comes to a standstill.
Administrative and opportunity costs (for example: the customer having to choose between products - lost opportunity for the business to make more) are incurred.
Business may run out of stock = difficult to negotiate discounts when placing orders.
75
Discuss the bargaining power of buyers.
This describes the power of buyers/customers to demand:
- higher quality
- lower prices
- longer trading hours
- delivery of products (offering convenience)
- wider variety of goods
It is up to the business to device if the above demands are worthwhile to meet, as satisfying more demands might mean lower profits, but not meeting them at all might mean no profits.
76
What factors should a business consider when selling to a final consumer?
- the type of product or service offered: customers will travel great distances to buy specialty goods (such as a good thrift store), but convenience goods (such as a basic T-shirt) does not warrant travelling far distances.
- price sensitivity - how much disposable income does the customer have? Which LSM group is the business marketing to?
- snob value: describes the image associated with the product. Influences where the consumer makes the purchase.
77
Buyers/customers have strong bargaining power when..?
- buying bulk
- buying similar products
- fewer buyers
- easy to switch
78
What are complementary products? Give an example within the clothing industry.
Products that complement one another. E.g, belt and jeans. Socks and shoes.
79
Discuss the threat of new entrants in the market.
- new entrants = new competition
- assess how easy or difficult it is for a new competition to enter the current market based on the number of entry barriers.
- if there are many competitors all competing fort he same market share, profits will decline
- not only current competitors steal customers - new businesses seeing an opportunity in the market may do the same, especially if competition has a USP
80
What are economies of scale?
Low input to maximise high output.
81
Who is part of BRICS?
Brazil
Russia
India
China
South Africa
Ethiopia
United Arab Emirates
Iran
82
Discuss the level of rivalry as one of Porter’s six forces.
- number of current competitors in the market
- aggressive competition for market share = potentially lower profits
- businesses should find a sector where a competitor is not performing well (prices/quality are bad) ∴ and opportunity for the business to make more profit in this sector
- business must ensure they are aware of sectors where competitors are doing well and implement tactics to avoid losses and eliminate them as a rival.
-
83
Why do businesses need to develop strategies?
To improve, and to outperform competitors - competitors have the power to lure away customers and profits.
84
Give examples of strategies a business could implement in order to eliminate the threat of competition.
- Customer loyalty programs (e.g. a smartshopper card)
- Reduction in prices of certain products (makes the business more attractive to potential customers). It must be ensured that quality is not compromised in doing so.
85
Rivalry amongst competitors is high when…?
- There are many competitors in the market
- Competitors are of similar size
- Exit barriers are high (expensive to stop selling product / large capital investment made)
- Limited potential for market growth (competitors competitive for the same market share)
- Products in the market are homogenous (not differentiated e.g. socks / jeans)
- Goods are easily substitutable (e.g. expensive bamboo clothes vs cotton, sheepskin slippers to non-slip socks)
- Low customer loyalty (customers switch easily, e.g. MrP —> PnP)
86
What factors require review when the business is compared with one’s competitors?
- size and financial resources (e.g. comparing MrP to a boutique)
- market share
- quality of goods/service (quality must not be compromised while pricing competitively!!)
- consumer brand loyalty
- pricing
- convenience of location (e.g. clothing retailer in a shopping mall vs in an industrial park) and distribution channels
- trading hours (must compete with online retailers)
87
What is a value chain?
A value chain is a series of consecutive steps that go into the creation of a finished product, from its initial design to its arrival at a customer's door.
88
Discuss the threat of substitute products as one of porter’s six forces.
- business may feel threatened when a buyer is easily able to find a substitute product at a better price/quality
- even more threatening if a buyer can switch at little to no expense
- NB: a different trademark is NOT a substitute product! Substitute products are completely different but satisfy the same need, not different brand.
- Increasing availability of substitute products generates more indirect competitors, which businesses must consider in order to outperform competitors
89
Give an example of a substitute product that may be a threat to a business within the clothing industry.
Sheepskin slippers vs non-slip socks
90
Discuss the bargaining power of suppliers as one of porter’s six forces.
- High bargaining power of supplier allows competitors to sell products/raw materials for higher prices and offered lower quality products/materials to the business
- This can negatively affect the business (business is paying more for goods, quality of products can go down/prices grow higher) ∴ reflecting poorly, influencing reputation/image
- business needed reliable seller or else will encounter problems
- Businesses depend on suppliers to be successful
- Suppliers must deliver good quality products, at the right time, in the correct quantity, at the right place and at a reasonable price.
- Large suppliers supply their products to wholesalers and retailers (e.g. Makro and MrP respectively)
- If a supplier sells to competitors at a lower price, puts business in a weaker position competitively ∴ company could be less successful. Can be prevented if businesses maintain good relationships with their suppliers.
91
Suppliers must deliver…
- good quality products
- in the right quantity
- at the right time
- at the right place
- at a reasonable price
92
What costs are associated with unavailability of stock?
- no materials = manufacturer cant produce = no sales = no profits
- no materials = machines and labour not effectively utilised (production comes to a standstill)
- customer goodwill lost if they have to go to competitors
- administrative and opportunity costs are incurred when no production happens.
93
What does the term ‘opportunity costs’ describe?
When the *opportunity* to make profits is lost.
94
Suppliers have a strong bargaining power when..?
- Few suppliers in the marketplace
- Supplier is large enough to make it difficult to achieve forward integration in the distribution channel
95
Discuss the power of buyers as one of porter’s six forces.
- Customers have the power to demand:
> a lower price
> higher level of quality
> longer trading hours
> delivery of products
>wider variety of goods
- businesses have to decide if their demands are worthwhile to meet:
> meeting more demands can mean possible lower profits
> not meeting demands can mean no profits
- a buyer is not necessarily an individual consumer
> could be another business looking to resell/manufacture something / a wholesaler / a retailer
> if buyers are not respected, offered good value for money, they may decide to support a different business
96
What factors should be considered when selling to a final consumer?
- Type of product or service offered
> Consumer will travel great distances to buy speciality goods (e.g thrift store, tailor)
> Convenience goods do not warrant travelling far distance (eg basic tee)
> Consumer may be happy to settle for a different brand or substitute product
- Is consumer brand loyal? Will they switch for better deals?
- Price sensitivity (disposable income of customer)
> Some customers are happy to pay more for a product or service if it is delivered or conveniently available
- Snob value (Image associated with the product: influences where the consumer makes the purchase)
97
Buyers have a strong bargaining power when…?
- buying in bulk
- many suppliers selling the same / similar products or services
- only a few buyers exist
- easy and not expensive for buyer to switch to another supplier
- a buy has the ability to integrate backwards into distribution channel
98
Discuss complementary products as one of porter’s six forces.
- Complements look at the potential within the market place to increase the demand for the original product, by introducing a complementary product
- E.g: belt to complement jeans
- Putting them in close proximity in stores makes complementary products more compelling to customer. (E.g, having belts on display to go with the jeans). Businesses should develop further strategies using this force (e.g, slight discount on belts when buying the jeans) therefore making more profit.
