Table of Contents
Abstract
WindowsWear is an established fashion company seeking to diversify the services it offers to the general public. However, before embarking on an endeavor, market research should be conducted to ensure that the initiative is viable. The purpose of this external environment analysis is to assess the viability of the business idea. The factors affecting WindowsWear can be categorized into political and legal, sociocultural, technological, economic and demographic. It is important for the decision of a company to be based on fact rather than mere speculation. From the environmental analysis below, the museum initiative proves to be a viable idea because of the few barriers to entry. The advantages that the museum will offer the company outweigh the disadvantages and therefore, it is a valid idea.
Background
The business environment of a company encompasses all the factors, whether intrinsic or extrinsic, that affects the overall functioning of the company. The intrinsic factors form the internal business environment while the extrinsic factors form the external business environment of the firm. The factors within the external environment are out of the control of the organization. The comprehension of the business environment concept is integral to the success of the business as it aids in forecasting potential problems that may impede its operational activities. It will also be instrumental in the startup of WindowWear Museum since it will provide input into the planning endeavors. Failure to consider the external environment in the planning activities might lead to a poor decision-making process. That may primarily because the decision-makers might miss an important point of consideration that would cost the entire team. Moreover, the concept increases the understanding of the industry as well as its dynamics.
Introduction
Macro environmental factors that will affect the WindowsWear Museum will be inclusive of factors affecting both the fashion (apparel) industry and the museum industry. In general, the macro business environment of the WIndowsWear will be primarily affected by economic factors, technological factors, political and legal factors, sociocultural factors and demographic factors. These factors are beyond the overall control of the organization. It is important for a company to comprehend the way these factors interact to ensure the functioning of the industry. Such knowledge will allow for effective and sound decision-making whose basis will be on facts collected from the environment. Dealing with these factors demands research into the business environment using tools such as SWOT analysis and PEST analysis. These tools will provide keener insight into how these aspects correlate and interact. Moreover, they utilize systems thinking approaches, which will strengthen the decision-making process further.
Analysis
Political/ Legal Factors
The regulation and laws of a country will affect the operations of business either positively or negatively. The government can be a source of assistance in ways such as the provision of government-backed subsidies and loans that may allow the firm to have a large enough source of capital. The politics of the country may affect the museum in such a way that it may seek to prevent the business from starting (Dorf, 2007). This is especially the case if the business is not in line with the laws of the country regarding the policies and regulations of the country. The question, in this case, is the legitimacy of the business in question. The government will affect a business that fails to conform to the laws of the country negatively since government agencies will fight to close it down. As such, the strictness of the country’s laws requires that WindowsWear Museum adheres to the laws of the nation for effective functioning.
WindowsWear Museum will be operating under the umbrella of the WindowsWear fashion company, but it will be subject to the taxation laws of the country. It is important to observe these laws as they are among the strictest rules in the country. People have received jail terms as a result of failing to comply with the requirements of the taxation laws (Dorf, 2007). In this case, WindowsWear Museum will have to conduct sufficient research into the taxation laws within the museum industry, which may be different from those of the fashion industry. It is possible that the company can use certain mechanisms within the industry to stay clear of taxation. For instance, the industry could choose to be a non-profit company where it seeks to promote the overall well being of the society. In this case, WindowsWear museum will be seeking to preserve fashion history rather than seeking to derive profits for the service.
Employment law is also one area that may affect the survival of a company in the political environment. The law dictates how a company interacts with its employees. Most firms always develop a human resource department; whose responsibility becomes the overall handling of the employees while some will outsource the duty to human resource firms. In any case, there is a need to understand the provisions of the Employment Law (Kozar and Connell, 2010). Failing to adhere to this law may bring trouble with the trade unions, thereby encouraging the workers to picket and strike. That will affect the productivity of the firm as well as its corporate image. It will also bring about litigation against the company as the employees can file a lawsuit against the firm. For instance, if a job requires that an employee receives protective clothing and yet he or she is not provided with any, the employee will have grounds for a lawsuit. It can be worse if the employee experiences an injury while working.
It is possible that the WindowsWear Museum can gain the support of the government. Museums have a tendency of stimulating the local economy, and that may result in the development of the local infrastructure (Kalafsky, 2007). For instance, the development of new museums in an area will encourage tourism, thereby promoting the trade in the area. That will encourage economic stability of the area, forming a basis for soliciting support from the local government. More employment opportunities for the youth in the area who have different business ideas will result. As such, the museum will be participating in promoting the overall goals of the government, which may encourage support of the government. Moreover, a fashion museum is also a new idea that may be a huge source of attraction of people that appreciate fashion and designs. As such, it can be a positive impact on the economy.
Economic Factors
WindowsWear museum has the potential for growth that will encourage the development of the industry. Being a museum means that it will attract tourists in numbers who will be spending their time and money within the community of the museum’s location. A fashion museum is a new idea within the museum industry meaning that few industries have been able to accomplish it (Muniz-Baell et al., 2011). Thus, the barriers to entry into the industry are few. Its difference from a typical museum is that it does not require archaeological digging of artifacts that are to remain on display. It does not also require expensive pieces of art for display. Instead, the museum just has to ensure that it can trace all the fashion designs in the industry from the commencement of the apparel industry to the current fashion designs today. Thus, starting the museum is not as complicated and as expensive as starting the other types of museums.
The capital projects and works that a museum stimulates will promote investment and employment in the region. With the influx of tourism in the area, capital projects will start coming up encouraging development in the area (Marcus, 2007). For instance, new hotels that meet the high standards of the tourism sector will crop up instigating development in the area. As tourists come in to visit the museum, they will need somewhere to rest and pass their free time. Sometimes, the museum may be a holiday destination where people come for leisure purposes. Hotels will crop up to ensure that the holiday destination meet the standards of the tourism sector. That will be a source of income for both the local and Federal government. These developments will also promote the infrastructural development of the region such as better transportation systems to increase the efficacy of moving tourists around the area.
An increase in interest rates may affect the accessibility of the business to capital, which is instrumental in the running of the business. High-interest rates mean that the investors will the monetary resources left to invest (Minchin, 2013). For WindowsWear museum investment, that may be an impediment to the success of the museum. For the company to successfully implement itself, there is a need for starting capital. That will allow for dealing with costs such as employment costs, rental costs for the area of operations, purchase of exhibits and so on. Moreover, the high-interest rates reduce the profit margins that the museum may earn. That is because it increases the operational costs since the firm has to pay for its loans on a monthly basis. As such, there is a need for low-interest rates allowing for the museum to effectively participate in the museum industry.
Competitors are also an important consideration while making a decision to enter an industry. Understanding the effects of competitors in a market situation is important, as it will affect the proceeds that a firm earns after conducting its economic activities. In a situation where there are many companies within an industry, there is a high level of competition and a higher substitution effect (Haan, Britt, & Weinstein, 2007). Substitution occurs where the clients can obtain similar products and services of a company from another company at a lower price. The affected company will lose its customers reducing the profits of the company. WindowsWear museum may be safe from the substitution effect since there are very few museums focusing on fashion design. It is a new idea that very few museums have decided to implement. WindowsWear museum will have a large market share, which is highly unexplored thereby ensuring that the profits obtained may be sufficient.
We can do it today.
Sociocultural Factors
The museums play an integral social role of preserving the history of the nation. The apparel industry has experienced tremendous changes all through the ages. Ever since the cradle of humanity, people have been wearing clothes (Vaughan, Yang and Tang, 2012). However, as time progressed, the type of clothing that people wear also changed. From animal skins, people have changed to wearing majestic suits. It is saddening that these changes are not recorded in history because they also mark significant events in human life. There is a need to document the history of humankind, and one way of doing so is through the museum. Museums have become a means through which knowledge and values of the past pass on to the future generations. Through this, the museum will be able to enhance the social cohesion of the community. WindowsWear museum will awaken civic cooperation and consciousness by sparking community spirit. People will want their legacy to remain unforgotten, and one of the best ways is through the prosperity of the museum.
Through the WindowsWear museum, the community will gain a new focus for celebration during significant cultural rituals and events. Through the community, it will be possible for the museum to gain social support from the members of the community enhancing the corporate image of the museum. Davey (2010) asserts that through active memorialization and commemoration of national and local events, the museum will bring people together increasing social interactions between the locals and tourists. That will increase the acceptance of the tourists into the community, as they will be a source of development in the community. It will also contribute to the social development of the community. For instance, as tourists come to visit the museum, the local infrastructure will advance, and that will result in the creation of more social amenities such as schools and hospitals.
Technological Factors
Increasing participation of technology in many industries is increasing the efficiency of organizations in meeting organizational objectives. WindowsWear museum, to keep up with its competitors in the industry, will have to employ new technology (Davey, 2010). For example, the museum may employ projectors to showcase the history of the apparel industry as well as the fashion trends throughout history to the tourists. That will allow for the museum operators to reach a large audience at once.
Increasing influence of technology increases the level of competition by providing new platforms of competition (Davey, 2010). For instance, the Internet allows for businesses to reach customers even beyond their national borders increasing its customer base. Therefore, WindowsWear museum will have to ensure that it embraces all the facets of competitions present in the industry.
Demographic Factors
With regards to the museum industry, demographics are not highly influential to its market share. That is because its services are utilizable by people of ages and traits (Dando, 2009). For instance, schools can decide to visit the museum as a part of a class session, which is beneficial to both the children and the museum. It is also possible that the museum is usable as a site for hosting galleries for famous artists resulting in huge financial gains. That means that the target market for the museum is large and non-specific.
Age can be a factor that may affect the displays that are set up in the museum. Fashion trends are divided according to age so that the older individuals have a different set of tastes and preference from the youth (Dando, 2009). Therefore, while setting up the museum, it will be important for the management to consider the age difference. The youth should have their side of fashion history, and the older members of the society should have their side. Gender can also be a contributor where the male and the females where their tastes differ. As such, it will be important to consider the way gender affects the way the potential clients will react.
Reflection
The analysis of the business environment above makes it clear that the WindowsWear museum is a viable idea. Politically, there are no restrictions that prevent entry into the industry. Through adherence and conformity to the laws of the country, the business idea stands to prosper. Economically, there are a few setbacks that can be remedied such as those of high-interest rates and competition. However, the museum has numerous economic, socio-cultural advantages that render the business idea viable. From a technological point of view, the museum has little technological changes that it will have to apply for effective functionality within the industry. The challenge of high-interest rates will be handled through seeking alternative sources of capital to supplement the financial loans. For instance, the company can resort to seeking grants and donations from the larger players in the apparel industries. Moreover, it could seek an acquisition contract so that it operates under the brand of an apparel industry.
Conclusion
From the above analysis of the external environment of WindowsWear business and the potential environment of the hypothetical museum, it is clear that the business initiative is viable. Not only will the museum be a source of social capital and support, but it may also become a huge income earner for the company. There are few hindrances to entering the museum industry especially because the idea is new. Low level of competition means that the new museum will have a large market share. It will also be able to attract fashion lovers to the fashion company increasing the potential market for the designs. The costs that the implementers will have to incur are primarily the startup costs. However, the positive impacts of the museum outweigh the negative ones.
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