“More Han half of Americans (55%) say they are trying to drop some weight, up significantly from 43% in 2011” (Hellenic, 2012, p. 1). This change in social values presents opportunity for Big 5 to highlight specific weight loss product lines, such as its treadmills, exercise bikes, running shoes, and complimentary apparel accessories, to name just a few.
A growing factor in Big g’s remote environment is the concern for ecology, including the air, water, and soil (Pearce, Robinson, 2011).As society has become more educated on the factors that damage the ecology, so has consumers demand for companies to become “green” and reduce their arbor footprint. This remote factor presents an opportunity for Big 5 to implement echo-efficient strategies (echo-efficiency) and policies. Stephen Scheming defines echo-efficiency as ‘to describe corporations that produce more-useful goods and services while continuously reducing consumption and pollution,” (Pearce, Robinson, 2011, p. 88). For example, Big 5 may consider more Internet heavy advertisements and the use of Search Engine Optimization (SEE) to attract more customers to its website.This opportunity will reduce the use of paper, printing supplies, and disposal services Although the paper details economy, social, and ecology, technological, and political factors also play a factor in Big g’s remote environment. For example, the introduction of new bar scanners that increase operational retail efficiencies (technological), or the requirement to follow the Restriction of Hazardous Substances, (Ross) mandate that prohibits the sale of products manufactured with banned substances (political).
Ultimately understanding and analyzing the effect of each remote environmental factor will allow Big 5 to implement targeted strategies to capitalize on opportunities and minimize threats. Industry Environment Industry environment pertains to how an organization copes with the five basic forces that shape the competitive market in which it operates. How these forces relate to each other will determine the competitive nature of the industry and control how much profit can be made. In a perfectly competitive market, where new entrants are fairly consistent and lack barriers, the likelihood of long-term profits is low.
This is seen in such industries as plastics and rubber. The five basic forces consist of suppliers, buyers, new entrants, substitutes, and industry competitors (Pearce, Robinson, 201 1). Big 5 Sporting Goods industry environment starts with determining the possibility or ease of new entrants into the market. The ease of the market depends on how many barriers exist for entrants. There are six major sources of barriers, the first being economies of scale.
Economies of scale allows Big 5 to purchase a large quantity of a product at a reduced per item cost.This in turn allows them to sell that product at a competitive price in the market. This creates a capital barrier for new entrants. An organization would need a significant amount of capital to take advantage of the economies of call and stay price competitive with Big 5 (Pearce, Robinson, 2011). Capital Requirements and economies of scale are the only two entry barriers for the industry. The other four sources are product differentiation, government policies, access to distribution channels and cost disadvantage of size.In the sporting goods industry, there is no differentiation of product, all entrants would have access to the same distribution channels and therefore access to all the same products.
Government regulations do not have a factor as they do not restrict entrants into the industry and affect all organizations the name. Cost disadvantage independent of size may cause a barrier if the organization’s leaders are ignorant of industry and need a learning curve; however if this is the case that organization would have difficulties getting past the capital barrier (Pearce, Robinson, 2011).Powerful buyers and powerful suppliers represent two other forces which contribute to Big 5 Sporting Goods industry environment. Big 5 will conduct business with power suppliers such as Nikkei, Rebook, Wilson Spalding and Under Armor. These companies have key features that characterize them as powerful suppliers. They can affect the price and quality of goods that Big 5 will purchase and sell. However, this event will affect all competitors in the industry. Big 5 represents a powerful buyer in the industry.
It had the ability to buy in large quantities and its purchases are standard within the industry. The products do not save Big 5 Money, they are buying the top quality product and the product itself is less important than the quality that it represents (Pearce, Robinson, 2011 In the sporting goods equipment industry the availability for substitutes exists in the form of used items. Big continues to sell discounted r clearance items in their stores, so in order for the consumer find a suitable substitute it would have to look toward organizations that sell used equipment.Sporting accessories have readily available substitutes in retailers such as Wall-Mart; however, the quality of the goods would be significantly different. Big g’s major competitors are Play It Again Sports, a nationally known company for both new and used good. Dick’s Sporting Goods, located throughout the nation, and Sports Chalet, a company that closer represents the size and capabilities of Big 5, but opened up the avenue of sports equipment rentals. Big 5 has put itself in a position to continue to lead the regional competition, while compete with the national companies.Operating Environment The operating environment is the factors that affect organizations ability to acquire needed resources or its profitability in marketing its goods or services.
These factors include the competitive position of a firm, the composition of its customers, its reputation with its creditors and suppliers, and its ability to obtain capable employees. Operating environment can be affected by a firm’s influence; thus the organization has more control over the operating environment (Pearce, Robinson, 2011 Competitive position is often comprised of situational factors, those that apply specifically to Big 5.Taking a large look at the organizations competitive position will allow Big 5 to forecast better short and long-term profits. Big g’s size is both a blessing and a curse when it comes to competitive position. The organization can take advantage of economies of scale, which allows it to have a vast array Of products covering all sporting genres. This gives Big 5 a higher competitive position than the smaller companies in the same market. However, it does not have the market share that nationally recognized companies have within its western footprint (Pearce, Robinson, 201 1).
The vast variety of sporting equipment and accessories that Big 5 carries, and sales allow the company to achieve a wide composition of customers. This characteristic allows Big 5 to limit the seasonality of the industry, as one sporting season comes to an end the next begins. The relationship between Big g’s customers and Big g’s suppliers is extremely important.
Big 5 prides itself on being able to provide the highest quality of product to its customers at a fair price. Developing a quality relationship with suppliers is important to Big 5 to ensure that quality, price, and uphold reputation.Having a strong relationship with creditors is also of importance to Big 5.
Creditors allow Big 5 to improve its cash flow, order, and receive merchandise in a timely fashion, and grow when the opportunity is there. Employee product knowledge, and superior customer service is what separates Big 5 from its competition. Whether the information be technical or latest trends, being able to acquire knowledgeable and quality employees is essential to long-term success of Big 5.Hiring the right employees and retaining them will increase the effectiveness in which Big 5 can achieve its’ short, and long-term objectives. Internal Environment understanding the internal environment of the business is just as important as understanding all other environments.
Unlike external environmental factors which are not always influenced by business, Big 5 has a significant influence over its’ internal environment. When analyzing its’ internal environment Big 5 managers should approach the process by asking such questions as, “How well is the current strategy working?Or “What are our torrents and weaknesses,? (SOOT Analysis, 201 1 , peg. 138).
The typical method of addressing questions such as these is to conduct an assessment of the businesses strengths, weaknesses, opportunities, and threats (SOOT). Defining Big g’s strengths and weaknesses Will also define its’ internal environment. According to Pearce and Robinson (2010), “A strength is a resource or capability controlled by or available to a firm that gives it an advantage relative to its competitors in meeting the needs of the customers it serves.Based on a 201 1 internal analysis Big 5 has identified the following strengths thin the organization: ; Merchandising strategy ; Network expansion ; Declining long-term debit Because Big 5 has a unique product line which enables Big 5 to differentiate its product mix and price. By doing this Big 5 has established itself as a value retailer to attract and retain a larger customer base (SOOT Analysis, 2011 Standardization Of all storefronts allows flexibility with opening new stores. Big 5 believes that convenient and accessible store leads to frequent customer visits.
This low-cost method of opening new stores enables new stores to realize profits in a short period of time (SOOT Analysis, 201 1). Over a two-year period Big 5 reduced its long-term debt from $96. 5 million to $48. 3 resulting in a 49.
8% decline it Big g’s long-term debt. A continued decline in long-term debt provides flexibility with plans to expand (SOOT Analysis, 201 1). Weaknesses according to Pearce and Robinson (2010) are “.
.. A limitation or deficiency in one or more of a firm’s resources or capabilities relative to its competitors that create a disadvantage in effectively meeting customer needs.
The following weaknesses were identified by Big 5 in its’ 2011 analysis. ;Single distribution center ; Region specific high risk exposure The reliance on one distribution center could lead to a loss in sales. If the distribution center is exposed to environmental threats such as fire, earthquake or other natural disaster this would impact Big g’s ability to receive merchandise to its stores when needed. Having one distribution center also leads to higher transportation Cost for longer distanced stores (SOOT Analysis, 2011).Located primarily in the western United States, Big 5 risks exposure to factors such as poor economic conditions, or natural disaster by expanding to other regions.
This high reliance on a single region hinders Big g’s ability to row (SOOT Analysis, 2011). Although SOOT analysis has proven to be a valuable tool for organ actions large and small it does have its limitations. The analysis could overemphasized its internal or a single strength while not realizing the impact external factors may have.In addition, strengths does not equate to a competitive advantage. The analysis can be static causing Big 5 to ignore changes in the environment (Pearce ; Robinson, 201 0, peg. 144).
Big 5 Sporting Goods external environment consists of interrelated environments that help form and direct its internal process and decision- making. Through the analysis Big 5 has uncovered its competition in the market, the threat of the economy, and its opportunities in the increased wellness awareness throughout the country.