The Ugg Australia have been experienced serious economic challenges that emancipate from the hard economic due to among other things entry of competitors. This has not only made the iconic firm underperformed on the public eye but also greatly reduced in profit margins. This report seeks to provide a strategic analysis for the firm in an effort to understand the situation (Galliers and Leidner, 2014). The analysis focuses mainly on external and internal environments.
To do an external environment of the firm, it is important to understand the background of the firm, from where it started and their line of merchandise. This will help our analysis of the industry which the firm operates in which in turn is vital in analyzing the external business environments (Adeoye and Elegunde, 2012). The Background information is as described below.
Background Information
The Ugg Australia is one of the founding firms in the footwear industry which has been in operation in Australia for over 4 decades. The company has been appreciated for always providing authentic Australia wear with the great look and feel of the Australian culture. This has made it earn reputation from the industry. The tanning process of the Ugg Australia footwear takes up to 10 working days as explained on their website https://uggaustralia.com.au The firm takes a lot of effort to ensure their product are ecological friendly to comply with the Australia environment conservation authority. The firm operates in an industry with many challenges and high expectations from the consumers. The brief description of the industry is as explained below.
Industry
The footwear industry in Australia has had tremendous improvements over time. This is attributed to the generally high consumer demands of high-quality goods, which has the Australia culture deeply rooted. The industry has been forced to have a serious business re-engineering and now much focus is on the sales on an online platform which have mushroomed the Australia economy (Chituc, Toscano and Azevedo, 2008a). The government has also had its share of this lucrative industry with annual average income from taxes estimated at 3 billion USD. The key players in this industry include the Betts group, RCG corporation and the super. In this industry, the buyers have more powers and dictates what type of products to be trending in the market. Most buyers insist on the footwear with great Australian appeal. The environment of the firm is further explained below.
Every business exists within an environment which can either be external i.e the firm has no control over them and internal which the firm has control over. This section highlights the various external environment which includes economic, physical, sociocultural, global, technological, political/legal and demographic environments as explained below(Sriminangga and Samopa, n.d.)
Economic environment
The economic environment which determines the buyers’ willingness and ability to buy the shoes at the prevailing market prices is key. The Australian dollar has been weakening against the US Dollar. This has made the consumers unable to buy the footwear at the current prices. The classic shoe designs have also suffered from the recession and consumers seek to find only the products that meet their needs at a cheaper price. This affects the business adversely (Hill and Hernández-Requejo, 2008).
Physical environment
The physical environment can make a firm succeed or not. The locality which the business located must be free from pollution to enhance the quality of life of the employees and makes consumers have felt safe when dealing with the firm products. Ugg Australia physical locality is ideal for business as it is surrounded by a good road network and other social amenities making it provide better services to the customers (Iskanius, Page and Anbuudayasankar, 2010).
Sociocultural
This environment is key to having a better turn around time for the firm’s product. Since the business serves the locals in the Australia setup which is predominately an egalitarian state, the need to ensure the products meet the cultural and social standards for Australian’s must be met lest the business risk closure due to low turn around (Hill, 2008).
Global
With the liberation of markets, multinational companies float the Australian market due to market liberalization leading to the importation of cheaply produced goods. Established brands such as Addidas and Nike pose a key threat to the success of Ugg Australia. The only way for Ugg Australia to service the threat of these multinationals is to differentiate their footwears to have a higher Australian appeal. This will give them a better competitive advantage over the other establishments (Ferraro and Briody, 2013).
Technological
Technology improves the efficiency and effectiveness of most business processes by automating some of the tasks in the value chain. The changing information technology field which brings with it disruptive technologies makes the firm to be always on the hunt for new technologies. The technology being piloted incudes a block-chain system to reduce currency and increase trust in the value chain for the footwear. This aims at eliminating counterfeits which flood the Australian market. Firms which does not embrace these disruptive innovations will surely face their downfall (Savrul, Incekara and Sener, 2014).
Political/Legal
The Australia political environment has been stable for quite a while, thanks to the egalitarian nature of the society where community interest is second to none. This stable environment has led to the entrance of new firms in the Footwear industry. Furthermore, the country has relatively nonrestrictive laws and regulations which not only reduce bureaucracy when starting a new firm but also encourages startup by the provision of subsidies. This has made new entrants to the business quite easy hence increase competition. The firm with more appeal will have a high survival rate in their products (Ekpenyong and Umoren, 2010).
Demographic
The Australia population is majorly made up of youth and children but the majority of the working class are aged 35-60. The demographic composition of Australian computer makes the demand for footwear on the rise since most of the consumers of their products are the youths. The ability to afford the expensive and classy footwears are affected by their inability to sustain pricy purchases due to their relatively low income. The working class also contributes a lot to the footwear industry as most of them can afford the expensive classy footwear. The best way to succeed in this environment is to produce more unclassy footwears (Klapper and Parker, 2010).
Industry Environment
The industry environment consists of the consumer and supplier powers which dictate the price of the goods and services. The consumers have a great power in detailing the quality and the type of products that the manufacturers have to design. The overall culture demanded by the consumers are shoes with great Australian culture making those manufacture who come up with strange designs to have to redesign their products to be competitive. The suppliers of the leather also do have a supplier power through their leather association which they use to advocate for a better price for their supplies. The manufacturers have to abide by the pricing set by the supplies lest they run out of stock (Chituc, Toscano and Azevedo, 2008b).
Competitive environment
The current competition in the footwear industry has been unfavorable especially for small start-ups like Ugg Australia who must compete with the already established brands like Nike and Adidas. These established brands use cut-throat advertisement strategies to convince the customers in buying their brands. Besides, the competition has led to the closure of some firms such as Baxter which used to among the competitive brands but has since lost their glory to Alias Mae. The Ugg firm only option to survive in this competitive market is to differentiate their products to have Australian culture, this will certainly give them a competitive advantage (Amoako-Gyampah and Acquaah, 2008).
Opportunities and Threats
Several opportunities exist for Ugg Australia firm. Being a small firm, the company can take advantage of the lowered cost of rent in most rural set-up and use them as their main processing site. This will enable them to sell their products at a relatively lower price compared to their counterparts in the urban and cities. The lowered prices will make their prices more appealing to middle-income earner especially the youth. The second opportunity that exists is the ability to integrate technology in their footwear that includes Internet Of things devices such as temperature measurement unit that is integrated with the footwear will make the product more appealing (Huang, Zhang and Yunwei, 2008). The overall effect is more sales due to the competitive advantage accrued to the use of such smart devices. Last but not the least, there exists an opportunity for Ugg Australia to go global through expansion and usage of online stores. This will enable it to conquer new markets in the future
Despite the existing opportunities, threats are inevitable for every environment. This threats poses a great risk for the business and inhibits it from achieving its vision and mission. The first obvious threat is the shaky economic times which makes the Australian dollar weakens against the US Dollar (Park and DeLong, 2009). This reduces the per-capita income for the country leading to generally low consumer purchases due to reducing disposable income.
The second threat emancipates from the fact that entry into the market has little regulations. This makes the firm face new entrants who come with a great offer with cut-throat competition to outdo one another. This can potentially eliminate the firm from business due to shrinking profit margins.
In addition to the external environment, there exist internal environments that can be analyzed to enhance the strategic analysis by looking inside the various organizational internal structures and systems with a view of making proposals of systems that can enhance the value chain of the firm. The Internal environment analyzed includes the firm’s resources, capabilities identification, core competency analysis. This will give a bigger picture look into the organization and automation gaps shall be identified, a systems proposed which shall be followed with a detailed evaluation of the proposed system to justify the recommendations (Xue, Liang, and Boulton, 2008).
Firms’ Resources
The firm resource was analyzed in the following cadre; employees capability, products portfolio, time and information. From the analysis, Ugg Australia has firebrand employees who are dedicated to meeting the firm’s vision and mission. It was however noted that the new employees need to get oriented on the firm’s vision and mission so that the human resource can be fully committed to the core vision which is to be a leader in footwear manufacture in the region and globally. The information resource the firm has harnessed was however noticed to be non-structured as most of the data was stored in file-based systems which are manually in analysis and interpretation.
Capabilities identification
Ugg has a lot of untapped potentials which when harnessed can transform the firm into a globally competitive going concern. The firm is able to design footwear that represents the true nature of Australian culture. This not only makes them able to sell more products but also be socially acceptable by the Australian community. The firm is capable of handling different size dimensions for various age groups. This makes their products more appealing to almost all the population of Australia, This gives the higher competitive advantage against the established multinational who blend cultures in their products drawn from various countries they operate.
Core competency analysis
The Ugg main area of expertise in the design and manufacturing of Australia menswear. This is attributed to the high number of sales of this line product compared to their counterparts such as children wear. Much effort is therefore taken to make this merchandise more appealing to the Australians. In addition, the firm has a record delivery rate on online sales which is accessed via there website. The customer’s testimonies show the firm is very competent in handling the online marketers who are very dynamic and demanding. This competence is attributed to their ability to navigate the local urban areas to delivery their footwear to the clients as ordered.
Despite having a website to view products and make a purchase, most of the business process is still manual and the value chain has been long. To curb this bottleneck, a more robust system is suggested that can strategically adapt to the changing information industry. The details of the system are described subsequently.
Proposed Information System
The proposed system is a mobile app that Ugg can develop and integrate into their value chain so as the customers can have the ability to make orders right from their mobile phones with ease. The app will integrate with the popular payment gateways such as BitPay which is very common in Australia. The system shall integrate with the web-based system and will have a reporting module for business owners view statistics real-time about the performance of the firm. This is key for forecasting and decision making.
Proposed System Evaluation
The proposed system shall be evaluated based on the following matrixes, improve in functionality, improved data quality, ease of use, adoption and the efficiency in using the system(Charland and Leroux, 2011). This shall provide a better bargaining power to adopt or reject the proposed system. The proposed system, in a nutshell, shall not only improve the efficiency of the business processed in Ugg Australia but also increase the sales volume. The strategic analysis report, therefore, recommends the following actionable points to ensure the firm remains competitive and survive the industry (Turner-McGrievy et al., 2013).
References
Adeoye, A.O. and Elegunde, A.F., 2012. Impacts of external business environment on organisational performance in the food and beverage industry in Nigeria. British Journal of Arts and Social Sciences, 6(2), pp.194–201.
Amoako-Gyampah, K. and Acquaah, M., 2008. Manufacturing strategy, competitive strategy and firm performance: An empirical study in a developing economy environment. International Journal of Production Economics, 111(2), pp.575–592.
Charland, A. and Leroux, B., 2011. Mobile application development: web vs. native. Queue, 9(4), p.20.
Chituc, C.-M., Toscano, C. and Azevedo, A., 2008a. Interoperability in Collaborative Networks: Independent and industry-specific initiatives–The case of the footwear industry. Computers in Industry, 59(7), pp.741–757.
Chituc, C.-M., Toscano, C. and Azevedo, A., 2008b. Interoperability in Collaborative Networks: Independent and industry-specific initiatives–The case of the footwear industry. Computers in Industry, 59(7), pp.741–757.
Ekpenyong, D.B. and Umoren, N.J., 2010. POLITICAL RISK AND THE BUSINESS ENVIRONMENT: AN EXAMINATION OF CORE CHALLENGES. Journal of Financial Management & Analysis, 23(1).
Ferraro, G.P. and Briody, E.K., 2013. The cultural dimension of global business. Pearson Upper Saddle River.
Galliers, R.D. and Leidner, D.E., 2014. Strategic information management: challenges and strategies in managing information systems. Routledge.
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Hill, C.W. and Hernández-Requejo, W., 2008. Global business today. McGraw-Hill Irwin New York.
Huang, Z., Zhang, X. and Yunwei, Z.H.U., 2008. The role of clustering in rural industrialization: A case study of the footwear industry in Wenzhou. China Economic Review, 19(3), pp.409–420.
Iskanius, P., Page, T. and Anbuudayasankar, S.P., 2010. The traditional industry sector in the changing business environment–a case study of the Finnish steel product industry. International Journal of Electronic Customer Relationship Management, 4(4), pp.395–414.
Klapper, L.F. and Parker, S.C., 2010. Gender and the business environment for new firm creation. The World Bank Research Observer, 26(2), pp.237–257.
Park, J. and DeLong, M., 2009. Understanding new technology adoption in the apparel and footwear industry within a social framework: a case of rapid prototyping technology. International Journal of Fashion Design, Technology and Education, 2(2–3), pp.101–112.
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Turner-McGrievy, G.M., Beets, M.W., Moore, J.B., Kaczynski, A.T., Barr-Anderson, D.J. and Tate, D.F., 2013. Comparison of traditional versus mobile app self-monitoring of physical activity and dietary intake among overweight adults participating in an mHealth weight loss program. Journal of the American Medical Informatics Association, 20(3), pp.513–518.
Xue, Y., Liang, H. and Boulton, W.R., 2008. Information technology governance in information technology investment decision processes: The impact of investment characteristics, external environment, and internal context. Mis Quarterly, pp.67–96.
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