External and Internal Environmental Analysis: Snow Cone Haven Nolan Williams Jr. STR/581 January 20, 2011 Bill Wider External and Internal Environmental Analysis: Snow Cone Haven Snow Cone Haven is here to keep you cool and relaxed throughout the day. Snow Cone Haven like all businesses must always be prepared for situations that impact operations. External and internal environmental factors significantly affect business operations and need to be addressed in some form or fashion.
This paper will identify and analyze eternal environmental factors, internal strengths and weaknesses, and conclude with an assessment of Snow Cone Haven’s organizational resources and competitive position. Snow Cone Haven is a new organization in the shaved ice and smoothie industry. The operating environment can be broken out into three categories: remote environment, industry environment, and external operating environments.
The remote environment does not affect the operating situation of any organization but economic, social, political, technological, and ecological factors that originate beyond the operating situation presents firms with opportunities, threats, and constraints. Economic trends in the proposed market areas are relatively stable. The level of disposable income has remained fairly stable and appear to have been unaffected by economic conditions based on spending over the holiday season.
Snow Cone Haven should perform quite well from a social environmental factor because of the product being sold. Snow cones will appeal to all market segments, and will be a more healthy option then ice cream. The political environment affects the economic environment of businesses. It has been shown that elected officials may provide incentives or tax breaks to companies or impose regulations that restrict business transactions or locations. The International Research Centre (IDRC) states that businesses “need to understand the relationship between governmental strategy or development plans. Snow Cone Haven is 100% in agreement with this thought and plans to review plans on hand with the local government’s planning and development commission to ensure targeted franchise locations are not slated for redevelopment. Technological factors in the remote environment are the scientific advances, which influence the competitive position of the organization. Pearce and Robinson (2011) stated “to avoid obsolescence and promote innovation, a firm must be aware of technological changes that might influence its industry. Taking advantage or not taking advantage of technology has the potential to take Snow Cone Haven to the top of the industry or relegate Snow Cone Haven to the back of the industry. Investing in new technology can produce immediate rewards in the form of increased demand and reduced costs. The industry environment encompasses the conditions that can influence businesses that provide the same or similar services. Exhibit 4. 8 in the Strategic Management (92) book provides and excellent overview of the forces that affect the industry environment.
Entry into the smoothie/ice cream industry requires a review of the determinants of entry and how they will affect Snow Cone Haven’s entry into this industry. Some entry barriers are product differences, capital requirements, and access to distribution. The impact of cost and supplier concentration can also have a significant affect on the industry-operating environment. Competition is fierce in the smoothie/ice cream industry according to a review of primary competitors TCBY and Smoothie King. QSR magazine released an article indicating that TCBY has reinvented itself to take advantage of market demands.
QSR indicated that TCBY will have “new store designs with more of a new lounge feel” (QSR, 2011). This is a direct threat to Snow Cone Haven, as we will have to be on the same level to attract business away from TCBY. Smoothie King is also making major changes according to recent press releases. Smoothie King is taking advantage of the new health outlook by, “searching and delivering a product with balance in nutrition and healthy lifestyles. This decision is a substantial threat as this directly impacts our products.
This will require more advertising dollars but overall Snow Cone Haven will produce a product far superior and have the capability to compete in the external industry environment. Snow Cone Haven will face many challenges as we approach opening day. The company is on the right track and ready to conduct an internal analysis to determine Snow Cone Haven’s strengths and weaknesses. The internal analysis will also include an assessment of organizational resources and how we stack up against competitors. The first step is understanding what our strengths are in comparison to competitors.
Snow Cone Haven has no proven strengths but strong in relation to competitors. Snow Cone Haven has the advantage of offering many flavors and sizes, motivated managers and employees, relaxed atmosphere, and a superior product. Snow Cone Haven has the advantage of not having to pay a franchise fee. I conducted a review and found that Bruster’s Ice Cream has a $35,000 franchise fee. Bruster’s website stated, “our base cost of entry is approximately $350,000” (Bruster’s). This leads me to believe that Snow Cone Haven has picked the right solution for opening a new franchise. Weaknesses also exist with Snow Cone Haven.
Snow Cone Haven is faced with uncertainty, as we have no history to determine success and validate franchise locations. We have to determine if we are attracting the correct population mix and that our product is well liked. The economy is another concern as the United States department of Commerce; Bureau of Economic Analysis recently reported that growth in the food services arena was only 0. 98% (Commerce) over the past two quarters. I believe this can be primarily attributed to the holiday season so it will require some monitoring. Organizational resources are an important aspect of business and require continual assessment.
Snow Cone Haven has the intangible assets and organizational capabilities to be successful based on a review of staff members skill sets. Tangible assets are a concern as they are rather thin and Snow Cone Haven has not fully identified all of our needs. Snow Cone Haven like most organizations has to continuously access its competitive position and possibilities. The development of a competitive advantage is predicated on an effective strategic management process with an understanding of organizational resources and how they contribute to the formation of organizational strength.
According to Duncan, Ginter, and Swayne, “organizations sustain a competitive advantage only so long as he services they deliver and the manner in which they deliver them have attributes that correspond to the key buying criteria of a substantial number of customers” (2008). As a new organization, Snow Cone Haven does not have a defined competitive advantage. I believe some of the potential advantages are the franchise locations and the quality management and support staff. The possibility for Snow Cone Haven to be at the forefront of its industry is endless.
Snow Cone Haven’s tasty product and bubbly personalities will take us to the top of the industry. Snow Cone Haven will be the leader of the industry. Competitors cannot implement as effectively and do not have the unique skills and resources available to Snow Cone Haven. Erica Olsen stated, “your competitive advantage needs to be sustainable and endure the test of time to be great” (2011). Snow Cone Haven has the leadership to be effective and I believe this review of our external operating environment, internal strengths and weaknesses, and competitive position shows that we are ready to take all challengers head-on.
References Duncan, W. J. , Ginter, D. , Swayne, L. E. (2008). Competitive advantage and internal organizational assessment. Academy of Management Executive. Volume 12, Number 3 Oches, S. (2011). It’s All About Relevancy in New TCBY Prototype. QSR Magazine. Retrieved January 17, 2011 from www. qsrmagazine. com/news Olsen, E. (2010). Sustaining your advantage over the competition. Retrieved from http://homebusiness. about. com/od/growing/a/comp_advantage. htm Pearce, J. A. , II, & Robinson, R. B. (2011). Strategic management: Formulation, implementation, and control (12th ed. ). Boston, MA: McGraw-Hill/Irwin. Tanner, L. (2010).
Bruster’s franchise information. Retrieved January 18, 2011 from www. brusters. com The International Research Centre. (2008). Key forces in the external environment. Retrieved January 16, 2011, from www. idrc. ca/en/ev-28364-201-1-DO_TOPIC. html United States Department of Commerce, Bureau of Economic Analysis. (2011). National Economic Accounts. Retrieved January 18, 2011 from www. bea. gov/national/nipaweb/nipa_underlying/SelectTable. asp#S0 Williams, B. (2010). Smoothie King Expansion Signals Trend Toward Healthy Living. Retrieved January 17, 2011, from www. smoothieking. com/press-releases/2010-07-24-new-product-line. php