To: Managing Director of Specsavers
From: Business Analyst
Date: 11th August 2008
Subject: Environmental Analysis for Specsavers – Current and the Future
This report will provide a detailed analysis of Specsavers current corporate appraisal – SWOT analysis. This will highlight the companies’ strength, weaknesses, opportunities and threats, which will help the company’s management, understand where the organisation is now. A Five Forces environmental analysis of the industry will examine the local, national and global influences of political, economic, social and technological factors (in the form of a PESTEL analysis) to understand opportunities and threats facing Specsavers currently and in the future. This will provide an evaluation of the external business environment in which Specsavers operates. This analysis will highlight the fundamental changes that the eye care industry is undergoing, especially; in defence to the unstable environment it faces from exogenous forces (oil prices, inflation etc) and endogenous forces.
2.0 SWOT Analysis of Specsavers
Specsavers main strength is in its local knowledge of customers within the UK and Worldwide, providing a trusted eye care service, affordable glasses and contact lenses to a number of countries in Europe and worldwide.. It also has a strong work force with highly trained opticians, who carry out professional eye test using the latest optical equipment. Its major weakness is its lack of luxury designer brand awareness nationally and globally relative to its major competitors like Selfridges. Specsavers faces external threats from existing completion (Boots, Vision Express) in the market place for eye care as well as cheaper low cost brands from the Far East. Changes in Socioeconomic conditions can also play a part in Specsavers future success, as buyers are now more environmentally conscious and ethically educated. The main competitors are all promoting a strong sense of Corporate Social Responsibility agenda. Specsavers must also be mindful of any potential takeover bids from the likes of Boots and Vision Express Group. See Figure 1 below for a full SWOT analysis of Specsavers.
Figure1: Specsavers SWOT Analysis
The SWOT analysis of the company shows that its strengths are in its wide range of products and its reputation for carrying out a professional eye care service, large investments in latest optical and hearing aids equipment and its international presence. However, main weaknesses are low brand awareness for designer frames.
Currently the company only distributes a number of designer brands of frames and sells it brands mainly through its stores. Therefore, it has opportunities to venture into e-commerce solution through web orders of designer frames. Also access additional capital and consider retail partnerships. The company faces various threats from new and existing competition, economic recession and due to its low brand awareness in designer (luxury) market segment faces potential takeover bids.
3.0 The Five Forces Model
Porter explains that there are five forces inherent in a market, which will jointly determine the intensity of competition and profitability of Specsavers and the eye care industry. The first is the threat posed by new entrants, as with the growth in designer frames being offered by Selfridges, Harrods, and Rackhams etc. The second is the threats from substitutes, laser treatment v spectacles, and the growing demand in laser vision correction surgery. The third force is the threats from the bargaining power of buyers, is this strong for both Specsavers and the entire eye care industry with a large number of alternative suppliers, hence, the aggressive pricing strategy, two for one offers etc. This results in a very strong competitive rivalry in the industry. This is intensified as a result of little or no differentiation in the service offered. Finally the threats from the suppliers bargaining power, this is very strong in the eye care industry for two reasons, one is highly specialised products supplied by few manufacturers, hence, Norville Optical who can command a very favourable terms and second is the existence of many buyers within the industry.
Threats from Boots, D&A, Optical Express and Vision Express
Figure 2.0 Porters Five Forces Model adopted for Specsavers
4.0 External Environment – PESTLE Analysis
All of those (political, economic, social, technical, legal and environmental) factors will to some extent apply to the eye care industry.
POLITICAL – changes in corporation tax in the future within UK and internationally. With operations in Europe and across the globe, is the political regime favourable to foreign investment. The introduction of Carbon Taxation could also pose a future threat to Specsavers.
ECONOMIC – the high-end eye wear industry is vary recession prawn and also very sensitive to changes in prices.
SOCIAL – changes in consumer taste and lifestyle represent both opportunities and threats for the eye care industry. Opportunities in terms of designer branded eye wear are now popular with high disposable income groups and also the growing trend in spectacles as a fashion accessory. The aging population in UK and throughout the globe will have a favourable impact upon the demand for eye care products and services. The threats are in terms of alternative vision correction treatments like laser and lack of skilled labour, will the educational system support future qualified opticians and audiologists, if not there may be a lack of supply.
TECHNICAL – Changes in retailing methods as such spec sales via the Internet is now a common place in eye wear, online appointment booking with patients receiving an email containing their appointment details and booking reference when they book online. Paperless operation, the management and administration of the company are undertaken on IT systems, which are accessed through secure servers; provide flexibility in the running of the stores. Specsavers has implemented a new version one system for document management in order to provide a centralised accounting function for its 830 UK and European stores. The development of the next generation lenses will also lead to technological opportunities in terms of cost reduction and improvement in quality of lenses.
LEGAL –Threats are in terms of future legislations for health and environmental issues. Specsavers needs to be mindful of data protection act (freedom of information act) as it will store a large amount of patients’ personal details. Do the current (or future) employment laws provide an advantage or disadvantage to the business?
ENVIRONMENTAL – The energy sources used, namely oil has vast ecological/environmental implications. The threats are in terms of fines and rise in cost of raw materials. The introduction of Carbon taxation will affect Specsavers future profitability.
Specsavers is clearly an organisation with a strong brand awareness and reputation for providing an affordable eye care service, with operations in a number of countries in Europe and across the globe.
Specsavers environmental analysis via the SWOT, PESTEL and Five Forces showed that the eye care industry is experiencing a change in terms of becoming more socially responsible and customer service focused (due to intense competitive rivalry). Specsavers needs to view those environmental changes as an opportunity rather than a risk. In order to succeed in the future Specsavers needs to see employees as the key to competitive advantage in an industry that is highly dynamic.
Corporate and human resource strategies are developed concurrently. Specsavers needs to view its human resources as the driving force in the development of its overall business strategy for the future. There needs to be an overriding emphasis on developing optician’s skills through intensive training programme (2 year graduate programme) and continual investment in R&D.
The future environment of Specsavers will largely be impacted by the introduction of the Carbon tax, which will threaten Specsavers ability to continue to offer affordable value for money glasses and contact lenses, as additional taxes will diminish margins, which could lead to increase prices.
The internet will continue to shape the way Specsavers operates as a business, currently using it primarily for online appointment booking, but as the social trends change, consumers with busy lifestyles will prefer to use online shopping for ordering their frames and contact lenses. Specsavers has in recent times implemented an online document management system, to enable it to centrally manage payment of supplier’s invoices. This has resulted in significant time savings and operational costs as a result of improve efficiency and freeing up of storage space.
Word Count =1,550
References & Bibliography
- Needle, D. (2004) Business in Context – An introduction to business and its environment 4th Edition, Thomson
- Worthington, I. & Britton, C. (2006) The Business Environment – 5th Edition, Prentice Hall Financial Times
- ACCA Paper 3.5 Strategic Business Planning and Development (2001) The Financial Training Company
- Johnson G and Scholes K (1993). Exploring Corporate Strategy – Text and Cases. Cambridge: Prentice Hall.
- Porter M.E (1980) Competitive Strategy-Techniques for Analysing Industries and Competitors.