Gymshark SWOT, PESTLE and Porter's Five Analysis

4319 words (17 pages) Essay

19th Apr 2019 Business Strategy Reference this

Tags:

Disclaimer: This work has been submitted by a university student. This is not an example of the work produced by our Essay Writing Service. You can view samples of our professional work here.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com.

Analysis of Business and IT/IS environment of Gymshark LTD. and Proposal of Business and IS/IT Strategy

Abstract

This report is conducted to investigate challenges, issues and disruptors facing Gymshark Ltd, an online retailer of gym apparel. Following this, an examination of external and internal factors of the business environment and IS/IT environment is conducted to identify a business IS/IT strategy.

The current situation of Gymshark is analysed using a SWOT analysis. The external environment of the business and IS/IT is examined through the use of PESTLE analysis and Porter’s five forces model. Current IT trends within the market are also explored to identify avenues for innovation.

The internal environment of Gymshark is then analysed used a Balanced Scorecard, with accompanying critical success factors. IS/IT considerations are also highlighted for each of the perspectives. The application portfolio of Gymshark and potential future applications are also identified with the use of an application portfolio matrix.

Using the analysis, a potential IT business strategy is discussed for the business moving forward.

1.    Introduction

Gymshark Ltd. is a fitness apparel online retailer, based in the United Kingdom. It was ranked the number one fastest growing company in terms of sales in 2016 (Fast Track, 2016). Created in 2012, it has grown exponentially through devotion to producing innovative, effective performance wear and an ever-expanding social presence (Gymshark, 2017). This social presence has been aided by the sponsorship of fitness athletes and social media influencers who promote their products.

1.1  Objective of Report

This report has been conducted to evaluate the challenges, issues, and potential disruptors that Gymshark face. The internal and external business and IS/IT environment are considered and with the application of appropriate tools and techniques, a business strategy is formulated. The examination of the internal and external environments that inform the strategy process comes from Peppard and Ward’s (2016) Digital Strategy Model (Figure 1).

Figure 1: Digital Strategy Model

The right way to achieve strategic advantage from information systems/technology is concentrating on rethinking business processes by analyzing current business issues, analyzing the environment changing and making information technology as a solution (Peppard & Ward, 2016).

1.2  Understanding the Current Situation

To understand the current situation of Gymshark, the identification of the strengths, challenges, issues and disruptors to the business need to be considered. This report uses a SWOT analysis to frame this before applying further tools and techniques to establish a business strategy with an IS/IT strategy underpinning this.

1.2.1 Gymshark SWOT Analysis

A SWOT analysis is an examination of an organization’s internal strengths and weaknesses, and external opportunities for growth and improvement (Harrison, 2010). For this report, a SWOT analysis is conducted to identify areas in terms of both the business environment and IS/IT environment in formulating a business strategy (Table 1).

Table 1: SWOT Analysis of Gymshark

1.2.2 Limitations of SWOT Analysis

While a SWOT analysis provides an overview of the current situation, it is limited from the point of view that two-sided factors are not considered (factors that could both be a strength and weakness). There is also no prioritisation of issues and it is not an in-depth analysis. Further analysis is needed to make decisions on business planning and strategy (Firth, 2017).

2.    External Environment

The identification of external opportunities and potential threats is paramount in the success of the business moving forward. This chapter explores these external factors that drive the development and revision of business strategy (Peppard & Ward, 2016). In terms of the external business environment, factors that directly impact the business and factors that the company does not have control of but may need to adapt to are considered. The external IT/IS environment analysis examines current IT trends that could be used to innovate within the market which could provide the business with a competitive advantage.

2.1 Porter’s Five Forces

The inclusion of Porter’s five forces model in this report is to gain an understanding of the competitive forces, their underlying causes, and to reveal the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition over time (Porter, 2008).

For Gymshark, the identification of the forces that act against it is key to thriving and improving its market position. Following is a five forces model, which highlights the forces needed for consideration:

Figure 2: Adapted from Porter (2008)

2.1.1 Competitive Rivalry

With the gym and sports apparel industry saturated, the competition is very high. With market leaders such as Nike, Adidas, and Under Armour taking the majority of the market share, it is necessary for smaller companies to seek out niches in the market for exploitation. With Gymshark focusing on gym specific apparel they are identifying a niche, but one that is becoming more and more popular with the entrance of new players. As the fastest growing company in the United Kingdom in 2016, Gymshark has built a solid foundation within the market but need to be aware of competition from rival companies who provide a similar product with similar branding. 

2.1.2 Threats of New Entrants

In terms of online, gym specific apparel retailers, the threat of new entrants is moderate/high. The increase in social media as a means of promoting a product in the last few years has already caused quite an influx of new online gym clothing retailers. While it takes a significant amount of financial and human capital to entry the industry, the increase in exposure from social media influencers and vloggers has created a new avenue for entrance. The sports apparel giants such as Nike and Adidas still dominate the mass market, however, new entrants can identify niches in the market which allow the gain particular segments of the market.

2.1.3 Threat of Substitution

There is a high threat of substitution in this industry as the release of new, innovative products from competitors may draw the attention of the customer. With this market being saturated, there is a lot of options available, where pricing, style, and fashion trends may mean the substitution of one brand for another. Gymshark aims to produce apparel that reflects the demands, trends, and personalities of people who actually use the gym (Gymshark, 2017), thus focusing on their consumers requirements and appropriate pricing, which, in turn, can offset some of the threat of substitution.

2.1.4 Power of Customers

Customers have very high power in this industry as there is a wide variety of choice and the ability to simply find another comparable product online for a cheaper price. Therefore, it is vital for Gymshark to create products that the customers can identify with and build their brand association and recognition. This is the rationale by providing social media influencers with their products to create perceived value based on association.

2.1.5 Power of Suppliers

In the clothing industry, the power of the suppliers is of low and insignificant force. This is because there is a large population of suppliers, which, in turn, reduces the impact of individual supplier demands. With apparel manufacture so saturated, if a supplier is demanding too much or increasing prices they can easily be dispensed of and replaced without having to consider loss of quality or increased price.

2.1.6 Limitations of Analysis

Porter’s five forces model has limitations that are necessary to acknowledge. The model does not link directly to possible management action, it appears as self-contained, without explicit links to PESTEL factors, and it oversimplifies value chains (Grundy, 2006). Therefore, it is necessary to complete supporting analysis to create a comprehensive business strategy.

2.2 Gymshark PESTLE Analysis

While Porter’s five forces model was used to identify where power lies in an industry in terms of competitors, suppliers, buyers, and substitutes, a PESTLE analysis provides a framework to examine a company’s non-controllable external factors that could potentially affect its operations. This examination can allow the company to react to by considering implications and minimising any future risks (Makos, 2014). The results of the PESTLE analysis of Gymshark are delivered in table 2 following.

Table 2: PESTLE Analysis

2.1.2 PESTLE Analysis

The political issue of Brexit can have a big effect on Gymshark. As a UK based company, leaving the EU could have an impact on importing supply from abroad, exporting goods to customers from around the world, and the power of currency may be volatile which affects the market. In relation to this, strength of the economy influences the purchase of leisure items such as gym apparel. Social factors such as the marketing of the brand through social media and social media influencers has a great impact on sales revenue. Gymshark is an innovator in terms of sponsoring Youtubers and fitness vloggers to promote their goods. As an online retailer of clothing, respect of supplier standards and awareness of competitor patents are of great importance to Gymshark. The consideration of environmental factors can differentiate Gymshark from other companies, and needs to be considered. Recyclable packaging and the use of eco-manufacturers could be considered to promote brand image.

2.1.3 Limitations of PESTLE Analysis

Considering this is analysis of the external environment, the limitations of PESTLE analysis is that there are assumptions and predictions made about external factors. The results of the analysis are also subjective as it is based on factors that can change every day (PESTLE Analysis, 2016).

2.2 IT Trends

This section of the strategy process identifies technology trends and opportunities for using IS/IT in new and innovative ways (Peppard & Ward, 2016). In analysing the external environment, Gymshark can gain insights to what new technology could be used to either innovate and differentiate from competitors, or how current technology could be used in new ways to improve operations/reduce costs.

Current IT trends in relation to online apparel retailers are identified in the table below. Gymshark’s current use of aspects of these IT trends, and opportunities for innovation and improvement are also highlighted in table 3.

Table 3: IT Trends

3. Internal Environment

This chapter outlines the application of tools and techniques to the internal business environment and IS/IT environment of Gymshark. While the analysis of the external environment identified factors that relate to the competition within the industry and the needs of the customer in terms of both the business and IS/IT environment, the internal environment analysis examines the information, systems and technology needs arising from the business strategy and the current activities of the business.

3.1 Balanced Score Card and Critical Success Factors

The balanced score card is a technique of examining the performance of an organisation from four different perspectives, financial, customer, internal business, and innovation and learning. The BSC explores the internal environment of an organisation.

Kaplan and Norton (1979, p. 72) highlight that the BSC helps organisations answer the following four questions:

  1. How do customers view us? (Customer perspective)
  2. What must we improve at in terms of operations? (Internal perspective)
  3. Can we continue to innovate and create value? (Innovation and learning perspective)
  4. How can we improve finances for shareholders? (Financial perspective)

To achieve explicit IT business objectives, a balanced scorecard can be used in combination with Critical Success Factors (CSF). CSFs are “the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization” (Rockart 1979, p. 85).

Used in conjunction with each other, these tools can build a framework that provides not only performance measurements, but aid planners to discover needs to be done and, in turn, measured (Mass PLC, 2017).

In the following tables (4-7), a BSC and CSF analysis is undertaken for Gymshark. Along with this, IT/IS considerations are made for each of the perspectives to underpin the formulation of strategy. The balanced scorecard used in this report is adapted from Kaplan and Norton (1979).

3.1.1 Financial Perspective

Table 4: Financial Perspective B

3.1.2 Customer Perspective

Table 5: Customer Perspective BSC

3.1.3 Internal Process Perspective

Table 6: Internal Process Perspective BSC

 3.1.4 Innovation and Learning Perspective

Table 7: Innovation and Learning Perspective BSC

3.1.5 Limitations of Balanced Scorecard

Bowen and McDonagh (2011) highlight that while the balanced scorecard gives an overall view of the four areas for concern in business growth and development, there areas do not give the whole perspective of the business. This is because information used in each of the perspectives is limited and not in-depth. Therefore, there is a need to support it with the use of other tools to formulate a complete business strategy.

3.2 Application Portfolio

The application portfolio details the required applications for the business to run, the current applications that the business possesses, and potential applications that have been identified which can add value to Gymshark. The portfolio is categorised in terms of the applications and their role in supporting current and future business strategy (Peppard & Ward, 2016). The potential applications that are used in this portfolio are taken from the IS/IT considerations identified in the balanced scorecard analysis. Gymshark’s applications are split into four categories, strategic, high potential, key operational and support.

Figure 3: Application Portfolio Matrix- adapted from Peppard & Ward (2016)

Applications have a lifecycle and move around the matrix over time (Kellerman & Lofgren, 2008). For Gymshark, proper management of these applications is necessary to ensure the transition of the applications from one area of the matrix to another to ensure they continue to add value to the business.

4 Strategy Proposed

This chapter compiles the various methods of analysis of the internal and external business and IT/IS environments to formulate a business strategy, underpinned by support IT/IS strategies.

Through the analysis of the external environment, it was identified that not having a mobile app is an area of weakness for Gymshark. This is supported by IT trends suggesting the importance of m-commerce. This report recommends that to maintain competitiveness moving forward, the addition of this to their application portfolio would be a good move for the future.

Gymshark is a niche sports apparel brand, as it focuses on products for gymgoers who want quality clothing that fulfils their expectations. To keep their competitive advantage over companies that are similar in nature, is necessary for Gymshark to innovate with their products and continue their strong social media marketing. To innovate with their products, the analysis conducted suggests that wearable technology within their products could be an area of high potential in terms of IS/IT applications in the future. Another IS/IT application which is identified as high potential is chatbots/AI applications, which can improve customer experience and aid customers in making purchases.

The balanced scorecard analysis of the internal environment identifies IT/IS applications that can be implemented to improve the organisation from each of the four perspectives. In terms of internal processes, the supply chain could be improved through automatic ordering when stock from supplier when stock of a products lowers to a certain level. This is something to consider as the company continues to grow. From the customer perspective, an online loyalty programme could be implemented to improve customer retention. The innovation and learning perspective identifies online training for improvement of workforce and confirms the mobile application and artificial intelligence as areas for innovation. Finally, from the financial perspective, all the IT/IS applications that are identified can support the increase of revenue and strengthen the value of the business.

5 Conclusion

This report identifies challenges, issues, and disruptors to Gymshark, and through the use of the appropriate tools and techniques establishes a business strategy for the company moving forward, underpinned by IS/IT applications.

The proposed strategy for the business going forward emerges from the analysis of the external and internal business and IS/IT environment. This is done to ensure that IS/IT strategy and planning is integrated into the pattern of business strategic management (Peppard & Ward, 2016).

Gymshark is a company that is growing fast and making a name for itself through innovative products and sponsoring social media influences who help grow the brand. To continue its growth, the analysis of the business has revealed that it needs to use IT/IS strategies to underpin its business strategies to maintain a competitive advantage over its immediate rivals and look to expand its market share to rival the market leaders.

6. Reference List

  • Bowen, R. & McDonagh, M. (2011) Weighing the pros and cons of balanced scorecards. Retrieved from: http://www.brighthub.com/office/finance/articles/70687.aspx
  • Fast Track (2016) Fast track 100 league table 2016. Retrieved from: http://www.fasttrack.co.uk/league-tables/fast-track-100/league-table/
  • Firth, M. (2017) Limitations of SWOT analysis. Retrieved from: http://smallbusiness.chron.com/limitations-swot-analysis-58212.html
  • Gymshark (2017) About us. Retrieved from: https://www.gymshark.com/pages/about-us
  • Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model. Strategic Change15(5), 213–229
  • Harrison, J. P. (2010). Essentials of Strategic Planning in Healthcare. Chicago: Health Administration Press.
  • Makos, J. (2014). Analyse PESTEL for monitoring your business or organization. Retrieved from: http://www.pestleanalysis.com/analyse-pestel/
  • Mass PLC (2017) KPI, CSF and the balanced scorecard. Retrieved from: http://www.mass-plc.com/blog/74/kpi-csf-and-the-balanced-scorecard
  • Kaplan, R. S., & Norton, D. P. (1979). The balanced scorecard: Translating strategy into action. Harvard Business School Press
  • Kellerman, J., & Löfgren, P. (2008). Application portfolio management: A framework for application destiny determination. Infosys Technologies Limited. [Online] April. IT Universitz of Göteborg.
  • PESTLE Analysis. (2015). What is PESTLE analysis? A tool for business analysis. Retrieved from: http://pestleanalysis.com/what-is-pestle-analysis/
  • Porter, M. E. (2008). The five competitive forces that shape strategyHarvard Business Review86(1), 78–93, 137. https://doi.org/Article
  • Rockart, J. F. (1979). Chief executives define their own data needsHarvard Business Review57(2), 81–93. https://doi.org/Article
  • Sachdeva, K. (2016) Top 5 Big Data Retail Use Cases Powered By Apache Spark & Machine Learning Capabilities. Retrieved from: https://www.linkedin.com/pulse/top-5-big-data-retail-use-cases-powered-apache-spark-machine-karan/
  • Ward, J., & Peppard, J. (2016). Strategic planning for information systems. (4th Ed.)New York: John Wiley & Sons, Inc

Cite This Work

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Related Services

View all

DMCA / Removal Request

If you are the original writer of this essay and no longer wish to have your work published on the UKDiss.com website then please: