1. Introduction
The decision to expand the operations of Millennium Coaches to the London market is a tough one that requires a lot of considerations to be done before the venture. Expansion plans are a part of every business and are a strategic way for growth. A business can witnessed the real dangers of expansion when it proceeds with expansion plans quickly without having it controlled or conducting a thorough analysis of the new market. The most common causalities affected by the dangers of expansion include customer satisfaction and cash flow. Conducting a comprehensive market analysis is therefore the most crucial and essential thing that Millennium Coaches should consider before launching their services in the London market. There are business analysis techniques that the company could use to conduct an analysis of the new market. These techniques include: PESTLE, SWOT, and MOST.
2. Tools of analyzing business environment
Each of these techniques of analysis can help the company come up with a solid plan for the expansion. Millennium Coaches can easily realize its organizational strategic objectives and integrate them with the expansion. In this way, the business can avoid making some changes or incurring some costs that will lead it into losses. The expansion plan is also supposed to be within the business’ financial capacity. Analyzing the business environment is important for the company to make the expansion without going beyond its financial capacity and business needs.
2.1. PESTLE Analysis
PESTLE analysis, as an instrument of business environment analysis, analyses several macro-level environmental factors that affect organizational operations. Examples of these factors include government policies, demographic changes, tax laws, and trade barriers. This model categorizes all these macro-level environmental factors into six categories: political, economical, social, technological, environmental, and legal. Government policies that govern operations of bus companies in cities in the United Kingdom fall under the political categories of the model. Local authorities in London might also have policies different from those of other cities in the country. The company therefore needs to consider all these policies and any recent changes made on them. Decisions made by politicians especially in legislative assemblies directly affect business operations. Millennium Coaches therefore should find out the political factors that would have an impact on their business operation in its prospective new market of London.
Secondly, the company needs to consider economic factors that might influence their operations. London’s economic growth, the interest rates of the region and inflation index are among the economic factors that have to be considered. For instance, if the rate of inflation is higher in London than in Manchester, then the company’s employees in London would definitely want an increase in wages to survive the high cost of living. When it comes to social factors, Millennium Coaches should analyze issues to do with social trends since it would directly impact the demand for their product in the new market. Social trends will also impact the willingness and availability of people to work for the company. For instance, London as one of the biggest cities in the world is full of young people. The more the population increases, the more the demand for public transport services increases. With the nature of the population it is easy for the company to get highly motivated and energetic employees who are more than willing to work.
As a bus company, Millennium Coaches needs to take into account technological factors to improve on the services that are offered to their customers. Integrating the latest technology to the company’s service delivery is the way to ensure that the company gets an edge over its competitors. London being a world class city has very a small aged population and this means that technology is embraced by virtually everyone. The company therefore needs to analyze and find out what are the latest technologies in the new market that can be used to improve on their products. It is important to bear in mind that technology is a means of improving quality as well as reducing cost.
2.1.1. Advantage of PESTLE analysis tool
This tool is advantageous for analyzing business environments because it is simple to understand and use. The tool can actually to be used to initiate and develop strategic thinking in the team charged with the responsibility of planning for the company’s expansion. Through the use of the tool, it is possible for the company to realize a way in which it can develop an edge over its competitors even as a new entrant in the market.
2.1.2. Limitations of PESTLE analysis tool
Perpetual market analysis is required in order to change a company’s game plan. The business environment is faced with a lot of drastic changes that can make it hard to anticipate for development. This therefore means that the tool has to be regularly updated to include the current changes of the market. The tool will require several users to conduct the analysis effectively. It requires diversification of the users. The company will therefore have to avail political thinkers, IT people, legal practitioners, economists, and professionals in the fields of marketing and environment; combining all these people to form the team that will conduct the analysis in order to make the tool effective. A lot of resources will have to be used. Lastly, the tool bases its data on assumptions implying that sometimes the findings may fail to be accurate.
2.2. SWOT Analysis
Unlike PESTLE, SWOT analysis will look into both internal and external factors that would impact the plan of Millennium Coaches to expand its operations to London. This tool is important for the company’s strategic planning. While conducting business environmental analysis using the SWOT model, the company will have to bear in minds its overall organizational strategic goals. The things that are therefore critically analyzed according to the SWOT model include, internal strengths of the company, internal weaknesses of the company, opportunities within the new environment, and lastly, the threats that the new environment poses for the venture.
Using SWOT analysis, the management of Millennium Coaches can discover a lot of aspects about the company that are different from its competitors. As earlier mentioned the new target market in London would probably be crowded with several bus companies operating in it. SWOT analysis can help the company understand its competitions and compare it to itself to identify the areas where it needs to match up with its competition as well as identify areas where the company can use to edge out its competition in the market. This is despite the fact that Millennium Coaches will be a new entrant. Using analysis of strengths, the company will identify the areas where it does better that other bus companies in London. Analysis of the weaknesses will help the company realize the areas where other bus companies in London are doing better that the company itself. Analysis of opportunities will help the company realize the available business needs and strategize how their entry into the market would help meet those needs. Lastly, analysis of the threats in the business environment will help the company realize ways of responding or handling the changes in the market.
The key strategy of using the findings of SWOT analysis is to match the strengths of the business to the opportunities available in the market as well as figuring out how to convert the weaknesses into strength. Performing the former may not be a hard task but however, performing the latter is challenging. Therefore analyzing the company’s weaknesses involve considering issues such as technology, employee skills, and quality of product. If the company is using outdated technology, it can try to convert this weakness into strength by acquiring the better technology than the ones used by its competition. If the company’s employees are not highly skilled, this weakness can be converted into strength by training the existing employees and recruiting new employees who are highly skilled and motivated to give their best.
2.2.1. Advantages of SWOT analysis
The tool can be used to help the company recognize business opportunities in the industry before its competition does. It is more of a strategic instrument that can be used as a guide for successful business operations. The tool also helps organizations keep a watch or monitor their business environment to strategize on any changes that need to be made to maintain or increase their position in the market. As Millennium Coaches roles out its operations in the London market, this tool of analysis would help it grow in the market share that it will control. The data collected from market analysis using the SWOT model is good for strategic planning for the company’s expansion into the new environment. The toll is also helpful in synchronizing the company’s resources with the new London market that it intends to begin operating on. This helps the company avoid issues such as over planning for the expansion which can result to the company using its resources inappropriately or incurring costs that might plunge it into losses.
2.2.2. Limitations of SWOT analysis
Because of the nature of the tool, there is a slight possibility for an organization to over look certain important strategic actions for its success. The tool is structured to make circumstances or aspects in the business environment to look so simple and obvious and this can create problems in trying to identify certain crucial strategic actions. There are also certain disadvantages that may be beyond the control of the company’s management. For instance, if the London market dictates either an increase or a decrease in cost for the services, the management would have no power but to play a long irrespective of the impact this has on its operational cost. Government legislations are also beyond the control of the company’s management. These limitations can be considered as threats and the management will have to come up with ways to adapt or respond to them.
2.3. MOST Analysis
This is one of the most important tools used for functional management which involve strategic planning and exploring business strategies. Unlike the other two tools discussed previously, this tool only focuses on internal environmental factors. It defines four attributes and therefore the management of Millennium Coaches will have to ensure that the expansion plan is in line with the four attributes. These attributes include, mission, objectives, strategy, and tactics. The mission is basically the intended level that the company wants to attain through the expansion project. In order to attain this level, the company will have to set goals and objectives that will help it reach there. Strategies are simply the available alternatives for moving forward while tactics simply involves figuring out ways in which the alternatives can be actualized to ensure that the company indeed moves forward.
In order for the company to make effective use of this tool, Millennium Coaches can try to link each of the four attributes from the top to the bottom so that they all depend on each other. The plan to expand operations to the London market must have a mission. What does Millennium Coaches intend to achieve through expanding its business operations to a different market? This mission must be clearly defined to begin the process of corporate strategy. The mission will be the driving force that will help state the strategic objectives to attain it. The objectives eventually result to formulation of strategic business options which forces the management team to come up with tactical ways of taking action.
Basically, this model of analysis is good for expansion projects since it helps businesses avoid being trapped in the comfort zone of their normal operations. Sometimes the normal demands by suppliers and customers can cause a business to be distracted from its need for growth. Expansion plans are a part of every business and are a strategic way for growth. A business needs to clearly state where it wants to be within a specific timescale and begin to plan and strategize how to reach there. Apart from clarifying on business mission or target after a specific period of time, the company also needs to clarify on how it would get there by defining objectives and setting action plans.
2.3.1. Limitations of MOST analysis
The main limitation of this tool lies on the fact that it is mainly used by for analyzing a business’ internal environment. This means that several macro-level environmental factors affecting organizations can be omitted for consideration if the tool is used solely. Because of this problem, MOST analysis tool is therefore used in combination with other tools of market analysis.
3. Conclusion and recommendations
Based on the above discussions, a comprehensive analysis of the new business environment needs to be conducted before Millennium Coaches launches its operations in London. Since London is the capital city and also one of the largest cities in the world, the company would probably struggle to get a share of the market as it tries to compete with already established bus companies in the city. Therefore, in order to achieve something out of this venture to expand the business, the company really needs to understand the new environment by analyzing it comprehensively. Each of the tools discussed above have their own limitations and benefits for understanding a business environment. PESTLE analyzes external factors, SWOT analyzes both internal and external factors, and MOST looks internal factors for strategic planning. All these three tools can be used together to ensure a comprehensive analysis of the new business environment.
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