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6. Market Analysis
6.1. Porter’s Five Forces
To illustrate the forces that shape our industry’s competitive dynamics, we use the Porter’s Five Forces model. In the process, this analysis will help us determine our area of strategic focus when formulating STOR’s business model.
Figure 13: Competitive Dynamics for Natural Bath & Skin Care Refilleries12 6.1.1. Supplier Power
Moderate. This assessment takes into account three different suppliers: supplier for its natural products, for tanks and dispensing valves and for leasing space. Overall, leverage from the side of suppliers is moderate because although STOR is a ‘middleman’ that is dependent on these suppliers to operate its business, there are many suppliers in the market. In addition, the novelty of a zero-waste refillery is a concept that suppliers will want to be a part of.
As a future franchise, all products in every branch in the Philippines and future locations all over Asia will be sourced from existing global consumers goods companies like L’Oréal and P&G which have been experts for decades in their fields. They are the ideal suppliers for a retail
12 Note. Tan, Trixie. Porter’s Five Forces analysis for natural bath & skin care refilleries. 2018
DOI:10.6814/THE.NCCU.IMBA.035.2018.F08
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chain because they understand what products the market wants and are already making strides in the development of natural alternatives for all their products. In addition, they also have an existing distribution system and consistent pricing all over Asia.
Our tanks and valves can be sourced, and custom made from outside the Philippines if local sources are not of the desired quality and competitive pricing that STOR needs it to be.
Leasing space in malls within Metro Manila is tough to find because STOR will have to compete with other businesses that want to open shop giving malls higher leverage. However, malls are always looking for new concepts to enrich their store-portfolio. Therefore, a strong branding and marketing concept coupled with the zero-waste shopping experience will be of great advantage for STOR.
6.1.2. Buyer Power
Moderate. This assessment is based on our target audience who are health and environmentally-conscious. Nevertheless, natural or unnatural, the Asian market is very particular with its bath and skincare products it is therefore expected that they demand our products to be effective and of high quality. These buyers exert moderate power because of the low switching cost. However, STOR also has the benefit of our consumers not being price sensitive and a differentiated shopping experience that allows our consumers zero-waste consumption.
6.1.3. Competitive Rivalry
Low. There are very few direct competitors scattered across Asia but none that has established itself as a leader in the industry. In the Philippines, STOR will also be the first refillery-type store for natural bath and skin care products. However, there are several indirect competitors selling natural products who have different business models that may pose a potential threat.
6.1.4. Threat of Substitution
Moderate. There are several indirect competitors in the Philippines that are offering the same
DOI:10.6814/THE.NCCU.IMBA.035.2018.F08
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high-quality natural products and have been gathering a small community of loyal customers since the early 2010. Majority of them sell their goods online, at bazaars and farmers markets or pop-up stores. Some have even gained fleeting media attention. However, none of these competitors have a big enough presence to completely threaten STOR’s business.
6.1.5. Threat of New Entry
Moderate. There is a relatively high barrier to entry for operating a refillery-type store at a mall in Metro Manila because the initial investment is high and setting processes in place for store operations will be challenging. The supply chain will be particularly tough because the shelf life of natural products is low. There is no tried and tested method for running an efficient refillery store yet. However, the real threat will come from established big-name brands that are slowly expanding their product lines to include natural alternatives and might consider changing their distribution style from packaged goods to refilleries.
6.2. SWOT
6.2.1. Internal Factors: Strengths & Weaknesses
Strengths Weaknesses
STOR’s zero waste philosophy aligns with business performance that equates to economic gains in the long run
Consumers need to be educated about the zero-waste ‘shopping method; Initial expenses for public awareness will be high Consumers and investors save on cost from
what used to be spent on plastic packaging
Changing consumer habits will take time before it becomes a norm for the target market
There is existing support from potential key partners in the media
STOR will still have to establish its brand and gain credibility
A growing demand for natural products from the Asian market
Fixed costs to open shop in high traffic malls will be high
DOI:10.6814/THE.NCCU.IMBA.035.2018.F08
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A strong vision to offer sustainable, healthy, safe and ‘waste-free’ choices to the Asian market
There is no existing chain of refilleries to learn from in terms of operations management
The expertise of our suppliers who are trusted big-name brands who continually invest billions for R&D in their in bath and skin care products
Scalable as the business grows
6.2.2. External Factors: Opportunities & Threats
Opportunities Threats
National governments in Asia are slowly setting legislations in place supporting the ban of plastic use
Shorter shelf life of natural products might result to wastage
Innovation and development of natural skincare are on the rise and becoming a priority for companies
Existing traditional bath and body shops are still more convenient and accessible for purchase
Possibility to reduce waste production and
contribute to environmental protection Big companies can easily copy the refillery dispensing method and leverage their established brand image and presence in multiple markets
Inspire other businesses to redesign their operations to go zero waste
Establishing a coalition of zero-waste businesses to get more support from a wider target audience
DOI:10.6814/THE.NCCU.IMBA.035.2018.F08
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