BO1BSRE301 Business Strategy: Analysis of Blackmores Ltd

Introduction 

The following business report is based on organizational environmental analysis of the company Blackmore Limited. It has been identified that due to growing and changing demand of the external environment, the organization has to develop and design new strategies to fulfill those demands. Likewise, the external environment also influences the internal environment of the company. If the demand of a particular product is high, the company needs to focus on that product or produce that product excessively by increasing internal capabilities such as hiring more talented workforce.  The organization needs to pay an equal attention to both external and internal environment to gain the desired amount of profits. The degree of an organization’s environment that exists inside the company as well as usually has immediate and precise implication for dealing with the organization is the internal environment. Similarly, the external environment of a company includes those factors that influence organization’s ability to function in the market.

To understand how an organization manages both the environment leveraging the key resources and gains profits, the current operation of Blackmores Limited has been considered. Blackmores is Australia’s leading natural health firm. Considering the vision of naturopath as well as founder Maurica Blackmore, the company is successfully developing the natural medicines for a better health. With a strong naturopathic heritage, the company remains as an ASX 100 publicly listed firm with the market capitalization of $2.3 billion (Blackmores.com.au. 2017). It has been identified that in Asian consumers brings in almost 50% of Group Sales and Chinese market of the company brings in $250 billion of sales (Blackmores.com.au. 2017). The company has observed a rapid growth in last two years. However, the dynamic local market and changing nature of the industry pose a serious threat to the company. The company manages to deal with such barriers and carries on the operation in the market.

Internal analysis 

Table 1: VRIO Framework of Blackmores Limited

Valuable-The above mentioned table helps to learn that Research & Development skills of BKL is are valuable as the company makes large investment in its quality of products. In addition, BKL’s unique compositions of natural products developed R&D differentiated the firm from local healthcare product suppliers such as Suisse. In addition, a technical capability acquired by the company is also a significant resource of Blackmore as with the development of technology, it has strengthened its position in global e-commerce market. Moreover, Blackmores hires talented people who have intensive knowledge about the natural ingredients (Shaw et al. 2012). In addition to this, the employees of BKL are provided with the appropriate training and development programs. Likewise, the prosperity for innovation increases the ability of the firm to get in the foreign market.

Rare-The human resource developed by BKL is a rare asset, as people at Blackmores are strongly committed to development of natural ingredients that helps people to live longer (Steward, Musa, Willis and Ali 2011). In addition, the company has highly trained workforce, which is rarely seen in other organizations in the sector. In addition to this, the social responsible corporate image developed by Blackmore is also a unique capability because the company applied several strategies such as wastewater management for environmental sustainability. However, hardly any organization in the sector has been observed to be implementing such initiative.

Costly to imitate- The organization has an increasing range of products that enable them to expand in global market. Due to the trained workforce, R&D skills and unique collection of natural ingredients, Blackmores develops different categories of products such as health vitamins with sub-category (Genuis et al. 2012). This capability certainly differentiates the firms from other organizations in the industry and the competitors like Suisse finds it difficult to manufacture equal quality of substitute items.

Organized to capture- The above-represented table helps to understand that even though, the company has been dealing with certain challenges like limited expansion, increasing competition in the domestic market, it has the capability to become leader in the global market as well. This is because the company is leveraging its workforce capability and R&D skills to reach the global market.

External analysis 

PESTLE analysis-

Political facto- The current political environment of Australia seek to develop a liberal government, which conventionally stands for de-regulation as well as lower tax for business. This scenario helps to learn that coming years will bring sustainable changes to the political environment. Thus, with low tax rate, Blackmores could maximize its productions as the profit margin increase and tax rates declines. However, Altharthi (2012) mentioned that increasing involvement of liberal government in the market could create an unfavorable market situation.

Economical- Australia economy is stable, which remains a significant opportunity for Blackmores to expand the business in the domestic market. In addition to this, the depreciation of Australia dollar makes it less expensive for the international customers to purchase natural health products. This makes Blackmores’ products more competitive and delivers a potential for the business expansion in the global market. Nevertheless, Malik et al. (2011) argued that unexpected downturn in the Australian economy comes of out of the Mining Boom, which leads to economic downturn as well as recession. As large amount of vitamins and supplements are perceived as discretionary spending and this recession could prevent the spending in Australian natural health products market.

Figure 1: PESTLE analysis

(Source: Malik et al. 2011)

Social- The customers put a significant focus on their health; thereby, the demand increases. In addition, the aging population of Australia enhances the prevalence of multiple health conditions that require vitamins. However, if the vitamins are cheaper outside of Australia, the consumers could buy items from elsewhere.

Technological – Like the China, Australia is technologically a developed nation. Thus, if the economy supports the market, Blackmores uses the technology to manufacture new natural health products, which enhances its productivity. In addition to this, due to technological advancement, the company successfully runs its e-commerce business. In this context, (Jackson, Hussainy and Kirkpatrick 2016.) commented that availability as well as low price of international shipping enables the company to deliver the products in the global market.

Environmental- As the company depends on the bounty of its natural environment, it is certain that the company is strongly committed to the environmental sustainability practices. Following the industry benchmark, Blackmores focuses on the facility management, where it seeks to reduce the environmental intensity as well as carbon footprint of its facility and operation. For example, the company puts a great focus in localized management of water, wastewater as the fundamental element of sustainable water program (Basu et al.  2015).

Legal-As Australian health department put make strict regulations of natural health products, the each organization in the industry must have to comply with the framework Blacmores’ system for complying with Australian privacy requirements include the commitment to compliance with the privacy requirement, resources allocated to privacy including the technology and other commitment.

Porter’s five forces analysis

Bargaining power of buyers (HIGH)- It is observed that besides, recent launch of online sale, which remains as the only direct selling channel network, Blackmores must maintain a strong relationship with three major buyers who assures more than half of its revenue (Locher and Pforr 2015).  For example, the supermarket chains have tremendous power over the company because of their economies of sales.

Figure 2: Porter’s five forces analysis

(Source: Locher and Pforr 2015)

Bargaining power of suppliers (LOW)- Most of the inputs used by Blackmores are not largely specialized. Thus, the bargaining power of the suppliers remains low. In addition to this, BKL’s expansion into Asian market might also increase its supplier choice (Malik et al. 2011).

Threats of new entrants (LOW)-

The obstacles to enter the market are hindered by high requirements of CAPEX (Capital expenditure) as well as different legal barriers. In addition, the deteriorating margins mean less lucrative to get in the VDS (Vistra Depositary Service) market at the present state (Jackson, Hussainy and Kirkpatrick 2016).  However, in Asian market, the threats of entrants remain high because the companies expand into Asian market to acquire a share of the regional growth.

Threats of substitutes (LOW)-The company observes a low threat from fresh-food as the consumers relies on measurable concentrated nutrients that lack in their diets. The Chinese medicines are also available in Australia but it is not certain whether it will create a new challenge in the long-term or not. In Chinese, it remains to be a significant competitor.

Industry rivalry (HIGH)-The natural health products observes a significant competition both in Australia and in the international market.  For example, Swiss Vitamins is posing to be a biggest competitor to Blackmores in Australia market. As put forward by, Locher and Pforr, (2015), the market is highly competitive as well as the competition is fierce with products that are being easily reformulated by the rivals. On other side, in East Asia, Backmores is small player, where it has to compete with the well-established domestic and international brands.

Microenvironment analysis 

SWOT analysis of Blackmore

Table 2: SWOT analysis

(Source: Jeon et al. 2011)

Conclusion 

The rapid expansion of Blackmore strengthens its position in both in domestic and international market. However, in Asian market, the company might take a few more years to acquire because a least percentage of the people in Asian nations rely on the natural healthcare products. In addition, the company might have to design a new business model in Asian market, as there are some major risks to target price such as regulations, customer preference, culture and unfavorable political environment. Moreover, the massive PR efforts have built foreign VDS brands as the high quality products in Asian market. Hence, the Blackmores could exploit these conditions.

References

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