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Assignment on

Launcing a new product justifying with Environment Analysis and Porters Forces.
Strategic Management (6103)

Submitted toDr. Riazur Rahman Chowdhury

Professor
Faculty Of Business Administration
University of Dhaka

Submitted byShahin Mahmud

ID: 11529015
MBA (Evening) Program
Department of Accounting and Information systems

Date of Submission: 06 September 2016

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Launcing a new product justifying with

Environment Analysis and Porters Forces.

Letter of Transmittal

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September 06, 2016

To
Dr. Riazur Rahman Chowdhury
Professor
Department of Accounting & Information Systems
University of Dhaka
Letter of Transmittal
Dear Sir,
It is of great honor to me to present you my term paper prepared for the course Strategic
Management (6103). The entire duration of preparing this report has been immensely helpful to
me, giving a golden opportunity to look outside the regular classroom and move to the real
world. A lot of lessons were learnt from your class that has been applied to prepare this report.
Developing interpersonal skills, thinking about real business problem and working on that and of
course handling each and every detail with a professional attitude were just to name a few. This
will help me in my future life as a business executive. In making the paper a worthy one, I tried
my best to gather all relevant information connecting to the work.
I would once again like to express my sense of gratitude towards you for giving me this
opportunity. I will always be available to respond to any queries that you may have in this
regard.
Thanking you.
Shahin Mahmud
ID: 11529015
MBA (Evening Program)
Department of Accounting & Information Systems
University of Dhaka
Table of Contents

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Topics
Aknoledgement
Abstract
Introduction
Literature review
Product selection
PESTLE analysis
Political Factors
Economic Factors
Social Factors
Technological Factors
Legal Factors
Environmental Factors
Porters Five Factor Model
Bargaining power of Supplier
Bargaining power of Customers
Threat of new entrants
Threat of Substitute
Competitive Rivalry between Existing Players
Conclusions
References

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Acknowledgement
Undoubtedly all praise to Allah. So, first of all, I express my deep gratitude to the almighty Allah
who created and nurture us in this transitory world. I am putting my heartfelt respect and
gratitude to my respected teacher Prof. Dr. Riazur Rahman Chowdhury for giving me a chance to
work on this interesting topic Launcing a new product justifying with Environment analysis and
Porters forces. Lastly I would like to express my thanks to the authors, researchers, article

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writers and friends who helped me in every stage of the report by providing valuable information
and suggestion in respect of preparing this paper.
Abstract
This report explains the overall process of selecting a new product to launch in the market for an
established business organizations and its justification in selection through the two renouned
method Environment Analysis and Porters Five Factor model. No business can run ignoring its
environmental factors since environment shape the organization. Same way with out cosidering
the other related factors like customers, competetors, suppier etc. a business can not become
successful. There are other model as well but due to time constraint and the requirmemnt of the
reportthese two important model has been used to justify the selection.
Introduction
Launcing a new product depends on many factors that affect both directly and indirectly. Todays
organizations find themselves operating in an environment that is changing faster than ever
before. The process of analyzing the implications of these changes and modifying the way that
the organization reacts to them is known as business strategy. Identification of the proper affect
of such elements determines the success and failure of the product. To identify the actual
opportunities and threats Environment analysis or (PESTLE) and Porters five force model can
be used to

Analyzing the organiiztions external environment.

Assessing the organizations internal capabilities and how well it can respond to external

forces.
Assisting with the definition of the organizations strategy.
Aiding in the implementation of the organizations strategy.

Literature Review
In analyzing the macro-environment, it is important to identify the factors that might in turn
affect a number of vital variables (Kotter & Schlesinger, 1991; Johnson & Scholes, 1993). The
Radical and ongoing changes occurring in society create an uncertain environment and have an
impact on the function of the whole organization (Tsiakkiros & Pashiardis, 2002). A number of
checklists have been developed as ways of cataloguing the vast number of possible issues that

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might affect an industry. The PEST analysis is one of them that are merely a framework which
categorizes environmental influences as political, economic, social, and technological forces.
Sometimes two additional factors, environmental and legal, will be added to make a PESTEL
(Political, Economic, Social, Technological, Environmental, and Legal) analysis, but these
themes can easily be subsumed in the others. The analysis examines the impact of each of these
factors (and their interplay with each other) on the business. The results can then be used to take
advantage of opportunities and to make contingency plans for threats when preparing business
and strategic plans (Byars, 1991; Cooper, 2000).
Kotler (1998) claimed that PEST analysis is a useful strategic tool for understanding market
growth or decline, business position, potential and direction for operations. The headings of
PEST are a framework for reviewing a situation, and can in addition to SWOT (Strengths,
Weaknesses, Opportunities, and Threats) and Porters Five Forces models, be applied by
companies to review strategic directions, including marketing proposition. The use of PEST
analysis can be effective for business and strategic planning, marketing planning, business and
product development and research reports. PEST also ensures that companys performance is
aligned positively with the powerful forces of change that are affecting business environment
(Porter, 1985).
PEST is useful when a company decides to enter its business operations into new markets and
new countries. The use of PEST, in this case, helps to break free of unconscious assumptions,
and help to effectively adapt to the realities of the new environment.
PEST is used before SWOTnot generally vice-versaPEST definitely helps to identify
SWOT factors. There is overlap between PEST and SWOT, in that similar factors would appear
in each. That is, PEST and SWOT are certainly two different perspectives: PEST assesses a
market, including competitors, from the standpoint of a particular proposition or a business;
SWOT is an assessment of a business or a proposition, whether your own or a competitors.
Strategic planning is not a precise scienceno tool is mandatoryit is a matter of pragmatic
choice as to what helps best to identify and explain the issues (Porter, 1985).

Product Selection

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Jutty, shopping bag made of jute I want to launch as per requirment of my company Board of
Directors to launch as a new product. Through this report I will explain the reason of selecting
this product to launch based on the Environmental analysis (PESTLE) and Prters Five Factors
Model. Jute is called as the golden fiber in Bangladesh and few years ago it was in the first place
in producing the jute around the world that is second at present. But there is no such product in
our country and the unhealthy polythine bag is everywhere that is making the country worst to
live in the world.

PESTLE Analysis
PESTLE analysis is a useful tool for understanding the industry situation as a whole, and is often
used in conjunction with a SWOT analysis to assess the situation of an individual business.
PESTLE analysis gives you an overview of the whole situation your business might be in.
Precisely, it is a birds eye view of the stimulus and the scenarios that surround your trade and
your business. PESTLE, is an acronym in which each letter denotes certain factors for the study.
These factors affect the market in many ways and alter the way strategies are thought of and
made. P stands for political factors, while E stands for economic ones. S has to do with social
factors in a country whereas T sums up all the technological aspects of the market. L denotes
legalities of the environment and E accounts for the environmental aspects and its influence upon
the nature of the trade youre in. PESTLE stands for Political, Economic, Sociological,
Technological, Legal and Environmental factors. The questions to ask are:

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What are the key political factors likely to affect the industry?
What are the important economic factors?
What cultural aspects are most important?
What technological innovations are likely to occur?
What current and impending legislation may affect the industry?
What are the environmental considerations?

Political Factors
The Political factor refers to the governmental policies which are much influenced by the
economic situation in a country. It is a macro aspect of analyze which deal with major changes to
the government policies of a country. It has great influence to the business outlook and
confidence. Political factors often comprise of

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o
o
o
o
o
o

Current taxation policy

Future taxation policy
The current and future political support
Grants, funding and initiatives
Trade bodies
Effect of wars or worsening relations with particular countries

In Bangladesh jute is highly patronized by the government with every kind of favor. As a local
business it will be taxed normally. Both current and future political support will remain i favor of
jute goods. There is a huge market throughout the countries around the world so wars or
worsening relations with particular countries will not hapmer the sale of this product.
Economic factors
The Economic factor is an area where macro-economic environment can affect the outlook and
competitiveness of any business sectors in the country. Economic factors comprise of

Overall economic situation

Strength of consumer spending
Current and future levels of government spending
Ease of access to loans
Current and future level of interest rates, inflation and unemployment
Specific taxation policies and trends
Exchange rates

Jutty will be an economically favorable product. Our peoples spending capcity is growing up and
hopefully it will continue for such kind of product. Government is also spending lot of money to
enlarge the sector. The approval of loans for producing jute goods is alsi easier in our country.
Current moderate inflation rate and huge unemployment will make it more economic to produce
Jutty.
Social Factors
The Social factors refers to the cultural aspects of the country. Social factors comprise of

Demographics
Lifestyle patterns and changes
Attitudes towards issues such as education, corporate responsibility and the environment
Social mobility
Media views and perceptions

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Ethnic and religious differences

Bangladeshi people are familiar with the jute goods. Lfestyle pattern is changing day by day and
they are prefering the healthy product. This product is not affected by the ethnic and religious
differences.
Technological factor
Technological factor is more tangible and easy to validate. It includes ecological and
environmental aspects, technology incentives such as Research & Development incentives,
automation reinvestment, high capital setup and rate of technological change in certain business.
The technological factors include:

Relevant current and future technology innovations

The level of research funding
The ways in which consumers make purchases
Intellectual property rights and copyright infringements
Global communication technological advances

There is an important role of technology to produce such finer product. With the technological
changes the product will be modified with the customer requirment.

Legal factors
Legal factors often comprised of
o
o
o
o

Legislation in areas such as employment, competition and health & safety

Future legislation changes
Trading policies
Regulatory bodies

Being made of jute the Jutty will not face any kind of legal barriers in our country rather it will
get every kind of supportive environment from the legal authorities. There is hardly any chance
of unfavorable future legislation changes for jute products in Bangladesh.
Environmental factors

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Environmental factors include

The level of pollution created by the product or service

Recycling considerations
Attitudes to the environment from the government, media and consumers
Current and future environmental legislative changes.

In our country everywhere we see thrown away polythine bag which is polluting our all elements
of environment resulting the capital city as the second worst place to live in the world. Our
peoples are habituated to through away the shopping bag here and there. So Jute bag will the best
solution to such pollution.

Porters Five Factor Model

The model of the Five Competitive Forces was developed by Michael E. Porter in his book
Competitive Strategy: Techniques for Analyzing Industries and Competitors in 1980. Since that
time, it has become an important tool for analyzing an organizations industry structure in
strategic processes.
Porters model is based on the insight that a corporate strategy should meet the opportunities and
threats in the organizations external environment. Especially, competitive strategy should base on
and understanding of industry structures and the way they change.
Porter has identified five competitive forces that shape every industry and every market. These
forces determine the intensity of competition and hence the profitability and attractiveness of an
industry. The objective of corporate strategy should be to modify these competitive forces in a
way that improves the position of the organization. Porters model supports analysis of the
driving forces in an industry. Based on the information derived from the Five Forces Analysis,
management can decide how to influence or to exploit particular characteristics of their industry.

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Bargaining Power of Suppliers

The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or
services.
Supplier bargaining power is likely to be high when:

The market is dominated by a few large suppliers rather than a fragmented source of

supply,
There are no substitutes for the particular input,
The suppliers customers are fragmented, so their bargaining power is low,
The switching costs from one supplier to another are high,
There is the possibility of the supplier integrating forwards in order to obtain higher

prices and margins. This threat is especially high when

The buying industry has a higher profitability than the supplying industry,
Forward integration provides economies of scale for the supplier,

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The buying industry hinders the supplying industry in their development (e.g. reluctance

to accept new releases of products),

The buying industry has low barriers to entry.

In such situations, the buying industry often faces a high pressure on margins from their
suppliers. The relationship to powerful suppliers can potentially reduce strategic options for the
organization.
For our product burgaining power of supplier will be low becouse there are huge no of supplier
of jute throgh out the country. Switching costs from supplier to supplier is low here.
Bargaining Power of Customers
Similarly, the bargaining power of customers determines how much customers can impose
pressure on margins and volumes.
Customers bargaining power is likely to be high when
o They buy large volumes, there is a concentration of buyers,
o The supplying industry comprises a large number of small operators
o The supplying industry operates with high fixed costs,
o The product is undifferentiated and can be replaces by substitutes,
o Switching to an alternative product is relatively simple and is not related to high costs,
o Customers have low margins and are price-sensitive,
o Customers could produce the product themselves,
o The product is not of strategical importance for the customer,
o The customer knows about the production costs of the product
o There is the possibility for the customer integrating backwards.
Since the bag will be a differentiated product so customers switching cost will be higher as a
result the customers burgaining power will be lower. Another reason is that this is not a high tech
produsct so we do not need to run with high fixed cost. As this type of product is being launch
for the first time so customer will have less option to burgain. Still due to polythine bag as an
exixting substitue th ecustomer will have some power to burgain.
Threat of New Entrants

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The competition in an industry will be the higher, the easier it is for other companies to enter this
industry. In such a situation, new entrants could change major determinants of the market
environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent
pressure for reaction and adjustment for existing players in this industry.
The threat of new entries will depend on the extent to which there are barriers to entry. These are
typically
Economies of scale (minimum size requirements for profitable operations),
High initial investments and fixed costs,
Cost advantages of existing players due to experience curve effects of operation with
fully depreciated assets,
Brand loyalty of customers
Protected intellectual property like patents, licenses etc,
Scarcity of important resources, e.g. qualified expert staff
Access to raw materials is controlled by existing players,
Distribution channels are controlled by existing players,
Existing players have close customer relations, e.g. from long-term service contracts,
High switching costs for customers
Legislation and government action
Threat of new entrants is higher in this sector availability of raw material, skilled labor, favorable
legislation agovernment etc. At the same time these will be the opportunity for our product as
well as the threat and opportunities are just opposite side of the same coin.
Threat of Substitutes
A threat from substitutes exists if there are alternative products with lower prices of better
performance parameters for the same purpose. They could potentially attract a significant
proportion of market volume and hence reduce the potential sales volume for existing players.
This category also relates to complementary products.
Similarly, to the threat of new entrants, the treat of substitutes is determined by factors like

Brand loyalty of customers,

Close customer relationships,
Switching costs for customers,
The relative price for performance of substitutes,

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Current trends.
The prime threat of this product is the existing poly bag which is low cost and highly available.
But the hope for the good is the current trend of conciousness about the environment freindly,
cleaner product for better healthy life etc. will decrease the threat of substitute product.
Competitive Rivalry between Existing Players
This force describes the intensity of competition between existing players (companies) in an
industry. High competitive pressure results in pressure on prices, margins, and hence, on
profitability for every single company in the industry.
Competition between existing players is likely to be high when
There are many players of about the same size,
Players have similar strategies
There is not much differentiation between players and their products, hence, there is
much price competition
Low market growth rates (growth of a particular company is possible only at the expense
of a competitor),
Barriers for exit are high (e.g. expensive and highly specialized equipment).
Since we are the first to bring the jute made shopping bag in the market so initially the
compititive rivalry between the existing compititors will be low.

Conclusion:
Finally it can be said that from both the perspective of environment analysis and Porters five
factor model launcing shopping bag made of jute is a wise decision. From the PESTLE anlysis
we found that all the affecting elements are in favor of the product to launch. Morover the
Porters five factor models elements also favorable for the selected product. I think thsese two
type of analysis is esential for launcing a new prodcut in the market and enough to take decision

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about selecting a new product. So I am going to launch the Jutty, the bag which will be made of
jute to the market soon.

References:

www.wikipedia.org

www.google.com

Grant, R., B. Butler, et al. (2011). Contemporary strategic management: An Australasian

perspective, John Wiley and Son australia.

Aktouf, O. (2004). The false expectations of Michael Porter's strategic management

framework. Revista Universidad & Empresa, 6(6), 9-41.

Andriotis, K. (2004). Revising Porters Five Forces Model for Application in the Travel

and Tourism Industry. Tourism Today Tourism Today.

Bailey, E. E. (1992). Airline deregulation: Confronting the paradoxes. Regulation, 15, 18.
Bang, K. E., & Markeset, T. (2012). Identifying the Drivers of Economic Globalization
and the Effects on Companies Competitive Situation. In Advances in Production
Management Systems. Value Networks: Innovation, Technologies, and Management (pp.
233-241). Springer Berlin Heidelberg.