HMV Groups markets had experienced rapid change over recent years and have become more competitive and with a diminishing amount of in store sales as consumers choose to use the internet to fulfil their needs. These trends are heavily influenced by celebrities and other social icons as well as advertising and publicity. The main technological development is that of the internet.
It has also given rise to competition in the form of piracy which is a growing social/ political issue. Piracy has had a large affect on sales and demand within the industry and any changes in law/ legislation or enforcement of piracy will have a large effect on the HMV group. It has enabled consumers to communicate directly with the seller and buy their goods without ever having to enter a store.
This has influenced the way goods are sold and the types of goods sold within the industry. It is important to evaluate these forces to determine the competitive nature of the HMV groups external environment. To do this I shall use Porters 5 forces analysis Porters 5 forces show that the markets that
HMV Group is involved with are highly competitive and rely heavily on the sellers ability to offer the consumer the choice they want and to be able to offer there good to the consumer in a variety of ways allowing the consumer to exercise a choice. It is also important to note that it is vital that the consumer has easy access to the seller as otherwise they will buy from a rival due to the low levels of customer loyalty. External Factors
An external factors examines the opportunities and threats that are available to it within its market and is also the study of other rivals that exist within its environment. It is important to study this when constructing a business plan as it is necessary to know what affects your rivals have on you and the environment you work in as well as the outside factors that affect your environment. Environmental Factors
There are a number of environmental factors or forces that can influence the behaviors of the market place affecting the consumers or the competition just as much as any business. For this reason it is necessary to conduct an environmental audit of the HMV Group to evaluate what these factors and forces are. An environmental audit is a study into environmental trends and events that have the potential to affect strategy and is used to analyse and identify such trends and events and to estimate their likelihood and impact. Market analysis
HMV Group is in a retail industry that has shown signs of continuous growth. A large proportion of HMV groups sales come from that of CD’s and DVD’s There is a very large market for these goods and this can be seen in section 1.0 of the appendices. CD sales have seen a natural decrease as the music becomes more readily sold on the internet and transferred to the customer. All MUSIC downloads are set to increase ten-fold by 2010 to account for 15 per cent of all music sold in the UK, researchers predict.
General internet sales in the UK have also been on a steady increase for a number of years as more of the population are now connected to the internet. Films which can be downloaded from the internet to computers are another area tipped for growth. However DVD sales have seen a considerable growth and 2004 was the first year in which DVD retail sales exceeded games and music in Europe. External overview
The market is has been highly profitable in the past but internet downloads and piracy is taking sales away from the industry. Competition from the supermarkets is also minimising profit and driving sales away from the high street retailers while general internet sales also diminish the sales in stores.
b)Analyse how external factors affect HMV’s strategy.
The primary tool for evaluating the factors that influence an organisations environment is PEST analysis. There is a large list of factors that affect the HMV Groups environment.The main Factors that affect the market for HMV is technological or social. The main social issue that affects that can influence sales are lifestyle or consumer trends. The products sold by the HMV Group and its competitors are not necessity goods and have very wide ranges of appeal. Consumer trends can change very rapidly and can be very troublesome or profitable for retailers in the industry as it can either leave them with to much or too little stock to meet demand. Political
Environmental issues government legislation international law universal rights taxation regulatory bodies government term and change trading policies funding, grants and initiatives pressure groups . Economic
Economic trends taxation, seasonality markets and trade customer forces interest and exchange rates, competitors, suppliers, employment rates policies . Society Lifestyle trends demographic trends skills availability consumer attitudes and opinions media laws trends major events ethnic and religious factors gender issues business ethics environmental concerns . Technological
Technological development research and funding information and communications innovation potential intellectual property issues new production processes transport technology .
c) SWOT analysis of HMV The most common tool used to access the above is a SWOT analysis. SWOT is an acronym used to describe the particular Strengths, Weaknesses, Opportunities, and Threats that are strategic factors for a specific company. A SWOT analysis should not only result in the identification of a corporation's core competencies, but also in the identification of opportunities that the firm is not currently able to take advantage of due to a lack of appropriate resources. Strengths
HMV Group has vast amounts of experience and expertise within its markets as well as having a large readily capable workforce. Stores cover a wide range of locations across the UK and is easily accessible to the consumer. HMV Group also has a well known brand name and affective market campaigns in place which add value to the company and boost sales. HMV also has a unique competitive advantage over most other sellers within its industries as it sells in stores as well as on the internet and also offers internet downloads and so sells to a broader market than many of its competitors. Weaknesses
Exists in a market where in store sales are diminishing and profit is being reduce from fierce competition. Marketing is not hugely successful and is simply underused. Opportunities Has the financial strength to move into different aspects of the retail industry and could begin selling other goods in its stores if it feels they can be more profitable than its existing goods.Could also expand further into international markets as other markets have failed to show as much competition as that in the UK market and could be more profitable. Threats
The continued growth of the internet and internet sales downloads and piracy is a large threat to HMV Group as it is becoming evident that the consumer wants goods provided from a large number of services and that it is complicated or unprofitable for HMV Group to meet these needs. Competition has been growing and continues to eat into HMV Groups profits this competition threatens to diminish HMV sales and market share as well as profitability.