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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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The retail industry has always been and continues to be the most fiercely competitive business sectors in all aspects of its operation In America. Therefore, it is crucial for Heytea to comprehend the business environment and the demands of USA consumers. Thus, porter five forces and swot analysis will be used to conduct analysis for the implications on the business environment of America.

SWOT Analysis

One of the initial stages in the strategic assessment comprises distinguishing Heytea's strength, weakness, opportunities, and threat (SWOT Analysis). It benefits Hey tea to focus on its strength and weakness, minimize threats and take the greatest possible advantage of opportunities available to establish HEYTEA business in America.  

 

strengths

These are Heytea qualities that propel it towards its objectives to provide high-quality requirements for its products. Heytea is an enormously familiar company In China which won an investment of RMB 100 million from Ho Boquan in 2016. These strengths include superior quality goods, skilled workforce, high value-added and vigorous hygiene process for making Heytea drinks. Initially, Heytea has always provided superior quality drinks to deliver the authentic taste of tea to customers. Heytea's original recipe has been highly praised by consumers which is a combination of salty cheese and tea. On the basis of high quality, Heytea imports cheese from New Zealand with selected tea or fresh milk for its light cheese tea series to provide consumers with a fresh and pleasant taste. Besides, Heytea also launched a fruit tea series providing an excellent taste of fruit mixing with tea. To meet its aims, Heytea exceptionally select quality tea as the base of fruit tea with natural sugar to bring a refreshing and rich taste.

Moreover, Heytea has always concentrated on providing extraordinary value to the customer to upsurge their loyalty and commitment to the brand. Hence, Heytea offers unique temperament and products in each season to meet the demands and needs of the consumer in this competitive environment. For instance, cheese mango, cheese strawberry, and cheese honey for winter and fruit tea series for summer. Also, Heytea emphasizes the overall experience of consumers whether it's the store design or product.  The store is designed in a way for consumers to adore multi-dimensional sensory experience which its merged with the tea culture, “Zen”, “minimalism” and “aesthetics” to provide a delightful experience. Finally, the product packaging follows the cool and simple style which certainly adds value to consumers.

Finally, Heytea has always believed in quality labor which is critical to its success. Heytea strongly relies on the word of mouth among customers rather than relying on traditional channels to market its products. Thus, Heytea provides extensive training to its labor to meet the market demands efficiently and effectively. Heytea credits its employees for business success.

Weaknesses

These form the detrimental factors and forces that a company experiences in its normal operations in the industry. As Heytea is an emerging business with numerous strengths yet still faces weakness that needs to be addressed if they want to rise to the next level. For instance, the absence of international market expertise and low reputation.

international market expertise is those which have insights into the culture and regulation of other countries which they have desires to enter the new international market. Consequently, Heytea lacks international market expertise which can be regarded as a weakness. As globalization has created many opportunities for Heytea to venture overseas to meet its objectives and to gain world recognition. Lacking market expertise which acts as barriers preventing Heytea to achieve its goals.

Another aspect that could be viewed as a shortcoming is the low reputation of Heytea. Heytea faces huge rivalry from Starbucks, Costa Coffee, Ubc, McDonald's and C straits café regarding them as the mother of the coffee market. Consumers in China has always been attracted to the foreign lifestyle trends which disregard the local culture and following western patterns whether for food, clothes or entertainment. Furthermore, consumers purchasing the popular drinks and ignoring Heytea which conclude that it has a low reputation in China.

Opportunities

 These are regarded as issues of the external environment that Heytea can capture those breaks to increase its profitability while stabilizing customer loyalty and market base. Such opportunities include new markets and expanding product offerings.

Heytea has huge opportunities to expand into the USA market and enlarge it globally. The company can expand its network of stores in the United States to acquire greater market share. With 84 billion servings of tea Americans consuming per year providing a lucrative opportunity for Heytea to expand. Moreover, this opportunity push towards diversifying into newer consumer segments and increasing its footprint across the USA and globally.

Heytea likewise has the chance to extend its product offering to take on the full range of food and beverage. For instance, Starbucks, Costa coffee and McDonald's McCafé provides an extensive variety of beverages and food which Heytea can likewise expand its product offering. Thus, these retailers are targeting consumer segment which leads to more business opportunities for Heytea to exploit

Threats

Threat are factors that could negatively affect organizational performance if the company is unable to mitigate and adapt to the emerging threats in the market. Consequently, Hey tea faces intense competition from local coffee shops in America that offers more diversified and creative coffee products. For instance, Starbucks provides products according to the customer taste to satisfy their needs and wants. Similarly, Seattle's best coffee providing offers such as “buy one get one free” to attract customer attention and loyalty. Moreover, customers are willing to trust and choose a local brand over foreign brands to show its patriotism. In other words, Heytea faces tough challenges from local stores patronized by loyal clientele and consumers.

The economic collapse that hit the entire world is amongst the economic factors that Heytea has to face in America. This recession has negatively affected the profitability of all the companies in the states. One of the reasons was the terrorist attack on September 11, 2001, which brutally damaged the USA economy. Due to the recession, shoppers have turned to low priced alternatives decreasing sales opportunities for Heytea. Also increasing labor and operational costs are other economic threats which affect Heytea operations in America. Further, the intensifications of dairy product prices influence the company adversely leading to another threat to its profitability.

Similarly, Heytea must adhere to strict regulations and laws as America has regulatory pressures that the company must face. For instance, Heytea business process is scrutinized closely by the federal government. Other factors that affect profitability, is the tax policy and employment laws. As the decision of Heytea to invest in the USA implicates the issue of employment and immigration laws which requires knowledge to employment laws to build the structure in compliance with USA regulations. Thus, political factors have a deep impact on Heytea and their profitability

Lastly, socio-cultural factors have a significant impact on the profitability of Heytea. For instance, changing preferences of consumers disturbing the sales as Americans are used to normal beverages and may barely accept the cream cheese toppings. Thus, Heytea needs to do strategic analysis, focusing on millennial generation and its customer preferences to succeed.

Porters five forces

Furthermore, Porter ‘s five forces help to evaluate America external environment

It is essential to acknowledge the forces in America's environment or industry which might's affects the profitability of Heytea. Porter's five forces can help Heytea to analyze America's industry structure and lead to a profitable position in the industry.

The bargaining power of supplier is low which means supplier can't force Heytea to raise the price as tea are manufactured in-house. Heytea has few suppliers and most of the tea are manufactured in-house. Moreover, as supplier power is low leads to low supplier concentration which supplier can't exert on Heytea to raise the price, lowering quality or even reducing the availability of their products., Thus, supplier scale is small and industrial concentration is low.

the threat of new entrants in the retail industry in America is low. It takes quite some upfront investments to start a tea company in America. Furthermore, America has strong government regulation which requires Heytea to obtain licenses, insurances and employer identification number which is easy to obtain as Heytea is already in the industry and experience. However, proprietary technology might be an issue for Heytea. Proprietary technology is the combination of processes, tools, and systems that are the property of Heytea which needs to guard closely protected legally by patents and copyrights.

The threat of substitute products for Heytea is high which leads to less profit as they offer the same or similar product. This is because substitutes directly influence the prices of the products and customer demands. America has a high consumption of caffeine which has resulted in numerous tea and coffee shop. Besides, with the availability of substitutes products, From Starbucks to café grumpy, four barrel and blue bottles in the market which it's easy for customers to shift away as the substitutes are cheaper than Heytea products. Thus, Hey tea should provide both good ambiance and quality products.

The bargaining power of buyers in the 21st century is grown very high which pressures Heytea to lower the price and enrich the product quality. Since customers are price sensitive and have every little piece of information available at their fingertips, there is hardly any switching cost as numerous substitutes are available. Furthermore, with the prevalence of the internet, Americans are more prone to check prices and products from many retailers. Also, as customers are individuals whose purchases are small compared to the total revenue of Heytea which means it's easy for customers to move to other retailers. Thus, Heytea should invest to improve customers loyalty and their commitment by addressing consumer concerns.

The retail industry is one of the most competitive industry in America and has a high rivalry intensity. As Most of the competitors have been in the industry for a long time and are well recognized globally. Also, the retail industry has been saturated with many firms selling cheese tea such as little fluffy head, motto, happy lemon and gong cha which customers can shift away to other competitors, resulting in low customer loyalty. Moreover, retailing companies are aggressively competing based on price, service, quality and strategic alliance for maximizing customer satisfaction and strengthening customer loyalty resulted in High exit barrier cost. Highly competitive rivalry regarded as a threat because it weakens the profit prospects of Heytea.

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