PESTEL and 5 FORCES MODEL analysis regarding our entrepreneurship project (Crafts & Culture on tumbrl)

1. Macroeconomic Environment of craftsmen and artists’ world:
PESTEL ANALISYS
01/10/2015
- Lack of government incentives
- Conducting a business
nowadays is increasingly
costly due to taxes and lack of
governmental support
(especially in Europe)
- Huge number of craftsmen,
stable sector
- Often ability and working
hours are not rewarded by
decent return
- Need to generate revenues to
survive
- Unemployment (Europe)
Political Economic
- Online global shop
- Most craftsmen are not selling
online
- A lot of middle age/old
craftsmans do not use
internet: the technology is
present but not fully exploited.
- Customer attitude: mass
products vs new trends for
unique products
- Sociocultural trends: People
are now looking for
new/different things,
rediscovering/ valuing
originality
- People value additional and
creative activities, developing
ideas and passionsTechnological
Environmental
Social
Legal- Rising environmental
concerns lead people to
perceive handcraft as more
environmental friendly, also
because of spreading
knowledge of hand-made
processes.
- Craftsmen are often not
organized and protected by
associations. They tend to
work as isolated entities.
1LEP-CRAFTS AND CULTURE

2. Analysis about the intermediary industry between craftsmen and
customers :THE 5 FORCES MODEL
Five Forces Impact and Rating
Score from Score* to Implied rating
0,0 1,0Very Weak
1,1 2,0Weak
2,1 2,4Low medium
2,5 2,5Medium
2,6 3,0High medium
3,1 4,0Strong
4,1 5,0Very strong
Our aim is to use this rating to try to assess the relative importance of the five forces in
this industry. In particolar these forces are:
•COMPETITIVE RIVALRY
•THREAT OF SUBSTITUTE PRODUCTS
•THREAT OF NEW ENTRANTS
•BARGAINING POWER OF SUPPLIERS
•BARGAINING POWER OF BUYERS
2LEP-CRAFTS AND CULTURE
*The higher the score, the stronger the force: ceteris paribus, the industry will be less attractive.

3. LEP-CRAFTS AND CULTURE 3
•COMPETITIVE RIVALRY: Our major competitors will be online retailers for
handmade goods and other online platforms. These sites sell everything and sometimes
they are more similar to bazaars than to quality-assuring services. However they are
numerous, heterogeneous and they are not concentrated. The industry faces medium
fixed costs, low exit barriers and there are not switching costs for customers. On the
other hand we think the market for hand-made and art products is growing, opening new
spaces for competition. It is clear that our goal is to differentiate our service in order to
assure quality and to offer products whose provenience is guaranteed to lower this
competition and target a more specific segment.
Industry growth
Concentration
Differentiation
Switching costsFixed-Variable costs
Excess capacity
Exit barriers
Rivalry among existing firm
Industry growth 1,5
Concentration 4,0
Differentiation 3,0
Switching costs 4,5
Fixed-Variable costs 3,0
Excess capacity 2,5
Exit barriers 4,0
Avg 3,2
FF impact Strong

4. LEP-CRAFTS AND CULTURE 4
•THREAT OF SUBSTITUTE PRODUCTS: Evaluating this force, we thought that the
alternative to our business is directly purchasing at craftsmen’s laboratories or at art fairs.
This traditional way of buying is costly and time consuming. Our alternative is new, cheap
and the customer can save time and efforts. Most imporantly, the quality is assured by our
close relationships with the artists.
Relative price and
performance
Buyers' willingness
to switch
Cheap alternative
products
Threat of substitute products
Relative price and performance 2,0
Buyers' willingness to switch 2,0
Cheap alternative products 1,5
Avg 1,8
FF impact Weak

5. LEP-CRAFTS AND CULTURE 5
•THREAT OF NEW ENTRANTS: In the chosen industry reputation and relationships
are crucial and it is necessary to invest time and money to develop them in a proper way.
The key is being a first-mover (or almost), in order to develop the biggest network possible
(we are talking about a two-sided market) : if we do this, it is likely that first mover
advantage and learning curve will protect us. On the other hand it is true that we do not
possess legal barriers (excluding trademark) to prevent entrance and that the capital
requirement is low.
First mover
advantage
Learning curve
Relationship with
customer
Legal barriers
Capital
requirements
Threat of new entrants
First mover advantage 2,0
Learning curve 2,0
Relationship with customer 1,5
Legal barriers 4,0
Capital requirements 4,0
Avg 2,7
FF impact
High
medium

6. LEP-CRAFTS AND CULTURE 6
•BARGAINING POWER OF SUPPLIERS: For networking purposes it is
important to involve a high number of suppliers, in our case artists and craftsmen.
This will provide us with a double advantage: the network effect as well as a lower
bargaining power of suppliers in the end. In fact, if we network with high numbers of
individuals, we will have more power attracting them.
In conclusion, we have also to remember that for this type of service the quality of
goods is crucial, and this will surely increase suppliers’ bargaining power.
The final outcome lies on the middle.
Switching costs
Backward
integration threath
Importance of
product for quality
Numbers of
suppliers
Volume per
suplliers
Bargaining power of suppliers
Switching costs 4,0
Backward integration threath 1,5
Importance of product for quality 4,5
Numbers of suppliers 2,0
Volume per suplliers 1,5
Avg 2,7
FF impact
High
medium

7. LEP-CRAFTS AND CULTURE 7
•BARGAINING POWER OF BUYERS: We expect customers to be numerous and
fragmented. As a consequence their bargaining power will be very low. Even if we start
selling to hotels, it is unlikely that there will not be a big buyer that tries to influence the
price or the services offered. For this reason this should be the weakest force in our
analysis. The only drawback is the lack of switching costs they face.
Switching costs
Backward
integtration threath
Numbers of buyers
Volume per buyer
Bargaining power of buyers
Switching costs 4,0
Backward integtration threath 1,0
Numbers of buyers 1,0
Volume per buyer 2,0
Avg 2,0
FF impact Weak

8. LEP-CRAFTS AND CULTURE 8
FINAL ASSESMENT
Five forces
Degree of rivalry 3,2
New entrants 2,7
Substitutes 1,8
Buyer power 1,9
Supplier power 2,6
Avg 2,4
FF impact Low medium
The result of this study underlines how the forces on this industry are low-medium,
meaning that it could be attractive to exploit the actual circumstances with an
original idea. The real challenge is finding something different from the actual
rivals, that represent the most fierce force.