Module 4MBS450

Theory and Practice of Business

Seminar Tutor: Nicky Erskine

Alicja Majewska – 11960290

BA International Business with French, Year

“We should have gone to Specsavers”

Analysis of the optical industry.

12 December 2008

Word count: 2865

(Excluding pages 1, 2, 3, tables, graphs, references and appendices)

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Table of Contents
1. Specsavers value chain..............................................................................................................2

1.1 Logistic:....................................................................................................................................4

1.2 Operation.................................................................................................................................4

1.3 Outbound logistics...................................................................................................................4

1.4 Marketing & Sale.....................................................................................................................4

1.5 Service:....................................................................................................................................5

2. Marco Analysis PESTLE..................................................................................................................5

2.1. Political...................................................................................................................................5

2.2 Economic.................................................................................................................................6

2.3 Sociological..............................................................................................................................6

2.4 Technological...........................................................................................................................8

2.5 Legal.........................................................................................................................................8

2.6 Environmental.........................................................................................................................9

3. SWOT – Specsavers case................................................................................................................9

3.1 Opportunities.........................................................................................................................11

3.2 Threats...................................................................................................................................11

4. Porters Five Forces......................................................................................................................11

4.1. Bargaining power of the customers:.....................................................................................12

4.2 Bargaining power of suppliers:..............................................................................................12

4.3 Competitive rivalry within the industry:................................................................................12

4.4 Threats of new entrants.........................................................................................................12

4.5 Threats of substitute..............................................................................................................13

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 5. Optical market penetration.........................................................................................................13

Bibliography:....................................................................................................................................15

1. Specsavers value chain:

Spacesavers - leading UK eye care retailer has been on the market from 1984. To be able to
compete with other optician retailers their value chain brings in each aspect outstanding
product, service and affordable price.

I will present a value chain on the scheme with future explanation:

Logistics:

 Electronically stock control with Fujitsu Sctiemens IT network

 Home delivery contact lenses

Operation:

 More than 2,000 affordable fashionable eye care for everyone

 Their own range of lenses

Outbound logistics:

 Free eye test

 2 for 1 promotions

Marketing & Sale:

 Annual spend of £20m to promote the brand

 Introducing in all glasses high quality Pentax lenses

Service:

 Direct mail to the customers about the eye examination appointment

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  Warranties up to 2 years (depends of glasses design)

Fig.1: Specsavers value chain

1.1 Logistic:

With the 1000th store opened in January in Holland, the company spread their wings into
other European countries as England, Spain, Sweden, Norway and Denmark. From 2007
the store was open overseas in Australia. To be able to control their stock online the Fujitsu
Siemens sight the Area Network agreement for commission, installing, managing,
supporting and eventual decommissioning of IT components wherever the optical retailer
may establish a presence in the world .The main thought of introducing this value was to
lower the IT cost and in monitoring the online sales. IT Service (2008).

1.2 Operation:

Specsavers has lots of products from different manufactories, designers include: Moonsoon,
FcUK vision, Missoni. As an operation value the glasses case is offer at the lower price if
purchase with the glasses or otherwise the free soft case is furnished to the customer.

1.3 Outbound logistics:

In Specsavers case their marketing role is to bring a customer to the product. The successful
mission was a free eye test offer on prescription with no “to buy” obligation. The customer’s
service value however wasn’t a sure key to gain the customers as they had a free choice
option of optical retailer afterwards. For the companies looking to expand in other market,
Europe is a natural extension. Some of the European countries, Hungary, Poland, offer a
cheaper goods manufacturing with the same high standards. Mintel (1999).

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1.4 Marketing & Sale:

With the law deregulated professionals included opticians opted by British government 27
years ago (Insight 2006 ), allowing them to advertise their products and service for the first
time, Douglas and Mary Perkins- creators of Specsavers Company seeing the opportunity
their open their first store in Bristol. Nowadays the advertising is much more advance and
easy to access however with the competition is it much harder to be seen. Specsavers opt
for their loyal customers and new comers with offers 2 for 1, affordable price for all
backgrounds.

1.5 Service:

With product maintenance Specsavers ensure that latest designs are available in the store,
and the warranties policy is open up to 6 months. (Specsavers 2008). Specsavers is the
family value company. They loyalty for the customers and treatment every buyer personally
gave them a leading place in most chosen retailers in UK.

2. Marco Analysis PESTLE

This analysis focuses on the optical industry, indicating the external factors influencing the
market.

2.1. Political

 Privatisation:

The most eye care branches are privatised and independent from political decision.
Nevertheless the link between government and optical industry has place where some of
them offer NHS eye check control and accept NHS prescription.

According to Matt Olczak from the leading UK Centre for research in the economics and law
of competition policy (Focus on opticians shows chain store pricing policies can save
independents 2006), since deregulation of the industry in the 1980s, introduced by Margaret

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Thatcher the growth of the chain store retailers has been rapid with freelance advertising
and set up prices by retailers themselves. Between 1988 and 1991, chain stores' market
share increased from 46 to 75 per cent. Today the optical retailers are selling glasses every
6 seconds.

This law ended the monopoly of optometrists over the supply of spectacles, and allows eye
care to be sold by independent institution as opticians or even supermarkets.

 War and political instability:

War for the optical industry is a time of development. The good example of it is the period of
Great World War 2 with the supply for army and navy.Thomas Artin, Deputy Director of
Instrument Production, says that the productivity of the whole industry was vary of the war
time expansion but its productive capacity at the maximum was no less than four times that
of the pre- war years. According to labours figures as 180, 00 as compared with 30, 00 in
1939.( Journal of Scientific Instruments, February 1946)

Today the help from government is pointed to African countries where the charities offer free
glasses often recycled from Developed countries.

2.2 Economic

 Recession

With the fear of recession hitting Europe we could expect the slowdown of the economy and
some sectors. However the optical industry is placed in the strong position in favours of
people needed glasses and contact lenses. Sales decreased may occur the expensive
deign frames. However with the Christmas and sales period the power of the customer
spending is encouraged by opticians by attractive offers.

In the other hand with Internet prices directly from the manufacturers can stole the
customers off the high street , the people trust more the opticians and prefer to buy them
from the store than online.

Last week the Bank of England shaved 0.25% from interest rates in an attempt to inject
some life into the sector and therefore increase sale of goods. (The Independent, 2008)

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2.3 Sociological

 Demographic

Fig.1

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With demographical survey on eye test in November made by Mintel more than 50% of
adults wear glasses or contact lenses. (Fig.1).

 Life style and fashion:

The factors that lead to this result are not only the health issue but also the life style and
fashion. With huge range of designers frames produced by different manufacturers opt for
gain the customers that don’t need the eye treatment but use the glasses as the
accessories. As well the contact lenses with eye colour changing hit the market pointed to
young people.

The life style is also a good indicator for optical industry in new idea creation. With more
people spending time in front of computer the new range of glasses were introduced to
protect eyes from CVS known as computer vision syndrome cause eyestrain, headaches,
dry eyes, burning, and blurred vision.(What are Protective Computer Glasses?, Wisegeek)

2.4 Technological

 Internet availability:

The availability of internet purchasing gives the power to optical industry of price command.
Some manufacturers have rights to sell their good for the warehouse price on the internet,
which lives high street retailers in customer gain competition. Optical industry opt for online
selling, however the precise eye test and glasses choice should be made in the stores.

 Laser treatment:

The innovation in eye treatment came with laser surgery more and more popular nowadays.
However this alternative has its price and is it not suitable for everyone. It is the most
expensive from of eye care staring from £500 per eye (BBC News: Eye laser surgery, 2002)
and it s mostly recommended for narrow group of people. The glasses industry still has the
more power over the eye laser surgery.

2.5 Legal

 Legislation:

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According to Mintel(2002) the legislation for contact lenses is slightly more restrictive than
spectacles.” In the last five years the direct supply of contact lenses has become an issue in
the UK. The GOC ruling states that opticians may only supply contact lenses up to the expiry
date of the prescription. This is usually a 12-month period from the prescription date. This
way, the legislation ensures that eyes have been examined for eye health as well as for
changes in eyesight.”(ibid). Strength

2.6 Environmental

 Recycling:

With the recycling issue for optical industry the program of collecting used, non wanted,
broken spectacles was introduced for third world countries. Charities with help from
government encourage the optical industry to join the program.

3. SWOT – Specsavers case

Presentation of SWOT for Specsavers Company will be based on Opportunities and

Threads presented in the table below.

The Company started its business in 80 where with new law of deregulation optical
profession they were free to introduce their service directly to the customers.

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 Opportunity
 The growing number of consumers
aged 45 and over needed an eye
treatment
 Fashion advertisement for branded
spectacles affordable for everyone
 Developing contact with colour eye
changing lenses to attract customers
Threats
 Lack of awareness about eye health
and the importance of eye checks.
 Hidden expensive costs of service
 Intensifying competition on prices,
especially from supermarkets and the
Internet.

Fig. 2

Segmentation is one of the factors where Specsavers will benefit from it now and in the
future. In approaching different group by their needs and offering suitable choice for them
will increase the sales.

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Fig 3.

3.1 Opportunities

 Segmentation:

With the intelligent segmentation Specsavers increased they market by demographic, life
style and needs criteria (Fig. 3). Better understanding of these key points reduces the cost of
marketing and gives better matching of the product to the customer.

 New technology

In the present with long life ageing population Specsavers needs to focus on existing
customers by offering them new innovations and solution with eye treatments. One of them
is new lenses, much more comfortable to wear or for some of the patients laser solution. The
idea of sending lenses by mail has a significant growth in the company with slightly cheaper
price than in store.

3.2 Threats

 Sight health awareness:

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The optical market is missing potential customers “blind” to health benefits of eye check
importance in the early stage of the life to able to prevent future growth of sight problems.
Specsavers response for this is an advertising campaign for regular eye check. Mintel(2008).

 Hidden costs

The factor that holds some people back from experience an optical good is a hidden cost of
treatments. As well the internet option is likely choose to purchase the base spectacles for
reading which are available without prescription.

4. Porters Five Forces

The Porter theory of five forces identifies the competitive forces that shape every industry
and every market. Companies should include those forces to enhance their position.

4.1. Bargaining power of the customers:

The power of customers can put the firm under pressure and affects the customer's
sensitivity to price changes. With six out of the adult wearing spectacles Mintel(2002) the UK
population needed eye care is on the way of expansion. Women tend to have even more
than one pair. With customer free choice of spectacles retailer after eye check in the store
with no obligation of purchase leaves the market struggling to keep in customers. Discount
and offer is a must, as well as loyalty service to beat the high street competition. Customers
are no longer satisfied with only obtaining product and service. With the internet comparison
sites they often choose the cheapest option. As well hidden prices of service are a
disappoint effect of optical market for buyers.

4.2 Bargaining power of suppliers:

The industry of spectacles frames in UK has been concentrating, still there are more than
160 suppliers with ten leading brand. To be able to sold them companies needs to buy the
licence and therefore pay much higher price for designer goods. Mintel (2008).The leading
market of spectacles lenses in UK belongs to French corporation Ellisor.Luxoticca is the
dominant if frame making, the house brand included design of Ray- Ban.The lenses are
made in majority by those three suppliers : including Johnson & Johnson, Bausch & Lomb
and Ciba Vision. “More optical brands continue to enter the market and are mainly
manufactured under licence and distributed via a large distributor”(ibid).

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4.3 Competitive rivalry within the industry:

The optical market is differentiated and segmented. The competitive rivalry is high within the
sector of the industry. Head in head competition in UK high street market is link between the
most powerful companies: Specsavers, Super Vision, Boots, Optical Express. All of them
have adapted almost identical pricing, customer service, advertising, promotion policies..

4.4 Threat of new entrants

Cost of the entry on the market isn’t very expensive- the problem is to gain customers as a
new company. With low- cost of online optical market the big chains include Specsavers
developed the IT technology on their website, however the comparison sites offers cheapest
deals.

4.5 Threats of substitute

Furthermore, laser correction has become an affordable option compared with buying
contact lenses or spectacles over two or three years. Mintel (2008). This option should be
consider, however not all sight problems can be reduced by laser treatment. For the moment
only this innovation can replace wearing spectacles or lenses.

5. Optical market penetration

Market penetration is a key issue in assessing the growth prospects for an industry.

 Demographical

Actually the market for spectacles is mature in the UK at present (Mintel1999), although will
grow slowly as the population ages. However there is a switch and new development direct
for contact lenses new generation- which you can wear it even during night in case of
emergency without side effects.

 Quality and branding

The growth of optical market is placed in segmentation and offers the best product for the
difference range of people from age to profession. For young people the glasses with strong

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frames and non scratches spectacles lenses for example. As well introduction of designer
glasses affordable for everyone attract the buyers.

 Cost supply

The introduction of mailing the lenses reducing cost form big chain retailers on the net apply
to Specsavers and online bargains to attract new customers. With more than 20 design
frames Specsavers put some of the brand in affordable price and offer “buy one get one
free”. They first introduced the monthly direct debit payment for full range of contact lenses.

 Abroad expansion

Specsavers has 270 stores opened in Europe plus new created in Australia. The
international connection gives them the power of taking care of their customers even abroad.
Stores in Europe are based in Denmark, Spain, Holland, Norway, Rep. of Ireland, Finland,
Sweden and United Kingdom and the same high standard policy is kept.

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Bibliography:

Brand Republic (2007) Superbrands case studies – Specsavers [online] Available from:
http://www.brandrepublic.com/Industry/RetailWholesale/News/631530/Superbrands-case-
studies---Specsavers/ [Accessed 10/12/2008].

Insight, Australian Newspaper (2006) Retail Giant Specsavers coming, first as a supplier,
practice later.

ESRC Society today (2006) Focus on opticians shows chain store pricing policies can
save independents. [online] Available from:
http://www.esrcsocietytoday.ac.uk/ESRCInfoCentre/PO/releases/2006/november/pricing.asp
x?ComponentId=17199&SourcePageId=13404 [Accessed 10/12/2008].

Journal of Scientific Instruments (vol. 23, February 1946, No 2), The British Optical Industry
in the War.

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Wise Geek (2008) What are Protective Computer Glasses? [online] Available from:
http://www.wisegeek.com/what-are-protective-computer-glasses.htm) [Accessed
10/12/2008].

BBC News (2002) Eye laser surgery [online] Available from:

http://news.bbc.co.uk/1/hi/health/2458511.stm [Accessed 10/12/2008].

Mintel: Optical goods and eyecare (May 2008) Strengths and Weaknesses in the Market
[online] Available from:
http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&&type=RCItem&
sort=relevant&mode=accessible&list=search_results/display/id=261946/display/id=336159)
[Accessed 10/12/2008]

Mintel: Optical goods and eyecare (May 2008) Companies and products [online] Available
from:http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=
261946/display/id=336164#hit1 [Accessed 10/12/2008]

Mintel: Opticians (December 1999) The Future [online] Available from:

http://academic.mintel.com/sinatra/oxygen_academic//display/&id=1583/display/id=80320/di
splay/id=80332?select_section=80331 [Accessed 10/12/2008]

Computer weekly (2008) Specsavers signs Fujitsu Siemens Computers for global expansion
[online] Available from:
http://www.computerweekly.com/Articles/2008/10/13/232626/specsavers-signs-fujitsu-
siemens-computers-for-global.htm [Accessed 10/12/2008]

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