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1 Firearm Industry Digital Business Strategy Courtney Hanley American Public University BUSN336: Strategic Decision Making Dr. Franklin Orellana June 18, 2023

2 Firearm Industry Digital Business Strategy The first use of a firearm dates back to 1364, and since then the industry as a whole has grown exponentially. The firearm industry has evolved from purchases in person, to in person and online transactions. Due to the heightened demand for online services, digital business strategies have had to come a long way through the use of things like big data, artificial intelligence, ethical, cultural, political, and even legal elements. Although they have come this far, the use of these elements, models, and technology combined allows for companies to further grow their business within this digital age. Using Porter’s Five Forces Model, I have developed a digital business strategy for use within the firearm industry. Strategic Plan based on Porter’s Five Forces Model On average, businesses are less than 40% digitized, and so far, products and services along with marketing and distribution are the most digitized. Supply chains lag behind but when they go, the impact on performance often more dramatic and disruptive than the other forms of disruption (“Digital Strategy | McKinsey Digital,” 2022). The use of Porter’s Five Forces Model considers the level of competition, consumer power, customer loyalty, available substitutes, the threat of new entrants, and supply chain power. Porter’s model can be applied to any segment of the economy to understand the level of competition within the industry and enhance a company’s long-term profitability (The Investopedia Team, 2023). First you must consider competition within the industry. Ask yourself or your team questions like how large are the number of competitors and how easily will they be able to undercut your business? Think of it this way. You business is looking to maximize profits so you are looking to find the supplier who can give you the best deal on the best quality for the products you are looking for. The same idea applies to the customer. If the customer is able to get the exact same product at another gun retailer or

3 gun supplier for a cheaper price, who do you think they are going to shop with? Chances are, unless you have built that loyalty, the customer is going to choose saving a buck over giving you the business. How much competition is around you that will give the customer these options, or how many gun retailers are around you that will be able to undercut your prices? When competitive rivalry is high, the prices may have to be set at a competitive advantage to lure customers to your business over others. When the competitive rivalry is low, the business will be able to achieve higher prices or set higher prices that do not turn the customer away knowing they can get it cheaper down the street. Of course, you still must consider how ethical your prices are. Just because you are in a rural area with not many gun retailers doesn’t mean you should upcharge your products unfairly. The potential of new entrants is also a very real possibility. New companies, new stores, new businesses open daily. However, opening a gun company, whether it be manufacuting or retailing, is not as easy as starting other types of companies. The less time, less money, less hoops to jump through make for an easy entrant into the market. The gun industry is more time, more money, more hoops to jump though. There are so many factors that come into starting this type of business, and the legality of this industry is unlike any other. This is why this industry is strong and has a lesser potential for new entrants and allows these companies to charge more and are ultimately more successful than say, a retail clothing store. The next factor to consider is supply chain power. For example, how easy is it to get the parts or materials needed to build the guns, have them manufactured, or even get fully assembled ready to sell firearms? How easy is it to switch suppliers if you have an issue with your sight supplier, or if you need to change companies who are manufacturing your fireams or firearm parts? If it is not easy or would cost a lot off money to switch, this means that you would depend highly on those suppliers. As a result, the supplier is the one who holds the power and can drive pricing.

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4 Supply and demand, the easier it is to get a product and the higher supply there is, the lower the cost. The harder it is to get, and the higher the demand will drive prices up. This is where AI would really come in handy. You could use AI to help formulate how much of each supply you need, who has the highest stocks or purchase, and how much you need to sell to still make a profit. Supply chain power is a big factor, but what about consumer power? Consumer power is affected by how many buyers or customer a company has, how significant each customer is, and how much it would cost a company to find new customers for its output. A smaller and more powerful client base means that each customer has more power to negotiate for lower prices and better deals. A company that has many, smaller, independent customers will have an easier time charging higher prices to increase profitability. (The Investopedia Team, 2023). This is something to think about if you are a small business just starting out and even if you are a larger company with more customers. For example, a smaller company trying to break into the market with a smaller group of customers may have to charge lower prices to drive in customers. The larger company that has already made a name for itself will likely be able to charge higher prices due to having many customers who know and recognize their brand, and therefore will pay more for it. Think about a new sunglasses company coming into the market competing with Oakley. Last, substitute goods or services that can be used in the place of your companies is a threat. We will take Sturm, Ruger, & Co. into consideration for this threat within the firearm industry. Ruger manufatures rifles, pistols, revolvers and accessories. Think about this, is there any substitute for a firearm? There may be other weapons of choice for self defence, home protection, hunting, etc., but is there really anything that compares in the nature of being so related to firearms that it could actually be substituted? I think not. This helps the threat of subsitutes be extremely low, almost non-existent.

5 Risk & Mitigation Statistics over time have proven that the firearms industry does exceptionally well under two conditions: right before a presidential election and during a national crisis. This means it’s a good time to go into business in the firearms industry (Alton, 2020). The country as a whole is seeing a massive divide, and the need to arm yourself is becoming more prevalent than ever. There are many risks to starting a business in the firearm industry in today’s society. There has been talk about regulating firearms more than ever, there are mass shootings more than ever, and even the possibility of firearms being banned as a whole. These are things that need to be considered during risk management and being prepared for in advance. Unless the entire second amendment of the U.S. Consitution is dissolved, the firearm industry will continue to grow and become more profitable. It’s not just online gun retailers that benefit from this industry. The whole industry benefits, including manufacturers, distributors, and even stockholders (Alton, 2020). Other risks include the potential for stricter gun laws. The best part about this risk is that it is currently driving sales of firearms, accessories, and ammunition through the roof. Companies are also currently focusing more on marketing strategies than supply chain, potentially putting themselves at risk for missing critical changes to their business. First movers and fast followers have a significant advantage. Successful companies examine all areas of their business model looking for vulnerabilities and opportunities, and when they found opportunities, they moved boldly making changes to their business strategies to align with the digital market. (“Digital Strategy | McKinsey Digital,” 2022). Due to the “panic buying,” it is creating a shortage in areas of this industry which is another risk and causes customers to be disappointed with the lack of selection at retailers. Contengency plans during this time are a must as these are real problems we are currently facing. You have to remember that marketing your products is not

6 the entirety of your business. You must consider all risks form all angles and be willing to find ways to adapt and mitigate those risks. Conclusion One thing is for sure, no company will succeed standing still. Evolution over time is what keeps a company in business, and constantly looking within and making those needed changes are what will determine their success. Due to the heightened demand for online services, digital business strategies have had to come a long way through the use of things like big data, artificial intelligence, ethical, cultural, political, and even legal elements. We can look at the successes of brick and mortar store fronts and learn from them, but apply it in the digital age to create companies of the future.

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7 References Digital Strategy | McKinsey Digital. (2022). In mckinsey.com . https://www.mckinsey.com/capabilities/mckinsey-digital/how-we-help-clients/digital- strategy The Investopedia Team. (2023, March 31). Porter’s 5 Forces Explained and How to Use the Model . Investopedia. https://www.investopedia.com/terms/p/porter.asp Claflin, J. (2017, April 23). What Does AI mean for Firearm Marketing? Garrison Everest. https://www.garrisoneverest.com/firearms-marketing/what-does-ai-mean-for-firearm- marketing/ Alton, L. (2020, September 23). How to Use Big Data to Cash in on the Firearms Market - SmartData Collective . Https://Www.smartdatacollective.com/. https://www.smartdatacollective.com/how-to-use-big-data-to-cash-in-on-the-firearms- market/ Gun Industry Immunity . (n.d.). Giffords. https://giffords.org/lawcenter/gun-laws/policy-areas/other-laws-policies/gun-industry- immunity/ Roca, C. (2022, August 18). Digital Business | How to grow your business step by step . ThePower Business School. https://www.thepowermba.com/en/blog/how-to-build-a- digital-business-step-by-step Olmstead, L. (2022, May 5). What Is Digital Strategy? How to Create a Digital Roadmap (2023) . The Whatfix Blog | Drive Digital Adoption. https://whatfix.com/blog/digital- strategy/

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