The Challenges Faced by the King of Shaves - Assignment Example

? Seminar Word Count: (2,208) King of Shaves Executive Summary According to the report findings, the global market is characterised by intense competition. As such organisations need to analyse and make strategic decisions in order to survive the threat of competition and thrive in the market. They also need to perform stakeholder analysis so that they can determine the effect of the company’s actions on various stakeholders as well as the effect stakeholders on the operation of the company. The king of Shaves operates in a competitive industry where there are more established and stronger rivals like Schick and Gillette. The paper outlines the challenges faced by the King of Shaves in the industry using Porter’s five force model and also assesses the generic strategies that the company applies in its operation. Table of Contents 1.0 Introduction 5 2.0 Findings 5 2.1 Porter’s Five Forces Model 5 2.1.1 Rivalry among Current Competitors 5 2.1.2 Threat of New Entrants 5 2.1.3 Bargaining Power of Buyers 5 2.1.4 Bargaining Power of Suppliers 6 2.1.5 Threat of Substitutes 6 2.2 Analysis of the Challenges Facing King of Shaves Using Porter’s Five Forces Model 6 2.2.1 Rivalry in the Market 6 2.2.2 Threat of New Entrants 6 2.2.3 Bargaining Power of Buyers 6 2.2.4 Bargaining Power of Suppliers 7 2.2.5 Threat of Substitutes 7 2.3 Opportunities and threats for King of Shaves 7 2.3.1 Opportunities 7 2.3.2 Threats 8 2.4 Strategy of King of Shaves 8 2.4.1 Cost Leadership 8 2.4.2 Differentiation Strategy 8 2.5 The Concept of Stakeholder Analysis 9 2.6 King of Shaves’ Stakeholder Framework 9 2.6.1 Stakeholder Framework 9 2.6.2 Mapping Stakeholder Power and Interest 9 3.0 Conclusion 10 1.0 Introduction The King of Shaves is a top UK manufacturer of shaving and skincare products that was founded in 1993 by Will King with a seed capital of ?15,000. King formed the company with his partner Hiten Dayal, under umbrella firm, Knowledge & Merchandising Inc. Since its establishment, the King of Shaves as grown as a brand and overtaken some of the most critical players in the industry. The company is now second to Gillette in the UK market and is picking in the U.S. market as well as other global markets such as China and India among others. However, the company faces strong opposition from its competitors in its growth focus. This report analyses The King of Shaves’ operation industry using Porter’s five force model and also proceed to identify opportunities, strategies of the company and closes stakeholder analysis. 2.0 Findings 2.1 Porter’s Five Forces Model Michael Porter developed a framework that assists business managers in their strategic decision-making process. Porter’s Five Competitive Forces Model is crucial for exploring the structure of an industry in which an organisation operates. Consequently, managers use the model to establish competitive edge over their market rivals (Ahlstrom & Bruton 2010). Porter’s five forces that drive competition in an industry include: 2.1.1 Rivalry among Current Competitors The extent of rivalry among companies varies from one industry to another. These variations in industry competition levels are of particular interest to strategic analyst. An industry with low level of competition is perceived as disciplined. Ruthless competition may prove detrimental to firms within an industry. 2.1.2 Threat of New Entrants The likelihood of new players getting into the industry also affects the level of competition. An industry with high level of barriers discourages new market participants from invading the market and exhibit attractive profit levels for existing firms. On the other hand, an industry with low entry barriers or free entry encourages new entries and exhibits low profitability (Ahlstrom & Bruton 2010). 2.1.3 Bargaining Power of Buyers The bargaining power of buyers refers to the ability of buyers to influence an industry. In an industry where the buyer power is strong, the buyers have great control of pricing of products whereas weak buyer power exerts insignificant influence of product pricing. 2.1.4 Bargaining Power of Suppliers A production industry is characterised by buyer-supplier relationships within an industry. Powerful suppliers have the capacity to exert pressure on producing industry by increasing the prices of raw materials in order to increase their share of industry profits. 2.1.5 Threat of Substitutes With reference to Porter’s five force model, substitutes are products in other industries (Hill & Jones 2009). The existence of a close substitute product in an industry limits a company’s ability to raise prices. The rivalry prompted by threat of substitute is associated with products from other industries. The threat of substitutes affects an industry by creating price competition. 2.2 Analysis of the Challenges Facing King of Shaves Using Porter’s Five Forces Model 2.2.1 Rivalry in the Market There are many competing firms, such as Gillette and Schick, in the industry in which the King of Shaves operates. The UK Azor 5 launch faces stiff opposition from counter-product launch by both Schick and Gillette. Profitability is likely to be low from intense competition in the industry. Schick is planning for a ?20m product launch for their new Hydro razor, which is its biggest UK campaign in history. Further, King of Shaves also has to contend with Gillette’s spending on its Fusion ProGlide, which would exceed Schick’s product launch expenditure. King of Shaves is in no place near the two big rivals in terms of spending, but intends to face off its rivals through its cost advantage. As such, King of Shaves faces a great tussle in launching its new products and ensuring that they perform better than the products of major competitors, who are more established and have significant market shares. 2.2.2 Threat of New Entrants The blade and wet shave industry in which King of Shaves operates exhibits low threat of new entrants. There industry is associated with high cost of entry, which discourages new participants from invading the market. Gillette is a popular brand in the industry. Similarly, Schick is also well known for manufacturing razors and blades. The products in the industry are patented, which gives the companies monopoly power in the industry. 2.2.3 Bargaining Power of Buyers The buyers in the industry are fragmented. The buyers can be divided into two categories: professional and recreational buyers. The industry exhibits weak buyer power. Gillette had always been the main determiner of the prices it charges for the wet Shaves. Consumers had no option but to purchase in bulk so as to avoid the high cost charged by Gillette and Schick. Where producers are the price setters, then the market is characterised by weak buyer power as they have no significant influence over the prices that producers charge for their products. 2.2.4 Bargaining Power of Suppliers The King of Shaves enjoys a perfect relationship with its suppliers and thus faces no threat of supplier power, which could force backward integration. 2.2.5 Threat of Substitutes The King of Shaves operates in an industry that currently faces high threat of substitutes. To begin with, wet shave of the firm can be substituted with razors and blades. Also, classic barber shops provide perfect alternative for razors and wet shaves for men. The main threat to the company’s razor is the upgraded razors of competitors. For example, Gillette offers five-blade razor while the King of Shaves offers a razor with four blades. Therefore, King of Shaves faces the challenge of pricing its products. Increasing the price of its wet shaving or razor might make consumers to switch to other alternative products. 2.3 Opportunities and threats for King of Shaves 2.3.1 Opportunities 2.3.1.1 Availability of New Markets The King of Shaves has the opportunity to exploit new markets. The company has many new markets into which it can to launch products. Through our cost advantage, King of Shaves can successfully penetrate in new markets and gain significant market share in the face of major rivals like Gillette and Schick, which charge expensively for their products. There is the UK market, US market to exploit. Also, the company is strategizing to launch in India and China among other global markets available for the firm. The company has the opportunity to exploit strategic partnerships with relevant firms such as Remington in its pursuit of new markets. 2.3.1.2 Use of Walgreen and CVS The King of Shaves has been selling its shaving gels via target supermarkets and pharmacy chain CVS, while selling its razors in Duane Reade drug stores on United States’ east coast. Duane Reade has only 300 stores, while the Walgreen combined with CVS chains have 17,000 stores. Therefore, King of Shaves has a big opportunity of increasing its sales by shifting major sales of its razors through Walgreen and CVS chains, which have almost three times as many stores as Duane Reade. Further, the company has the opportunity to make good use of Wal-Mart, in which it has not established a significant presence. Wal-Mart is a popular global brand that has millions of customers. Through using the chain store, King of Shaves is likely to increase its market share and boost its profitability. 2.3.2 Threats 2.3.2.1 Threat of Competition The King of Shaves operates in an extremely competitive industry. The company faces stiff competition from its market rivals, Gillette and Schick, which are much more established and have stronger financial base. The King of Shaves thus faces the risk of being thrown out of the market by the two giants besides smaller competitors in the market. Cutthroat competition could lead the firm to exit the market of to face a likely buyout by rival firms. 2.3.2.2 Threat of Substitutes The company’s shaving gels and razors faces the threat of substitution for other alternative products. For instance, the battery powered razors face stiff competition from electric powered shaving machines. Also, the company’s gels and razors face high competition from the products of competitors. The UK’s Azor faces off with Gillette’s Fusion ProGlide. 2.4 Strategy of King of Shaves Michael Porter in 1985 provided generic strategies in his book, Competitive Advantage: Creating and Sustaining Superior Performance. He labeled these generic strategies as cost leadership, differentiation and focus. Porter further divided focus into differentiation focus and cost focus. King of Shaves utilizes differentiation and cost leadership strategy (Schermerhorn 2010). 2.4.1 Cost Leadership Cost leadership approach entails being a leader as concerns cost in an industry (Ovidiu, Anca, Razvan & Catalina 2010). King of Shaves provides low cost razors and gels in its industry. In the launch of new products by Gillette, Schick and King of Shaves, the King of shaves intends to outdo its rivals by maintaining its low cost advantage over it competitors. Gillette offers a Fusion ProGlide handle at ?12.99 for a handle, battery and a blade, which is quite expensive. Gillette’s single Fusion ProGlide cartridge costs ?2.83 while our Azor 5 promotional charge is ?1 and then ?5.99 for six in the post launch period, while six Gillette’s Fusion ProGlide will cost ?16.99. 2.4.2 Differentiation Strategy Differentiation entails making a company’s products unique and more attractive than those of competitors (Porter 2008). The King of Shaves’ approach is to develop and supply the market with unique products. The reason that King gives for taking five years before launching Azor 5 was to ensure that it is unique and better than the alternatives offered by competitors. The company had to utilize a technology that uses no pivot, which is the main technology used and patented by competitors. 2.5 The Concept of Stakeholder Analysis The concept of stakeholder analysis refers to the identification of a person, organisation or groups who have high probability of affecting or being affected by a proposal or an action and categorizing them in accordance with their impact on the action or proposal or the impact of the proposal or action on them (Andriof 2002). The process involves the analysis of attitudes of various stakeholders with regards to a particular proposal or project. It is aimed at developing cohesion between stakeholders of a company and the project team so that the proposed project of the organisation can yield desirable results (Friedman & Miles 2006). 2.6 King of Shaves’ Stakeholder Framework 2.6.1 Stakeholder Framework Figure 1: The stakeholder model of the firm, from Donald and Preston (1995) Based on the above model, the following diagram (diagram 2) represents a map of stakeholders of the King of Shaves. Figure 2: The Stakeholder Model of King of Shaves 2.6.2 Mapping Stakeholder Power and Interest Stakeholders with medium to high power and interest are critical for the success of the company. They have the capacity and interest to influence the outcome. High interest low influence group can form also have considerable power through formation of alliances. High power low interest group may be influenced by the high interest low power group to form a more powerful alliance. Low power, low interest stakeholders are those that neither have power nor interest in the operation of the company and should be given minimal management effort. Government Politicians Customers CEO (Will King) private equity backers Trading partners Trade unions communities Employees Employees The media suppliers Figure3: Stakeholder interest vs. power map. 3.0 Conclusion Strategic decision making is crucial for every organisation in the modern market characterised by intense competition. There are numerous strategic decision-making tools that are available for managers to making critical decisions for their organisations. Michael Porter provides one of the most popular strategic management tools, the five force model, for managers to analyse the industries in which their organisations operate. Organisations such as King of Shaves, can utilize the model to assess the nature of industry in which they operate and develop necessary and relevant approaches that can guarantee their success in the market. Porter also provided generic competitive strategies that organisations can use to increase their market share and profitability in an industry. These strategies include cost leadership, differentiation and focus strategies. The King of Shaves uses differentiation and cost leadership strategies to increase its customer base. The report also covered stakeholder analysis, which is crucial for the success of every project or organisation. Bibliography Ahlstrom, D & Bruton, GD 2010, “International management: strategy and culture in the emerging world,” South-Western Cengage Learning, Mason, OH. Andriof, J 2002, “Unfolding stakeholder thinking [Vol. 1], Theory, responsibility and engagement,” Greenleaf, Sheffield. Donaldson, T & Preston, LE 1995, “The Stakeholder Theory of the Corporation: Concepts, Evidence and Implications.” The Academy of Management Review, Vol.20, no.1, p.65-91 Friedman, AL & Miles, S 2006, “Stakeholders: theory and practice,” Oxford University Press, Oxford. Hill, CWL & Jones, GR 2009, “Strategic management theory: an integrated approach, 9th Ed,” Houghton Mifflin, Boston, MA. Ovidiu, NB, Anca, IB, Razvan, LN & Catalina SM 2010, “The Use of Michael Porter’s Generic Strategies in the Romanian Hotel Industry,” International Journal of Trade, Economics and Finance, Vol. 1, No. 2, pp. 173-178. Porter, ME 2008, “Competitive Strategy: Techniques for Analyzing Industries and Competitors,” Simon and Schuster, New York, NY. Schermerhorn, JR 2010, “Exploring management, 2nd Ed” John Wiley, Hoboken, N.J. Read More