Blacks Leisure Group Plc - Case Study Example

Black's Leisure Group Plc Business Black's leisure Group Plc is one of the leading retail outdoor and board wear group in United Kingdom. The company carries all its operations under two categories: The Outdoor Group and the Boardwear Division. The Outdoor Group comprises Millets and Blacks, the largest outdoor retailers in the UK, and Freespirit and Mambo, the leading retail chains in the newly emerging UK boardwear market. The Boardwear Division comprises the wholesale and retail arms of the O'Neill brand, one of the world's leading names in boardwear. The Group has the exclusive distribution rights to the brand for the UK. In brief, the company operates more than 450 stores under seven companies- owned and managed retail chains. 1. A macro-environmental and competitive audit The UK Boardwear market has been growing strongly in recent years and is estimated to be worth around 400m at retail prices. Blacks Leisure is market leader in this fast growing market segment through its O'Neill and Free Spirit businesses. The main competitors for Blacks Leisure Group is Debenhams, JJB Sports, Snow & Rock and Halfords. With an increase in the number of consumers of the broad wear market, the competition has been growing tremendously. A large number of new entrants are seen entering this market in the past few years. However, Blacks Leisure still continues to dominate the market with its large range of products and a large number of outlets. PEST Analysis: PEST analysis is concerned with the environmental influences on a business. The acronym stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business. Identifying PEST influences is a useful way of summarizing the external environment in which a business operates. Although the PEST analyses rely on past events and experience, it can be used as a forecast of the future (Wilson and Gilligan, 1998). Political factors The political environment is good. The government is stable and reliable, even if Britain fails to achieve total agreement with some EU policies from time to time. At present no EU directives are known which will have a direct effect on the UK sports or outdoor wear retail industry in the near future. Due to the EU membership a trend can be seen towards stricter environmental protection legislation. This may have a direct or indirect effect on Blacks Leisure Plc or its suppliers. Economic factors Looking at the economic environment, it is somewhat tricky since on one hand there is the strong sterling compared to the Euro. Euroland encourages imports and endeavors to hold domestic prices at an attractive level. But on the other hand it is difficult for UK to be competitive outside its boundaries because of the high pound sterling exchange rate against the Euro. As Blacks Leisure Group sells about 92% in the UK marketplace, this may currently only have a limited effect, but could be more important in the future when thinking globally. Social factors In the present world scenario it is being observed that the people retire earlier these days, and are working for shorter hours as well. Average working hours per week have decreased over the last 20 years. As a result people have more spare time. This means they have time to compare prices in the High Street and the quality of goods and services from retailers. As a result they are spending more time comparing different sellers. Another issue these days is the "Green environmental issues". A large number of people are getting concern over the environment and thus are getting in the depth of the production cycle of products. Blacks Leisure is taking different steps to assure people that they operate as an eco-friendly environment. Technological factors Another issue is the speed of technological transfers which also has an impact on the industry - it is not comparable with the fast growing internet business - but nevertheless it is important. New technology allows new products to be developed, e.g. Lycra, Supplex or other synthetic material. Existing materials can be produced quicker and cheaper. Adopting these technologies can be a decisive factor as to whether a company is ahead of his competitors or whether it lags behind. Competitive Audit: The competitive audit is one of the best ways of evaluating the marketing performance of a company and its competitors. The main competitors for Blacks Leisure Group is Debenhams, JJB Sports, Snow & Rock, Halfords. However, it is observed it faces a more severe competition from Halfords Plc. The main strength of Halford's lies in its competitive strategies which are not only well formulated but also effectively implemented which means it is well positioned to take advantage of current and future market opportunities. The company aims to maintain and leverage its core strengths and develop new opportunities for growth. The result of the competitive audit performed on Blacks Leisure's competitors could be represented in the following manner: ________________________________________________________________________ Halfords Debenhams JJB Sports ________________________________________________________________________ Product or Service 1. Customer acceptance 0 + + 2. Customer satisfaction in use 0 + + 3. Product quality level/innovation - 0 + 4. Adequacy of assortments + 5. Services provided 0 0 0 Place 1. Customer accessibility + + + 2. Selling areas + + + 3. Parking facilities + + + 4. Appearance of facility + 0 + Price 1. Comparative price levels 0 0 0 2. Number of price lines - 3. Consistency of price policies - - - 4. Credit policies and practices 0 Promotion 1. Promotional ability 0 + 0 2. Ethical standards 0 0 0 ________________________________________________________________________ In the above table, the minus sign (-), indicates that the business being evaluated Blacks Leisure's in this case, ranks below the competitor on the specific factor; a question mark (), indicates that the relative standing is unknown; a zero (0), indicates equal competitive standing; and finally the plus sign (+) indicates that the firm ranks above the competition in the specific factor. The above table represents where does Blacks Leisure stands in the market among its competitors. Further to this, it would be useful to assess the nature of the competition in the market in order to formulate strategies to resist the existing cut- throat competition. The most influential analytical model to be used for assessing the nature of competition in the market would be Michael Porter's Five Forces Model. Using this model, it would be possible to determine the industry attractiveness and long-run industry profitability. The five forces and their relevant description are as follows: Threat of new entrants: New entrants erode the profits earned by firms in an industry in two ways: first, by stealing business and dividing up market share among a greater number of firms; second, by decreasing market concentration, intensifying internal rivalry and reducing profit margins. A number of conditions may foster the threat of new entry as such low economies of scale, product homogeneity, low legal and government barriers and so on. Off late we have seen a large number of firms entering into this market, hence, Blacks Leisure's management should be attentive to these new entrants. The bargaining power of buyers: Buyer power is the capability of buyers, purchasing agents and customers of the industry to influence the price and the terms of the purchase. The bargaining power of buyers will be influenced by many factors as such the number of customers and the volume of their purchases, the number of businesses supplying the product and their size, switching costs and the availability of substitutes and so on. The bargaining power of suppliers: Businesses must obtain the resources that they need to carry out their activities from resource suppliers. Since suppliers wish to change the highest prices for their products a power struggle arises between organizations and their suppliers, the advantage accruing to the side which has more choices or less to lose if the relationship ends. Threat of substitutes: Competition depends on the extent to which products or services in one industry are replaceable by those from another industry. A threat of substitutes exists when a product's demand is affected by the price change of a substitute product. As more substitutes become available, the demand becomes more elastic since customers have more alternatives. This condition hampers a firm's ability to raise prices. Competitive rivalry: Competitive rivalry is how firms interact in pursuit of competitive advantage. If two or more companies heavily concentrate on very similar business segments, it could cause a competitive rivalry. Effective strategies needs to be formulated and implemented by Blacks leisure in order to resist the persisting competition. 2. An internal analysis of Blacks Leisure Group The internal analysis assesses relevant areas involving the product/service offering and the firm itself. Internal analysis can be accessed by taking a functional approach, first taking into consideration the organization's top management and its corporate - and business level objectives and strategies, and then moving on to analyze each of the company's functional level objectives and strategies. In the case of Black Leisure Group, the data was retrieved looking into the regional organizations and assessing their current and future areas of strength and weakness. The analysis was carried out on a regional basis, by looking the functionalities of the heads for specific activities. For instance, the regional chief of manufacturing is responsible for analyzing and interpreting the firm's manufacturing strength and weaknesses, first on a country-by-country basis by examining the situation in each of the firm's operating units before bringing the data together into a Europe-wide analysis. A regional perspective was thus developed for each of the major functional areas and fed into the overall analysis of the region. Special studies were undertaken in areas of particular sensitivity and uncertainty. The strategic analysis of the firm's internal environment remains underdeveloped. Analysis of the internal environment was, for the most part, concerned with issues of strategy implementation - the design of structure, control systems, and management style - all of which were viewed as consequences of the strategy adopted. On a positive note few of the most effective strategies formulated and implemented so far by Blacks Leisure Group are the sole factors of the growth in the firm. Blacks management team is focused on delivering additional sales growth and improving operating margins by: expansion of business by developing existing stores and opening new stores; effectively implementing trading and complementary marketing practices leveraging its brands into new product and service categories improving and increasing product sourcing channels increasing operational efficiency. In order to identify where does Blacks Leisure's Group Plc fits within the industry's value system, it is mandatory to identify and analyze its primary and support activities. Porter (1985) divides the internal activities of a company into primary activities and support activities. These are: Primary activities 1. Inbound logistics: It is concerned with receiving, storing and then distributing those inputs that are required by the company in producing its products and services. Blacks' adopts techniques like JIT which has resulted in the efficiency of its inbound logistics. 2. Outbound logistics: It deals with collection, storage and distribution of the final product to the company's customer. The same technique JIT applies here, and has been proving good for the firm. 3. Operations: Operational activities deal with the transformation of inputs into the final product. The smooth functioning of the operational activities is clearly evident by the growth of this firm. 4. Marketing and Sales: A large number of effective strategies have been formulated and implemented by Blacks Leisure; these have resulted in overall boosting the profit of the company. 5. Service: There is often a need to provide services like pre-installation or after-sales service before or after the sale of the product or service. Different measures are being taken to provide customer with the utmost satisfaction level. Support activities 1. Procurement: These activities relates to the purchasing of raw materials which are required for the company's operations. Black's leisure procuring department could be considered as the most efficient as they aim at obtaining highest quality goods at the lowest possible prices. 2. Human Resource Management: It deals with the workforce of the company. Needless to mention Black Leisure's HRM management is considered to be the best in the industry. 3. Technology development: This deals with technological innovation. training and knowledge that is crucial for most companies today in order to survive. 4. Firm infrastructure: Blacks has the largest number of outlets throughout the UK. It is to be noted that the ability of a firm to understand its own capabilities and the needs of customers is crucial for a competitive strategy to be successful. 3. SWOT Analysis: In order to keep constant eye on the market position, it is essential to carry out SWOT analysis. A SWOT analysis is a review of strengths, weaknesses, opportunities and threats for an organization. Strengths and weaknesses are internal - they are factors relating to the product, or to the firm itself. In contrast, opportunities and threats are external - they relate to factors in the market, or to what the competition is doing. Strengths: High quality and well-tested products Credibility and reputation in Europe Lean management structure Strong bargaining position with suppliers A balanced mix of defensive and growth markets. A strong track record of earnings growth and cash generation. Weaknesses: Underexposed and limited brand awareness at International Level. Lack of female consumers. Expense of products eliminates part of potential market. Opportunities: Halfords and Debenhams are preoccupied in other product lines. Introduction of quality management program to improve quality of products and decrease costs. Threats: Cut-throat competition exists in the market. Economic recession: lack of disposable income to spend on leisure wear REFERENCES: 1. Baker, Michael. (2000): Marketing Theory: A Student Text. Thomson Learning EMEA Publishers. UK. 2. Doyle, P (1998): Marketing Management and Strategy, 2nd edition, Financial Times Prentice Hall, Harlow 3. Hague, Paul (2002): Market Research - A Guide to Planning, Methodology and Research. Oxford Press. UK. 4. Lynch, R (1997): Corporate Strategy, Financial Times Management, London. 5. Stevens, Robert (2006): Market Opportunity Analysis: Text and cases. Haworth Press. 6. Taylor, James and Kinnear. Thomas (1996): Marketing Research - An Applied Approach. McGraw-Hill Publishers. 7. Wilson and Gilligan (1998), Strategic Marketing Management, 2nd edition, Butterworth Heinemann, Oxford. 8. www.jjbsports.com 9. www.blackleisure.co.uk 10. www.halfordscompany.com Read More