Organizational Performance and Analysis of Domayne Company - Case Study Example

CHANNEL Dyad ANALYSIS REPORT Domayne – Company Overview Domayne is one of the brand s of Harvey Norman Holdings Ltd, one of the major retailers in Australia. In fact the company activates in many retailing sectors: ‘Electrical, Computers & Communications, Small Appliances, Furniture, Bedding & Manchester, Home Improvements, Lighting and Carpet & Flooring’ [1]. The company has several stores across Australia but also in neighbouring countries like New Zealand and Malaysia. The company has been also expanded in Europe with a store in Slovenia and another one in Ireland. For 2007 the company sales revenues have been estimated [1] approximately to 1,329,431 compared to the amount of 1,103,902 (2006). This increase in the company’s profits has led to the increase of its share price (38.49 in 2007 compared to 21.70 of 2006). The above achievements are the result of the firm’s expansion through franchising. More specifically, in accordance with the Chairman’s report [1] 2007 has been an important year for the business characterized by the continuous expansion of its brand names (Harvey Norman, Domayne and Joyce Mayne). More specifically, it has been estimated that [1] ‘twelve (12) new Harvey Norman, one (1) new Domayne and ten (10) new Joy franchised complexes commenced trading’. Domayne - Supply chain management It should be noticed here that Domayne (as a brand) was launched by the firm in 1999 and offers currently a ‘wide range of furniture, bedding, computer and electrical products’ [1]. After being launched by Harvey Norman Holdings Ltd, Domayne improved its position in its market. However, this strategic decision had also severe consequences to all the firm’s existed practiced. Initially, strategic management practices followed until then had to change in order to be adapted to the culture of Harvey Norman Holdings Ltd. In this context, it is noticed by Macrae et al. (1997, 64) that ‘brand managers face many challenges (including questions of brand strength, world-class culture, “glocal” branding, seeded marketing channels, “service smart” integration, brand architecture and brand organizing)’. Among the issues reviewed by the firm’s managers has been that of its relations with its suppliers. Regarding this issue it should be noticed that the increase in the firm’s profits (as resulted from the expansion described above) has been based partially in the improvement of the firm’s communication with its suppliers. Current paper focuses on the relationship of the firm’s brand, Domayne, with its suppliers especially regarding one of its sectors, electronics. In this context, it should be noticed that Domayne offers a wide range of electronics including small appliances, audio visual and home appliances. Another issue that should be mentioned is that the company’s suppliers in the sector of electronics are many, a fact that indicates the firm’s effort to keep its relation with its suppliers free from pressure (less suppliers can lead a stronger pressure on the firm in accordance with the view of Porter’s five forces, see Figure 1). Figure 1 – Five Forces of Industry Competition (Porter, 1998, 22) Regarding the above, the relation between the firm and its suppliers (including Samsung Electronics) should be based on a well-structured plan that will ensure the effectiveness of the two firms’ cooperation especially in the long term. At this point we should proceed to the explanation of the firm’s relation with its suppliers. The area of supply chain management has been extensively examined by Krishnan et al. (2001, 259) who noticed that this sector ‘has become an important part of strategic planning in both large and small businesses since the 1990s as firms increasingly choose outsourcing as an externally-driven strategic growth path’. Towards the same direction, Griffith et al. (2005, 254) supported that ‘a firms global supply chain consists of multiple business partners across a wide number of countries’. In other words, supply chain management has been appropriately customized in order to meet the needs of each particular firm. Indeed, Santos et al. (20000, 2) noticed that ‘according to its characteristics, objectives and the resources available (human, physical, financial etc.), each company prioritizes some competitive criteria, according to market tendencies and concentrates its efforts to get a competitive position relating to concurrence’. In this context, the development of business strategy should be based on the firm’s characteristics, its targets and the position of its competitors (who can have a severe impact on the development of a firm’s strategic plans including those with supply chain management). In the case of Domayne and Samsung Electronics the way that the specific cooperation operates can help to understand the effectiveness of this cooperation and to identify any potential proposals for improvement or change in both the parties involved. On the other hand, the description of the term of channel management – which is the most appropriate regarding the firm’s relation with its suppliers – would be valuable in order to identify the firm’s current potentials and its prospects for the future (a well – structured relation with suppliers should be considered to be the base for the development of a firm in any industrial sector). Generally, it seems that until now both companies have managed to keep the effectiveness of their cooperation – as it can be proved by the firm’s performance (in accordance with the corporate statements, [1]). Domayne and Samsung Electronics – channel management Before examining the firm’s relation with its suppliers we should proceed to an extended examination of the relevant industry (in this case electronics) where the firm operates (or at least one of the sectors in which firm operates). Regarding this issue, it is noticed by Pritsker (1997, 32) that ‘industry analysis typically focuses on a companys external dimensions such as its markets, customers, and competitors’. In other words, industry analysis does not refer to the firm’s structure or its internal problems but usually involves in the firm’s external environment as described above. On the other hand, it should be mentioned that in most cases, when referring to the cooperation of a firm with its suppliers, we use the term ‘channel management’. The above term has been described by Bielski (2001, 54) who supported that ‘"Channel strain" is a term youll sometimes hear at industry conferences; it refers to the stress of managing multiple customer touch points and product distribution methods--and of smartly linking line-of-business technology previously disconnected’. From a different point of view Thorson et al. (1996, 186) stated that ‘channels of marketing communication and channels of distribution have become virtually indistinguishable from one another; this change suggests the need for a reconceptualization of channels of distribution and channels of communication; this reconceptualization, which we will call integrated channel management, reflects the current blurring of the boundaries of the communication and distribution functions, as well as the need for management practices and organizations that facilitate simultaneous consideration of both the costs and benefits of the communication and distribution functions’ (Thorson et al., 1996, 186). The description of channel management as described above suggests that in order for a company to improve its relationship with its suppliers, it has to proceed to a series of changes in its practices (both internally and externally). On the other hand, the firm can choose the appropriate strategy in order to develop its supply chain in accordance with its needs, the preferences of its customers and its financial strength to respond to the relevant cost. The strategic Option Generator provided by Wiseman (see below Figure 2) can be considered as an effective tool for the firm in order to improve its relation with its suppliers – actually this strategic tool can be used for the restructuring of the whole corporate strategy following the firm’s needs and its potentials in its entire activities. What is the strategic target? Supplier Customer Competitor What is the strategic thrust? Differentiation Cost Innovation Growth Alliance What is the mode? Offensive Defensive What is the direction? Use Provide Figure 2 - Wiseman’s Strategic Option Generator (Wiseman, C., 1985, ‘Strategy and Computers’, Dow Jones – Ivwin) Under these terms, customers of Domayne are well protected against potential financial losses (due to possible failures of the products provided by the firm). The communication of the firm with its suppliers (including Samsung Electronics) is developed enough in order to provide to the potential buyers the appropriate cover for all products offered by the firm. In this way, the improvement of the firm’s profits in the long term is secured while the position of the suppliers is the most appropriate (in accordance with the market’s terms, see Porter’s five forces, Figure 1 above). In this way, potential conflicts between the firm and its suppliers will not have particular effect on the firm’s customers. On the other hand, the simultaneous cooperation of the firm with many suppliers ensures that the latter will keep the prices of the products at low levels in order to face the competition – this situation is in favour of the customers who will have the chance to choose among a wide range of products at a relative low price. Application of logistics – issues for consideration Generally, logistics are considered to have a significant role in the development of appropriate cooperation among firms in all industrial sectors. Regarding this issue, it is supported by Ciscel et al. (2005, 429) that ‘several variables play parts in the transition from a manufacturing-based production system to that of a flexible, logistics-based system while the changes in the system of production can be traced to globalism, outsourcing, and retailing power’. On the other hand, it should be noticed that the development of appropriate logistics is a challenging task which should be combined with an analytical examination of the industrial environment (as described above) and an overview of all firm’s chances for growth in the future (identification of firm’s strengths, weaknesses, opportunities, threats).In this context, we could refer to a study made by Kim et al. (2006) in which the role of innovation (related with the supply chain communication systems) can affect the channel relationships. The above study led to the conclusion that ‘the effect of applied technological SCCS innovations on channel capabilities is mediated by interfirm systems integration; in contrast, administrative SCCS innovations enhance information exchange and coordination activities directly; furthermore, the influence of applied technological innovations for SCCS is not strong enough to affect either responsiveness of the partnership or firm performance, whereas administrative innovations for SCCS affect both’ (Kim et al., 2006, 40). The development of logistics has been extensively examined in the literature and it has been found that in order to ‘to survive in such a competitive market, it is no longer enough to buy the right goods at the right cost - retailers must also get them to the right place at the right time, and with the right operational costs; doing this well requires the best possible logistics, combining the information that determines buying decisions with the product flows that get goods to customers most cost effectively’ (Dvorak et al., 1996, 120). Towards the above direction, it is highlighted by Baker et al. (2005) that the firm that is interested in implementing a system of logistics should primarily complete the following tasks: ‘1. Layout analysis; 2. Routing analysis; 3. Bottleneck identification; 4. Bottleneck management and 5. Work-in-process (WIP) management’ (Baker et al., 2005, 44). However, other, alternative schemes of action are also possible to be applied in accordance with the firm’s characteristics, its long term targets, its position in the market and mainly the prospects for success offered by the particular industrial sector. Potential problems – Aspects for the future The cooperation between Domayne and Samsung electronics may face problems especially if the two companies fail to communicate appropriately regarding the changes in customer preferences and the support offered to the customers for the products provided by Domayne (and supplied by Samsung Electronics). In this context, it is noticed by Robertson et al. (1995, 547) that ‘because private sector organizations are driven primarily by market or consumer preferences, organizational effectiveness is more readily measured in terms of efficiency and profitability’. Because of the above reasons, it is noticed by Cook et al. (2001) that managers around the world should proceed to the following initiatives related to supply chain management: ‘making and keeping relationships, implementing new technology in the supply channel, the use of forecasting to increase supply chain effectiveness, outsourcing to increase efficiency, and cost management as a strategic weapon’ (Cook et al., 2001, 14). It is not required that theoretical schemes are followed strictly; however appropriate provision should be made in order for firm’s customers to be protected in relation with the products offered by the company while the profitability of both the firms in the long term should be also considered. References Baker, G., Maddux, H. (2005). Enhancing Organizational Performance: Facilitating the Critical Transition to a Process View of Management. SAM Advanced Management Journal, 70(4): 43-47 Bielski, L. (2001) Coping with Channel Strain. ABA Banking Journal, 93(7): 54-59 Ciscel, D. H., Smith, B. E. (2005). The Impact of Supply Chain Management on Labor Standards: The Transition to Incessant Work. Journal of Economic Issues, 39(2): 429-437 Cook, J. S., Debree, K., Feroleto, A. (2001). From Raw Materials to Customers: Supply Chain Management in the Service Industry. SAM Advanced Management Journal, 66(4): 14-23 Drovak, R., Paasschen, F. (1996) Retail Logistics: One Size Doesnt Fit All. The McKinsey Quarterly, 2: 120-124 Griffith, D. A., Myers, M. B. (2005). The Performance Implications of Strategic Fit of Relational Norm Governance Strategies in Global Supply Chain Relationships. Journal of International Business Studies, 36(3): 254-274 Kim, D., Cavusgil, T., Calantone, R. (2006) Information Systems Innovations and Supply Chain Management: Channel Relationships and Firm Performance. Journal of the Academy of Marketing Science, 34(1): 40-54 Krishnan, H., Park, D. (2001). Supplier Selection Practices among Small Firms in the United States: Testing Three Models. Journal of Small Business Management, 39(3): 259-269 Parnell, J.A. (2003). Five Critical Challenges in Strategy Making. SAM Advanced Management Journal, 68(2): 15-25 Porter, M. (1998). On Competition. Harvard Business School Press Robertson, P. J., Seneviratne, S. J. (1995). Outcomes of Planned Organizational Change in the Public Sector: A Meta-Analytic Comparison to the Private Sector. Public Administration Review, 55(6): 547-558 Pritsker, K.D. (1997). Strategic Reengineering: An Internal Industry Analysis Framework. SAM Advanced Management Journal, 62(4): 32-43 Thorson, E., Moore, J. (1996) Integrated Communication: Synergy of Persuasive Voices. Mahwah, NJ: Lawrence Erlbaum Associates http://www.domayne.com.au/ [1] Read More