The UK Retail Market Strategic Management - Essay Example

?Global Strategic Management Executive Summary The strategic management report prepared for the launch of the new company in the UK retail market addresses to the various aspects that have to be considered at the time of a launch of a company. The report offers an insight into the market conditions prevailing in the retail market of UK. The PEST and 7S analysis has been done to give an idea about the environmental condition in the country. This will analyse the various political, economic, social and technological factors in UK. The SWOT analysis highlighting the strengths and other significant aspects has also been discussed to give an idea about the retail market. The other crucial things like stakeholders and their role has been briefly discussed. A new business is exposed to vulnerabilities and therefore the various contingencies that the newly formed company can face have also been discussed. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 5 Stakeholder consultation and participation 6 Critical Assumptions 7 Vision & Mission 7 Environmental Analysis (PEST) and drivers of future change 9 PEST Analysis 9 7S Framework 10 Structure 11 Strategy 12 Systems 15 Style 15 Staff 16 Skills 16 Shared Values 16 SWOT Analysis 16 Strategic goals and objectives 17 Resourcing 18 Implementation Framework and challenges- Ansoff Matrix 18 Evaluation and Control 20 Performance Management System- 20 Timeframe and Contingencies 21 Conclusion 23 Appendix 24 Reference 25 Bibliography 27 Introduction The project presents a strategic management report for a company to be set up in the UK market. The primary objective is to provide a report for a private equity firm for providing venture capital for the company to set up operations in UK. The company would be established in the retail market in UK which has been showing strong prospects very recently. This is primarily because the market is less flooded with large retailers. The project presents the analysis of the market and designs a complete management strategy for the company that would be established. It outlines the criteria against which the stakeholders’ participation would be secured. It presents the vision and mission statements of the company and makes analysis of the environment using PEST. The resource implications arising from the analysis has been presented in the project. The global drivers of change that might influence the company have been presented also. Finally, a performance management system has been designed for to evaluate and control the progress of activities. Stakeholder consultation and participation The company to be launched will be a privately held entity. Therefore, the shares of the company will remain in the hands of selected individuals. The main stakeholders of the company are expected to be shareholders, suppliers and the private equity firm. In a privately held company the shares remain in the hands of selected group of individuals. The main advantage of a privately held company is that ownership vests in the hands of few people thereby facilitating fast approval of crucial business decisions. This is a good feature as the management decisions can be carried out fast without any impending approvals. The shareholders of the company though few in number enjoy rights relating to voting. The directors of the company will be elected from this group of shareholders. The private equity firm can also place its member in the company Board. The directors of the company will take up various responsibilities relating to marketing, finance and other important matters. As the directors of the company are also the owners this will help in avoiding any ‘conflict of interest’. The suppliers of the company also form one of its stakeholders. The company can acquire goods on credit from this group of suppliers. Therefore they too have a stake in the company. However they will not enjoy any say in the company affairs. Initially the company may not be able to attract funds from the banks and financial institutions. Eventually with the expansion of business activities the company may be able to acquire funds from the financial institutions. However the company does not wish to rely much on debt. Therefore, the debt holders are not likely to play an important role in company management. This is likely to be in the interest of the company as too much debt can lead to interference from this group of investors. Critical Assumptions The company is initially to be set up as a small sized business to exploit the increasing retail market of UK. Like other retail businesses the aim of the company is to spread its geographical base. With time it wants to evolve globally. Despite the competition in the retail market it is assumed that the company will be able to acquire its own share of customer base. The cash flows of the company are expected to be positive in a span of 2 to 3 years. In the first year of operation the company may not be able to realise positive cash flows as there will be an extensive spending in office space and promotional activities. It is expected that the company will break-even from the next operating year. The company can be expected to start reporting profits from the third year onwards. One more critical assumption is that the company will be able to procure goods partly on credit from the suppliers. Though the company does not have any financial history it is assumed that the suppliers will show interest in the company. Vision & Mission The mission, vision, goals, objectives and project hierarchy are interlinked in a way that anything happening at a plateau is an impact of the previous one and affect the one that follows (Koenig, 2003, p.76). Source: (Koenig, 2003, p.76). The vision of the company is to establish itself as the best retailer. This can be achieved by offering innovative solutions to meet the customers’ demand for sophistication by continually improving the quality and service of its products. This will give the company a competitive edge over the other players in the industry. The company wishes to set itself apart from the other retailers by forging a long term relationship with the customers. To ensure the satisfaction of the customers the company aims at making an in-depth use of technology and provide a host of value-added services to its customers. The company has the mission of providing the best products at affordable prices. This will enable the common people to save more thereby leading to a better lifestyle. The goods of the large business retailers remain out of reach of the common folk. Therefore, the business activities of the company will set a common platform for the people not belonging to the wealthy class. By catering to the needs of the rich and the other consumer classes the company will be able to emerge as a ‘company for all’. Besides widening the market base of the company it will entrench its image in the society. Environmental Analysis (PEST) and drivers of future change PEST Analysis PEST analysis provides analysis of the environmental microenvironment where the firm would operate. The political environment shows that government regulations are friendly for investors and these regulations are supported by the local authorities. The change drivers mainly come from the grass root levels. The government regulations are supported by the local authorities and greater emphasis is provided to the community based decisions. It is also expected that there would be a gradual privatisation of the infrastructure and utilities (Transport Visions, 2002, p.2). UK’s economic environment also looks favourable for the company. After the recession, the British economy has shown the “longest period of expansion on record during which time growth outpaced most of Western Europe” (CIA, 2011). Britain is also located in a favourable place between the European Union and the United States. This makes it a favourable place to attain socio-economic growth and economic demand (Transport Visions, 2002, p.2). The future social scenario of Britain also looks hedonistic where the lifestyle of people would be self centred. This shows that there would strong demand for consumer products and this would trigger growth of the retail market. All aspirations and actions would be aimed at improving the quality of life. There would be greater “shopping community centred lifestyle” which would go in favour of the company. Great initiatives are being taken in the fields of research and development across the nation. There are also expectations that numerous telecommunication channels would come up which would provide high access and high bandwidth for the services. The nation’s technological status is also more advanced than most other nations in the world. Moreover, it has numerous sustainable energy sources, like fuel cells, photo-voltaic panels, aero-generators, etc, which would be conducive for conducting business operations. In other words, the nation has demonstrated continuous growth in the field of technological advancement and utilities (Transport Visions, 2002, p.3). 7S Framework In this project the McKensey’s Seven S model has been used for incorporating the dependencies and interrelationships of the different organisational factors. It provides a reasonable and useful way of organising the factors (Egner, 2009, p.7). The model was developed by Pascale and Ethos and is depicted in the following figure. Figure 1: Organizing for Interconnectivity (Source: Witcher & Chau, 2010, p.249) The Seven S model is examined from a technical and social perspective. The first three elements, namely strategy, structure and systems are considered to be more technical while the remaining four elements, style, staff, skills and shared values are more social and oriented to the human dimension (Carlock & Ward, “Assessing the Firm’s Organisational Resources”). Structure Since it would be a conventional retail organisation, it would have a hierarchical structure where the individual employee would have to report to a single line manager. The structure would be like that in a line organisation. The hierarchical structure would be as follows. The top position would be taken by the CEO or the President of the company. There would be mainly three departments, namely marketing, store operations and merchandising. The marketing department would be accountable for devising marketing strategies, public relations, promotions etc. The store operations would be sub divided into departments like cashier and sales. They would be responsible for revenue management and prevention of loss. The merchandising department would responsible for planning, buying and inventory control. Te control department would be comprised of human relations, finance and technology. The human resource department would implement training programs, compensation programs etc. The finance department would responsible for accounting and credit while the technology department would develop and implement the right technologies. Strategy Blue Ocean Theory The blue ocean strategy is recommended in this project because the company would enter into the unknown market space which is called “blue ocean” (Siegemund, 2008, p.27). The blue ocean strategy is given in the following figure. Figure 2: Blue Ocean Strategy (Source: Kim & Mauborgne-a, 2009, p.7) Reconstruct the market boundaries This step would include revaluating the industry’s assumptions and shaping the company’s business model. It would require identifying the key competitive drivers like the preferences of customers, product qualities, process and the industry standards. The aim is to break the conventional marketing habits. The company could modify its present product qualities to enter a new market or a new set of customers. It could build a new brand for the company for expanding operations in new areas. Focus on the Big Picture, Not the Numbers It is crucial to keep the aim on the overall picture and not entirely rely on statistics. It is important to maintain the direction in which the company is headed and not get lost by industrial statistics. A continuous assessment of the competitors’ industry position, products, and prices would be helpful in clarifying the possible opportunities for the company (Kim & Mauborgne-b, 2005, p.4). Reach Beyond the Existing Demand The basic aim is to enter a market which is untapped. The company should not focus on the customers which is already present. The real growth of the company lies beyond the existing demand and tap the potential future customers. This strategy would include special emphasis on promotions and advertising. Get the Strategic Sequence Right It is important to get the strategy sequentially in order to achieve “value innovation”. In this context technological innovation plays a big role. Innovation would be helpful in designing a product which would appeal to a large audience. The product’s price, qualities and features must also be designed to achieve the same. Moreover, the impediments that influence the mass from buying the product should be removed (Kim & Mauborgne-b, 2005, p.4). Overcome the Key Organizational Hurdles Hurdles might crop up against implementing any changes in the system. It would be crucial to overcome difference between departments in the organisation. Employees might also feel hesitant to enter into a new market. Resources would require reallocation which could face resistance, especially the human resources. This would have to be compensated with proper compensation and benefits (Kim & Mauborgne-b, 2005, p.5). Execution into the Strategy Implementation of the strategy would first and foremost require getting of the participants’ trust. It would require extra efforts in all steps on the process. The key solution lies in involving the three Es, namely engagement, explanation and expectation while implementing the strategy (Kim & Mauborgne-b, 2005, p.5). Systems Systems are comprised of the primary and secondary processes which enable the company to attain its objectives. The activity of procuring materials would be done by the local retailers because that would be cost effective and can also be monitored easily. The local distributing channels would be used for shipping of the final products to different places. In this case, the outskirt markets and households would be targeted. The aim would be to reach those markets which were untapped and where there was less competition. The primary processes would be complemented by the secondary processes. There would be a comprehensive research and development team which would thrive on building the right kind of products and services based on market analysis and designing effective corporate strategies for the organisation (Egner, 2009, p.9). Style Style would include the way in which the strategy would be communicated with the people. In the blue ocean strategy, the management would communicate its strategy with each department. It is important to coordinate the actions of every department with the main objective of the organisation. It should be ensured that each individual activity of the departments are collaborated and adds to attainment of the organisational objective. The roles and responsibilities of people would be made clear, and major emphasis would be given to quality and standards. Staff It would important to clearly define the qualities of the individual staff. Their experience and qualification would have to be aligned with the job role. In this case, since a new market would have to be explored, the company would require an experienced sales staff with the relevant experience to enter the new market. Skills Since it is a new organisation, it would have to gain acceptance in the market. For this purpose, major emphasis would have to be provided to enhancing quality standards. This would be helpful gaining trust of the people and improving goodwill for the company. Shared Values It is important to share the key things with all individual in the organisation. The mission of the company would have to be shared with the prospective buyers. In other words, the aim that the company was trying to achieve would have to be communicated effectively among all to align strategies in the same direction. SWOT Analysis The alliance of the company with the private equity will bring along with it the technical and managerial expertise of the venture fund. The venture capitalists are reputed for their in-depth understanding of the industry that they operate. By way of this they can ensure a strong foothold of the company in the retail market. A weakness of the company is that its newness may come in the way of procurement of financial resources. The growing demand of the retail business in the country offers scope for new companies to flourish. The major market players in the industry can pose a threat to the company. Strategic goals and objectives The company initially plans to make a place for itself in the UK market. After this it aims at making a foray in the international arena. This will widen the consumer base of the company. The objectives of a company define its short term business goals that facilitate the achievement of the long term goals. The company wishes to be committed to the following- Providing customers value for their money by offering goods at competitive prices. Satisfying the needs of the consumers by seeking their opinion with respect to all types of product innovation, setting up of store facilities etc. Generating a fair return for its investors by investing their funds in profitable business avenues. The aim of the investor behind any investment initiative is to earn good returns. Therefore the company will scrutinise the investment opportunities properly at the time of committing funds. To nurture the talent of its workforce. The staff of the company will be imparted necessary training in customer interaction and other related areas. An employee reward program needs to be in place so that the employees can be suitably rewarded on the achievement of any pre-set target. The suppliers being one of the stakeholders it is important that the company works in close alliance with them to form a long lasting relationship with a strict emphasis on the product quality and process. An important objective of the company will be to work towards community welfare and ensure environmental protection. Resourcing To ensure a smooth running of the business operations it is important that the company has all the resources in place. This includes the financial resources, human resources, fixed resources, etc. The finance needs of the company will be met by the combination of the owners’ funds and venture capital money. The human resources required by the company need to be specialised in the area relations. This is very important as they are the ones who can influence the customers on their store visits. The company will store the products of varying brands as this will help it in realising its objective of catering to all the classes of consumers. Another factor that deserves consideration is the location of its stores. The stores of the company should be centrally located as this will enable easy accessibility. Implementation Framework and challenges- Ansoff Matrix The Ansoff matrix has been used as a tool for entering into the market. It is a tool for exploring the generic options for the company while defining its future business. In this case the blue ocean strategy has been used for entering the UK retail market. Thus in this case the ‘market penetration’ approach would be used, which falls in the first grid of the Ansoff Matrix as given by the following figure. Figure 3: The Ansoff Matrix (Source: Mercer, 1996, p.171) Since there are already a large number of major players in the field, it would be difficult to tap the already existing customer base. The focus thus would be to create a new market for the company’s products. Firstly, the strategy would include identifying the customer base which was not under the existing retail audience of the present retail payers. Then their requirements would have to be explored and the demand would have to be estimated. Based on this research, their products and their features would be decided to meet their requirements (Luck, 2008, p.346). Evaluation and Control Merely setting of goals is not enough it is important to have sufficient control mechanisms in place. It is important to identify a measure of evaluating the outcome and measuring the efficiency of workflow. To achieve results the actual performance must be compared with the desired performance so as to identify ant shortcomings and initiate necessary action. Performance Management System- A Balanced Scorecard (BSC) is a way of monitoring the performance of a company. By way of BSC all the components of the business help in delivering high value and achieve profitability (Anselmo, 2010). Source: (Kaplan & Norton, 2002). The various departmental managers of the company will be made accountable for the performance of their respective department. This will help in raising business productivity and improving efficiency in areas ranging from customer relations to the top-line of the business. The data gathered by the managers can help in tracking business performance and help in aligning the business activities with pre-set goals. Like the efficiency of an employee can be measured by the rise in the number of customer visits, increased volume of purchases, increase in customer loyalty etc. Similarly the financial performance can be evaluated from the rise in turnover ratios, increased profits and sales figures. The results achieved must be matched with the business objectives as this is one factor that can make the company successful. Timeframe and Contingencies A business plan is exposed to various contingencies. The activities of the business are prone to economic cycles. In the event of a downturn there is a decline in the general level of business activities. This will likely have an impact on the retail operations of the company as well. However, the only consoling factor is that the retail of goods is not impacted much by an economic downturn. The company may take some time to penetrate the market. The retail market in UK has major market players. However, the growing demand offers great potential for the new companies. But it may take a significant amount of time for the newly formed companies to make a place for them in the domestic retail arena. The success of a retail business is highly dependent on the availability of skilled workforce. A workforce specialising in customer relations is a prerequisite. A dearth of quality workforce can be a serious impediment in business success. It is important that the company has a training program in place so that it can groom its employees accordingly. This will help in mitigating the problems relating shortage of skilled workforce. Conclusion The growing demand in the retail market in UK offers scope for the entry of new companies. The retail industry in the country has significant market players. The consumers demand for high quality goods. The new companies must align their objectives in a way that it helps them to achieve business goals. A major hurdle that a new company faces is with regard to finances. As a result the private equity firm has been approached to sort the issue relating to financing. Besides financing, the venture capitalist will also offer managerial and technical expertise thereby assisting the nascent company in better management of operations. Appendix The retail market in UK comprises strong market players. The retail environment in UK is unique in the sense that branded products offered by the retailers form a considerable portion of the sales. This is increasing on a year-on-year basis. In the UK retail market the branded products trade on the basis of superior quality and there is no place for second quality products with lower prices. The retail industry in the country is marked by stiff competition and ever increasing consumer expectations. The quality of the products offered is of utmost importance and the activities are monitored and have to satisfy the set quality standards. These standards have been clearly defined by the BRC Technical Standards. The companies seeking a certification from this standard setter must ensure that the due adherence of the standards (British Retail Consortium & Institute of Packaging, 2004, p.2). Reference Anselmo, D. (2010). Marketing Demystified. McGraw-Hill Professional. British Retail Consortium. Institute of Packaging. (2004). BRC/IoP global standard: food packaging and other packaging materials. The Stationery Office. Carlock, R. S. & Ward, J. L. (2001). Strategic planning for the family business: parallel planning to unify the family and business. Palgrave Macmillan. CIA. (2011). Europe :: United Kingdom. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html. [Accessed on April 04, 2011]. Egner, T. (2009). McKinsey Seven S Model. GRIN Verlag. Kaplan, S.R. Norton, P.D. (2002). Partnering and the Balanced Scorecard. 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