Strategic Management of Argos - Assignment Example

?Strategic Management “Argos” analysis” A brief of the organization Argos, one of the largest general merchandise retailers of the UnitedKingdom was founded in 1973 (Argos Website, n.d.). Today, this company is a multi-channel retailing organization, selling general merchandise and products for the home from over 700 stores throughout the United Kingdom and Republic of Ireland, online and over the telephone (Argos website, n.d.). Being a part of the Home Retail Group, the market leader in the home and general merchandise market, Argos serves over 130 million customers a year through its stores and takes 26% of sales through the internet channel alone (Argos website, n.d.). Large customer bases across the UK and Ireland enabled Argos to achieve impressive sales during the last financial year - ?4.3 billion (Argos website, n.d.). In order to achieve this result the company has employed about 33,000 people across the business (Argos website, n.d.). While the company has not presented its mission as a separately identified statement, its strategic vision and mission could be derived from the information given on the website; it follows that: “we are extending our product range to help you make more responsible choices, conserve resources and save money” (Argos website, n.d.). Additionally, the company is concerned about the environmental issues and is striving to run the business in a sustainable way. Therefore, it is possible to say the main organization’s purpose is based on three key organizational values, which include not only supply of the customer with an extensive assortment but also conserving of the buyer’s resources and saving their money in sustainable way (Argos website, n.d.). While reviewing the official information presented at the Argos’ and Home Retail Group’s website, it is possible to summarize the key strategic issues and objectives which the company faces. These include (Home Retail Group, n.d.). Leadership in multi-channel retailing The company’s strategy is based on the idea of becoming the market leader in multi-channel retailing and maintaining of this status (Home Retail Group, n.d.). In order to achieve these heights, Argos, being a part of the Home Retail Group is working under the development of highly successful mobile and internet channels to reach its customers and meet their demand (Home Retail Group, n.d.). In future, the company’s management is planning to introduce such developments as: mobile apps for the iPad and Android, and TV shopping channel apps (Home Retail Group, n.d.). However, an integral part of the Argos strategic model is continuous investment in its stores (Home Retail Group, n.d.). Differentiated and market leading formats The company strives to differentiate its form from other retailers. In order to achieve this goal, Argo refreshes its brand and refurbishes its stores (Home Retail Group, n.d.). Product ranges and related services Expansion of the product range enables the company to grow its market share and to drive the leadership in its core markets (Home Retail Group, n.d.). Therefore, Argos is keen on the development of the ways of choice expansion. Delivering value to the customer As a part of its strategy, Argos is aimed at maintenance of highly competitive price position by comparing the price levels, organizing regular promotions to attract more consumers, and designed (and continues to work on) sourcing opportunities through direct sourcing and importing (Home Retail Group, n.d.). By introducing special lines, as “WOW” and “Argos Value”, Argos continues to deliver the best value to the customer. Leveraging scale and infrastructure Efficient cost base The Company seeks the opportunities of both cost reduction and business flexibility (Home Retail Group, n.d.). Financial strength Financial strength of the company is the vital characteristics which is necessary for the further growth and development of business. Thus, for example, the company plans to open about 20 stores during this financial year (Argos website, n.d.). Strategic Analysis After Argo’s mission and strategic objectives and issues have been identified it is the best time to analyze the external environment in which the company operates. Analysis of both external and internal environments of the organization will enable it to develop viable strategic options considering such factors, as company’s competitive environment, core competencies and key strategic resources, strength and weaknesses, opportunities and threats. PESTEL Analysis Political factors Government activities and relations with other countries significantly impact the retailer, which might import/export the products/resources having not favorable conditions (trade barriers, quotes, tariffs, etc.). Economic factors Such economic factors, as: economic conditions; cost of raw material products; utilities and services; changing demographics, etc. play significant role in Argos’ business development process (Home Retail Group, 2010). Activities of the government of the UK and Republic of Ireland aimed at addressing the fiscal deficit in response to global economic downturn and uncertain economic situation in the world, directly impact on the costumers (Home Retail Group, 2010). These factors have the potential impact on the Argos’ costs, sales, cash generation and profit (Home Retail Group, 2010). Additionally, due to the volatility of the global economy, UK based retailer is exposed to the risk currency fluctuations (Home Retail Group, 2010). Social factors Continuous change of the customer’s preferences is the main factor, which should be taken into consideration and permanently monitored by the company, while tracking its demand curve. Economic factors are often tightly related to the buyer’s capacity; thus for example, by cutting public spending, or changing tax policies, consumers become more sensible to prices, and tend to change their preferences (Home Retail Group, 2010). Technological factors The company’s multi-channel retail business is highly dependent on the technologies and IT developments. For providing the customers with online shopping and Check and Reserve services, and for getting closer to the customers through online reviews and social networks, Argos needs to be keen on new IT developments (Home Retail Group, 2010). Additionally, success of the company’s business depends on the IT infrastructure for ensuring security of all shareholders, and for efficient cooperation with suppliers (Home Retail Group, 2010). Environmental factors Argos’ business is partially dependent on the seasonality/weather uncertainties (Home Retail Group, 2010). In addition to this factor, the company strives to minimize the negative impact on environment. Legal factors The Company always faces the risks caused by the changes in UK and overseas regulation and legislation (Home Retail Group, 2010). The changes in UK employment/fiscal policy (for example, increase in minimum wage) can seriously impact the company’s revenues (Home Retail Group, 2010). Porter’s Five Forces Analysis The likelihood of new entry The likelihood of new entry seems to be relatively low. This statement can be supported by the statistical data, according to which almost 10% of all VAT-registered businesses in the United Kingdom are retailers (British Retail Consortium, 2010). However, the total number of UK retailers has significantly decreased during the last year: in 2011 this amount exceeded 286, 700 retail outlets, and now this amount is almost twice lower, 188, 320 (British Retail Consortium, 2010). This decrease can be explained by the global economic downturn and probably by business rate burdens and continuously increasing property costs, including: the loss of Empty Property Rate Relief, the impact of the non-domestic rates evaluation and the introduction of a Business Rate Supplement (British Retail Consortium, 2010). The power of buyers Retail industry in most developed countries can be considered as an industry with a strong power of buyers. Individual customer would not have strong bargaining power in the retail industry; however, taken as a whole, customers demand the products of high-quality bargaining prices (Investopedia.com, n.d.). So as the buyers can easily buy from other retailers, Argos needs to provide a high quality products/service at reasonable prices. The power of suppliers In the retail industry, suppliers tend to have very little power (Investopedia.com, n.d.). Argos is very exacting retailer with regard to its suppliers and requires them (suppliers) to sign up to the Supply Chain Principles (Home Retail Group, 2010). The degree of rivalry There is a tough competition on the retail market of the UK and the Republic of Ireland. While significant market share is captured by the local retailers, there are European, international and global retail networks which also rival for their customers. The substitute threat Retail industry has a tendency of not focusing only in one service or product, but to differentiate services/products (Investopedia.com, n.d.). Argos also pursuits this tendency, in order to enable the customers choose from a wide range of goods. However, the same goods or substitutes could be found at another store; this creates the substitute threat for the company’s competitive position. SWOT Analysis Strengths Weaknesses Strong brand name; Development of own brands Argo’s low cost operating model Support of the Home Retail Group; strong financial condition Up-to-date store formats Enhanced tools to increase customer choice Competitive remuneration packages Management development and training programs IT recovery plans Strong promotion “Responsible retailer” Significant dependence on suppliers Opportunities Threats Merger and Acquisition opportunities Intensive use of all new technology developments in order to attract new customers and cut costs Opportunities to expand outside the UK and Ireland (European Union) Increasing costs of raw material products/utilities/services Seasonality/weather Changing demographics Currency fluctuations Changes in UK and overseas regulation and legislation (environmental regulation; consumer protection) Likely entry of potential competitors Changes in UK employment and/or fiscal policy Delay or interruption in service provided by third party suppliers Strengths Argos business has significant amount of strengths which enable the company to gain its competitive advantages among other retailers. These include: development of own brands, up-to-date store formats, low cost operating model and some others. By developing own brands the company provides customers with an opportunity to enjoy unique goods/products which are produced specifically in this company. The retailer becomes recognizable not just as a “seller” of different things, but also as the provided of own brands. This enables company to provide the best prices for its own branded products and to increase customer’s loyalty. Argo’s low cost operating model enables the company to reduce the prices for proposed products or at least not to increase it. This strength enables Argos to achieve one of its primary strategies of being price competitive retailer. Enhanced tools, such as online customer ratings and product reviews, are aimed to increase customer choice. By increasing the customer’s choice, Argos increases its customer base and therefore makes more money on sales. Competitive remuneration packages partially enable the company to attract the right people for Argos and to motivate them towards excellent service providing and performance. Management development and training programs is strength of the company, which appears to be an essential condition necessary for effective, competitive and up-to-date business development. By understanding the heavy reliance of Argos upon IT technologies, the company’s IT recovery plans represent a significant strength of the company, which might be very helpful in case of IT system failure, etc. Today’s increased public concerns about the environment pollution, climate change and other changes in nature often dictate the behavior of buyers. More and more people tend to choose the company, focusing on sustainable development of its business. Therefore, Argos, being a “Responsible retailer” becomes highly competitive retailer due to its sustainable approach to running a business. Weaknesses There is not much official information, from which it is possible to analyze the Argos’s weaknesses. The only significant weakness that has been noticed relates to the company’s significant dependence on suppliers, and on the quality and safety of the products they provide (Home Retial Group, n.d.). Opportunities The most obvious opportunities for Argos include: Merger and Acquisition opportunities; intensive use of all new technology developments; opportunities to expand outside the UK and Ireland (European Union). By acquiring commercially attractive retailer, the company might be enabled to grow its business in more quick and efficient pace and to boost its competitive capabilities. Another opportunity which also might help the company to expand its business more quickly relates to the business expansion outside the borders of the country. As a good start point, it can be some countries of the European Union. Threats All the threats have been derived from the PESTEL Analysis section, which provides a detailed description of all the potential threats for Argos’ business. Strategic options analysis – Balanced Scorecard Taking SWOT Analysis as a basis, now it is possible to derive possible strategic options for the company. The four options, basically developed by Heinz Weihrih, can be helpful in matching the environmental threats and opportunities with the Argo’s weaknesses and especially its strengths (Weihrih, n.d.). One of the alternative strategies is the WT strategy, which focuses on minimization of both weaknesses and threats (Weihrih, n.d.). Another alternative is to apply the WO Strategy which attempts to minimize the weaknesses and to maximize the opportunities (Weihrih, n.d.). The ST Strategy is based on the strengths of the organization that can deal with threats in the environment (Weihrih, n.d.). And the last option would be adoption of the SO Strategy. By adopting this strategy Argos would be aimed at maximization of both, strengths and opportunities (Weihrih, n.d.). Conclusion Considering all the information, concerning internal and external environments of Argos business, it might be concluded that the company can focus on adopting the ST Strategy. Thus, the company will rely heavily in its internal strengths but also will deal with threats in the environment. The company faces significant threats from the external environment, that is why focusing on these, will enable Argos become successful business. References: Argos Website (n.d.). About us. Retrieved from http://www.argos.co.uk/static/StaticDisplay/includeName/AboutArgos.htm#about British Retail Consortium (2010). Retail Stats & Facts: Sector Stats & Facts. Retrieved from http://www.brc.org.uk/brc_stats_and_facts.asp?iCat=668&sCat=Sector+Stats+%26+Facts British Retail Consortium (2010). Policies & Issues: Local Government. Retrieved from http://www.brc.org.uk/brc_policy_content.asp?iCat=632&iSubCat=633&spolicy=Local+Government&sSubPolicy=Business+Costs Home Retail Group (n.d.). Current positioning. Retrieved from http://www.homeretailgroup.com/home/about/curr_pos/ Home Retail Group (n.d.). Argos Business Review. Retrieved from http://www.homeretailgroup.com/ar/2010/review/argos/ Home Retail Group (n.d.). Principal risks and uncertainties. Retrieved from http://www.homeretailgroup.com/ar/2010/review/principal/default.shtml Home Retail Group (2010). Annual report 2010. Retrieved from http://www.homeretailgroup.com/ar/2010/_downloads/HRG_Annual_Report_2010.pdf Investopedia. com (n.d.). The industry handbook: the retailing industry. Retrieved from http://www.investopedia.com/features/industryhandbook/retail.asp Weihrih H. (n.d.). The TOWS Matrix - A Tool for Situational Analysis. Retrieved from http://www.usfca.edu/fac_staff/weihrichh/docs/tows.pdf Read More