Strategic Planning for Next Plc - Case Study Example

Strategic Planning for Next Plc Table of Contents Introduction 3 1 Company Background 3 2. Porters generic strategies 3 3. Corporate level strategies 4 3.1 Ansoff matrix 4 3.2 BCG matrix 5 3.3 Strategic methods and evaluation 6 4. Leadership and strategic Change 7 4.1 Types of strategic change 7 4.2 Managing change 7 4.3 Force field analysis 8 4.4 Strategic Leadership roles 9 5. Strategic Comment 10 5.1 Strategic issues and recommendation 10 6. Conclusion 11 Reference List 13 1. Introduction Strategic planning includes critical analysis of the environment within which an organization functions. Strategic analysis facilitates in proper utilization of organizations resources by understanding the existing threats, strengths and competition within the environment. The primary aim of strategic planning and evaluation is to maximize resource utilization and be able to meet competition existing in the market effectively (Johnson, Scholes and Whittington, 2008). The following research work is an effort towards understanding the strategic advantages and position of Next Plc. 1.1 Company Background Next Plc is the largest retailer of the U.K in terms of volume of sales. The company offers clothing and accessories for men, women and children. They also sell home furnishing and kitchen appliances. Next owns 500 retail stores in the U.K alongside of 200 franchise stores around the world (Next Plc, 2014). Next is also a highly active online retail service provider with over three million customers who avail the company’s online shopping facilities. 2. Porters generic strategies Cost leadership Differentiation Focus Competitive advantages Next products are price moderately higher than other retailers. This is mainly done to indicate higher quality. Next gives much importance to quality of its products and services. Innovation and CSR related activities are also undertaken at a larger scale then most of the other firms. Focus is mainly upon quality and development of new products to expand products range. Potential threats and weaknesses Since the company does not follow the economic pricing concept, it fails to attract the low income group. Lack of development of low cost products and initiatives to expand market size hampers growth as industry saturates. Less focus upon cost reduction strategies. 3. Corporate level strategies 3.1 Ansoff matrix The ansoff strategy is essentially a corporate growth strategy that analyses the products and the markets of the firm. Essentially there are four types of combinations for markets and products as shown below: Existing products New products Existing markets Market penetration Product development New markets Market development Diversification Next is already well established in its existing markets. However the company may consider reducing the price of their current products and establish themselves more strongly in their existing markets. Additionally the company may strengthen market penetration through effective advertisement and promotional strategies. New product development may also be considered to be an effective strategy for the company to establish themselves more strongly in their existing markets. Next is seen to primarily concentrate upon its clothes division. It may consider expansion of their markets by developing new products in the segment of footwear and other home products (Ault, McDonald and Burt, 2003). Next is seen to have lower presence in the markets of Asia and the Middle East. However if the company considers entering new markets in Asia, it must reduce the prices of their products. Next may also consider entering the nations such as India and China by developing new products which are economically priced. The challenge for Next would be to maintain their existing levels of quality alongside of cost reduction (Austin, 2002). Therefore it can be stated that the company is required to crucially consider price reduction for enhancing growth based on products and markets. This can be effectively done through implementation of strategies such as decreasing cost of production, transportation, enhance manpower efficiencies and effective stock management (Aaker, 2008). 3.2 BCG matrix The BCG matrix is an analysis tool which facilitates understanding the growth and relative revenue generated from the products of a company. The matrix essentially facilitates developing long term strategic plans for their products. The matrix essentially divides the company’s products into four categories. These are star, cash cows, question mark and dogs. Firms are expected to enhance the products or try to shift their products to the categories of stars and cash cows (Bensoussan and Fleisher, 2013). For Next Plc there exist no products which belong to the category of dogs for which both market share and growth is low. However few of the brands of clothes, footwear and home décor sold by the company are seen to fall into the category of question mark whose market share is relative low but display a high rate growth in the markets of the U.S and the U.K due to the existence of high brand value. Most of the products sold by the company in the category of clothes are seen to fall in the category of stars (Böhm, 2009). Similarly few of low priced garments band sold by Next is seen to fall into the category of cash cows as they generate a large proportion of revenue incurring low costs. By reducing the prices of many of footwear and home decor products of the company, it is possible to shift them into the category of stars or cash cows (Beattie and Thomson, 2007). 3.3 Strategic methods and evaluation Next plc essentially follows the strategy of organic development and strategic alliances in the process of developing strategies for growth and market development. Organic development is a process by which the company focuses upon growth based upon their own capabilities. The efficiency of the management and the employees plays an important role in this respect. Next gives much importance to their talent recruitment process and ensures that the workers of the firm and strategically aligned with the needs and objectives of the company (Thompson and Martin, 2005). Additionally, Next tries to enhance their power in the markets by focusing upon the need of the consumers. Next essentially targets a niche segment and most of their products belong to the category of the high end market. Next crucially analyses the needs of the consumers belonging to this category and develops their products. The company spread their investments overtime based on the needs of the niche market they serve. Quality of products is one of the uttermost points of focus for Next. In respect of developing strategic alliances, Next forms tie ups with efficient and renowned suppliers for procuring products on time. Next also has developed strategic tie ups with a number of distribution companies in the markets of Europe. For establishing integrated marketing communications policies, the company has also formed tie ups with a number of media firms (Burt, 2000). Next evaluates their strategic options on the basis of suitability, feasibility and acceptability. Every strategic decision undertaken by the company is evaluated on the basis of its feasibility, suitability and acceptance in the market. This would require matching the objectives of the firm and the consumers with the offering arising out of the products. Rational decision making is facilitated and it becomes possible to meet market objectives more effectively. The company analyses the risk returns return policies for long as well as short term period before developing strategic plans of growth. The firm also carries out sensitivity analysis, shareholder value analysis and financial implications before taking suitable decisions relating to new product development or any other type of innovative strategy (Doherty, 2000). 4. Leadership and strategic Change 4.1 Types of strategic change The retail market is characterized with frequent changes. Companies such as next Plc is therefore required to frequently upgrade their products or make changes in them so that market needs can be met effectively. Strategic change implementation is not a very easy task. Firstly the firm needs to understand the needs to change and whether undertaking such change can facilitate achievement of competitive advantages. There are essentially four important types of strategic management changes a firm may undertake namely; adaptation, reconstruction, revolution and evolution. Adaptation strategy is undertaken when the products and strategies of operations need not be altered much. Minor changes are made so that the products can easily adapt with the market. Such changes are mostly related to advertising or promotion of products. If Next plans to enter new markets it requires undertaking the reconstruction strategy. The reconstruction strategy requires organizations to alter strategies to a very large extend. Alterations are made in respect of pricing, distribution of products, product attributes and their quality. Reconstruction is also often undertaken with changes in the culture. Such reconstruction is not implemented upon the organization as whole but only upon a particular product division or a strategic business sub unit (Doherty, Ellis-Chadwick and Hart, 2003). The firm may also undertake the revolution strategy when complete changes in respect of the basic strategies and operations are required. Next undertakes such strategies very rarely. The company takes up such strategies only at times when market changes are immense and it becomes essential to fundamentally alter many aspects of operations. Evolution is a change which is seen to automatically occur with firms over time. Retail organizations are often required to alter their product strategies along with changes in the tastes and preferences of the market. Over time immense changes are noticed in the manner in which organizations operate. Both revolution and evolution are changes which take up immense time (Easey, 2009). 4.2 Managing change Next is seen to manage change on the basis of participation, collaboration and training. Next believes that participation of employees and managers cohesively is essential for the implementation of change. Unless managers and employees develop adequate understanding amongst themselves implementation of change becomes difficult. For such reasons it is often seen that Next encourages managers and employees to communicate with each other effectively and promotes the development of understanding between them. Employees are more eager to change if management provides them with adequate support (Stroope and Hagemann, 2010). Change also requires suitable training efforts. Managers must train employees regarding the new policies so that they are able to understand why such change is essential and there implications upon growth. Such participatory change management techniques lead towards lowering the resistance caused from the employee side and they find it easier to associate themselves with the needs of the organization. Next also ensures that change strategies direct the organization towards the right path. Hence before implementation of change, Mangers are required to forecast their long term implications and accordingly take decisions relating to implementation of change (Grant, 2005). Next ensures that change is perceives by all members of the firm as a positive phenomenon. Being in the retail sector adapting to change is a necessary organizational feature. Next not only takes into consideration the needs of the firm and its employees, but it is also required to incorporate the requirements of all its stakeholders. Organizational change usually has a long term impact upon the firm. Hence it requires the acceptance of all related parties of the organization. One of the most important operational objectives of Next is to provide sufficient returns to shareholders. Hence it must ensure that all types of strategic changes lead towards the enhancement of profits so that ultimately higher returns can be provided to shareholders. Ensuring the quality of products is also a highly essential strategic goal for Next. Hence changes brought about in the organizations structure or mode of operations must not cause any type of alterations in the quality of the products (Harris, 2000). 4.3 Force field analysis In order to implement a strategic change it is essential to have adequate impetus which pushes the management and the organization as a whole to undertake alterations. Force field analysis is a strategic tool which facilitates recognizing the grounds upon which an organization should undertake changes. Force field analysis can be carried out using a number of different types of frameworks such as mapping of different activities, stakeholder mapping or the 7-S framework. In most cases Next is seen to use the 7-S framework to identify situations that requires them to change. While conducting force field analysis, organizations are required to evaluate three different types of factors. These are essentially the push factors, the resistance factors and the additional factors. The push factors are essentially those aspects which force the organization to undertake change (Pearce and Robinson, 2000). In case of Next the push factors are essentially changes in customer needs, changes in style and fashion, enhanced competitive powers of rivals and development of substitute products. Such factors may mandatorily require the organization to change so that Next may continue to procure competitive advantages in the market. Apart from changes occurring in the market, political factors also forces Next to undertake changes in their operations or production policies. Alternatively there may also exist a number of factors which causes resistance towards changing. Such factors may include organizational culture, worker opposition, past experience or legal contingencies. While implementing change, Next is required to carefully evaluate the forces which are the strongest and accordingly formulate plans of action (Johnson, Scholes and Whittington, 2008). 4.4 Strategic Leadership roles Leadership plays an important role in the implementation of changes within an organization. Leaders who are essentially managers are required to guide employees towards the adoption of change. Leaders may share their experiences with employees and motivate them to accept change in a positive manner. Change is usually initiated by the top level mangers. This means that are adequately aware of the situation and why changes are necessitated. Hence they are able to guide employees at lower levels more effectively (Lennox, 1994). 5. Strategic Comment Next has displayed a steady rate of growth over the years. The efficient management of resource and proper strategic planning have facilitated the firm to emerge as the second highest apparel firm in the U.K. Next is also known for operating in a responsible way with adequate consideration for the environment. The company however lacks strong presence in overseas markets, particularly in Asia. Entering these markets would facilitate Next to counter the issue of high competition existing in its home nation (Grant, 2010). 5.1 Strategic issues and recommendation On the basis of the strategic evaluation conducted for Next Plc, the following important aspects require to be considered. Factor Reason What needs to be done Advertising Next is losing consumer impression due to lack of media presence Enhance advertising efforts through television and internet. It is also essential to indulge in celebrity endorsements. Create stronger message indicating quality .There are many retailers offering similar quality advantages as Next, at lower prices. Next requires communicating with its consumers more strongly that their products offer supreme value and symbolize class and status. This can be done through more integrated marketing communication channels. Diversification In order to survive in the market, it is essential to invest in product diversification. Enhancing product range and inclusion of more brands is essential. Hence greater efforts towards innovations need to be applied. Adoption of low cost strategy to enter merging markets. Nest will achieve less success if it enters the emerging markets with its existing high price strategies. Develop differentiated low and economic pricing policies for penetrating into the developing nations. This would require acquiring new brands and develop new products, to match the pricing policy. Popularise CSR Consumers are hardly aware of the social initiatives undertaken by Next. Include greater media presence while addressing social needs, conducting seminars, charities and pursuing activities for the betterment of the society. This would encourage more consumers to be associated with the brand and indirectly lend a helping hand towards society’s growth. 6. Conclusion The strategic evaluation of Next Plc reveals some of the shortcomings as well as the attributes for success of the company. However, such strategic evaluation requires being performed from time to time to identify potential threats existing in the market and accordingly formulate plans for overcoming them. Next Plc adopts a dual strategic operating approach by focussing on the needs of both shareholders and the consumers. Due to such excellent policies and well through operational plans, Next Plc is one of the best known stores of the U.K, in the high end retail sector. 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