The Strategic Capability of Noni Limited - Assignment Example

Report on the Strategic Capability of NONI B LIMITED (ASX: NBL) Table of Contents Background of Noni B and Its Context 3 Assessment of Current Strategy and the Capacity to Sustain Competitive Advantage 3 Industry Development since Last Few Years 4 Internal Assessment and External Assessment of Noni B 5 Key Strategic Issues/Findings 6 Evaluation of Strategic Options 7 Recommendations 7 Three Different Schools of Thoughts and Their Applications 8 References 9 Appendix 10 Background of Noni B and Its Context Noni B was established in the year of 1977 and in the year 2000, it was listed in the stock exchange of Australia. It is a specialty retail store in Kings Park, Australia that deals primarily with apparels and has about 214 stores in every state and territory and has more than 1500 shareholders as well as more than 1000 staffs. It provides stylish, contemporary clothes for women who are aged above 40 and has two fashion labels namely Noni B and Liz Jordan (Noni B, 2010). Assessment of Current Strategy and the Capacity to Sustain Competitive Advantage Noni B has developed a new strategy after the closure of one of its stores called La Voca because of economic downturn, which will increase the sales volume of the company and will help it become the ultimate destination for ‘40+’ demographic. The strategy involves systematic adjustments to all the aspects of business for this market segment. It has been paying more attention towards the in-store presentation in addition to taking customer experiences to a higher level. It has been increasing the complexity in its communication technology and is also providing training to the staffs in order to meet the needs and demands of the customers. It has also been recruiting people who can have compassion with the customers and understand exactly what these age group demands. It has proper plan, people and passion to meet the challenges that are going to come in its way in the near future. Teamwork is one of the factors that help the company to achieve the best possible outcomes for the businesses. It acts ethically and honestly every time in order to make positive difference in the community. All the members of the company are driven to perform well and achieve profitable growth. The company is striving for excellence in order to meet the demands of the customers. The company focuses on becoming the best retailer to provide the fashion clothes to people of Australia. Noni B brand is well recognized and is respected in all the target markets. It has built loyalty programs which has more than 850000 members. In terms of financial strategy employed in the company they have a strong cash flow and negligible debt. It has been able to focus all its resources to the core company i.e. Noni B business. Its strong culture has also helped it to remain competitively ahead. In order to sustain the competitive advantage Noni B has been nurturing the Liz Jordan brand which features boutiques designer clothes. It sells its merchandise through both retail stores and online catalogs and also provides services like home delivery and shipping, replacement warranty and gift card scheme (Noni B , 2010). Industry Development since Last Few Years Noni B has more than 214 stores according to the statistics of the year 2009. They had 219 stores in the year 2008 and 209 in the year 2007. In the year 2008 La Voca was closed which was one of the store operated by the Noni B. In order to cover the cost of the closure $2490000 was charged for restructuring provisions. As the chain was closed rapidly a few of the provisions were added to the fiscal year 2009 results as all the provisions were not used. In the fiscal year 2008-09 the profits were reduced and the rates of interest were falling thus the people didn’t have much discretionary income. There was a decline in the sales volume and because of the high competition the profit margins were also declining at the end of the year. There was some sign of improvement in the customer sentiment but still no final dividends were declared and it was on April, 2009 a 2 percent interim dividend was paid. In the year 2008, market buyback was announced which was 10% of the companies’ issued capital and this was suspended in the month of September 2008 because of the deteriorating economic conditions. In the same year, the value of the assets fell and the consumer confidence was also declining and the company was forced to undertake heavy discounting in order to keep the sales moving. There was a fall in profit after tax to $2296000 in the year 2009. In order to balance the weaker market condition Noni B planned to cut the expenses. After the closure of La Voca in the year 2007-08 it decided to develop a three year strategic plan in the year 2009 so that they can focus on the Noni B stores and can become the leading fashion retailer for the 40+ women. In the year 2009 action plan was implemented, the result of which is the increased profit after tax in the year 2010 by 68.4% (Noni B, 2010). Internal Assessment and External Assessment of Noni B Strength of Noni B has been the management expertise that it has. It is because of their commitment and enthusiasm that the company is heading towards success. The head office staffs of the company have shown a constant commitment and dedication towards the company even during the tough conditions, which has provided the company genuine strengths to tackle all adversities. Noni B has been ranked in the highest category by Federal Government Equal Opportunity for women in the Workplace Agency. The company was applauded for taking initiative in the difficult times, including a Chairman Award for Innovation, TAFE partnership and university work experience program. One of the strengths of the company stems from the fact that the company is public listed company. There has been an increase in demand in the year 2010 in the spring season and increased consumer confidence. Decrease in profit and decrease in sales in the year 2009 were the weaknesses that they had. The company plans to open many new stores at selective places and wants to grow to 250 stores. Its loyalty program with 850000 members is also an opportunity for the company. There has been a decrease in disposable income of the people because of the decrease in the interest rates due to which the company’s sales has seen a reduction which can pose a threat in the near future (Noni B, 2010). Key Strategic Issues/Findings By discounting La Voca store in the times of economic slowdown, the company aimed to achieve sales growth from the other stores that are existent by concentrating to become the leading fashion retailer. More attention has been paid to the in-store presentation and building up of consumer confidence. It has been adjusting all aspects of the businesses to reach the age group of 40+ women and to meet the demands of the customers. It has been making strategies in order to reach more of customers after the economic recovery. The company has been serving customers with apparels that are quite fashionable and is unique in quality. In order to align with the customers, it planned to invest in Noni B’s relationship with its target market and the community, it also supported mission Australia Jumpers for Key program. Noni B acted as a collection site for donation of warm clothing for those people who are in need and also offered donor discounts on any new clothing. With these strategies it is able to gain new customers. The management is also taking a conservative approach to control the inventories and to expand the branch. In order to highlight its Liz Jordan range it is elevating it as designer label through brand promotion and in-store merchandising (Noni B, 2010). Evaluation of Strategic Options During the year of 2008 it decided to close La Voca, and it was during the year 2009, the company decided to open 12 new stores and close two unprofitable stores. It also plans to open three stores which depend upon the leases which are satisfactory for Noni B. With the closure of unattractive segments, it can pay more attention towards the other attractive segment and with the opening up of new stores the company is benefited as it plans to expand its operations (Noni B, 2010). Recommendations Noni B can enter into other sectors apart from fashionable apparels and accessories. As the company has been targeting only on the 40+ age group women, it can also target other age groups as well as the men in order to increase the scope of the company. When opening any new outlets, it needs to have a thorough inspection of the location and must also consider the lease rent that they need to pay. Before closing any unprofitable segment they must also consider the losses that they have to bear after such closure in terms of left over inventories and loss of reputation. At one point of time, they opened up a branch and suddenly they closed up another. These measures adversely affected the reputation of the company. It can pay more attention towards the marketing strategies and promote its brands to make consumers aware. Three Different Schools of Thoughts and Their Applications The three different schools of thoughts, according to Mintzberg’s school of thought, along with their application can be listed below: The Positioning school: The main focus of this school of thought is that it places the business within the industry context and sees how to improve the strategic position in that industry. It sees strategy formation as analytical process. Noni B can apply this school of thought for its strategic formation as this school of thought will help it to improve their strategic position within the industry. The Cultural school: This school of thought involves various groups and department within the industry; it views strategy formation as collective process. Noni B can apply this school of thought as the culture of Noni B demands collaboration and teamwork in order to deliver the best to its customers. The Entrepreneurial school: This approach seeks to tell that the visionary process takes place within the minds of the founders. This can be applicable to Noni B as the company has clear visions for the future and the founder aims at making the company one of the leading fashion retail stores in Australia (12 Manage, n.d.). References 12 Manage, No Date. Ten Schools of Thought, Mintzberg. The Entrepreneurial School. [Online] Available at: http://www.12manage.com/methods_mintzberg_ten_schools_of_thought.html [Accessed September 22, 2010]. Noni B, 2010. Noni B Annual Report 2009. Home. [Online] Available at: http://www.nonib.com.au/assets/pdf/Noni-B-Annual-Report-2009.pdf [Accessed September 22, 2010]. Noni B, 2010. Appendix 4E. Annual Report 2010. [Online] Available at: http://www.nonib.com.au/assets/pdf/announcements/Appendix_4E_Preliminary_Final_Report_to_the_ASX.pdf [Accessed September 22, 2010]. Noni B, 2010. Noni B 1H09 Results. Home. [Online] Available at: http://www.nonib.com.au/assets/pdf/announcements/Noni-B-H1-09-Announcement.pdf [Accessed September 22, 2010]. Appendix In the year 2010 Noni B announced earning results of the year with sales at $117.4 million that fell to 0.7% as compared to $118.15 million in the previous year. The profit after tax of $3.9 million in 2010 was increased by 68% as compared to $2.3 million previously. A final dividend has been paid of 3.0 percent per share to the shareholders in 2010. It also announced that its inventory and cost was under control and had a strong balance sheet and also stated that the financial position would be stronger in the year 2011. It has appointed Ann Phillips as chief financial officer and secretary in this year. Read More