A Marketing Audit for Poundworld - Report Example

A MARKETING AUDIT REPORT FOR POUNDWORLD Table of Contents 0 Introduction This present paper is a marketingaudit report on a bargain shop. It is evident that the bargain shops have rapidly increased in numbers along most high streets in the United Kingdom, partly because of the strict pricing policies or business strategy that focuses on physiological pricing. The other names for the bargain shops include pound shops or GBP1 shops. This present audit report focuses on Pounworld, which is one of the bargain shops that are located in Scarborough, in North Yorkshire. Scarborough hosts numerous leading shopping chains and other independent shops. Additionally, Scarborough has numerous shopping streets, and it is the location for the famous Brunswick shopping center. As for Poundworld, it is a family owned business and among UK’s leading single-price retailers. The first Poundworld shop opened its’ doors in 2004 and currently the retail chain boosts of over 180 stores across the UK. Poundworld stocks a variety of more than 5000 products at single price of GBP1. This report will first begin with a macro and competitive environmental analysis that includes PEST analysis and SWOT analysis. Secondly, the report will highlight on the retail chain’s market segment, strategic assets, business model, and value proposition. The third section of the report will review the current marketing mix of the retail chain while the fourth section will develop appropriate marketing mixes for the retail chain that will aim at increasing its profitability and market share. 2.0 Macro and competitive environmental analysis Under this section, this present will preset analysis that were conducted on Poundworld pertaining to its environmental condition and the analysis on the company’s resources, competencies, future prospects and possible threats on the company’s survival. These analyses will mainly include the PEST analysis and the SWOT analysis. 2.1 PEST analysis According to Porter (1980) in order to understand, the macroenvironment in which a company operates in, it is essential to conduct a PEST analysis for the company. In this regard, some of the environmental forces that will be analyzed include; political, economic, social and technological forces. The analysis will look into each of the four forces and then identify how each force affects the business operations of Poundworld. Yip (2004) further notes that the pestle analysis will help to identify forces that have a significant impact on Poundworld’s business supply, demand and cost within the UK market. PEST analysis Political Krajewski et al. (2009) noted that political forces as well as legal forces that include government policies and the general political climate could create opportunities and/ or threats for businesses either indirectly or directly. It is evident that the political forces present within the UK market are favourable to businesses. This is because Poundworld as well as other retailers not only within the Scarborough area but also within the entire UK market have been recording success in their operations. This assertion is substantiated by the fact that, in a period of nine years, Poundworld was able to increase its’ branch network to include 180 stores nationwide. This is shows that political forces are in favour of Poundworld business partly because it offers employment to more than 3500 employees and because it offers its’ customers goods at low prices thus, improving their living standards of customers. However, Krajewski et al. (2009) stated that the increase in taxes by the government led to drastic reduction on the spending power for UK consumers. Thou the increase in taxes led to increase in operations cost such as marketing expense for Poundworld. The company has been able to mitigate this risk by the fact that most consumers with low spending power do prefer to shop at GBP1 shops, where goods are affordable. Therefore, the increased taxes have also acted as an advantage to Poundworld due to affordability of their stocked items. Economical According to Walters and Rainbird (2007) economic forces determine how easy or difficult it will be for Poundworld to post strong financial performance at any given time since this force affect the availability of capital, cost, and demand. From the analysis of Poundworld, it is also evident that the UK economic force has favoured the company ever since after the 2008 to 2009 economic recession that affected the leading economies in the world. This is because Poundworld reportedly launched its’ multi-price brand, DiscountUK in 2010 and the brand has now more than30 stores across the state. Secondly, Poundworld opened their first convenience format store (Poundworld Express) in 2011 at Wakefield and so far, the brand has grown to a branch network of 7 express stores across the state. Since Poundworld cannot influence the economic force within their market, they can only use effective marketing communication to attract consumers based on their affordable products. Social Kaplan and Norton (2008) stated that the social environment mainly determines the current taste of consumers i.e. what consumers want, and according to Krajewski et al. (2009), pricepoint retailing established a new socio-cultural movement in the retailing industry. Ever since its inception in the UK market by Poundland in 1990, single-price point has become part of the British socio-culture, and seemingly, a majority of consumers prefer single-priced products. In respect to the marketing aspect, Poundworld has to ensure that their marketing communication abide by the distinct British socio-culture to avoid any negative feedback from the target audience. Technological The current global businesses environment is technology-based and businesses utilise technology as a tool to gain competitive advantage within the market place. Therefore, technological forces determine the business performance of companies. In respect to the marketing strategies of Poundworld it evident that the company has utilised technology in the form of social media to reach its’ target audience and even lower the advertising cost. The company has placed adverts in social sites such as facebook, twitter, Google plus (+) and Youtube. 2.2 SWOT analysis Bernard (1981) described SWOT analysis as the technical appraisal mechanism that a business can apply in order to evaluate its opportunities, threats, weaknesses, and strengths. The main strategy in this analysis is to evaluate the internal and external factors that might affect the financial performance of Poundworld. SWOT analysis Strengths According to Yap (2004) strengths are the most significant variables of any business that offers it a competitive edge over the others. Poundworld has four key strengths that include wide market presence in the UK market where it has 180 stores. Secondly, Poundworld has diversified into other brands that include convenient format stores and multi-price brand. These two strengths act as risk mitigation measures for the entire company they increase the company’s profitability and all of the three brands can share marketing communications or advertisements thereby reducing overall marketing cost. The third strength for Poundworld arises from the fact that it sells all of its’ product for a single price of GBP 1, thereby attracting many customers and benefiting from high bargain power over the suppliers. Poundworld fourth strength lies on the fact that it uses social media (new media) for its marketing campaign apart from old media. The social media sites such as facebook, twitter, Google plus and Youtube offer a cheaper medium for advertisements that is equally effective since marketing communications reach the intended target audience in a desirable manner. Weaknesses Trent (2007) described weaknesses as aspect of a business that may hinder it from achieving set goals and objectives. One of the main weaknesses of Poundworld is the fact that it sells its’ products at a single-price unit of GBP 1. This prohibits the retail chain from adjusting its prices to reflect the present market conditions. Secondly, the retail chain cannot adjust its’ mark-up percentage to maximize its’ profit. Thirdly, the single price unit does not attract high spenders because they view the retailer’s products as of low quality and they world rather buy the same product offered at Poundworld stores in other stores that sell them at a higher price. Opportunities Ehrbar (1998, P. 97) described opportunities as, “exterior functionalities that are necessary in aiding the continuity of the company.” Opportunities usually enable a company further gain a competitive edge over its rivals in the market place if properly exploited. Poundworld has an opportunity to expand further its market presence even beyond the traditional UK borders. With an increased market presence, Poundworld will be able to increase its’ bargaining power over its competitors, and equally increase its profitability. Threats Brown et al. (2011) described threats as external factors that may hinder a business from attaining long-term success. The main threat to Poundworld is the increasing number of retailers who offer products at single price unit. With increase in such retailers, Poundworld is likely to lose its bargaining power over its suppliers, and they may incur losses or low profits due to high selling price from the suppliers. 3.0 Poundworld’s market segment, strategic assets, value proposition and business model Poundworld’s business model only focus on one single market segment, which is composed of customers who are looking out for cheap but genuine products. This market segment consists of, but it is not limited to low income earners or people with less disposable income. Summarily, Poundworld target consumers who want to spend less on a wide range of products that include household essentials, cleaning products, toiletries, car care gadgets, first aid and medical kits, and groceries, among other. Poundworld strategic assets are its stocked products, which pass the quality market, they are genuine and from trusted suppliers such as Coca Cola, Cadbury’s and Johnson’s. The Poundworld gain a competitive advantage because of the products that its stocks. Through its marketing communication the retail, chain usually strives to communicate to their target audience on their value proposition bestowed on the products that come from distinguished suppliers and/ or manufacturers. 4.0 Elements of the marketing mix that needs improvements Joshi, (2005) described marketing mix in his studies as a collection of elements within the marketing strategy of a business organisation, which are devised to increase profit as well as meet customers’ needs and expectations. They include 4.1Product Poundworld is among one of UK’s leading single price retailers mainly because it sells all of its range of products at a flat rate of GBP1 regardless of size, manufacturer, usage, and durability, among other factors. Because of the single-price business model, the retail chain is unable to stock a wide variety of goods because it will require them to sell above the GBP1 mark, which does not conform to their business practice; this translates to lost business opportunities. 4.2 Price As already noted above Poundworld offers all of its products at a single price of GBP1, this act as a disadvantage to the business organisation because they put off customers who are usually willing to spend more, and who associate cheap products such as those offered by Poundworld to being inferior or fake. The fixed price of GBP 1 also puts off customers who would wish to buy products that cost less than GBP 1 in other retail chains. 4.3 Place Poundworld’s products are only available in only 180 stores that are located across the state of UK. This number is considerably small when compared to Poundworld’s key rival, Poundland, which has over 300 stores located wide across the state. The limited number of stores of Poundland means that only a small portion of customers within the UK market can get to enjoy the value proposition they present to customers. 4.4 Promotions The promotions strategy of Poundworld mainly focus on the price aspect of the stock products and only highlights on a few chosen products on its advertisements despite the fact that its stocks more than 5,000 products at a single price of GBP1. This promotion strategy, which lays more focus on the single-price strategy, does not offer much information to the target audience on specific items that they can get for the single-price from the retail chain’s stores. 5.0 Recommendations For Poundworld to gain a leading role in the UK market it has to revise its’ marketing mix and its key business strategy; below are some valuable recommendations. These recommendations aim at increasing Poundworld’s market share, as well as its profitability. 5.1Recommendations on Poundworld’s key business strategy All of the single-price retailers share the current Poundworld business strategy, and hence for Poundworld to emerge as a cut above the best it has to restructure its business strategy by introducing discounted products that have a selling price lower or higher than the single-price of GBP1. This strategy will yield positive outcomes because the retail chain will be able to increase its market segment or target customers. 5.2 Product Currently Poundworld stocks only low-priced products of which the mark-up percentage is usually low. In order to increase customer base, overall profitability, and create a risk management measure the retail chain should introduce products that have discounted prices such as low priced phones, radios, television sets, and DVDs, among others. Moreover, the retail chain can also introduce products that cost less than GBP1. Through this strategy, Poundworld will be able to maintain its key business strategy of offering products at exceptionally low prices, and it will be able to attract more customers. 5.3 Price Upon the inclusion of new products as mentioned above, the price of products within the retail chain will majorly still be the single-price of GBP1, but there will also be discounted prices for some assorted products of which some will cost less than GBP 1. This marketing element will be able to attract more customers who are looking for affordable deals on a range of products that would not have being available during the single-price of GBP 1 regimes. 5.4 Place Concerning the marketing element of place, Poundworld should seek to expand its branch network from the current 180 stores across the UK to higher figure or better still it should aim at opening up at least one store in key towns of the state. In addition, Poundworld should aim at being the first UK single-price retail to venture into other untapped foreign markets such Asia and Africa. With such an expansion, the retail chain will be able to increase its overall profitability as well as market share. Furthermore, a wider branch network will give Poundworld a more bargaining power over its supplier and it will be able to acquire their merchandise at a low price than the small single-price retailers. This marketing element will enable Poundworld to lock out small competitors from entering into the market, and thereby reducing its market share. 5.5 Promotions Since Poundworld will be introducing new products that cost more or less than the GBP 1 and venturing into other new markets, therefore, the cost of promotion will be considerably high as it is usually high at the initial stage of any product life cycle. In the new promotion strategy, Poundworld will ensure that their target audiences get to learn more about the stocked products at their different prices. Secondly, the marketing communication should also inform the target audience of new stores that have opened and those that are about to be opened up in new locations. In order to reduce cost Poundworld should jointly market their products with the supplier or manufacturer. That is, collaborate with the manufacture and supplier to ensure that their adverts inform the target audience that the advertised product is available at Poundworld’s store at a specific price. Secondly, Poundworld should intensify its marketing communication through adverts on magazines, newspapers, radio stations, and television channels. Moreover, Poundworld should continue to utilise the new media such as facebook, twitter, Google plus and Youtube for marketing communications. 6.0 Conclusion From the PEST analysis, it is evident that political forces, economical forces, socio-cultural forces, and technological forces that are present within the UK market are all in favour of Poundworld business, and this explains the tremendous growth of the retail chain over the past few years. In reference to the SWOT analysis, the main weakness of the retail chain is its’ pricing strategy that limits its potential of profit maximization. However, the re6tail chain has an opportunity to expand further and lock out the small single-price retailers that are emerging sporadically within the market. After the review of the current marketing mixes, the audit report recommends that Poundworld should introduce a set of new products that have discounted prices and other products that sell below the single-price of GBP1, which will still maintain the business model of offering products at a considerably low price and it will be able to attract more customers. Moreover, the retail chain will engage in market expansion program to open up new stores even beyond the border of the UK. Because of these new introductions the retail chain will engage in an aggressive marketing campaign to inform the target audience of the new products, prices, and locations References Brown, S. Bessant, J. and Lamming, R. (2011). Strategic Operations Management. London; Routledge Ehrbar, (1998): The real key to creating wealth. New York- Wiley Kaplan, R. and Norton, D. (2008). The Execution Premium: Linking Strategy to Operations for Competitive Advantage. Boston, MA. 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