Appropriate Organizational Structure for Currys - Case Study Example

INTERNATIONAL MARKETING Contents Introduction 2 Discussion 4 Market Entry Strategies 4 Marketing Mix 8 Appropriate organizational structure for Currys 10 Conclusion 11 References 12 Introduction Globalization has resulted into intense competition in all industrial sectors making it difficult for an organization to produce products as well as adopt the best strategies so as to enter into new markets. In the current scenario it has been observed that the electronics industry has achieved significant growth. Currys is one of the most renowned electronic retailers which have been able to position itself well in the market place. As per statistics the company has able to increase its revenue from £7910.2 million to £8213.9 million. This growth indicates that the company has the required competencies so as to compete in the international market. The organization majorly deals with all form of electronics products such as refrigerators, music systems, LED/LCD television sets and air conditioners. However the industry in which Currys operate is a highly competitive market with very strong players such as Hitachi, Samsung, Sony, Yamaha, LG and JVC. These companies do possess their own flagship stores that comprise of wide range of electronic goods at the most reasonable prices. There is a need that Currys to adopt price flexibility in its system so that it is able to survive as well as grow in the market. The organization is a British retailer that operates in the electronic sector and has marked its presence in Ireland as well as UK. The company was founded in the year 1884 and is owned by the Dixons retail. There is only a slight increase in the GDP of UK in the past few years. This in turn has resulted into a very saturated market of electronic goods making it essential for many retail companies to shift to other countries. The company has been able to enhance the purchasing power of customers by offering value added services as well as giving desirable discounts on all its products. However the company faces a tough competition from other retailers as well as from OEM manufacturer which has made the company to implement strategy to enter into an opportunistic market of Sweden. This decision needs to be supported by appropriate strategies so that the company is able to generate more revenue and a strong position in the EU country as an international branch performing its operations in Sweden. Discussion Market Entry Strategies The market entry strategies that are adopted by a company totally depend on the nature of the market. For some company forming alliances is the best strategy and for some to adopt franchising strategy is the most suitable. All these strategies also depend on the cost that the company is willing to invest in the new market. There are some very popular market entry strategies such as exporting, directly or at times indirectly with the help of a middleman, manufacturing the products in the market that is been targeted and outsourcing sales (Richter, 2012).Other form of market entry strategies comprise of licensing, franchising, wholly owned subsidiaries, strategic alliances, joint ventures, Greenfield project, exporting, outsourcing and Turnkey project. However for Currys the best suitable market entry strategies would be wholly owned subsidiaries and franchising. Franchising is a method which incorporates leasing for a particular span of time by giving the right to utilize the business models and the brand of the organization. The franchising method is adopted by a company simply because it reduces the burden to start up a new store in an unknown market, thus reducing the level of risk and investment. In relation to the franchisor this forms an alternative option for opening chain stores in the market and hence reduces the liability of the firm (Tielmann, 2010).The success of the franchisor totally depends on the franchisees success. The one who forms the franchisee are offered much greater incentive in comparison to the employee base simply because these people have a direct stake in the organization. This can also be stated as franchisor is a supplier of goods that gives the right to the franchisee to use the trademark and distribute goods so that it reaches the customer. In this structure the operator or the franchisee pays a significant amount of profit to the supplier. This method is generally used when a company does not want to invest much in the international markets or want to avoid any form of risk associated with the new market. The major advantages that such a strategy offers to a company are mainly in the form of financial, operational, strategic and administrative (Henry, 2011).The franchising creates an alternative income source for the company, this mainly in the form of royalty, franchisee fees and levies. This kind of capital injection helps to improve upon cash flow and facilitates higher profits and even high return on the capital investment. The other forms of benefits that are enjoyed by the company are reduced advertising costs, operating and distribution costs. The cost that is saved by a company through this form of market entry strategy can be utilized by the firm in any other sector such as that of research and development so as to offer best products to the market. The purchasing power always gains economies of scale through this market entry strategy. In terms of operational benefits this strategy enables a firm to operate centrally then to own any specific location. This in turn also gives procedure uniformity which is reflected through enhanced productivity, better quality and consistency. The franchisee maintains high quality control simply because of the hard work and huge investment in the business operations (Gelder and Woodcock, 2003).The focus towards gaining monetary results in turn helps to achieve higher level of customer satisfaction and improved effectiveness of sales. The strategic benefit is that it helps a company to spread risks in the form of large number of locations through investments made by people. It even helps to reduce the effect that comes from the competitors as it facilitates more of network expansion and even gives an opportunity so as to focus on the changing trends of the market. In terms of administrative benefits the company which is centrally located helps to maintain the business operations through effective recruitment, cost effective workforce and reduction in turnover of key personnel. The major disadvantages are that a company needs to make significant capital allocation while performing pilot operations as well as setting franchisee infrastructure. At the initial stage of this strategy the company needs to possess sufficient resources which would be required to train, support as well as recruit franchisees. This form of strategy can pose a serious risk on the firm as it can be subjected to trade name being spoiled due to the franchisees if the company does not have the capability to identify the best personnel for the business operations in the new market (Allen, 2006).Other form of disadvantage is that a lot of pressure is imparted on the franchisor by the franchisee in terms of implementing new policies and procedures. The company also needs to disclose all form of confidential information related to business operations to the franchisee which is the major risk for the firm. A wholly owned subsidiary is another form of market strategy that can be regarded as a company that owned completely by the holding company or the parent company. The common stock of the subsidiary would be hold by the parent company. The parent company has also the power to select the board of directors for the subsidiary who are responsible for controlling business operations for the subsidiaries. The subsidiary can belong to the same industry as that of parent company or it may be a part of completely a different industry (Onkvisit and Shaw, 2009).The major advantages of wholly owned subsidiaries are that it helps to take control over the supply chain which previously had to rely on service providers and suppliers. This facilitates more of vertical integration where all the supply chain activities are under the same owner. This strategy also enables the company to manage risk as well as diversify. Diversification is a method through which a firm can reduce the level of risk in business operations by investing into wide array of businesses so that if a particular segment fails then it can be substituted by any other segment which is profitable. Many companies utilize the concept of subsidiaries so as to enter into a new market simply because it prevents the company to reduce the level of exposure majorly for the parent company. The loss that a company can witness in a new emerging market can be totally left on the shoulders of these subsidiaries. The parent company also can take an initiative with the local partner so as to launch local subsidiary and perform business operations in the home country. On the other hand it may implement foreign subsidiaries so as to receive the most favourable tax treatment from the foreign government. The major disadvantages of this market entry strategy are that more taxed evolves due to the same company divided into so many business entities. On the other hand the technique of diversification would mislead the company in terms of what it performs the best in the industry. Further the parent company has the legal duty in terms of promoting all the corporate interests of its own subsidiaries this in turn would result into conflict between the subsidiaries and the holding company. Amongst the two the most suitable market entry strategy in the present scenario for Currys is wholly owned subsidiaries. The market that the company is going to enter is Sweden. This location is very suitable for any electronic goods manufacturing company simply because it possesses the market demand for such products. The consumer market of this country is more aligned towards modern and quality products. The rapid growth of urbanization has made the purchasing power of consumer market high with more of disposable income as noticed in the past few years. The real presence of the company in this new country is very essential simply because of the fact that people are more aligned towards value added services and believes that quality matters more than price. There are some well established competitors in this market since many years making it more necessary for Currys to open its new subsidiaries in this market. This strategy would enable the company to reach out directly to the customers and not be dependent on any franchisees for its business operations and strategy implementation. On the contrary franchising would not be a suitable strategic option for the company as it would result into sharing of practices and information that would back fire as the competition is intense in the market. Any form of conflict between the franchisor and franchisee would result into an adverse effect on the business operations of the company. Marketing Mix The marketing mix comprises of certain factors that helps an organization to position itself in the best possible way in the market. Currys majorly specialize in two important sectors that are household appliances and home electronics. In order to operate in the new country the company has to make certain changes in its marketing mix that is in terms of products, price, place and promotion. The electronic goods that is sold by the company is very limited which clearly states that in order to survive competition the company needs to form ventures and incorporate more branded items in its stores. The company should not diversify in the present context into different product segment simply because it needs to establish its position in the new market as an electronic retailer. Currys in its product line can incorporate branded laptops, cell phones and other home appliances that are not there in its present product line. This would enable the company to offer more product range accompanied with wider choices in terms of brand. The competitive market of Sweden offers a great opportunity for the company which it can explore. In such a scenario where there are strong players in the market the best strategy that can be adopted by a company is to offer quality products at competitive prices. The pricing strategy that would be best suited for the company is cost plus pricing (Schindler, 2011).In this pricing technique the company just needs to calculate on its operating cost and then add a small profit margin to that cost which is offered to the customers. Though such pricing strategy would not be so much profitable in the present scenario but it would help the company to penetrate into the market and gain more market share (Mills, 2002).This form of price wars has been proved to be advantageous for many companies in the initial stages of market entry. The third factor of marketing mix is promotion which is essential for any firm so that customers are aware about the product or services. Being in the retail sector that is highly competitive it becomes very essential to adopt the best promotional strategies. The most appropriate promotional techniques for the business operations of Currys in Sweden are advertisements in newspapers, radio and social media. The trend of digital advertisement has gained its presence in the recent scenario (Cheverton, 2005).More number of customers can be reached through bulk messages and emails which would help the company to save time as well as cost. Currys can even give advertisements in daily newspapers of Sweden so that people may encounter the wide range of products and attractive prices that is offered by the company. Radio is the most significant promotion tools in international markets which can also be adopted by the company to promote its presence in the markets of Sweden. The distribution or place is the fourth factor in marketing mix. There would be no such specific changes in the distribution channel of the company. The company should only focus on extending its number of retail stores in Sweden and make these stores operate in locations that are nearby shopping centres or malls that can be easily accessed by the customers. On the other hand the company can also import certain products from the foreign markets and sell under its own brand so that more product choices are available to the customers (Madaan, 2009).The major cost implications that the company would witness will be in the areas of product and promotion. The company has to bear cost in promotional measures so as to capture market share in Sweden. On the other hand maintaining more of stock would also comprise of added cost for the company. However the cost implications that would be witnessed by the company in the market entry stage would be overlapped once the company gains presence in the market and carries on with its business operations smoothly in Sweden. Appropriate organizational structure for Currys The organizational structure that should be adopted by a company would be dependent on the form of market entry strategy that is implemented so as to expand on its business operations. Currys new target market is Sweden and in order to enter this market the strategy that would be adopted by the company is wholly owned subsidiaries. The control of the company’s operations would be with the President of the company as the major reason behind such subsidiary strategy is to have centralized control. The organizational structure so as to handle business operations as well as marketing practices by Currys in Sweden would be as stated in the diagram below- The above organizational structure clearly depicts that the wholly owned subsidiary of the company would have a complex structure for operations. The marketing operation would be managed by four important heads of the subsidiary of Currys, they are marketing manager, operations manager, accounts manager and HR manager. These heads in turn would be reporting to the President of the company. The advertising as well as sales supervisor would be reporting to the marketing manager in context of any marketing issues or problems that are faced by sales staff of the organization. The benefit of this structure is that it would enable the company to control its business operations in the most efficient manner without any form of complexity. The operations in the new country would be under strict supervision of appointed managers (Baligh, 2006).The major role of the manager would be to coordinate well with all the other supervisors so as to report appropriately to the president of the company. This structure would provide more of flexibility in the system that is essential for the future growth of the company. The disadvantages are very low for this structure. The major disadvantage is that work pressure on the managerial position would be very high and the Head of the company needs to handle wide range of issues coming from these managers. The level of hierarchy is low which would result into more of workplace conflict if the supervisors do not coordinate well with the managers (Graubner, 2007). Conclusion Currys as a British retailer dealing in electronic goods has been able to make a strong market presence in Ireland and UK. The company operates with wide range of electronic products and offers the best of prices possible. The markets in which it operates as become highly saturated which has made it essential for the company to shift to other regions or expand its business in locations where there is high opportunity. The market that has been chosen by the company to expand its business operations is Sweden. The major reason behind such specific choice is that the new region offers the best of infrastructure that is essential for retail business. On the other hand the demand of the consumer market in this region is also very high which indicates that the purchasing power of customers is high in Sweden. The population of Sweden is more inclined towards stylish, branded and good quality products. The consumer market in this region is not much conscious about the prices as long as it gets quality products. However the electronic market segment of this region is very competitive which needs to be considered by the company while taking any decisions that is related pricing strategy formulation. The adoption of right marketing mix would enable the company to survive in the market for long run. References Allen, M. 2006. Analysing the Organizational Environment. UK: Select Knowledge Limited. Baligh, H. H. 2006. Organization Structures: Theory and Design, Analysis and Prescription. USA: Springer Science & Business Media. Cheverton, P. 2005. Key Marketing Skills: Strategies, Tools and Techniques for Marketing Success. Great Britain: Kogan Page Publishers. Gelder, D., and Woodcock, P.2003. Marketing and Promotional Strategy. UK: Nelson Thornes. Graubner, M. 2007. Task, Firm Size, and 0rganizational Structure in Management. Germany: Springer. Henry, A. 2011. Understanding Strategic Management. New York: Oxford University Press. Madaan, V.S. 2009. Fundamentals of Retailing. New Delhi: Tata McGraw-Hill Education. Mills, G. 2002. Retail Pricing Strategies and Market Power. Australia: Melbourne Univ. Publishing. Onkvisit, S., and Shaw, J. 2009. International Marketing: Strategy and Theory. New York: Routledge. Richter, T. 2012. International Marketing Mix Management. Berlin: Logos Verlag Berlin GmbH. Schindler, R. 2011. Pricing Strategies: A Marketing Approach. UK: SAGE Publications. Tielmann, V. 2010. Market Entry Strategies. USA: GRIN Verlag. Read More