Micro-Environmental Analysis of Harvey Nichols - Report Example

Micro-Environmental Analysis of Harvey Nichols Executive Summary The paper dealt with conducting a micro environmental analysis of Harvey Nichols.The conducted analysis helped to gain a greater understanding of the principle of marketing in a rapidly changing business environment. Moreover, it helped to demonstrate an awareness of marketing concepts and approaches that are brought to practice by the organizations to gain a competitive edge (Ocasio and Joseph, 2005). Additionally, it helped to understand the relevance of marketing research to organizations and the impact of micro environment on marketing decisions. Various micro environment evaluations have been employed to gain a better insight of the current position of the industry, its customers, shareholders and competitors. An in-depth analysis helped to suggest appropriate recommendations for the company in order to sustain its position in the market. Moreover, the learning outcomes of the report were to understand the principles of marketing within a constantly changing environment and the concepts and approaches that demonstrate an awareness of the harsh business environment. The report also helped to gain an understanding of the relevance of market research in an organization to analyze its market position and competence and to plan strategically. The report critically analysed the main influence of the firm’s activities on consumer behaviour and the paper also illustrated the significance of market research to organisations. The impact of the environment on advertising decisions of Harvey Nichols was demonstrated with current marketing theories and practices in a logical manner to analyse the firm’s current position and strategies. Table of Contents 1.Executive Summary 2 2. Introduction 5 2.1. Principles of Marketing in Constantly Changing Environment 5 2.2. Awareness of Marketing Concepts and Approaches in Practice 5 2.3. Major Influences on Consumer Behaviour 5 2.4. Importance of Market Research to Organizations 5 2.5. Impact of Environment on Marketing Decisions 6 3. Analysis of Industry, Market Size and Competition 6 3.1. SWOT Analysis in Harvey Nichols 6 3.2. Competition: Porter’s Five Forces Analysis in Harvey Nichols 8 3.3. PEST Analysis 10 3.4. Shareholders of Harvey Nichols 11 4. Segmentation, Targeting, Positioning and Customer Value Proposition 11 5. Marketing Review of Current Activities: The Marketing Mix 12 6. Existing Product and New Product Development 13 7. Distribution Channels, Innovative Edge and Pricing Mechanisms 13 8. Conclusion 14 9. Recommendations 14 Reference List 15 Appendices 17 2. Introduction Harvey Nichols started its operation in Knightsbridge in 1831 and since then it has led the way of sourcing extensively desirable and cutting-edge designer brands (Benedict, 2015). The brand operates its business internationally and is recognized as the UKs premium luxury fashion retailer and is also globally renowned for its efficiently edited fashion and beauty merchandise, for providing premium food and wine and for its award winning restaurants (Moore and Doherty, 2007). 2.1. Principles of Marketing in Constantly Changing Environment In the constantly changing environment a company needs to abide by certain principles in order to sustain the competitive market. Some principles that the firms (in this case Harvey Nichols) follows are: The firm adheres to the marketing mix elements as per the changes and trends in its micro environments and conducts frequent environmental scanning to adapt and invest in effective marketing strategies. 2.2. Awareness of Marketing Concepts and Approaches in Practice Various marketing concepts and approaches in practice are: the production concept which states that the consumers will accept products that are widely available and inexpensive, the product concept which states that consumers will like the products that are of superior quality. These concepts are followed by Harvey Nichols in order to gain a competitive edge. 2.3. Major Influences on Consumer Behaviour Various marketing approaches and concepts implemented by a firm impact on the consumer behaviour. Better marketing campaigns, for instance by understanding that consumers are more conscious to recent fashion trends, Harvey Nichols design their advertising campaigns focussed on current fashion trends. This will influence consumer buying behaviours positively resulting to increased sales. 2.4. Importance of Market Research to Organizations Market research on microenvironment factors that are the business factors has an increased effect on a company’s capacity to serve its consumers. These factors include the company itself, its suppliers, marketing channels, consumer markets and the common public. The elements of micro environment are controllable by the company. Market research also enables a firm (in this case Harvey Nichols) to get and overview of its current market position. Therefore, it is important to conduct a market research to develop and attain sustainable marketing strategies. 2.5. Impact of Environment on Marketing Decisions Developing effective marketing decisions require proper analysis of a firm’s micro environment. Environment analysis helps Harvey Nichols to analyse its market position, strengths, weaknesses and competition and thereby help in making appropriate decisions to fight the competition and develop the strengths. 3. Analysis of Industry, Market Size and Competition Harvey Nichols has a booming position in the luxury industry with its department stores being preferred by wealthier shoppers. The market share kept on increasing since many years (Appendix 1). Though the retail sales were decreasing due to falling demands in the luxury markets, it has diversified its business and gained a huge market share. The brand is turning back to the stock market 137 million after the takeover by Mr. poon who is a Hong Kong businessman (Bernroider, E., 2002). 3.1. SWOT Analysis in Harvey Nichols SWOT (strengths, weaknesses, opportunities and threats) analysis is a simple framework for conducting situation analysis of a company’s business units and accordingly generate strategic alternatives (Steyn, 2004). By conducting this SWOT, Harvey Nichols can analyse position of its industry, market size and competition. Strengths Loyalty of customers as they are satisfied with the company’s products and services. Customer service- Consultant and personal shopping experience and tax free customer service. All the business units are experienced Strong existence of distribution and sales network Weaknesses Prices of products and services- As the company’s products are high priced, the consumers purchase them occasionally rather than regularly. Weak brand- The brand is not valued by the customer and because of this; the brand sells the same product cheaper than other stores. Huge investments in research and development Opportunities Brand Name- The brand has well known departmental stores as it has many branches worldwide. Online market- Provides the online shopping facility to its customers. The income level is projected to increase constantly Threats Strong competition- The brand faces tough competition from Harrods, Selfridges and John Lewis. Presence of substitute products- Identical products are offered by the other shops in the UK market at a cheaper price. Mounting costs of raw materials 3.2. Competition: Porter’s Five Forces Analysis in Harvey Nichols Porters five forces model is a renowned micro-environmental analysis tool of a company to get a detailed view of its business environment and accordingly initiate and implement competitive marketing strategies to sustain the harsh global competitive environment (Moore and Doherty, 2007). This analysis is conducted for Harvey Nichols to understand its business environment in the UK market. Figure 1: Porters Five Forces Analysis of Harvey Nichols (Source: Beyazit, 2011) Threat of new entrants- The competition from the new stores coming into existence in the UK market with similar concepts is low, as Harvey Nichols has a strong reputation and a high standard in the market. Moreover, the brand is well established and has positioned itself as a highly expected store (Beyazit, 2011). However, opening a new branch of an existing departmental store, in other areas in the UK or in the foreign counties can be a threat because the other brands have the experience and capability to compete with Harvey Nichols. Bargaining power of suppliers- Harvey Nichols provides its customers a wide range of products which are not easily available in departmental stores of other brands, which means that these products are exclusively sold in their retail outlets. Over many years, this strategy has been in the company’s favour in creating a large customer base and gaining loyal customers because of availability of premium products that are limited to specific outlets (Moore and Doherty, 2007). Bargaining power of buyers- In case of Harvey Nichols, this power is balanced because they have the capital to purchase as they belong to the consumer category of high income but also have fewer alternatives to purchase from (Moore and Doherty, 2007). This is because most of these products are of limited edition and are lavish in nature. Threat of substitutes- For Harvey Nichols, the threat of substitute goods and services is medium because of the type of products sold, that is the luxurious products and also due to the fact that it is quite difficult to produce such products in bulk quantities (Vrontis, D., 2003). Rivalry between existing competitors- The rivals that are into competition with Harvey Nichols are Harrods, Selfridges, John Lewis, Fortnum and Mason, House of Frasser and Debenhams (Bruce and Kratz, 2007). Every single store of these brands offers products and services from internationally acclaimed fashion brands. The merchandises of these stores include women’s wear, men’s wear, accessories, food, beauty products and home appliances. In addition, some of these stores also have personal shopping assistance (Bruce and Kratz, 2007). 3.3. PEST Analysis Political- Retailing has become a considerable contributor to economic development in UK. On the other hand the market for department store is reasonably inelastic unless the costs are reduced to the extent that they are in competition with the other departmental stores. Political factors are favourable for Harvey Nichols to enhance their business growth. Economical- The economy and the retail industry are closely related such that when the inflation decreases and customers have more money to spend the demand increases. Non specialist stores have been observed to have the lowest quarterly growth since 2010. Internet shopping has increased in UK that possesses an opportunity for Harvey Nichols. Social- The current changes in lifestyle has been observed in the working women in UK. Due to introduction of new technology like computers the work time for people has become easier and People from this development have gained more leisure time (Bulletin, 2005). Technological- Technology has a great impact on supply and demand of Harvey Nichols product. Technology has supported in faster manufacturing and the demand for ready to wear garments has increased. Internet shopping has gained much popularity and can banish many departmental stores out of the market (Vrontis, D., 2003). 3.4. Shareholders of Harvey Nichols The major shareholders of Harvey Nichols are Dickson Poon, who is a businessman in the luxury goods retail sector and is the company that possess ownership of Harvey Nichols and thereafter some shareholders such as Burton group and Bertolucci SA joined the company’s shareholder group (Bruce and Kratz, 2007). 4. Segmentation, Targeting, Positioning and Customer Value Proposition Harvey Nichols wants to position its brand as the most renowned fashion brand that provides its customers with superior fashion experience. It wants to portray its image of being a luxury brand that provides definitive fashion experience with the best collection of brands in fashion, food, home and beauty (Wale, Robinson and Dickson, 2010). The objective of Harvey Nichols is to target particular market segments by categorising customers on the basis of age, occupation and income. These consumers belong from the middle and upper classes and between the age group of 24 to 34 years, who are generally of the high income group (Bose, 2008). This high income customer segments can afford the superior value products. Harvey Nichols solely anticipates their customers’ needs and frequently inspects consumer behaviour on their advertising campaigns to survive in the highly competitive market. They value their customers and all focus on designing all their products as per the desires of their customers. They provide an excellent customer support services and employs new technologies to make the products easily available to the customers (Hambrick and Fredrickson, 2001). 5. Marketing Review of Current Activities: The Marketing Mix The marketing strategy of Harvey Nichols is aligning the micro environmental analysis of the brands business in the UK (Dickson.com.hk, 2015). In order to successfully position the products, identifying the target market is very crucial. Harvey Nichols strictly considers the 4P’s strategy to grab a huge amount of market share. Product- To differentiate itself from its competitors, Harvey Nichols continues to improve their collections to source the best of the new seasons fashion and accessories (Moore and Doherty, 2007). They offer their luxury products in their selected retail outlets in the UK and therefore these products have very less chance to be similar to the competitors’ products. Price- Pricing of the products is based on its target market with high disposable income and having high fashion sense (Ivythesis.typepad.com, 2015). To sustain the competition from other brands that are offering the same products at a lower price, Harvey Nichols needs to segment its products and price them accordingly (Lewis and Hawksley, 2011). Place- Harvey Nichols strategy is to lace its stores at the heart of the cities in the UK. The brand has five stores in the UK located at the cities that are the commerce centre of the country. This strategy is implemented considering the fact that the gross disposable income of the people in these areas are high than other locations in the UK (Harveynichols.com, 2015). Promotion- Marketing programme cannot be successful in absence of effective communications. Harvey Nichols spends a lot in their advertising campaigns and this marketing strategy has also been successful to a great extent (Dickson.com.hk, 2015). The brand selects to advertise in the fashion magazines and newspapers to grab attention of consumer segment that pays attention regularly on the latest fashion trend. Productivity- Harvey Nichols has a very demanding placer of work which ensures that all its employees work on their full capability. The company enhances the productivity of their workforce by constantly motivating them and directs them to achieve maximum sales and productivity targets. Their products are easily available in all their stores whenever in demand (Computacenter, 2015). People- Harvey Nichols ensures that they have the most efficient and appropriate workforce with exceptional abilities, talent and attitude towards the organizational tasks. The values of the personnel require possessing integrity, professionalism, teamwork, recognition and dedication to contribute superior quality service that the company’s consumer desires and to have an excellent reputation of the brand (Sakarya, Eckman and Hyllegard, 2007). Process- The production process of Harvey Nichols is always centred on the products quality. They use highly efficient equipments in their manufacturing process and source their raw materials from highly sustainable resources. For apparels they use a unique production process by which pleating simultaneously creates texture and form. 6. Existing Product and New Product Development Harvey Nichols offers luxury fashion apparels for men and women, fashion accessories, beauty products, wine and food. Their products range from luxury products that are high priced to daily use products that are low priced. The brand offers wide range of cosmetic ranges and perfumes for women (Beyazit, 2011). Many other lifestyle products range from stylish apparels, luxury headphones, statement umbrella, shoes and fashionable key rings. Harvey Nichols constantly discovers new product ranges to offer their customers the latest fashion (Grundy, 2006). The brand captures the current industry advancements and their “New In” section comes with world’s first facelift in a jar. By analysing what’s on trend recently, they keep their regime always up-to-date. 7. Distribution Channels, Innovative Edge and Pricing Mechanisms Harvey Nichols employs various distribution channels to make its products available to its target customers. They sell their products in-store and also have special stores for exclusive merchandise (Grundy, 2006). Harvey Nichols is constantly involved in innovation. It develops its products and services regularly which make them win over its competitor brands (Steyn, 2004). The brand has developed new distribution channel that is e-commerce which is their first step towards developing multi-channel strategy. The pricing mechanism of Harvey Nichols is centred on its target customer group. They set high prices for almost all of their product ranges to complement its product quality. The brand keeps its prices high so that it matches the luxury status of its products (Steyn, 2004). 8. Conclusion The purpose of this report was to identify the threats and opportunities faced by Harvey Nichols in the UK market and to categorise the marketing strategies implemented by the business to cope up with harsh competitive market. For developing such sustainable strategies, the SWOT analysis, Porters five forces analysis and evaluation of its customers, shareholders and competitors have been conducted for Harvey Nichols UK based departmental stores. The study presented the marketing theories and practices are utilized in a logical approach supported by appendices. 9. Recommendations Marketing environment has an increasing impact on the strategic decisions of a company. Analysing its position in the market, impact on customer, competitive position a company can develop a list of strategic decisions to gain a competence and improve the weak areas of its business. The brand needs to minimize their threats and maximize the utilization of their market opportunities for maintaining its competitive position in the long run (Steyn, 2004). Therefore, before developing and implementing a corporate marketing strategy, any company, in this case Harvey Nichols should go for a detailed analysis of their micro environment. Reference List Benedict, s., 2015. Sophia Benedict Profile and Sample - A profile and analysis of the London department store industry. [online] Available at: < http://www.ivoryresearch.com/writers/Sophia-Benedict-ivory-research-writer/> [Accessed 16 June 2015]. Bernroider, E., 2002. Factors in SWOT Analysis Applied to Micro, Small-to-Medium, and Large Software Enterprises:: an Austrian Study. European Management Journal, 20(5), pp. 562-573. Beyazit, E., 2011. Evaluating social justice in transport: lessons to be learned from the capability approach. Transport reviews, 31(1), pp. 117-134. Bose, R., 2008. Competitive intelligence process and tools for intelligence analysis. Industrial Management & Data Systems, 108(4), pp. 510-528. Bruce, M. and Kratz, C., 2007. Competitive marketing strategies of luxury fashion companies. Fashion marketing: Contemporary issues, 8(6), pp. 130-50. Bulletin, R., 2005. Harvey Nichols in supply chain upgrade | The Retail Bulletin, Retail News. [online] Available at: < http://www.theretailbulletin.com/news/harvey_nichols_in_supply_chain_upgrade_05-04-05/ > [Accessed 16 June 2015]. Computacenter, 2015. Harvey Nichols enhances the customer experience and will make savings of £1 million with unified communications. [online] Available at: < http://www.computacenter.com/our_customers/case_studies/downloads/Harvey%20Nics.pdf> [Accessed 16 June 2015]. Dickson.com.hk, 2015. Dickson Concepts (International) Limited. [online] Available at: < http://www.dickson.com.hk/ > [Accessed 16 June 2015]. Grundy, T., 2006. Rethinking and reinventing Michael Porters five forces model. Strategic Change, 15(5), pp. 213-229. Hambrick, D. C. and Fredrickson, J. W., 2001. Are you sure you have a strategy?. The Academy of Management Executive, 15(4), pp. 48-59. Harveynichols.com, 2015. Harvey Nichols - Designer Fashion, Beauty, Food & Wine. [online] Available at: < http://www.harveynichols.com/ > [Accessed 24 May 2015]. Ivythesis.typepad.com, 2015. The Marketing Strategy of Harvey Nichols - Thinking Made Easy. [online] Available at: < http://ivythesis.typepad.com/term_paper_topics/2009/07/the-marketing-strategy-of-harvey-nichols.html#axzz3b4OCp5eA > [Accessed 24 May 2015]. Lewis, B. R. and Hawksley, A. W., 2011. Gaining a competitive advantage in fashion retailing. International Journal of Retail & Distribution Management, 18(4), p. 58. Moore, C. M. and Doherty, A. M., 2007. The international flagship stores of luxury fashion retailers. Fashion Marketing, 5(1), p. 277. Ocasio, W. and Joseph, J., 2005. An attention-based theory of strategy formulation: Linking micro-and macroperspectives in strategy processes. Advances in Strategic Management, 22(18), pp. 39-61. Payne, A. and Frow, P., 2005. A strategic framework for customer relationship management. Journal of marketing, 69(4), pp. 167-176. Sakarya, S., Eckman, M. and Hyllegard, K. H., 2007. Market selection for international expansion: Assessing opportunities in emerging markets. International Marketing Review, 24(2), pp. 208-238. Steyn, B., 2004. From strategy to corporate communication strategy: A conceptualisation. Journal of Communication Management, 8(2), pp. 168-183. Vrontis, D., 2003. Integrating adaptation and standardisation in international marketing: the Adapt Stand modelling process. Journal of Marketing Management, 19(3), pp. 283-305. Wale, D., Robinson, P. and Dickson, G., 2010. Closing Remarks: the Future of Events. Events Management, 22(6), p. 238. Appendices Appendix 1: Market share gained by Harvey Nichols through UK stores Market share gain at Harvey Nichols reflects the recent strength of the luxury market in the UK, on the back of the buoyant economy. Sales were also boosted by a new store in Dublin and expansion at Birmingham. The Knightsbridge flagship store has performed well, attracting Londoners and visitors alike. Read More