Strategies of Argos to Enter Chinese Retail Market - Case Study Example

Strategies of Argos To Enter Chinese Retail Market CONTENTS CHAPTER 1: Introduction 3 CHAPTER 2: Basic Strategies 4 2.1: Chapter Outline 4 2.2: Influences of Argos 4 2.3: Argos in Retailing 5 CHAPTER 3: Strategical Applications 8 3.1: Chapter Outline 8 3.2: China in Retailing 8 3.3: Business Strategies of Argos in China 9 3.4: Entering Chinese Food Market 11 CHAPTER 4: Theoretical Analysis 14 4.1: Chapter Outline 14 4.2: Empirical Analysis 14 4.3: SWOT Analysis 14 4.4: China’s Pharmaceutical Industry 15 CHAPTER 5: Conclusion 17 Questionnaire 19 References 21 Recommendations 22 CHAPTER 1: Introduction The Argos is an organisation that provides general products for the homes through online or telephone. The retailing business is done through a catalogue. According to the latest assessment it is serving over 130 million customers in a year through its stores and takes four million customer orders either online or over the phone. That is to say it is having an average of 17 million UK households or around two thirds of the population. There is an Argos catalogue at home at any time in most of the places of UK. This paper basically highlights all these skills of the company and thereby is trying to give the keys that is going to or has made the company get into the Chinese market as a part of its strategical expansion. The chapter 1 is just the introduction about the Company and the description of each chapter that are included in the paper. Chapter 2 is looking at the use of the basic strategies by Argos to get into the market of China. This chapter is also concentrating on the influences of Argos in the business world. It also checks the condition of Argos in the retailing sector. Chapter 3 is all about the marketing strategical applications adopted by Argos in getting into the markets of China. This chapter discusses the position of China in retailing market and the business strategies of Argos in China. By these processes this chapter also gives a look at Argos getting into the Chinese food market. Chapter 4 is a kind of analytical chapter. It is concentrating on the empirical analysis sector of Argos business policies over the markets of China. It is also is checking out how fruitful are the results of these empirical breakthroughs through Swot Analysis and looking at the China’s Pharmaceutical Industry through Porter’s Five Forces Strategy. Chapter 5 is consequently the last chapter and is the conclusion to the paper. CHAPTER 2: Basic Strategies 2.1: Chapter Outline This is the chapter that is discussing the influence of Argos over the retail market of the worlds. It is an attempt to check the role of the company in retail marketing. 2.2: Influences of Argos Argos has got a great influence over the retail marketing sector of the world. As it is, Argos is a great shopping online and stores. With an exclusive approach it offers thousands of top brand products in variety of categories. The basic distributions are clothing, footwear, accessories for men, women, and children, sports wear, exercise equipment and home styles. It has got a home delivery system, which allows delivery of most in store items and also a selection of larger goods in the catalogue. All these specific items are for delivery only. This is the provision that any customer can prevail and can order the goods for home from in store or online. This can be done through either the Argos website, telephone or text message service. These are all used to ensure the stack is available when the customer arrives in store. Customers can browse through the catalogue, select items to buy, pay for its items, and then collect the items from the store or selected items are delivered to their home. Its system is the technology and management for the home building industry. To provide the global coverage and platform location, Argos data collection relay system is used and with all specified details. All over the world it is known for being a catalogue retailer and is equally recognised for its value, choice and convenience in services. Argos has got some very interesting things in its products list. There is a transmitter known as Argo transmitter. With this transmitter anybody can track a ship, an animal or any platform which are placed anywhere in the world. This transmitter is having very strong radar functionality and is a worth for all. The benchmark system of Argos for global environmental observation and monitoring is this data collection system. The procedure is to collect the best possible things and get thenm into the catalogue to make shift to the shopping cart of the customer. This no doubt needs a wide ranged variety and a really strong inspection over the market. Argos is capable of all these inspections and with a highly rated success. 2.3: Argos in Retailing The Argos Shopping network is a well furnished section and is made with a very convenient planning. It provides an innovative information technology and security services for regulatory compliance. It is also well equipped with the categories of performance monitoring, device monitoring, resource optimization, network visibility, trouble shooting, capacity planning. In a nutshell all the sections in Argos are having fully integrated reporting capabilities. The better the function is the better is the process to maintain critical network and security. The Shopping implements of Argos have got an extensive mechanism of the turn key solutions. It has a comprehensive process of responding after understanding of the organisation. This system provides is famous through out the world and has got world wide coverage for polar- orbiting systems. By applying the Argos instrument on a moving satellite, there is a multifaceted scope for a detailed report of everything that somebody needs. It helps in the study the world-life migration paths and for monitoring the ocean buoys. Argos internet site is a world known site. It is considered as the best for internet retail site in the UK. As Argos is the winner of the customer service initiative award for retail week's 2006 online retailer of the year, its reputation has been growing consistently. Its internet presence gives a great scope to develop a business or organisation. The best thing about the company is its attempt to add around 30 stores per annum. While assessing all the retailers of the world the picture becomes very clear. We can see Argos being one among the major retailers in the UK because it’s primarily displays goods to customers is through the appropriate catalogue. As it is a part of Home retail group it has got the sections inclusive of the information about environmental issues like energy and waste management, chemical strategy. Argos is committed to the access of their services and stores to every single customer who is interested in buying things from it. Not only that the retailing section has also made remarkable development in the IT category. The company also provides the multimedia information service and health professionals to its customers that too through online services. It has been found that almost all of the world's chief retailers function exclusively on a very familial basis, or in a slender assortment of few of the countries. These large scale retailers apply great efforts to convey their explicit firm advantages towards the transverse international barriers. When it comes under the international circumstance, that is to say the macro-level; then the national differences in trading preferences and significant steps in the supply-chain deviation are handled with more scrutiny. The systematic chain is also well maintained with micro-level location advantages. It is a process of proper functionality into dispense of individual preferences. In the process those companies or businesses that arrive early and introduce the business under retailing processes have gained in occupying the brand identity. Argos is no exception. It too is very fast in its moves both in macro and micro levels. Yet the growth and popularity are comparatively having more rapid paces than any other company of same business trend. CHAPTER 3: Strategical Applications 3.1: Chapter Outline This chapter is checking out the retail market of China and the process of the application of the business strategies of Argos in entering the Chinese retail and food market. 3.2: China in Retailing AT Kearney consultants in an annual study1 of emerging retail markets; has discovered that the window for international retailers in China is going to get close very soon. This is because the market has got saturated by getting dropped from fourth to fifth place in this rating. The lead author of the report, Fadi Farra, said that ‘it has underlined the importance to retailers of timing their entrance into an emerging market, estimating there was a five-10 year window of opportunity. "China was number one five years ago. Now China isn't the place to be: India is."2 Inspite of all these predictions Argos is daring to get into the markets of China. This is the source of authentication regarding the attainment of boldness in business strategies of Argos. The reasons are though very critical yet are very simple for Argos’ strategical applications. As declared by the investment markets, China has made about 40% of the world's socks in 2007.3 The retail marketing section in China is growing consistently form from July 20074. The rte of increase in growth is also very consistent. The investment market it has found that from last between 2004-2007, the retail market of China is not only growing giganticly, but also is getting equally saturated for the international retailers. Though this has open many doors for the investors all around the world. In the first half of 2007, increased economy was found to be11.5%. Along with the consumer retail sales, that got a rise of 16.4% over the year in July. There was the display of 0.4% point growth since June’s 16%. Surprisingly the growth in the retail sales of the country has been calculated to have grown by 5.6% just in the month of July. In the field of foreign exchange, the export of the retailed goods played a very strong role. With the increase in production and education the in house consumption too got the maximum hype. 3.3: Business Strategies of Argos in China The marketing management as applied by Argos to get into the market of China is the key to the success of all competitive marketing strategy. It is nothing but a market-oriented strategy that creates an advantageous and sustainable market for the particular company and gives it the brand identity. The process is not only continuous but has got a regular inclination towards tougher floors of competition. These developments are strategical and follow certain steps and keys to attain the respective target. These keys are in being fore mostly a specific market –oriented company. Then the objective of the respective company is to establish a certain amount of position or placement in the market. This placement under any circumstance has to be profitable and must have customers’ responses. The grip of Argos is so strong that the company can survive under any situation and it is sure that it is not going to face one-off transaction in the market of China. The idea is to hit the floor and sustain there by bringing innovative discoveries on its way for more durability among the customers. The company in itself is efficient enough to generate its resources and thereby maintain them under regular durations. The understanding of the market makes the business more sustainable. There is the space for equal concentration over government rules and the world wide spreaded competition. The approach is Argos always be international with the motive of fulfilling the customers’ demands from their native point of view. The adoption of the cultures of China is considered as a compulsion for rapid expansion and growth. Getting branded is the chief motive of Argos in the Chinese market. The competitions go universally and thus even the smaller units are put on equal levels. The effort is thus to offer absolute services and to develop a networking of advertising media before launching the business in a particular area. There are many postmodernistic approaches given to the marketing strategies. Wright, Marian states* in ‘Schema Schema: Consumers’ Intuitive Theories about Marketers’ Influence Tactics’ has very strongly put up that the companies lack in ‘Persuasion knowledge’. It states that the company, that is Argos in China, needs to be aware for the various persuasions that are made to the customers in general customers are most of the time aware of old tactics and thus lays little importance to the repetition. The approach should be multifaceted. The individual importance should be laid stress. There should be an individualistic approach to the whole process of persuasion. The click needs to get into the psyche of the consumer. The understanding must be kept on broader aspect for better elaboration. The attempts have to be novel and very much powerful. The target should be reached through proper channel. The experiences of the customers need to be collected first and then the persuasion models needs to be created. The approaches have to be very personal with relevance to the product usability. There should be a regular researches made on the attempts made by the competitors. The depth of novel presentation comes from the lessons collected from the failures that the other companies of the same kind have suffered. 3.4: Entering Chinese Food Market Argos in China is the boldest step ever taken Argos is getting into a market that is on the verge of saturation for foreign retailers. In the European market the ethnic food is having the equal growth as the organic food. This is also seen as Argos picks up the Chinese market and gets the growth in a far rapid manner. There is the continuous growth to display reasonably high growth levels, in most instances outpacing the overall food and drinks market. Ethnic foods are now being eaten with increasing frequency by an expanding section of the population, all over the world. This is due to the growing consciousness towards the health ethnic cuisine. The flavour of ethnic cuisine is also spreading as a result of the fact that consumers are becoming well-traveled, and hence their tastes are becoming more sophisticated. It has been found through the speculations made by Argos has discovered that the Chinese ethnic foods market is far more fragmented, due to the wide variety of products available. However, in the level of multinational food groups it maintains a strong presence. Yet there are variations too. Some of these have been successful in growing the market via major brand activity all around. Thus the leading brands like Argos have pioneered their respective categories, and built up considerable levels of customer loyalty and has increased the sell on a rapid way. The whole of Western Europe is dominated by three main types of ethnic food. These are namely Chinese/Oriental, Indian and Mexican/American. The retailing assessments of the sales of these foods were worth EUR3.88bn in 2006, equivalent to almost 95% of the total market. The largest sector is the Chinese/Oriental category, which accounted for a share of around 42% in 2006, ahead of Mexican/American (27%) and Indian (25%). The basic thing that the Argos is adopting is the five forces and Value Chain analysis as advocated by Michael Porter in his ‘Strategic Management Model for Value Chain Analysis’ (2007). It is a strategical analysis that includes all the aspects of a business. In the process Michael Porter is picking up those features that are adopted especially by Argos in order to sustain in the market. These are the procurement, e-commerce and IT infrastructure, human resources training, marketing management, retailing and above all strict market study to collect the preferences of the customers of a respective place. CHAPTER 4: Theoretical Analysis 4.1: Chapter Outline This chapter is targeting at the implementation of empirical analysis to the marketing section of Argos and the application of SWOT analysis to the same. It also checking the China’s Pharmaceutical Industry – Porter’s Five Forces Strategy 4.2: Empirical Analysis The LTEM output is a kind of process to make an estimation of the impact on producer returns from different assumptions relating to market developments for conventional and organic commodities. These assumptions are consisting of various queries like; getting tested against assumptions relating to the proportions of organic consumption and production share. 4.3 SWOT Analysis By sing SWOT to analyse the market position of a small management consultancy with specialisation in HRM of Argos can be detected. All the strength of Argos has be analysed through the given market related, finance related , operational related , research and development related, hr related categories, as it starts performing in the retail market of China. For the market related factors the inspection has to be of product quality, packaging, advertisement, service, distribution channel. Strengths Weaknesses Opportunities Threats Reputation in marketplace Shortage of consultants at operating level rather than partner level Well established position with a well defined market niche. Large consultancies operating at a minor level Expertise at partner level in HRM consultancy Unable to deal with multi-disciplinary assignments because of size or lack of ability Identified market for consultancy in areas other than HRM Other small consultancies looking to invade the marketplace Track record – successful assignments As for the finance related segment the importance would be on optimum debt/equity ratio, number of share holders, inventory size, optimum use of the financial resources, low cost of borrowings proper investment of the financial products. To deal with the operational related section, Argos has to check out the low cost, higher productivity, excellent quality, modernised technology of the Chinese market. 4.4 China’s Pharmaceutical Industry – Porter’s Five Forces Strategy An analytical survey over the Chinese pharmaceuticals market is very important as it is widespread and one of the largest categories. It has forecast to become the world's fifth largest by 2010 – and the largest by 2050. These declarations are very important for Argos to follow. There are still greater market access following China's entry into the World Trade Organization (WTO), multinational investors continue to face a range of obstacles. Argos has to be prepared of complex distribution, under-developed retail options, intellectual property infringements and pricing controls and pressures. Subsequently, the continuing reliance of leading domestic companies on generic drugs has prevented the emergence of Chinese brands. Experts believes that the retail industry of China is still with a scattered geographical layout, duplicated production processes, and outdated manufacturing technology and management structure. For success in China, Argos has to opt for changes in any of the Porter’s Five Forces Strategy. It has to make a choice between a) Reducing the Bargaining Power of Suppliers. b) Reducing the Bargaining Power of Customers, through partnering, supply chain management, supply chain training, increase dependency, the building of knowledge of supplier costs and methods, take over a supplier, increase loyalty, increase incentives and value added, move purchase decision away from price, cut put powerful intermediaries . c) Reducing the Treat of New Entrants. d) Reducing the Threat of Substitutes, by the means legal actions, increase switching costs, alliances, customer surveys to learn about their, preferences, enter substitute market and influence from within and accentuate differences. e) Reducing the Competitive Rivalry between by existing players, avoid price competition, differentiate your product, buy out competition, reduce industry over-capacity, Focus on different segments, communicate with competitors. CHAPTER 5: Conclusion Argos has got about 680 stores throughout the UK and Republic of Ireland. In Europe itself Argos is having a huge market line of selling sectors. There are some of the basic keys of the company’s marketing sector. These keys are a) Strong retail brands with large customer bases –Digital marketing is having a very critical role in China and so Argos could allocate more than the 5% to 10% they do in the U.S. the recent efforts could be by means of focusing on Internet advertising. b) Market leading position- There were the tremendous sales of over £5.8 billion in the last full financial year ranked Argos as the second leading home and general merchandise retailer in the UK. After Home Retail Group, Argos is said to be the second largest retailer of home improvement goods and garden related products. It became the third largest retailer of consumer electronics and large domestic appliances. c) Shared infrastructure and logistics expertise- Chinese youth has got the habit of switching over of phones very often. It is in part due to the weight placed on the mobile phone as a status symbol. Argos took the chance and is providing all sorts of cell phone varieties of sleek phones that the Chinese youth considered an aspiration buy. d) Purchasing, sourcing and supply chain scale- The China Market Research Group (CMR)5, conducted in-depth interviews with 500 Chinese between the ages of 22 and 32 in 10 cities to gauge whether fears of a global slowdown would influence their shopping habits. By means of purchasing, sourcing and supply chain scale, Argos is getting deeper into the market. It has got the maintained scale of efficiencies and supplier relationships to deliver value for money to consumers across the broad range of products it sells e) Choice and value-led product offering- China’s retail environment has changed drastically in last few years. It is due to the intervention of more and more stores and brands entering China’s retail environment. This is also because Chinese youth have different expectations in the shopping experience than older generations. In the process Argos is one of them. f) Integrated multi-channel offering - The increasing importance of the China market on global basis, all sorts of multinationals must launch marketing campaigns designed specifically for the mainland. This must have the integrated multi-channel offering of structuring the ad campaigns, so that; the company can very clearly represent the feelings and excitement of Chinese youth. g) Experienced management team delivering a long-term track record of growth – Argos is having an experienced management team delivering a long-term track record of growth. It has found that more than 70% of the young people say that they use search engines such as Baidu to find out more about products, giving hype to online sellings. This is the best possible door for Argos to get into the market and sell its products to the Chinese youth in special. Questionnaire: 1. What were the key factors driving the China market growth in 2007? 2. How has inflationary pressure impacted the market of China in 2007? 3. Who are the top retailers have whom Argos has to face in China? 4. Which is the most effective market for Argos? i/ UK ii/China iii/ India iv/ Scotland 5. How online retailers are there in Chinese retailing market? 6. What initiatives are Argos retailers putting in place to drive their share to the China retailing market? 7. What is total number of stores per annum, Argos aims opens? i/ 20 ii/ 30 iii/ 40 iv/ 50 8. Which is the most popular gadget of China? i/ mobiles ii/ play station iii/ i - pods iv/ palmtops 9. What measures is Argos retailers are taking to cut their costs and protect their margins in accordance to Chinese currency? 10. What is meant by integrated multi-channel offering? 11. How are Argos retailers developing their store environments in a better way? 12. How competitive are the other retailers in China? 13. What are the differences between organic and ethnic food stuff? 14. According to the Porter’s Five Forces, which is the major threat to Argos in China? Why? 15. What can be the contribution of Argos in the pharmaceuticals sector of China? 16. What are the basic strengths behind the entrance of Argos in China? 17. Elaborate the multi-channel strategy of Argos? 18. How successful do you think Argos can be in China? 19. Will Argos be able to sustain itself in the saturating state of Chinese retail market? 20. What are the threats do you think Argos is going to face in the markets of China? References 1. Johnson & Scholes; 2001, Strategic Management, Exploring Corporate Strategy, 5th Edition 2. John Kay ‘Foundations of Corporate Success’, Oxford University Press, 1993 3. John Kay (1993) ‘The Structure of Strategy’; Business Strategy Review 4 (2), 17–37 doi:10.1111/j.1467-8616.1993.tb00049.x 4. Kotler, P. (1996) ‘The Principles of Marketing’, Second European Edition, Prentice 5. Hall Marketing (2002): ‘Don't let media's search for a story cloud the business issues.’ Vol 3, p. 16 6. Michael Porter in his ‘Strategic Management Model for Value Chain Analysis’ (2007) from ‘Competitive Advantage, (1985) 7. Mintzberg, Henry, and Frances Westley (2001), ‘Decision Making: It’s Not What You Think’, MIT SloanManagement Review, 42, Spring, pp. 89–93. 8. Professor Richard Hall, ( “A Framework for Identifying the Intangible Sources of Sustainable Competitive Advantage”, in Competence-Based Competition, G Hamel & A Heene (eds.), 1994, John Wiley & Sons). 9. Peston, Robert; 2004, Who runs Britain?' 10. Schnaars, Steven, and Paschalina (Lilia) Ziamou; 2001, ‘The Essentials of Scenario Writing’, Business Horizons 11. Szymanski, Stefan; 1998, ‘Why Is Manchester United So Successful?’ Business Strategy Review, 9 12. Wright, Marian states in ‘Schema Schema: Consumers’ Intuitive Theories about Marketers’ Influence Tactics’, ( in Advances in Consumer Research, 13, pp. 1–3. 1985) Recommendations 1. Brown, Stephen; 2003, ‘Material Girl or Managerial Girl?’, Business Horizons, 2. Dahisten, Frederik; 2003, ‘Avoiding the Customer Satisfaction Rut’, MIT Sloan Management Review, Summer 3. 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