Strategies of David Jones, Kmart, and Coles Supermarket Using Porter's Competitive Strategies - Case Study Example

Managing Strategies and Strategic Planning Introduction Strategic planning is an organisation's development of describing its strategy and generating resolutions on alloting its resources to pursue this strategy (Bradford et al, 2000). Among the organisation's resources are its people and its capital. According to Samson and Daft (2009), it is the formal deliberation of an organisation's future course. Michael E. Porter developed in 1979 at the Harvard Business School a tool to make an analysis of the atttractiveness of an industry structure. This is the Five Competitive Forces Model. It is an analysis tool that is made by the identification of five fundamental competitive forces. These forces are the entry of competitors, the threat of substitutes, the bargaining power of buyers, the rivaly among the existing players and the bargaining power of suppliers. A sixth factor could be added which is the government. To describe two of Porter's strategy, the bargaining power of buyers and the bargaining power of suppliers will be discussed and examples will be given. Relationship of marketer with buyer or supplier may be lucrative but after sometime, the situation may change. A good example is Dell. Currently it is buying its chips from Intel. However, after some time AMD may suddenly come up with new product that may make Dell seriously consider forging relations with AMD instead of Intel. On the other hand, Raymond E. Miles and Charles C. Snow developed the Organisational Type theory. Based on their theory, there are three superior performing business types. They believe that all other organizations are average, and in some cases, less than average. Their theory holds that superior organization have direct and clear match between its mission, strategies, behavior and characteristics. These organizational types are the defenders, prospectors, analysers and reactors. To concentrate on two types of organisations, the defenders and prospectors will be discussed. Organizations with slim product-market domains are called defenders. Upper managers in defenders organisations are greatly knowledgeable and skilled in their organisation’s inadequate area of operation. This does not tend to search outside their narrow domains for new opportunities (Miles and Snow, 1978, p. 29). Among its basic strategy set are aggressively maintain prominence within its chosen market segment, ignore developments outside of this domain, penetrate deeper into current markets and normally growth occurs cautiously and incrementally. Among its characteristics and behavior are single core technology, often vertically integrated, updates current technology to maintain efficiency, stable structure and process, dominant coalitions are finance and production, planning is intensive, not extensive, promote from within, functional structure, extensive division of labor and high degree of formalization, centralized control, vertical information flows, simple and inexpensive coordination and managers evaluated on efficiency versus the past. Prospectors, on the other hand, are organizations which almost always looking for market opportunities (Miles and Snow, 1978, p. 29). Included in its basic strategy set are broad domain in a continuous state of development, wide range of environmental conditions, trends, and events, change creators in their industries, growth primarily from new markets and new products and and uneven, spurt-like growth. Among its characteristics and behavior are inefficient, changing structure and technology. It has frequent prototype production using multiple technologies -- technologies in people not machines. Its dominant coalitions are marketing and research and development. In this type of organisation, key executives’ tenure is shorter than defender’s. Planning is broad, not intensive. It has product-based structure. It has less division of labor, low formalization. Control is results-oriented. Information flow is to decentralized decision-makers. It involves complex and expensive coordination. Conflict is directly confronted and resolved. Managerial appraisal is used versus similar organisations. Defender airlines, for example, are more successful than the prospector airlines. State-owned enterprises tended to adopt defender strategies. On the other hand, privately-owned enterprises tended to adopt prospector strategies. Prospector organisations are companies operating in mature markets. Prospector organizations prioritise new service and product to answer the clients’ needs as well as demands. Prospector organisations solve this problem by employing generalists, by being decentralized, encouraging collaboration among different departments and unit and having few levels of management. Defender organisations face the challenge of sustaining market share. Thus, they function best in stable environments. These organisations achieve success by specializing in particular areas. Defender organisations deal the administrative problem. Among those problems are securing efficiency, putting up formal procedures and centralization. They can rely on long-term planning. This is due to the fact that their environments change slowly. Strategies of Target, Coles supermarket, David Jones and Kmart Using Porter’s Competitive Strategies Description of the Strategies of Target Using Porter's Competitive Strategies For Target Corporation, competition with other retail giants is intense for this company. There is presence of several businesses that operates in the retailing industry and targeting similar audience which are the Kmart Corporation, Wal-Mart Stores, Inc., Kroger, Costco Wholesale Corporation and The Home Depot. These competitors offers the same services to clients and produce similar products. To maintain its competitive edge among them, this company set-up its own website. It is doing internet advertising. Other strategies that it employs include merger, acquisition and partnership. It is implementing numerous distribution centers and store outlets expansions in several states in order to extend the corporation’s marketing. This company caters to the younger, educated and rich customers unlike its competitors. Its shoppers fall on a 46 years old age median, mostly female, have children at home, and attended or completed college. This company has a strong power. Differentiation strategy of this company is by producing products under its own brand name. Its main differentiation is in the clothing section. In this part of the Target, its product in store is its own products. With this strategy, the company could charge premium prices, and earning above average. The degree of supplier power for this company is relatively fair. It is continuously getting suppliers providing its supply needs. The power of the suppliers in the industry is counterbalanced by the availability of alternative suppliers. It is the strategy of this company to seek savings by getting supplies of the products from suppliers at low prices. This is resulting to cut down in price. The company is making it possible by by contract to a supplier or by getting products in a whole lot. The company has certain features that could address the threat on substitutes. Among them is its the pricing strategy which is via its discount department store. Target is the place where customers could easily search for their needs at a relatively cheap and reasonable price. Target is offering does not exist anywhere else. The reason behind Target’s reasonable pricing is the implementation of the Cost Leadership strategy where this company emphasizes on organizational efficiency. Another feature of the company that could address the threat on substitutes is having more upscale and trend-forward merchandise. Description of the Strategies of Coles Supermarket Using Porter's Competitive Strategies From Porter's strategy, the Focus strategy, involves the combination between cost leadership and differentiation strategies or possibly even both within a particular portion or segment of the entire market ( Porter: 2003). Successful and huge company like the Coles Supermarkets implants the Porter's competitive strategies to compete against other rising competitive industries. Coles Supermarket is engaged in a big competition with another supermarket, the Woolworths. It is a competition through the utilisation of the grocer’s liquor chains. This is an alleged predatory pricing will hurt the margins of brewers like Foster's Group Ltd. and Lion Nathan, Ltd. and those of independent liquor retailers. Coles and Woolworths are behemoths locking horns. Coles and Woolworths amount to roughly fifty per cent of the Australian liquor retailing market. Most other sales are through small, independent retailers. Woolworths is around forty per cent while Coles is around thirty-five per cent of the Australian grocery market. These are the oligopolistic or duopolistic market shares. This type of market share reflects competition that is often leading to equilibrium. This point is reached via efficient price signaling. At other times, this equilibrium is reached when the market share is maintained. In terms of the Porter's Five Forces. Coles and Woolies have affected the economic structure of their industry(s) substantially so as to diminish rivalry through the acquisition of competitors and by building strength across retail markets. This is done so as to decrease the likelihood of competitive attacks. They also increase their Bargaining Power vis-a-vis Suppliers. They likewise reduce Buyer’s choices of store operators and their Bargaining Power. They build substantial barriers to entry.   Description of the Strategies of David Jones Using Porter's Competitive Strategies Australian giant David Jones has thirty-five department stores across the continent. It is popular as a quality store. Its department store's success has been overshadowed by its foodchain and online website failures. The department store got it right. Foodchain got it wrong. Its competitive strategy is on thirty to fifty-four year-old high-income women buyers. The strategic factors of David Jones are image, customer service, store presentation and product range. Through the years, these have been the competetive strategies of this company. David Jones' strategic image factor is through its in-store product brands and advertising. On the other hand, its customer service monitors vigorously via a mystery-shopper programme. Combination of strategic factors allows this company to be competitive on price. Porter’s influence can be observed in the David Jone’s thinking on competitive strategy. Its management decided on whether they should go for very focused programme, differentiation or price leadership. Its foodchain was put up to achieve its desired growth. These stores are standalone gourmet food outlets. Foodchain has its ability to obtain competitive advantage on several factors such as product range, location, hours of operation, store presentation and price. David Jones suffered the consequences in the operation of their food business. The meagre net profit of this company did not reflect the efforts that this company is putting in terms of continuous improvement. During this time, David Jones had to write down its millions on foodchain. It has ended its foodchain business. Description of the Strategies of Kmart Using Porter's Competitive Strategies Kmart Corporation is a retailer based in Michigan. It is the second largest retailer in the U.S. in terms of sales volume. To address high competition in the discount retailing, it is constantly adapting its existing strategies to emerging threats and opportunities. In the past, Kmart failed to cope with increased competition and changing customer expectations. Its major competitors are Wal-Mart and Target. So in order to keep up with the competition, Kmart is offering lower prices on selected items using coupons and sales. This company invested huge amounts on advertising. At the end, this strategy brought back its customers to their chain of stores. References Bradford, Robert W., Duncan, Peter and Tracy, Brian. 2000. Simplified Strategic Planning: A No-Nonsense Guide for Busy People Who Want Results Fast! Chandler House Press. Kenny, Graham. 2003. Management. Australian Financial Review, p. 44-45. Miles, Raymond E. and Snow, Charles C. (1978). Organizational strategy, structure, and process. New York: McGraw-Hill Book Co. SPorter, M. (1979). How competitive forces shape strategy. Harvard Business Review, 57 (2): 5-8. Porter, M. 1998. Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York: Free Press. Samson Danny and Daft, Richard L. Management. 2009. 3rd Asia Pacific ed. South Melbourne: Cengage Learning Australia. Read More