Harvey Norman Holdings Limited - Case Study Example

Running Head: Наrvеy Norman Holdings Company Limited Marketing plan Name Institution Date Наrvеy Norman Holdings Limited 1.0 Executive Summary Harvey Norman Holdings Limited, a public company in Australia has experienced gradual increase in its sales revenue since 2003, which is attributed to the outstanding leadership of Gerry Harvey, a prominent entrepreneur in Australia. The 2012 annual report indicated that the company experienced a challenging business environment because of the extraordinary price a marginal reduction in television and devices product portfolio due to external forces in the market. Despite the challenge, the company has continued to experience growth as a result of diversified business undertakings locally and internationally. Its integrated retail, franchise and property dealings have helped the company adapt to the ever changing retail market. Harvey Norman Holdings is faced with a challenge of increasing its profits and maximum utilization of its resources as the market continues to grow. The marketing plan focuses on the growth strategy the company can use to improve its relationship with the customers and improve on service provision in a way that satisfies customer needs. The plan is structured to begin with an introduction, which gives an overview about the company. The company’s market situation analysis is discussed, and focus is on its competitiveness, PESTEL and SWOT analysis, and the company’s marketing objectives. How the company should conduct market segmentation and identify its target market through the positioning strategies like the 4ps are examined in the plan. The action plans to be conducted by the company throughout the year will also be presented together with the projected financial outcomes. The plan will finally provide the way forward a far as monitoring, evaluation and control of the company’s business operations are concerned. Table of Contents 1.0 Executive Summary 2 Table of Contents 3 2.0 Introduction 4 3.0 Market situation Analysis 4 3.1 Competitive Analysis 4 3.2 Political and legal environment 5 3.3 Economic environment 5 3.4 Socio-cultural forces 6 3.5 Technological environment 6 4.0 The SWOT Analysis 6 5.0 Marketing Objectives 8 6.0 Marketing Strategy 8 6.1 Market segmentation 8 6.2 Target market 9 6.3 Positioning strategies 9 7.0 Action programmes 10 8.0 Projected income statement 11 9.0 Monitoring, evaluation and control 12 9.1 Contingency plans 13 References 14 2.0 Introduction Harvey Norman Holdings Limited was started in 1982 by the two Australians Gerry Harvey and Ian Norman. In the year 1987, the company went public and is currently listed on the Stock Exchange in Australia. The major business activities for Harvey Norman include franchise goods, property enterprise and retail products. The retail products are used both in homes and offices and they include Computer and communications appliances, electrical, small appliances, bedding and Manchester, furniture, lighting, carpets and home improvements. During the 2011 financial year, the company’s market capitalization hit $ 1.955 billion. In the same year, Harvey Norman had established over 200 franchised complexes within Australia, which operated under three brand names: Domayne, Joyce Mayne and Harvey Norman. The company has taken advantage of its competitive market position and powerful financial control to utilize the opportunities in the market. Harvey Norman Holdings Ltd is an international company with openings in New Zealand, Ireland, Singapore and Slovenia (Harvey Norman Holdings Limited Annual Report, 2012).The evaluation of the company’s internal and external forces forms the basis for the marketing plan. 3.0 Market situation Analysis The company has really expanded its operations and occupies a larger share of retail, franchise, and property market in Australia. The market continues to grow despite introduction of new competitors in the industry. The company has to conduct the PESTEL analysis to ensure its survival in the future. 3.1 Competitive Analysis Retail, franchise and property market has experienced increased competition for the past years and has been a challenge to Harvey Norman Company. The company experienced a decrease in its profit margin during the last financial year due to intensive competitive environment and challenging retail market. Nevertheless, the company has managed to dominate the Australian market, and because of diversity the company is able to adapt to the dynamic retail market and alleviate some of the problems it went through in the years. The company has an outstanding asset base of about $ 4 billion and proper management of its working capital which gives the company a competitive advantage over the competitors. Harvey Norman boosts of having build reputation in the overseas market like New Zealand, Ireland, Singapore and Slovenia. According to Kotler and Armstrong, (2009) it is through these markets that it is able to rise above the local competitors, some of whom are new in the retail, franchise and property market in Australia. 3.2 Political and legal environment Good governance and democratic political environment in Australia led to the development of retail, franchise and property industry. With effective governance and accountability leadership in place, the citizens are assured that their needs will be met (Perreault et al, 2006). The good political environment in Australia has enabled Harvey Norman to expand its operations within and without the borders of the country. Harvey Norman has to abide by the legal procedure in Australia like the consumer protection laws which for instance, states clearly the guidelines to be followed when advertising and selling any given product. Product safety is mandatory, and this is provided in law. Harvey Norman has always adhered to the political and legal requirements in Australia, and no political occurrences are expected to affect the operations of the company. 3.3 Economic environment The prevailing economic factors in Australia and in the overseas markets have to be considered by Harvey Norman Company when carrying out its marketing strategies. Kang et al, (2002) argue that income level, spending patterns and the rate of unemployment affects the buying capacity of customers. The company should analyse economic situations in the overseas market to be able to meet the demands of its customers. For instance, economic depression in New Zealand affected the operations of the company, but due to diversification and being a market leader in various product categories, it continues to operate in that market territory. The Company’s products are able to meet various needs of customers, which is an advantage to the company (Lamb et al, 2012). Therefore, Harvey Norman Company will have to carry out forecasts in the various markets to establish the appropriate marketing strategies to use to increase sales. 3.4 Socio-cultural forces Socio-cultural factors have an impact on the operations of a business. Every country is dominated by various cultural and social trends that often define the behaviours of certain groups of people and their lifestyle. The values, beliefs, age, attitude and religion are important in identifying the target market (Frambach and Nijssen, 2005). Also, consumers in the current society prefer living a comfortable and are attracted to new product developments that would help meet their needs. Harvey Norman Company is able to meets the ever emerging consumer needs by selling variety of appliances. Computerised communications, one of the product portfolios for Harvey Norman fits in well with some trends in the society: a move to automated tasks and reliance on computers. 3.5 Technological environment According to Wilson and Gilligan, (2005) technology is an important factor that contributes to the profitability and growth of a company. It also plays a role of shaping societal and environmental changes in an economy. Harvey Norman will have to embrace the emerging technological changes in marketing and selling of the products. Some of the products could be sold through the company’s website. Also, the company can use new technology to design the show rooms in a way that helps to save time during the purchase. A company that embraces new technologies is likely to be at an advantage compared to competitors in terms of service delivery. 4.0 The SWOT Analysis The SWOT analysis represents the strengths, Weaknesses, Opportunities and Threats that affect how businesses are conducted. It helps in strategic planning and serves as a basis upon which a company's vision is established so as to enhance the attainment of strategic development goals set by the company. SWOT analysis is used by organizations to analyze both the internal and external environments (Gasparotti, 2009). Harvey Norman Company's Strengths, Weaknesses, Opportunities and Threats are indicated below. (a) Strengths Harvey Norman has product differentiation and this is due to a strong market orientation, high commitment level, product customization and quality support services. There is low employee turnover rate due to good remuneration packages. This is also contributed by good relationship that exists between management and employees. The company's long relationships with the major suppliers have enabled them to understand the requirements of the products which have helped maintain the quality standards. The increase in the opening of various showrooms is an indication of customer satisfaction, which helps to increase the volumes of sales hence business growth. (b) Weaknesses The company has high hierarchy of management and absence of management support may hinder employee creativity. In this case, a lot of knowledge is held by only few people in the company. Some products are bought seasonally and this reduces the cash flow. This could also be stressful to the personnel. There is increase in the number of competitors in retail, franchise and property market, which requires the company to strengthen its marketing strategies (c) Opportunities Increase in demand for retail products, computer appliances and simple appliance offers the company an opportunity for growth. Harvey Norman Holdings limited has experienced gradual market growth for the past years, which has led to the opening of new branches both locally and in the overseas markets. The retail products and franchise are distributed with ease both locally and internationally. The globalization of business operations provides the company an opportunity to build stronger relationships with both the existing and potential clients in foreign markets. Strong company-consumer relationship has helped the company gain goodwill and customer loyalty hence securing a competitive advantage over her competitors (d) Threats Increased competition from local franchise dealers who try to imitate the company Consumer needs keep on changing and adjusting to the changes comes with additional cost to the company. The company is faced with the task of changing its business practices in order to be in line with technological changes. Government policies of price control within the local market and the overseas market 5.0 Marketing Objectives A part from being focused to a market-oriented and customer oriented business practise, Hervey Norman Holdings Limited should set an objective that will see lead the company to achieving a profit margin of at least fifty percent over a period of five years to come. The biggest percentage of the growth should be realized from new product brands and products that have a continuous purchase pattern. The company should establish bench-marks to help in measuring progress if the set marketing objectives have to be accomplished (Dwyer and Tanner, 2002). One of the main objectives for the company should be to know better how to meet the needs and satisfy the current customers. This could be done by analysing customer behaviours towards the company’s products. Another marketing objective should be to establish new products that can make use of its knowledge base. This will require the Harvey Norman Company to carry out a simple research and analysis of products in the same line, which will help it increase its product portfolio further. 6.0 Marketing Strategy 6.1 Market segmentation Market segmentation is the process of dividing the market into homogenous segments which have similar characteristics that will then form the basis for identifying the target market. The characteristics may be on the basis of demographics, geographic, psychographic or behavioural (Tynan & Drayton, 1987). Harvey Norman deals with the supply of office as well as household items namely electrical, computers & communications, small appliances, furniture, bedding & Manchester, home improvements, lighting, carpet & flooring. Consumers of these items can be categorized in terms of their incomes, the first category being the high income and consumers who are very particular about the quality of the products they purchase regardless of the price they have to pay. The other group is that of the low income earners who are very cautious about prices and quality is secondary to their needs. 6.2 Target market According to Dibb & Simkin (1996), one benefit of segmenting the market is that it gives the management a chance to focus its resources and efforts on the segment or a number of segments that will effectively meet the overall marketing plan of the company. Harvey Norman will remain to target the high income end consumers who normally put quality before price. This is because in this category of customers, there is room to load good margins so long as the company maintains its long held culture of delivering quality goods and service. Harvey Norman is positioned as a strong house hold brand name in the supply of electrical, computers & communications, small appliances, furniture, bedding & Manchester, home improvements, lighting, carpet & flooring. Harvey Norman value proposition offers its customers a wide range of office and house hold goods under one roof. 6.3 Positioning strategies Product position: Quality products with two year guarantee for electronics. Product line: Harvey Norman will remain flexible in its range of products by tailoring its franchise to the more profitable products (Harvey Norman, 2012). Price: Prices remain lower than those of competitors with guaranteed refund for amount paid over and above that of the competitors. Communication: The digital platform will remain a key avenue of communicating and obtaining feedback from the existing customer base as well as tapping into new customers (Harvey Norman, 2012). Sales force: Regular training of the sales team as well as proper remuneration with the aim of retaining a highly motivated and effective team. Service: Customer satisfactions will be the driving force of service delivery. Advertising: Advertising through television on a regular basis with constant market surveys to identify customer demands. Sales promotion: A reward systems of awarding points to customers who make high value purchases to be introduced. Synchronous: Fine-tune the digital platform to ensure timely communication with the customers. The digital platform remains also an important channel of boosting sales through online marketing (Marsden, 2013). Research and development: Invest more on research to improve the quality of products as well as meet specific customer requirements. Marketing research: Invest more on research by seeking knowledge on the most productive product lines as well as getting feedback from customers on the quality of the products. 7.0 Action programmes Harvey Norman’s action programs that will guide in the achievement of the company’s objectives are as follows: February: Conducting training to equip the sales people with thorough knowledge on the target market as well as introducing bonus payments to the best sales person every month. This will be handled by Terry A. and the cost is $ 20,000. March: Harvey Norman will carry out a month long advertisement on the local television channels sensitizing potential customers on the quality of its products and competitive prices. The expected cost is $ 7,000 and will be handled by Ann Rose. March – December: The Company will launch a reward system at the point of sell by awarding bonus points to customers who buy in bulk. This points will be redeemable once at the end of every month by the customer picking an item in the store whose value is equivalent to that of the bonus points. The estimated cost is $ 50,000 and will be handled by Joel T. April: Carry out a customer satisfaction survey to get the feedback about the advertisement, opinion on customers on the customers’ products and services as well as identified their needs that could leads to possible introduction of new product lines. The estimated cost is $ 3,000 and will be handled by Ann Rose. May: The Company will carry out an online survey on its digital platform to test the popularity of its products as well as inform potential customers on the bulk purchase reward system in progress. The planned cost is $1,000 and will be handled by Michael Joseph. June: Harvey Norman will advertise in the local dailies to enhance a sustained campaign of its superior quality products at an estimated cost of $ 4,000. Michael Joseph will be in charge. July: The Company will offer a month long free repair services to electrical and electronic goods belonging to the companies customers whose two year warranty has expired. The estimated cost is $ 15,000 and Albert E. will handle this. September: Re-advertise in the local television channels with emphasis on quality of the company products and the competitive prices. The expected cost is $ 7,000 and will be handled by Ann Rose. October: Participate in the annual trade show where the wide range of company’s products will be on display. The expected cost is $ 20,000 and will be handled by Terry A. December: Carry out an end of year promotion through discounted prices of products as well as other give a ways. The estimated cost is $ 25,000 and Michael Joseph will be in charge. 8.0 Projected income statement Table 1: Harvey Norman projected P&L January 2013- December 2013 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec $ (000 000) $ (000 000) $ (000 000) $ (000 000) $ (000 000) $ (000 000) $ (000 000) $ (000 000) $ (000 000) $ (000 000) $ (000 000) $ (000 000) 1.sales revenue 120 124 115 130 125 120 122 110 112 115 120 130 2.Direct costs 30 34 25 50 35 20 22 20 32 25 35 40 3.Profit Margin 70 90 90 80 95 100 100 90 80 90 85 90 4. Advertising & promotion 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 5. Research & development 1 1 1 1 1 1 1 1 1 1 1 1 6.Sales Person Salaries 2 2 2 2 2 2.5 2 2 2 2 2 2.5 7.Net marketing contribution 66.5 86.5 86.5 76.5 91.5 96 96.5 86.5 76.5 86.5 91.5 86 8. Overheads 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 9.Net operating profit 65 85 85 75 90 94.5 95 85 75 85 90 84.5 9.0 Monitoring, evaluation and control According to The Quality Assurance Agency for Higher Education (2012), monitoring provides a short check on the overall achievement of the set goals. The success of the marketing plan will be achieved only if it is properly implemented and constant control is excised in course of the implementation to ensure that any corrective measures are instituted as and when need be. Control remains a very crucial management responsibility which entails monitoring the implementation process of the marketing plan, evaluating its success by measuring the actual results against projected results and determining the reasons for the variance and instituting corrective measures immediately. Harvey Norman will constitute a 7 member marketing audit team that will be charged with the responsibility of monitoring evaluation and control process. The audit team members will draw from finance and marketing department and will on a quarterly basis report to the chief executive officer on the progress of the implementation of the marketing plan. Figure 1.0 show the control cycle that will guide the marketing audit team in their role of ensuring that that the marketing plan is fully implemented and the objectives fully realized. Figure 1: The control process 9.1 Contingency plans According to Deloitte (2011), contingency planning is about thinking the unthinkable. It entails the understanding by the management that the planned objectives are subject to many factors some of which are beyond them and as such institute possible measures to mitigate for any eventualities. The marketing audit team for Harvey Norman will be reviewing the progress of the implementation of the plan on a quarterly basis and will recommend possible cause of action is situations where by corrective measures needs to be instituted. References Cateora, P. R., Graham, J. L., Cateora, P. R., & Cateora, P. R. (2005). International marketing, McGraw-Hill/Irwin. Deloitte, (2011), Euro contingency planning, retrieved on 22, May 2013 from http://www.deloitte.com/assets/Dcom-Sweden/Local%20Assets/Documents/Euro-contingency-Deloitte-ACT.pdf. Dibb, S. & Simkin, L. (1996), The market segmentation workbook: target market for marketing managers, Cengage learning Emea. Dwyer, R. and Tanner, J., (2002). Business Marketing, 2nd Ed. McGraw-Hill, New York. Frambach R.T., and Nijssen E.J., (2005). Marketing strategies, Wolters-Noordhoff bv Groningen. Gasparotti, C. (2009). The internal and external environment analysis of Romanian naval industry with SWOT model. Management, 4(3), 97-110. Harvey Norman Holdings Limited, (2012), 2012 annual report, retrieved on 22, May 2013 from www.harveynormanholdings.com.au/companyprofile.htm. Kang, K. C., Donohoe, P., Koh, E., Lee, J., & Lee, K. (2002). 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(1987), Market segmentation, journal of marketing management, Vol.2, Is.2, pp. 301-335. Wilson R.M.S, and Gilligan C., (2005), Strategic Marketing Management – planning, implementation and control, Elsevier Butterworth Heinemann, Oxford Read More