Situational Analysis of Hervey Nichols - Case Study Example

Situational Analysis: Hervey Nichols (Name) (Institution Affiliation) (Date) Table of Contents In Table of Contents 2 Strategic Option 2: Market Development. Here, Hervey Nichols will venture into North America, specifically Mexico and Asia (South Korea) and attract the affluent customers who love shopping in Luxury retailing stores. 10 Strategic Option 3: Diversification. This would involve venturing into new markets with new products. 11 McDonald and Wilson, (2011) posit that market penetration is where a company sells its current products and service to its existing markets in order to achieve growth as far as market share is concerned. On the other hand, market development involves venturing into new market segments for a company’s current product and services. Further, they assert that diversification is whereby a company focuses on the development in order to sell them into a new market. The above three strategic options have been selected as Hervey Nichols’s best strategic choices. Appendix 2 explains more on the same. Further recommendations based on the SWOT analysis is shown in Appendix 3 11 6.1.Market Selection 11 Mexico stands out to be best market segment in North America to venture into as it has a strong and rapid growing economy as well as an affluent population due to the high disposable income. 11 1.0. Introduction The emergence and ever-evolving technology has created leaps in transportation, financial flows, and technology thus, the world has continued to feel “small and smaller.” Today, companies as well as consumers can conduct business in any country of their choice because of international trade. Evidently, products and brands that are produced in one country are accepted by other nations enthusiastically. It is with this reason that a retail company such as Harvey Nichols has been able to expand internationally since its inception in 1831. Research indicates that most consumers associate imported brands and products with status and quality, a feature that the Hervey Nichols has benefited from in a long time; therefore, the affluent will always purchase foreign products. However, globalization has come with its challenges. For example, consumers have a myriad of options when it comes to shopping as there are many similar products in the market thus challenging the companies to produce quality and affordable products. Moreover, companies cannot market these products identically across the world. In effect, this report aims to analyze Hervey Nichols situational analysis in order to give a recommendation on various strategic options the company can use in order to support its global growth based. Furthermore, based on the company’s current situation analysis, the report will recommend two market entries, in which it can develop its 9th international store as well as the best market entry mode to be used. Lastly, the report will recommend on the promotional mix strategy to be used by Hervey in its 8th international store, to be positioned in Qatar, as well as specific the recommendation for each aspect of the mix. 2.0. Harvey Nichols Company Profile Founded in 1831 by Benjamin Harvey, Harvey Nichols Company is an internationally renowned luxury retailer, which offers, men’s wear, women’s wear, food and beauty products. Besides its fashion retailing business, the company developed its London store and it now operates, a wine shop, bar, food market and a restaurant. Headquartered in London, Hervey Nichols has stores in Manchester, Bristol, Leeds, Edinburgh, Dublin, Kuwait, Saudi Arabia, Hong Kong and Turkey (Harveynichols.com,. 2015). 3.0. Situation Analysis Since Harvey Nichols’ proposes to open an 8th international store in Doha Festival City, Qatar, it is important for a situational analysis based on the targeted country to be done. The analysis is significant as it helps the company to evaluate the viability of doing business in Qatar. Thus, this section will highlight the uncontrollable business factors that may affect Harvey Nichols’ operation in Qatar. As Donboli & Kashefi (2005) points out, it is important to delineate both the macro and micro environment factors in situational analysis. This is because it helps in identifying both the threats and opportunities that a company may face in the new market segment. Consequently, the report will use the PEST analysis, which stands for political, economic, social and technological factors, in evaluating the macro-environment. In regard to micro-environment analysis, the report will use competitor analysis. Further global external factors that affect Hervey Nichol is discussed in appendix 9. 3.1. Political Headed by Emir Sheikh Hamad bin Khalifa al-Thani, Qatar is a constitutional monarchy, which is hereditary (Rathmell, & Schulze, 2010). According to the Word Bank, Qatar’s political stability index stands at 1.22, which is more than countries such as Australia and U.S.A with an index of 1.8 and 1.6 respectively. This indicates that Qatar politically is stable, and the chances of destabilizing the government are minimal. Certainly, Hervey Nichols store in Qatar will be safe from potential political violence or civil unrest. In 2005, the Gulf Co-operation Council (GCC), which Qatar is a member, signed a Free Trade Agreement with the European Union. This Agreement allows a flat rate tax of 5% to be charged on imports entering GCC from the European Union. This would be an advantage to Hervey Nichols store that is to be situated in Doha, Qatar, as it would evade the 10% percent tax levied on foreign businesses owned by non-GCC nationals. 3.2. Economic With a GDP of approximately $203.2 billion and GDP per capita of $93,715, Qatar is considered as one of the wealthiest nations in the world. The small monarchy gets much of income its income from the enormous amount of hydrocarbons it often exports. With a GDP growth rate of 6% annually, Qatar is a conducive environment to start a business as it is characterized by an affluent population (Doha, 2011). In a recent World Economic Forum, Qatar was recognized as the top competitive economy in the Arab world; United Arab Emirates, comes second with a GDP per capita of 43,000. This indicates that the annual disposable personal income in Qatar’s is higher than in Dubai and Saudi Arabia. This implies that the positioning of Hervey Nichols in Qatar is advantageous to the company as it will record high sales due to the affluent population, who love “classy” products. 3.3. Social With a population of nearly 2.2 million, Qatar is considered a traditional country whose culture is associated with the teaching of Islam. Of the total population only, 30% are Qataris while the rest are foreigners who have gone to invest and work as the country is undergoing major infrastructural changes (Doha, 2011). The population in Doha City, Qatar’s capacity is characterized by wealthy people who love classy products and shop in large malls with designer products. As such, Harvey Nichols in Doha will grow rapidly due its classy products and the spacious and luxuries shopping mall, which the Qataris will often love to visit. 3.4. Technological According to Rohm (2013) seventy-three percent of Qataris use digital gadgets to search and acquire goods and services. A Majority of the Qataris own digital communication gadgets such as iPhones, smartphones and tablets as they spend a considerable amount of their time on the, internet looking for attractive shopping sites and products. A research conducted in Doha indicated that most retailers depend substantially on e-commerce as people in Qatar do not carry cash but credit cards (Jackson & Shaw 2012). Thus, it is imperative for Hervey Nichols to invest in integrated digital marketing as well as initiate online payment services. The company should develop mobile-generated retailing services, such that customers can search online for the latest products in the store and subsequently make purchases of the same. 3.5. Porter’s 5 forces analysis As indicated in Appendix 1, Porter’s 5 forces characterizes the competitive environment that the company resides in. it is often a strategic precaution that a company takes in order to ensure a long term profitability of its products. 3.6. Competitors Hervey Nichols has many competitors both in London and internationally. There are three close rivals who have opened big stores in Doha City: Selfridges Retail Ltd, House of Fraser and Harrods Holding Company. All the three companies engage in the same retailing activities similar to that of Hervey Nichols and have opened stores in Doha City. Selfridges Retail has a net worth of £ 233, 400,000 while that of House of stands at Fraser £927,900,000, and Harrods Holding £85,695,220. With a net of £ 70,194,000, Hervey Nichols needs to enter new markets more so, in South America and Asia in order to remain competitive. 4.0. Hervey Nichols SWOT analysis 4.1. Strengths 4.1.1. Pricing Power Hervey Nichols has a pricing power. Since the company is involved in the selling of luxurious product such as designer clothes and jewelry, Hervey Nichols has the ability to dictate higher prices. Moreover, majority of its customers are affluent and as the Leisure Class Theory holds, higher prices often signal quality (Veblen, 2007). 4.1.2. Excellent financial ratios Hervey Nichols has an excellent financial position thus through the financial leverage concept, the company can use its balance sheet to ask for a loan that can be used in expanding the business thus more profits. 4.1.3. Strengthened Sales Statistics from the 2014 financial report indicate that sales in the emerging markets have emerged, with approximately 28.4% accounting for total 2014 sales (Insidemedia.com 2014). This has been largely due to the company’s emerging presence in the international market as well as its strategic approach to expand in new markets. 4.2. Weaknesses 4.2.1. Poor digital Presence Unlike other major players in the luxury retailing industry, Hervey Nichols is hardly active on the social media platform, which is precarious considering it is associated with the fashion industry. With the emergence integrated marketing communication concept in the international marketing, Hervey Nichols needs to increase its presence in the social network in order to compete effectively with other brands. 4.2.2. Lack of M-commerce (Mobile commerce) initiatives Over the last decade, the use of m-commerce has increased as many companies use this tool to attract more customers because of its efficiency. M-commerce concept is paramount in today’s digital society, which is dynamic as it would provide customers with instance purchasing services among other benefits. 4.2.3. Regular anti-far protests Lately, the company has been experiencing constant protests from anti-far activists who are pressuring the company to halt its “cruel” sale of far. These scenarios can be dangerous to Hervey Nichols as it risks losing its reputation and using considerable amounts in lawsuits. 4.3. Opportunities 4.3.1. Digital Innovations Hervey Nichols should take on the early opportunity of integrating into the use of phone apps as well as well as tablets. Moreover, the company should consider using the digital platforms such as YouTube to post videos of trendy fashion products in their stores. 4.3.2. Emerging markets Evidently, the developing countries have been noted as fast growing regions in the world as their populations have started keeping up with the trendy fashions and luxurious lifestyles (Jamal, 2003). Thus, these features will enable Harvey Nichols to expand quickly. 4.4. Threats 4.4.1. Volatile Currencies The fluctuation of currencies in Harvey Nichols’s new stores internationally may affect the company’s investments as the costs and revenues would change rapidly. 4.4.2. Growing Competition. Hervey Nichols is currently facing stiff competition from big players such Harrods Holdings and Selfridges Retail Limited, and is set to face more emerging competitors who are expanding their stores globally. Research indicates that there over 114 international luxury retail companies competing for the international market of approximately £24 billion (Moore et al., 2000). 5.0. Summary of key issues/challenges Looking at the SWOT analysis one would not fail to notice that the company has not taken advantage of the current technological advancement used by other businesses. Technology helps the company to reach more customers thus expanding their market share. For example, the company has not invested in mobile commerce, whereby customers can use mobile apps in viewing as well as placing their orders. Therefore, they should develop m-commerce initiatives in order to grow their business. Secondly, the company’s presence is not felt on the social networks even though they have an account with social sites such Facebook and Twitter. Many customers today spend much of their time on the social sites thus by engaging with the customers online, they establish a connection with the company thus increasing customer loyalty. 6.0. Hervey Nichols Strategic Options In light of the analysis generated from Hervey Nichols’s internal and external environment, this report recommends further strategies to be considered via the opportunities highlighted in the SWOT analysis. The options have been recommended based on ANSOFF MATRIX as seen in Appendix 2 Strategic Option 1: Market Penetration – Hervey Nichols would be involved in furthering digital experience for consumers, operating a ‘m-commerce’ strategy. The company will continue to develop an ‘in store experience’ by digital enhancements i.e. the use of ipads and virtual shopping Strategic Option 2: Market Development. Here, Hervey Nichols will venture into North America, specifically Mexico and Asia (South Korea) and attract the affluent customers who love shopping in Luxury retailing stores. Strategic Option 3: Diversification. This would involve venturing into new markets with new products. McDonald and Wilson, (2011) posit that market penetration is where a company sells its current products and service to its existing markets in order to achieve growth as far as market share is concerned. On the other hand, market development involves venturing into new market segments for a company’s current product and services. Further, they assert that diversification is whereby a company focuses on the development in order to sell them into a new market. The above three strategic options have been selected as Hervey Nichols’s best strategic choices. Appendix 2 explains more on the same. Further recommendations based on the SWOT analysis is shown in Appendix 3 6.1. Market Selection Mexico stands out to be best market segment in North America to venture into as it has a strong and rapid growing economy as well as an affluent population due to the high disposable income. 7.0. Recommended Market Entry Strategy and Justification Market development is the recommended strategy for Hervey Nichols as it coincides with the company’s objectives of expanding internationally. Accordingly, Hervey should consider opening stores in Mexico City Mexico as its GDPs has been on a rapid upward Nichols trend in the last decade. According to the World Bank, Mexico has a high personal disposable income due to its rapid economic growth and has a high concentration of individuals with considerable net worth as indicated in Appendix 4. Thus, Hervey Nichols has a chance of expanding rapidly in Mexico as its citizens would want to shop in reputable and luxury. The most efficient market entry mode would be through a flagship store. This store would play a significant role in contributing to the brand’s profile building in Mexico’s capital city. This is because the most affluent live in Mexico City and would want to shop in a prestigious and luxury stores. As Moore et al., (2010) puts it, new customers are often attracted and inspired by flagship stores and would want to visit them severally when shopping. Hervey Nichols would attract more clients in these two foreign new market entries as flagship stores are often identified as being unique from the rest of the retail stores because of their scale, set-up operating costs, design as well as location. In addition, their decadent size gives a positive signal as far as the prestige and identity of Hervey Nichols are concerned. The flagship entry mode would be effective to Hervey Nichols as it targets high-income consumers. 8.0. Marketing Mix for Hervey Nichols In this section, the report will discuss Hervey Nichols typical marketing mix: price, place, promotion and product. The analysis is in line with the promotional mix, which holds that every business venture need the correct price, right price, in a proper place using the proper promotion (Jackson & Show, 2008). 8.1. Product The products being offered by Hervey Nichols are a mixture of exceptionally high quality as well as luxurious fabrics, which includes 100% lambskin, silks and wools for both men and women. Moreover, the company offers expensive jewelry and accessories. The products will be the primary basis of differentiating it from other stores in Qatar, therefore; the company should include expensive Islamic apparel in order to attract more affluent customers. Hervey Nichols should also maintain recognized apparel designers as well as perfumes and watches in to attract the Doha City affluent population who often see these products advertised in magazines and other media channels. 8.2. Price The pricing structure for Hervey Nichols should take a strategic approach based on the quality of the products as well as the luxurious materials used. The company should also incorporate its strong brand equity. Although the company targets an affluent population in Doha City and Qatar at large, it should offer “premium priced” products in order to suit both the core consumer as well as the affluent. However, some classic accessories such as watches should be priced highly as the high-quality products will be positioned in the luxury Doha City. 8.3. Place For Hervey Nichols to increase its growth in Qatar, the company needs to avail an online product selection and payment services in order to satisfy more customers who cannot make to the store regularly. The company should also incorporate home delivery services for their customers as they dealing with the affluent individuals, who live lavishly and would want to pay for every service offered to make their lives comfortable. 8.4. Promotion According to Jackson and Shaw (2008) business must have marketing communication goals in order to expand more and become successful. Thus, Hervey Nichols should integrate into integrated digital platforms in order enhance their digital presence strategy. Consumers in the Arab world are said to spend more than 45% of their time on the internet (Siddiqi, 2003). As such, the company should put their promotion materials on social sites as well as Qatar on-stream news websites. Further analysis can been seen in Appendix 8 9.0. Summary In summary this report has highlighted the issues Harvey Nichols is facing based on the on the analysis of their current situation. In effect, the report has recommended various strategic options they can use in order to support their global growth based on the analysis of their current situation. Furthermore, the paper has suggested two market entries, in which they can develop their 9th store as well as selected the flagship stores model as their market entry mode. Lastly, the report has recommended the promotional mix strategy to be used in their 8th international store as well as a specific recommendation for each aspect of the mix. 10.0. References Doha, Q. 2011. Qatar. Donboli, J. H., & Kashefi, F. 2005. Doing Business in the Middle East: A Primer for US Companies. Cornell Int'l LJ, 38, 413. Harveynichols.com,. 2015. The Company. Retrieved 16 April 2015, from http://www.harveynichols.com/about/the-company/ Insidemedia.com. 2014. Sales close on £200m at Harvey Nichols. Insider Media Ltd. Retrieved 15 April2015, from http://www.insidermedia.com/insider/national/128889-positive-year harvey nichols/ Jackson, .2012. Fashion Marketing. Basingstoke, Hampshire: Palgrave Macmillan Jackson, T., & Shaw, D. 2008. Mastering fashion marketing. Palgrave Macmillan. Jamal, A., 2003. Retailing in a multicultural world: the interplay of retailing, ethnic identity and consumption. Journal of Retailing and Consumer Services 10, 1–11. Moore, C. M., Doherty, A. M., & Doyle, S. A. 2010. Flagship stores as a market entry method: the perspective of luxury fashion retailing. European Journal of Marketing, 44(1/2), 139 161. MinteL, 2011. Consumer Attitudes towards Luxury Brands [online] [viewed 20th April 2015]. Available from: http://academic.mintel.com/display/600566/ Moore, C., J. Fernie and S. Burt, 2000. European Journal of Marketing. The internationalization of the designer retailer’s brand [online] [viewed 15th April 15, 2015]. 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