Australian Retailer Harvey Norman Company Overview and SWOT Analysis - Case Study Example

Harvey Norman Student’s Name: Institutional Affiliation: University: Table of Contents Introduction ..........................................................................................................................3 Executive Summary ...............................................................................................................4 Company Overview.............................................................................................................. 5 SWOT Analysis ....................................................................................................................6 Porters 5 Forces ..................................................................................................................... 8 Financial Information ...........................................................................................................10 Recommendations .................................................................................................................10 References .............................................................................................................................. 11 Harvey Norman Introduction The purpose of this report is to provide a general view of the Australian retailer Harvey Norman business in relation to how it is organized and run. Harvey Norman is operational in Australia, Slovenia, Northern Ireland, Ireland and New Zealand (Koons, 2011). The report uses two business analysis methods to identify the opportunities and threats as well as well as the strengths and weaknesses of the business. SWOT Analysis that is carried out on Harvey Norman retailers to evaluate the relation between the internal resources of the company and the capabilities (strengths and weaknesses) as well as the external possibilities that comprises of opportunities and threats (Bohm, 2009). The Porter’s five forces analysis helps to provide a clear understanding of the industry and the immediate participants. The five forces are used to analyze the threat of the new competitors’ entry and the effects that are felt. The second force is about the threat of substitute products and services that get in to the market and make competition stiff because of cheap prices that they are sold at. The bargaining power of customers is another threat because it lowers the targeted realization from the products. The bargaining power of the suppliers is yet another force that affects the running of business mostly the B2 C business. The final force is the intensity of the rivalry competition that is associated with the business. The carrying of the above business analysis helps in coming up with the right channels of realizing the market share of the products in the market and the ways in which one can find the most suitable means of making the profit margin increase as well as maintaining the standards and retaining the customers vat the same time (Roth, 2010). Executive Summary Harvey Norman retailers business has considerably grown to an international standards business despite the fact that there is stiff completion in the market. There are increased revenues and it is evident that the business will continue to grow. At certain stages of growth and the external forces that affect the business like changed business policy in Australia, the business will at times lose the growth track and decline. The other forces are completion, weak economic conditions that affect the whole world and the larger amount of money used in advertisement online as well as through the mainstream media (Roth, 2009). The returns gained from the commercialized adverts are at times lesser than the input and this reduces the growth rate. So many franchises have used Harvey Norman’s business name and at times they spoil the image of the retailing business (Dick & Merrett, 2007). There are varied results achieved in the year 2010 by the Harvey Norman’s first- half sales falling by two percent in Australia. This was the opposite of what was expected because the television share had grown in the retail chain. There was deflation of price in electronics that compromised the growth of revenue although sales in computers had been hurt by the resultant competitive market and this made the customers to be rather cautious hence lowering the sales. For example the electrical franchisee sales that were recorded in Australia got strengthened although there was an extremely difficult environment for conducting business (Koons, 2011). Company overview Harvey Norman is an Australian-based business that deals with the retail of varied products like computers, electrical, furniture, beddings among others. It is operated on franchise basis and its main brand name is Harvey Norman Holdings Limited. The holdings have more than two hundred and thirty stores in different locations such as Malaysia, Slovenia, Northern Ireland, Ireland and New Zealand. Australian retail chains like Space furniture, Ariston appliances, Domayne and Joyce Mayne are the key franchisors of Harvey Norman Holdings Limited (InvestSMART, 2011). Harvey Norman Holdings Limited was first opened in 1982 by Gerry Harvey and Ian Norman but only specialized in electrical goods and appliances. From that humble beginning it was expanded to the great retail chains that are known internationally. Since then Harvey Norman Holdings Limited has become a hose hold name. It is popularly known by its slogan ‘Go Harvey, Go Harvey, Go Harvey Norman’. The business culture is embedded in this anthem that portrays how enthusiasm to attain the entrepreneurial spirit has captured those involved in the business (InvestSMART, 2011). Harvey Norman Holdings Limited (HVN) had its total sales at A $116M as at 1987 and the growth has been consistent to the present up to A$4billion. HVN stores are operated under franchise and their revenue is sourced from the advisory services provided and the advertising fees charged to its franchisee (InvestSMART, 2011). Even if HVN has grown to be of real significance to the society it surrounds, it has received many controversies. For instance, ACCC acted against HVN in 1995 for distributing a catalogue that included about twenty errors knowingly. This was including items with features that were not available in their stores and some of the commodities they never had. Gerry Harvey, the company’s chief executive received criticism for saying that the economical problems in Ireland were similar to the Irish potato famine. SWOT Analysis The SWOT analysis in HVN is used to analyse the strengths and weaknesses as well as the opportunities and threats the business faces in the daily running of activities. This analysis will help the HVN administration to appreciate the strengths of the company and also help on how to keep on holding to this and expanding on the strengths. By identifying the weaknesses the business highlights the weakness which acts as a drawback and chose on how to minimize them. The company will also maximize on the opportunities that come its way and make business transactions that will help it move a step higher. The recognition of threats makes the business to identify the risky moves that can bring the business down. The business strength is based on the team work that the company believes in and sustains throughout their stay. There comes many challenges but they can not diminish the solidarity in HVN. They believe that their phenomenal success is rooted in what they call OUR TEAM; it is inclusive of the customer too (Johnson, 2009). They also believe that their marketing strategies and branding makes them to become the customer’s choice. The manner in which the services are rendered to the customer is their utmost strength because they believe that the customer is a part of their team. The greatest weakness is when due to unhealthy competition Harvey Norman failed to post an item on sale over the website and consumers tweeted negative tweeps about the retailers. It was a good way to learn through a mistake that, people follow them up whatever they do online people see. That time consumers were angry because there was nothing to be sold over internet (Richards, 2011). The other weakness is ignoring to check pricing of commodities abroad hence pricing their products out of the market. They received a lot of criticism from people who felt extorted but that helped them learn that to use the web advantage is more important because of maintaining the business image (Richards, 2011). According to Richards (2011), Gerry Harvey once went into battle because of increased ten percent tax on the online purchases and his explosion made most Australians aware that most retailers are pricing g their commodities very expensively. This outburst made consumers to feel like they are being cheated (Richards, 2011). Harvey and Norman retail business has opportunities that help the business in thriving. The opportunities are found in the manner in which it carries on its organizational ability. The fact that the business has franchise outlets makes it an opportunity to have many sales. This maximizes their sales. It offers its products in three different brands which help the consumers to at least diversify but what is beneficial to the company (Dibb, & Simkin, 2008). It has varied products thus making it a consumers’ choice because there is variety under the same store. If they realize these opportunities they can work harder to see that most of the customers are retained and this can easily help them achieve their vision and mission easily (Cris, 2010). There are various threats that the business needs to be aware of. The administrators need to be aware of the government policies that held growth of the business. This is by introduction of legislative controls that force the business operators to use more money than budgeted (Greenhalgh, 2011). According to Greenhalgh (2011), HVN has a lot of cheap stock that is quite attractive but if caution is not taken they will be out of business in ten years time. The reducing sales is an evident threat because the share price fell from a high of about $7 in the year 2007 to about $2.5 presently. This indicates that there is a decline in sales. Apart from declining sales completion is hindering growth intensity by far. In the past four years Harvey Norman has not been able to increase their number of stores which stands at 200 presently. This is due to increased rate of competition. The level of competition is stagnating the sales that are not thrilling at all (Greenhalgh, 2011). The other threat is that the company is downgrading to hold. Over the past four years HVN has not produced anything substantial. It has managed to produce just $282 whereas the capitalization of the market is $2.6. Investors are not optimistic in anyway and that is why they are waiting for the exit. They feel that they need to change their investment styles until opportunities appear again in the company (Greenhalgh, 2011). Currency is also deflated and cost of goods is very but the consumers are few because availability of money is scarce thus forcing demand to lower hence fall in sales. Porter’s Five Forces Threat of new entrants According to Stafford (2009), Gerry Harvey was convinced that there were no online business transactions with worthy returns. He challenged his competitors to find ten online Australian traders who were making substantial transactions over internet because he felt that the concept was a waste of time. He thought that the world consumers are being conned in a fake deal but he was amazed how wrong he was. According to Poster’s five forces threat of new entrants in the market had dawned on him. Australian retailing scene is now dominated by the likes of Amazon, Aple’s I Tunes and e bay. Harvey Norman is threatened by the manner in which the new markets have entered the scene (Stafford, 2009). They came with new skills that matched globalization stage. Apart from the international online competitors there are smaller Australian companies that strengthened their brands and improved their sales by concentrating to niches of the retailing sector. In the next five years Australia is going to record an increment of 5.5 % annually. The increment will rise to about $21.2 billion by 20014 from $15.1 billion. Gerry Harvey has been highlighted as one of the slow traders who are overtaken by new business concepts. This will reduce consumers who frequent Harvey Norman’s stores because the concepts of online trading are being adopted day in day out (Stafford, 2009). Customers bargaining power Harvey Norman is known to produce quality good that needs to satisfy the need of the retail consumers. The market is lacking consumer confidence because of many factors like unemployment, consumer price index, the high level of interest rates which is forcing the consumers not tot to afford the products produced by the businesses (Harvey Norman Limited, 2011). In preparation of meeting the consumer needs Harvey Norman produces products according to different cycles of maturation as well as different levels of demand and consumption exhibited by the consumer. HVN predicts that next year will really be hard due to negative consumer sentiment and rising levels of employment (Harvey Norman Limited, 2011). Threat of substitute products Harvey Norman has faced threat from substitute products that are being sold cheaply. These products are of poor quality but HVN can not jeopardize its image at the expense of counterfeit products. This act brings imbalance in the market. The competitors get the products from abroad at a cheaper price and this challenges business with Harvey Normans (Allen, 2008). Degree of rivalry among existing competitors is a bit high. This is because Gerry Harvey wanted to disapprove the fact that online trading is not effective in anyway. He finds that HVN is being overtaken by events whereby even smaller companies are doing better than HVN (Dick & Merrett, 2007). There ones rose a bitter outburst because of increased tax by ten percent that made consumers to realize there is something wrong with transactions and prices. After they checked over internet they felt that they were being extorted. Financial information Harvey Normans Holdings limited has experienced shrinking of revenues from A$1.4 Billion to 1.3 billion. Despite the drop the company managed to grow from A$214.4 Million to A$231.4 Million. Recommendations Harvey Normans should workout its weaknesses and ensure that the failures that are brought by ignorance are evaded. The fact that consumers do not find products online is humiliating and portrays that there is laxity in the business. The company should also uphold new ways of conducting business for instance upgraded online trading so as to minimize expenses on the maintenance of business (Graham et al., 2001). The company needs to foster unity amongst the workers so that they form a real team in the place of work. The company should be purchasing stock in advance because when inflation occurs the prices may shoot. Expansion of business premises should be enhanced and also laying of strategies to retain customers formulated even if it is giving incentives like free transport. The company should ensure that it invests in the right workforce so as to have the best team leaders steering the group in the positive direction (Hill & Jones, 2009). References Allen, K. (2008). Launching New Ventures: An Entrepreneurial Approach. London: Cengage Learning. Bohm, A. (2009). The SWOT Analysis. Berlin: GRIN Verlag. Cris, (2010). Franchise Business Opportunities. Retrieved 10 July, 2011, from http://franchise.business-opportunities.biz/ Dick, H. & Merrett, D.(2007). The internationalisation strategies of small-country firms: the Australian experience of globalization. Camberley: Edward Elgar. Dibb, S. & Simkin, L. (2008). Marketing Planning: A Workbook for Marketing Managers. London: Cengage Learning. Greenhalgh, (2011). Tide turns against Harvey Norman. Retrieved 10 July, 2011, from http://www.intelligentinvestor.com.au/articles/Harvey-Norman-HVN/Tide-turns-against-Harvey-Norman.cfm Graham, S., Goldblatt, J. & Neirotti, L. (2001). The ultimate guide to sports marketing. New York: McGraw-Hill Professional. Hill,C. & Jones, G. (2009). Strategic Management Theory: An Integrated Approach.London: Cengage: Learning InvestSMART. (2011). Harvey Norman Holdings Limited (HVN). Retrieved 9 July, 2011, from http://www.investsmart.com.au/shares/asx/Harvey-Norman-Holdings-HVN.asp Johnnson, A. (2009). Computer Department: Message from Anna Johnson, General Manager, Computers.Retrieved on 10th July, 2011 from http://www.goharveycareers.co.nz/DEPARTMENTS/COMPUTERS/tabid/33031/Default.aspx Koon, C. (2011). Harvey Norman TV market share growing, retailer says. Retrieved on 9 July, 2011, from http://www.theaustralian.com.au/business-old/industry-sectors/harvey- norman-tv-market-share-growing-retailer-says/story-e6frg9h6-1226004486556 Richards, D. (2011). Is The Franchise Model Broken? It Is Very Close To Being. Retrieved 10 July, 2011, from http://www.channelnews.com.au/Comment/C6H7E4Q2 Roth, M. (2010). Top Stocks 2011: A Sharebuyer's Guide to Leading Australian Companies. Hoboken, NJ: John Wiley and Sons. Stafford, P. (2009). Top 10 online retailers. Retrieved on 10th July 2011 from http://www.smartcompany.com.au/retail/20090209-top-10-online-retailers.html Harvey Norman Limited. (2011).Harvey Norman. 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