Marketing Mix Critique, Masters Home Improvement - Woolworths - Case Study Example

Marketing Mix Critique: Masters Home Improvement Student’s Name Institutional Affiliation Date Marketing Mix Critique: Masters Home Improvement Introduction Masters Home Improvement is one of the chains controlled and managed by Woolworths. In order to diversify its Australian presence, Woolworths decided to venture into hardware industry by establishing Masters Home Improvement in 2011 (Cadeaux, 2016) . However, after registering some initial improvement and opening up more than sixty branches in the country, the chain has experienced turbulent times including making loses of more than three hundred thousand dollars. Consequently, the management of Woolworths decided to close the Masters by December 2016 if there will be no interested buyer. The following paper analysis-marketing strategy of Master Home Improvement under Woolworths. Marketing Environment Analysis – Micro Trends In January 2015, Woolworths announced that it would surrender its attempt of entering into the hardware and home improvement business by offloading its Masters chain (Cadeaux, 2016). According to the statement issued to the stack exchange, the company announced that would start the process of “orderly” exiting the Masters Home Improvement and Home Timber & Hardware business through either selling or shutting it if there was no interested buyer. Under the micro perspective analysis of the Woolworths’ situation, there are different reasons that made the company decide to shut down its Masters chain. Firstly, the company entered a poorly thought-out strategy, which was dubbed “project oxygen”. Secondly, the location of the business was wrongly situated. Evidently, although Masters had already opened sixty-two sites around the country, experts observed that the location of the stores was questionable since the company opened establishments in places where even its competitor, the Burnings, had already rejected. Thirdly, Masters was also selling off the wrong products at the wrong time of the year compared to its competitors, which was admitted by its senior management (Cadeaux, 2016). Further, Masters through Woolworths, had flawed and poor workplace culture which made it to perform badly. Finally, Woolworths failed to replicate its shopping experience in its new Master Chain, whereby this retailer was unable to employ the customers experience even after recognising that the layout of the store was unsuccessful with customers. Poor Organizational Culture Although Masters was able to expand exponentially a short period, one of the main reasons why the project has failed is due to poor culture where employees felt less motivated which also affected the service delivery to customers (Cadeaux, 2016). Unlike its competitor Bunnings (Bunnings Warehouse), which has developed strongly and warm organisational culture where employees feel empowered, Masters’ employees have reported of poor working relationship with their bosses who are not approachable. Wrong Location Location is one of the key considerations for any business entry. Business entry into an industry or a given market segment plays a critical role in its future success. In fact, poor location of a business indicates a wrong entry strategy, which leads to failure. In the case of Woolworths, most of its sites did not have the potential of creating a market base, as is the case with Bunnings (Cadeaux, 2016). Consequently, unlike the previous plans of opening up more stores, the company was unable to keep up with its competitors. Marketing Environment Analysis – Macro Trends Critical to note is that a part from internal or micro issues that have affected the permanence of Woolworths, which has consequently influenced the fall of Masters, there are also external factors that have contributed immensely to its downfall (Cadeaux, 2016). Notably, these factors ranges include increased competition, legal issues, the changing and dynamic economic performance, and politically motivated trends. Increased Competition The main reason for the fall of Masters is the increased competition in the retail industry (Cadeaux, 2016). Although most of the investors showed massive support for Maters to close, it was clear that the competition from the main rival Bunnings played a pivotal role in this decision. As the main player in hardware and home improvement field, Burnings realised the increased competition and decided to even improve its service delivery and avoid losing its existing customers but rather attract more. In this way, Woolworths was taking a big gamble when it decided to expand into hardware. Understandably, the home improvement market of Australia is estimated to worth over $40 billion per annum, whereby the dominant company is, Bunnings, which is owned by Wesfarmers (Cadeaux, 2016). According to Bunnings’ financial reports, the company is able to generate about thirty percent profit on the money that is invested into the business each year. However, the financial loss of lost $169 million in the 2014 financial year was a wake-up call for Woolworths to decide on the shutdown of Masters Home Improvement. Government’s Competition Policy Although it may seem as farfetched, it is prudent to note that political conditions in Australia have also played a center stage in influencing the poor performance of Woolworths. For example, recently, the Federal Government in Australia has enacted a competition policy that inhibits major and independent e players such as Coles and Woolworths from eliminating competition (Cadeaux, 2016). In this way, the smaller players such as Masters must struggle to compete with bigger companies, thus resulting to performance failure. Marketing Mix – Overview and critique Overview of Current Marketing approach Under marketing theory, a company should have a marketing strategy that incorporates seven factors in the form of seven “P”s, which include product, price, place, promotions, people, process and physical evidence (Physical Environment) (Gerg, 2015). Product is the first element in the four variables of the marketing mix. As a key component in any business, product refers to the commodity that is being sold by the company. Further, product-related decisions are the first decisions that one should consider before making any marketing plan. Masters adopts diversification of products by offering different types of hardware products for home improvement such as building supplies, paint and accessories, lighting and electrical, fasteners and adhesives among others. Pricing refers to the strategies that a company employs in fixing products’ prices. The process of pricing is determined by various factors such as the production cost, marketing and advertising costs, fluctuations of market prices, and distribution costs among other considerations (Gerg, 2015). Masters decided to sell its products at low prices compared to the rest, which include offering discounts to customers. Place is the location where customers can find the products, such as through online services or physical location. Masters provides its products through more than sixty-two physical stores throughout Australia. Promotion is the use of all tools of communication by a company in order to reach its target customers within a given geographical region. Although Masters has used different methods of promoting its product, the most common is the use of media such as television platforms to advertise its products. On the other hand, “people” refers to targeted customers. The target customers for Masters are the public of Australia. Further, “process” is the way customers are served by the organization through their support staff. Notably, Masters’ customers have raised concerns over poor services received at the stores. Finally, physical evidence is the physical environment where the goods or services are delivered. Evidently, Masters have tried to ensure that some of its stores are as attractive to the visitors as possible including tiling the floor for easy movement. Critique of Effectiveness In light of the seven Ps, the following table provides a brief analysis of the Masters’ marketing strategy. Critiquing the Effectiveness of Masters’ Marketing Approaches Current Approach Critique of effectiveness Product Diversification Although diversification of products is advised in order to satisfy different customers, as a new entrant in the hardware industry, there was need to identify the most demanded products from the industry to avoiding overstocking products that would take long time on the shelves. Price Penetration: Low prices to customers As a pricing strategy, low price of products requires in-depth understanding of the market trend including the financial implication for new companies (Gerg, 2015). Place Physical place The establishment of many stores in the country also needed to come after critical analysis of the different market segments (Ferguson, 2014). A company can have only one location and make maximum profits. Promotion The use of media such as television for advertisement Although the use different media (News.com.au.) in advertisement was acceptable, it should have corresponded with other factors such as efficient service delivery to customers Physical Masters have tried to ensure that some of its stores are as attractive to the visitors as possible including tiling the floor for easy movement. The physical presence and attempts to make them attractive were prudent ideas (Ferguson, 2014). However, the chain fails to match physical appearance with efficiency from the support teams. Process Customers receive products directly from the hardware stores. The process of delivering products to different market segments was a prudent step. However, the management would have decided to concentrate on few stores and introduce other delivery services in order to improve efficiency. People Transactional approach was used to engage customers Customers are key components of any business (Ferguson, 2014). Business buying products and services, they needed efficiency and professionalism, which were lacking in some instances. Marketing Mix – Redesign Product As noted above, Masters decided to diversify the product by offering a wide range of goods to the customers (News.com.au.). However, one of the biggest mistakes was to have sold wrong products at the wrong time. Experts have noted that in the first few years, Masters had failed to understand the seasonability of the hardware products and the behavior of customers in different times of the year (Ferguson, 2014). In fact, by tying with Lowes USA, it should that stock was out of season in Australia. Further, the product range of the company was questionable (Ferguson, 2014). Evidently, Woolworths had decided to get into a sector with highly competitive white goods while at the same time ignoring margin basic hardware. Based on this reality, the product range needed to be reviewed to incorporate some of the core categories such as hardware, power, and garden tools. In this way, Masters would not have experienced challenges during “high” seasons. Price Penetration strategy, as a pricing mechanism is a prudent business approach (Gerg, 2015). However, Masters decided to sell all its products at cheaper prices, which is not always a wise idea for a new company. Notably, the pricing was intended to attract many customers, thus making maximum profit based on “multiplier effect”. In this way, the notion was that the customers would buy many products at low price. However, the market forecasts based on the customers’ behavior did not turn out to be correct, which affected the financial performance of Masters. In tagging the price of products, all factors ought to have been considered, including the marketing and advertising costs, fluctuations of market prices, and distribution costs among other considerations. However, the failure to conduct proper market analysis led to high losses. In this respect, it is prudent for Masters to be selective on the product range as noted above and add premium as a second pricing strategy. Place The selection of the location of the stores for Masters’ products could have been done correctly, but the number of stores needed to be reduced (Ferguson, 2014). Entering into a new industry requires strategic positions that will act as the basis for other market segments. In this way, opening outlets would have been gradually done with critical analysis of the market dynamics. Therefore, Masters need to slash the number of stores in order to focus on the improvement of efficiency, which will enhance customers’ experience. Processes and People Customers are the key pillars of any business’s success (Ferguson, 2014). Therefore, it is the role of organizational management to ensure that the interaction between customer service agents or employees and customers is as friendly as possible. However, in the case of Masters, some customers complained of poor services, which included lacking customer service agents to serve in some stores (Ferguson, 2014). In some instances, phone calls to the company from the customers went unanswered, which demonstrated poor customer service. In this regard, it would be prudent for employees to be motivated and empowered on the basic aspects of customer service. Leadership should also be demonstrated to ensure that customers are served appropriately. Implementing Recommendations In reference to the above challenges facing Masters Home Improvement, it would be prudent to implement the following recommendations. Reviewing the Number of Store Outlets A critical look at the financial difficulty that Masters has found itself points to the increased number of stores that have been opened, thus overburdening the management (Knox, 2015). In this way, the efficiency of service delivery to customers is compromised. Understandably, the company has invested a lot on hardware part of the business, including its appearance, while forgetting the “soft” parts such as creating good relationship with employees. Therefore, it would be wise if proper analysis would be done on the performing stores. The rest should be closed, in order to focus on few and efficient stores. Employees Issues Motivating and empowering employee is one of the soft but productive measures that boost company’s performance. The complaints by customers on poor services show that most Masters’ employees are not motivated or empowered. The management needs to set up a team that will look into staff issues and determine ways of solving them. The objective would be to ensure that customers are served by happy and motivated employees. If some employees are unqualified, the recruitment or other staff members should be conducted. Change of Strategy As noted above, from the start, the entry strategy was flawed. Woolworths need to change the entire entry strategy and conduct a SWOT analysis of its competitors such as Bunnings( Gerg, 2015). As a new entrant in the hardware business, Woolworths should note weaknesses of its competitors and work to bridge the gap and attract customers on its side. References Cadeaux, J. (2016). Why Masters was a disaster for Woolworths. Business Think. Ferguson, R. (2014). The Woolworths Chains. London: Bloomsbury Publishers. Gerg, A. (2015). Marketing Theory. London: Bloomsbury. Amazon Publishers. Knox, M. (2015). Supermarket Monsters: The Price of Coles and Woolworths' Dominance. Collingwood: Schwartz Publishing Pty, Limited. News.com.au. Woolies pulls the plug on Masters. Business retail. Bunnings Warehouse. Home: History. Read More