Development proposal for UK Fashion footwear retailer - Essay Example

?PROPOSAL FOR LIGHT FEET LTD FOOTWEAR RETAIL IN THE UK Porter’s Five Forces Analysis The Threat of Substitutes Light Feet Ltd will face market challenges within the UK footwear retail industry and market which mandates it to employ appropriate strategies so that these challenges are overcome. The competitive advantage of the company within the UK market by the company can be understood through an analysis of the five forces that determine strategy for competitiveness as postulated by Michael Porter. According to Porter (2008, p. 79), the threat of business substitutes poses a challenge to a company which defines the strategies that a company implements to overcome this threat for competitive advantage. There are substitutes within the UK for retail shops for footwear that Light Feet Ltd must be aware of. A list of the footwear retailers in the UK that would be substitutes for Light Feet Ltd’s substitutes are listed below. 1. Wynsors World of Shoes 2. BananaShoes 3. Barrats 4. Schuh 5. Daniel Footwear 6. Jones Bookmakers Key Note (2012, p. 1) points out that the UK footwear market demonstrated an increase in expenditure by consumers on foot wear by 18% in 2008. This expenditure is related to the fact that substitute retail shops have led to competitive pricing for footwear and a resultant motivation of consumers to make more purchases. Light Feet Ltd requires to be aware of the competitive business environment within the UK footwear market so that managerial decisions on strategy and competitive advantage would be focused at overcoming the threat that substitute retail shops for footwear would pose on the company. In accordance to Business Wire (2012, p. 5), the switching costs of consumers within the UK footwear market are relatively low. This means that consumers would easily change the retailers from whom they buy footwear to substitute dealers without incurring significant costs. In this regard, the company’s pricing policy must ensure that competitive prices are provided to the consumers so that the inclination of the buyers for substitute retailers for footwear can be overcome or reduced. It is therefore the performance of the company in pricing and tradeoffs with its advantages over the substitute retailers that competitiveness within the UK footwear market can be achieved. The UK footwear industry is highly competitive as illustrated by the values of imports that various retailers have achieved from different global markets as presented on the figure below. Supplier Power Porter (2008, p. 82) demonstrates that the competitiveness of a company within a market is determined by the ability of a company to apply strategic business approaches which are aimed at taking advantage of the supplier power. In this regard, Light Feet Ltd must perform a market research and analysis in order to determine the power that the manufacturers of footwear within the UK have on the retailer who deal in these products. This will allow the company to make right choices and informed decisions on its relationship with the manufacturers of the footwear brands that it sells within this market. Through effective relationship with the suppliers or manufactures of footwear, the company will be able to win the confidentiality of the suppliers and as a result ensure a constant supply of footwear. This is an important consideration because it determines the ability of the company to meet the demand in the markets. Moreover, constant supply will allow Light Feet Ltd to meet the needs of its loyal and new customers for variety of footwear products. In the supply of footwear within the UK market various outlets have demonstrated competitive advantage as illustrated on the table below.   1995 2000 2005 2008 Shoe Shops 45 37 33 30 Sports and Outdoor shops 14 19 17 15 Clothing Stores 12 11 14 17 Grocery Superstores 5 7 8 7 Mail order/online 10 9 10 11 Other Retailers† 14 17 18 20 Total 100 100 100 100 Mintel Oxygen Reports (2012, p. 1) reveal that the footwear market in the UK is complex because of the unequal concentration of suppliers and manufacturers of footwear. Because of this it is difficult for the market to be divided into various smaller sectors. Light Feet Ltd is therefore compelled to engage with suppliers who provide it with differentiated footwear brands so that the supply of these products would guarantee the company of achieving the target output in terms of profit. Substitute inputs are available within the UK footwear market which are characterised by suppliers who provide low quality and low cost footwear and clothing (Mintel Oxygen Reports, 2012, p. 1). This has resulted to business threats especially for retailers who depend on high quality products from specific suppliers. It is recommended for Light Feet Ltd to stick into suppliers who provide authentic and high quality footwear. It is through this strategy that the company will maintain its image within the market as a retailer of high quality and authentic footwear products. This wills help the company to win the loyalty of consumers and therefore increase its market share. Buyer Power Buyers who comprise of the consumers of a company’s products are the most important stakeholders and as a result have been described to be the major determinants of the competitiveness of the company within the market of its operation (Porter, 2008, p. 86). Consumers of footwear within the UK market have been described as very price sensitive (Footwear Industry Profile: United Kingdom, 2008, p. 1). This reflects that the pricing of Light Feet Ltd’s footwear will be achieved through a thorough evaluation of the market characteristics on price. However a cost benefit analysis must be used as one of the appropriate strategies in achieving competitive pricing within the market. Moreover, the power of consumers mandated Light Feet Ltd to provide adequate information to the consumers. This includes the place where they would access the company’s product, price information and the quality of the products. Casadesus-Masanell & Ricart (2010, p. 125) explain that a competitive business provides its consumers with adequate information about products and services that are offered so that they are motivated to make a purchase for these products and as a result improve the sales of the company. PR Newswire (2012, p. 1) reveals that the footwear industry within the UK is characterised by buyers who are inclined to specific brand identities. This is due to the desire for brands that are considered to be authentic and of high quality. It is in line with this assertion that Light Feet Ltd must be able to promote its products through an integrated approach or strategy which will ensure that the diverse market is presented with marketing communication messages and images that demonstrate the company’s products and service as the most authentic. For example, the company must be able to demonstrate that the footwear that is sold within the company’s premises and outlets are designed to meet the needs and preferences of the consumers. In this sense therefore the company would have employed the best business strategy which is targeted at overcoming the challenge that is posed by the power of the buyer. The Threat of New Entrants Porter (2008, p. 88) points out that new entrants into the market often lead to business barriers for growth and competitive advantage of a company within a specific market. Mintel Oxygen Reports (2012, p. 1) show that the footwear industry within the UK is less significantly regulated which makes many companies both from within the country and foreign investors to venture into footwear retailing. This means that Light Feet Ltd is likely to face business barriers related to new entrants into the market. These barriers include expansion of the business and enlargement of market share for its footwear. In addition, market barriers such as competition for supply and resources would emanate from the inevitability of new entrants into the UK footwear market. It is therefore evident that the strategic management of the company must be geared towards the implementation of various strategies such as technology and enhanced consumer relationships so that the entry of new retailers in footwear will not cause the company to lose its consumers to business rivals and the resultant possible reduction in market share. Pehrsson (2009, p. 68) demonstrates that in order to overcome the barriers that are caused by new entrants into the market, business advantage must be sought by a company through appropriate market and management strategy. This means that Light Feet Ltd must be able to minimize its cost through efficient business operations and value chain. In addition, access to inputs must be expedited by the company so that all logistical costs are reduced. In this sense, the company will be able to maintain its profitability regardless of the fact that new entrants into the UK footwear market pose a challenge and threats to its business operations and share within the market. It is in this sense therefore that it is recommended that Light Feet Ltd must achieve an elaborate and efficient access to the distribution network so that its products reach the market faster than rival businesses and new entrants. In addition, the company must ensure that its products are distributed to all footwear market segments within the UK. New entrants into the footwear market in the UK are demonstrated by the amount of exports of these products as demonstrated on the figure below. The Intensity of Business Rivalry The Footwear Industry Profile: United Kingdom (2012, p. 1) shows that there is intense rivalry within the UK footwear market in which companies and retailers on footwear deal competitively in different brands such as Vans, Timberland and Converse. This rivalry within the UK footwear market has been demonstrated in the management of human resource, implementation of technology, marketing communication and promotional strategies and efficiency of the value chain (Gill & Meyer, 2011, p. 15). This therefore acts as a reflection upon the management team within Light Feet Ltd to design and implement appropriate strategic plans and objectives based on market analysis of the UK retail market for footwear. It is in this sense that the company would overcome the intense business rivalry within this market and as a result achieve business success. Among the recommended business strategies for competitiveness include online marketing communication, proper human resource management approaches such as motivational schemes and provision of high quality, convenient and affordable products to the consumers. In addition, interactivity with the consumers could lead to a competitive advantage within this market. Furthermore the company should consider providing its consumers with diverse and customized product and services within its retail stores do that their loyalty to the company is won. More importantly, the company must adhere to the legal framework within the UK in addition to the ethics of corporate social responsibility so that it would enhance its image in the market and therefore a competitive advantage. A combination of these strategies will enable Light Feet Ltd to overcome the intense rivalry within the UK footwear market and industry. Business Risk Analysis Light Feet Ltd faces a risk of irregular supply of its footwear from the local producers. This is a significant risk for the business because it is likely to cause the company to fail to meet the demand of the market leading to loss of business opportunities and reduced sales. In addition, irregular supply will cause the company to fail meeting the orders that are placed by its loyal customers. In this sense the company will lose the confidentiality of its consumers and as a resultant failure to maintain their loyalty. East, Gendall, Hammond & Lomax (2005) demonstrates that when the supply of products for a retailer is cut or reduces, business processes slow greatly and this leads to losses which emanate from the reduction in sales and loss of consumer to competitive firms. Generally the competitiveness of the company will be impacted negatively if the supply of its products from the manufacturers is curtailed. It is therefore necessary for the company to employ appropriate strategies which will help it to avoid situations where supply of its show product reduces or is cut completely. Gulgun Kayakutlu & Gulcin Buyukozkan (2010, p. 129) reveal that poor relationships with the supplier are the main cause of irregular supply of good to retailers. Therefore Light Feet Ltd must overcome this business risk by ensuring that an interactive and communicative relationship is encouraged and maintained between the company and its suppliers. This includes the adoption and implementation of technology to facilitate business communication with the suppliers and electronic process of placing orders for suppliers. In addition, this business risk can be minimized through prompt payment of the suppliers so that business and professional relationships are maintained between the company and it suppliers. In addition, the logistics of the company’s supply chain should be facilitated through effective or proper management so that supplies are delivered on time and as result avoiding unnecessary details and fluctuations of the supply of goods and services. Fluctuation of prices within the UK footwear market is another significant risk that the company is likely to face in its business operations within this market. Kanti (2012, p. 113) explains that when the price of products fluctuate, retailers are likely to incur losses especially when the capital investment on the business and stock is significantly high. Atsmon, Kertesz & Vittal (2011, p. 54) add that prices of a specific market are likely to fluctuate as a result of intense business rivalry or competitiveness. New entrants into the market and counterfeit products are other factors which are argued to be major causes of price fluctuations within a specific market (Kaufmann & Roesch, 2012, p. 20). The fluctuations of prices are therefore a significant risk that the company would face in the UK footwear market because these fluctuations translate to possible loss and reduction of revenue. This means that the company will be unable to meet its business objectives and financial goals. In order to overcome this risk, it is therefore necessary for the company to conduct effective price forecasts. This will allow the company to predict possible changes in prices at an early stage so that appropriate strategies are employed by the decision making role of the management so that unnecessary losses cannot be incurred. In addition, an effective pricing policy should be implemented within the company in order to overcome this challenge or business risk. The mitigation strategy thet Light Feet Ltd will employ for its business risks is presented in the figure below Another business risk that Light Feet Ltd is likely to face within the UK footwear market involves changing trends, tastes, preferences and fashions. Trend that are likely to change within the UK footwear market include the use of technology in facilitating retail operations and production of footwear which will cause the company to incur extra expenses in its operations. Furthermore changes in fashion would lead to losses that are related to lack of sales for stock that has run out of stock. In this regard the company faces a risk of running out of business as a result of market changes and changes in fashion and trends. In addition, changes in tastes and preferences of consumers are a significant risk for the business because it would lead to loss of loyal customers to rival businesses or retailers. Ellickson, Misra & Nair (2012, p. 750) point out that a company should conduct regular market research so that it is enabled to predict possible future changes in the market so that it would act appropriately and accordingly. Therefore, Light Feet Ltd must invest in market research so that it becomes aware of the changing trends in the market and as a result employ effective strategies of meeting the dynamic and changing needs of the market. Charitable Activity Stakeholder Analysis According to Kaufmann & Roesch (2012, p. 18) companies enhance their corporate image within their market through adherence to their corporate social responsibility and the ethics of organizational practice in addition to the moral values of the community or society within which they operate. It is in this sense that Light Feet Ltd aims at encouraging their customers to engage in donating their worn out footwear to a charitable organization which takes them to users within developing nations. Therefore this is a business strategy that will be used to promote the sensitivity of the company to charity and participation in charitable activities and initiatives. However this can only be achieved through the involvement of all stakeholders. The consumers are the most important stakeholder in this charitable activity. This is because they are responsible for donating their worn out shoes to the charitable organization. Therefore the company would be mandated to engage its customers in this activity through informative and motivational roles. Through effective communication and marketing of the charitable program, the company will convince and draw the interest of its customers into donating their shoes for charity. This process can be facilitated through incentives such as discounts for customers who donate their shoes to the charity. Through such strategies the company will play its motivational role in encouraging the consumers to donate their worn out shoes. In addition, the company will benefit from an enhanced corporate image within the society and business popularity. The charitable organization is another important stakeholder within this endeavor. Light Feet Ltd will therefore work collaboratively with this organization to ensure that they are efficiency in collecting the worn out shoes from the customers and delivery to the destined third world countries. More importantly are the employers of the company as one of the most important players or stakeholders of the charitable activity. The employees of the company will determine the success of this endeavor because they play the participatory role in engaging the consumer to donate, record keeping and promoting the charitable activity within the market. In addition, the employees of the company will be involved in the collection of the worn out shoes and presenting them to the charitable organization. This means that the management team of the company will be mandated to motivate the employees so that they would participate in this activity. The employees as important stakeholders would be motivated for participation though benefits and bonuses. This will lead to the success of the company in engaging in the charitable activity as part of its corporate social responsibility. References Atsmon, Y, Kertesz, A, & Vittal, I 2011, 'Is your emerging-market strategy local enough?', Mckinsey Quarterly, 2, pp. 50-61 Business Wire, 2012, “Research and Markets: Footwear Retailing in the UK - Verdict Market Report - Specialists Kurt Geiger, Office and Schuh will all Increase Market Share in 2012”, Business Wire (English), 5 Casadesus-Masanell, R. & Ricart, J.E. 2010, "Competitiveness: business model reconfiguration for innovation and internationalization", Management Research, vol. 8, no. 2, pp. 123-149. East, R., Gendall, P., Hammond, K. & Lomax, W. 2005, "Consumer Loyalty: Singular, Additive or Interactive?", Australasian Marketing Journal, vol. 13, no. 2, pp. 10-26. Ellickson, P, Misra, S, & Nair, H 2012, 'Repositioning Dynamics and Pricing Strategy', Journal of Marketing Research (JMR), 49, 6, pp. 750-772 Footwear Industry Profile: United Kingdom, 2008, Footwear Industry Profile: United Kingdom, pp. 1. Footwear Industry Profile: United Kingdom, 2012, 'Footwear Industry Profile: the United Kingdom', pp. 1-33 Gill, C. & Meyer, D. 2011, "The role and impact of HRM policy", International Journal of Organizational Analysis, vol. 19, no. 1, pp. 5-28 Gulgun Kayakutlu & Gulcin Buyukozkan 2010, "Effective supply value chain based on competence success", Supply Chain Management, vol. 15, no. 2, pp. 129-138 Kanti, T 2012, 'Market Segmentation and Customer Focus Strategies and Their Contribution towards Effective Value Chain Management', International Journal Of Marketing Studies, 4, 3, pp. 113-121 Kaufmann, L, & Roesch, J 2012, 'Constraints to Building and Deploying Marketing Capabilities by Emerging Market Firms in Advanced Markets', Journal Of International Marketing, 20, 4, pp. 1-24 Key Note, 2012, “Footwear Market Report Plus 2012”, Clothing and Personal Goods, pp. 1 Mintel Oxygen Reports, 2012, “Footwear Retailing-UK-July 2012”, UK Retail Briefing, pp. 1 Mintel Oxygen Reports, 2012, “Footwear: Shoes March On Through the Recession”, Mintel Press Release, pp. 1 Pehrsson, A. 2009, "Barriers to entry and market strategy: a literature review and a proposed model", European Business Review, vol. 21, no. 1, pp. 64-77. Porter, M E 2008, 'The Five Competitive Forces That Shape Strategy', Harvard Business Review, 86, 1, pp. 78-93 PR Newswire, 2012, “Footwear Retailing in the UK: Verdict Market Report”, PR Newswire US. Read More