Strategic Management (An Analysis on the Retail Industry)

Question: Task Critically evaluate the key issues that strategic analysis plays in a business or organisation that you are familiar with. In this assignment, you are required to write a 2500 word report. This includes a 200 word executive summary, but excludes references and appendix. Your Report should cover the following: 1. Briefly describe the background information of the organisation (or SBU) chosen. This information should be brief and relevant to the discussion of your assignment and thus may include ownership, history, size, business scope, major products/services, and major markets of the organisation (or SBU). 2. Conduct an external environment analysis including a macro-environment analysis and Porter's 5 forces analysis: (a) Conduct a macro-environment analysis for the entire industry within which the organisation (or SBU) operates. You should use the PESTEL model and focus on understanding the purpose of this analysis, the identification of key factors and their implications in te rms of key opportunities and threats, and discussion of their overall impact on industry growth in the future. Draw your conclusions based on your macro-environment analysis. (b) Undertake a competitive analysis using Porters 5 forces model. You should pay attention to the purpose of this analysis, the inter- connectedness of different aspects of the competitive forces, and their overall impact on the industry and the organisation selected in terms of main driving forces in the competitive environment. Draw your conclusions based on your five-force analysis. 3. Conduct an internal environment analysis. You should identify, differentiate and evaluate the key resources and competencies of the organisation (or SBU) that are most likely to provide sustainable competitive advantage. 4. Summarise your findings based on your external and internal environment analysis. Identify the key issues that the organisation (or SBU) faces and give your recommendations. Answer: Executive summary In the recent years, the retail industry has been experiencing the robust growth on the global platform. With the involvement of the different strategic approaches, the particular industry has been experiencing enormous growth. However, the strategic management has several challenges including orientation for globalization, involving e-commerce culture, reducing the competition in the market, product diversification, etc (Hitt, Ireland Hoskisson, 2012). Most of the retail organizations follow a particular process to execute business in both domestic and international platforms. The key concepts for strategic management are such as goal setting, investigating the strategy formation, strategy implementation, and strategy monitoring, etc (Ward Peppard, 2016). The prime challenge for the retail industry is to manage the workforce in an effectual manner. Most of the time, it becomes challenging for the retail organization to reduce employee turnover issue (Eden and Ackermann, 2013). Hen ce, the organization needs to implement unique strategies for reducing such issues from the business. Most of the business analysts have highlighted the fact that the employee motivation is one of the key components for reducing the staff turnover in an effective way (Hill, Jones Schilling, 2014). In this particular assignment, the internal and external strategic issues have been highlighted in an appropriate manner. On the other hand, the competitive analysis has been conducted based on Porter five forces analysis. The identification of internal and external issues has been highlighted in the paper. Background of the organization: The organization is one of the giant supermarkets in the global platform. With the help of the strategic business unit, the organization has been successfully executing the business in both domestic and international platform (Slack, 2015). At the initial stage, the company was formed in the UK. However, the particular business has expanded its business on the global platform. The CEO of the organization has stated that the business development strategy has been playing a major role in ensuring the long-term growth in the internal platform (Barney Hesterly, 2015). The company is determined to deliver a wide range of high quality products to the customers for ensuring sustainability in the business. The organization follows a hierarchy structure in the business, as it facilitates them in executing the business in a systematic manner. Although the particular organization is a UK based retail organization, it expanded its business to the Asian, European and North American countries (La sserre, 2012). On the other hand, the organization has been trying to implement new strategic approaches including mobile shopping to enhance the business opportunities in an appropriate manner. The organization has chosen to pursue a strategic business unit (SBU) across all of its business areas for maximizing the degree of competitiveness within the large demographic market areas (Ward, 2012). The CEO of the company has discussed that the SBU would cover the strategic foundation, size and scope of the business, strategic thrust, and product and brand identification, customer market served, the promotional activities, and the financial targets. External analysis: a. Macroanalysis: PESTEL Framework Political factors: The performance of the organization is highly influenced by the political factors, as the business has been executed in different countries. The local government always encourages the industry to create new job opportunities for the local community. However, the job opportunity would be mixed in nature including flexible, low paid and local based to high paid and high skilled jobs (Rothaermel, 2015). The particular organization has been employing a large number of students, physically challenged, and elderly staffs, who deliver good performance with a low salary. In the recent years, the retail industry has been facing the high turnover issue. Hence, their employment structure facilitates them to reduce the turnover issue in an effective manner. Economic Factors: The economic factors largely influence costs, price and profits of the business. The most influential economy factor is the high rate of unemployment. Consequently, it decreases the effective demand of certain product line (Mellahi Frynas, 2015). These factors are not controllable by the strategic business unit of the organization. Although the international market is expanding, the particular organization needs to follow the strategic approach to experience adequate profit margin in the business (Stead Stead, 2013). Social or Cultural Factors: According to the current market situation, the customers have moved towards the bulk and one-stop shopping due to several social changes. Hence, the organization has enhanced the non-food items in the stores. On the other hand, the demographic changes including an aging population, reducing in the homemade meal, and an increase in female workers have facilitated to enhance the business in an effective manner (Keupp, Palmi Gassmann, 2012). Moreover, the demand of product depends on the social conditions. The organization has focused on selling the organic food products. Technological Factors: In recent years, the organization has brought several technologies for enhancing the business opportunities in both domestic and international market. The retail stores employ the technologies like wireless devices, intelligent scale, electronic self-labelling, self check-out device, radio frequency identification (RFID) (Goetsch Davis, 2014). The implementation of the electronic fund's transfer systems (EPoS), electronic point of sale (EFPoS) has made a great impact on the business. Environmental Factors: The organization has been focusing on the corporate social responsibilities of the business. The organization has provided huge job opportunities for the local communities. Consequently, it facilitates in enhancing the social status. On the other hand, the organization has been paying an adequate amount of taxes to the government, which facilitates in strengthening the national economic structure (Harrison John, 2013). Legislative factors: Different legal policies of the government have created a great impact on the retail business. The food retailing Commission (FRC) has implemented a new code of conducts, which says that the organization needs to stop the unethical practices such as changing the price without notice, demanding payments from the suppliers (Fernie Sparks, 2014). b. Competitive Analysis: Porters 5 forces model Threat of New Entrants: The grocery market is dominating by some retail organizations. Due to the huge competition in the market, the organization face challenges in expanding the business in the global platform. In the UK grocery market, a top brand like Tesco, Asda, and Sainsbury possess 70% of the market share (Hamilton Chernev, 2013). Over the last three decades, the grocery market has turned into a supermarket dominated business. The majority of the large grocery chains have built their business based on their operating efficiency, major marketing mix expenditure, and one-stop shopping (Varley, 2014). This particular force has a great impact on the small business also. Hence, it can be assessed that the new entrants have to face several challenges for executing the business in the domestic market. It is very difficult for the new entrants for raising sufficient capital due to developed supply chains and large fixed costs. Bargaining power of suppliers: This particular force indicates the power of suppliers, which may be influenced by the large grocery chains in the market. It indicates the fear of losing the business to the supermarkets. It allows for negotiating the better promotional prices in the business. On the contrary, the suppliers also get threatened due to the huge growing ability of the large retail business (Ellram, Londe Weber, 2013). Most of the time large retailers force their suppliers to deliver the product at lower price. Hence, it can be assessed that the competitive rivalry forces have reduced the profit margins for the supermarket chains and suppliers. Bargaining power of customers: The enhancement of the undifferentiated products facilitates to reduce the switching cost. Consequently, more power is yielded to the buyers. The particular organization has engaged different loyalty card program for enhancing the customer retention process. Due to the implementation of customer retention strategy, the organization has been experiencing better profit margin in recent years. In recent days, the retail food organizations have engaged them in selling the non-food items due to increased customer demand in the market (Bloom et al., 2012). Most of the supermarkets expand their business into banking sector or the pharmacy sector. On the other hand, the consumer has also become aware of the challenges like fair trade. Threat of substitutes: General substitution can decrease the demand for a particular product, as the customer can switch to the product at any point of time. In the recent years, the emerging industry has been experiencing different changes in the business approach. In this context, the particular organization has been trying to obtain existing small-scale operations and opening Express stores in the local towns. Bargaining power of competitors: The strategic business unit of the organization has highlighted the fact that the increasing demand of customer has facilitated the retail industry in experiencing enormous growth (Hbner Kuhn, 2012). The market size of the organization has been expanded to both domestic and international platforms. In the competitive market, the organization has been trying to implement innovative approaches in the business for experiencing high profits. The innovative approaches may include the development of a wide range of trading formats for bringing changes in the consumer behavior. The retail organizations have been focusing on price and value to obtain a better position in the competitive market. Internal analysis: SWOT Analysis The organization has strong financial resources, which allows them to expand the business in the large demographic areas. The strengths, weaknesses, opportunities and threats of the organization are discussed in the below table: Strengths The prime strength of the organization is its increasing market share. It holds an adequate percentage of shares in the UK retail market. The general growth and ROI indicate its position in the retail industry (Ward Peppard, 2016). The organization has been expanding its business in the large international market. The online shopping facilities have facilitated them in enhancing their profit margin in the business. The brand value of the organization is helping them in increasing its customers base both in the domestic and international platform. Weaknesses Although the international market has been developing, the organization is quite dependent on the domestic market (Hitt, Ireland Hoskisson, 2012). Debt reduction is another challenge of the business. Due to the large capital expenditure, the financial resources have been decreased for other operations. In the emerging market, the organization has been conducting the business itself. In some region, they should tie up with other organizations to obtain better profitability (Eden and Ackermann, 2013). Opportunities Most of the retail organizations have been trying to invest on the non-food retails ventures. Hence, the particular organization should involve the nonfood items in the stores for enhancing their total sales. The organization needs to focus on the product diversification for improving its business opportunities in the global market. Although the organization has made a footstep into the international market, it needs to improve its financial resources for further international expansion (Slack, 2015). Threats The huge market competition has brought challenges for the retailers to for delivering high quality products at a reasonable price. Due to political legislations, the organization may face challenges in expanding the business on the international platform. In the UK market, there are several retail leaders including Wal-Mart or Asda (Hill, Jones Schilling, 2014). Consequently, it creates challenges for the organization to execute the business in an effectual manner. Identification of issues of internal and external environments: By analyzing the internal environment, it can be assessed that the organization is dependent on its domestic market. However, the particular organization has made the footstep into the international market (Barney Hesterly, 2015). On the contrary, the financial strengths allow the organization in expanding the brand in the international market. The retail industry has been facing huge challenges in managing a proper workforce in the business (Lasserre, 2012). For conducting the business in an accurate manner, the organization needs to focus on their employee engagement policy. The biggest strength of the organization is its brand value. Consequently, the management should utilize its brand name for recruiting highly skilled employees in the business. On the other hand, the retail organization needs to focus on the emerging business process, as it facilitates in gaining business opportunities in the new market structure (Ward, 2012). For avoiding political legislations, the organizat ion can merge their business with the existing market leader to obtain a profitable outcome. By improving the pricing policy and promotional activities, the retail organization can reduce the threats of new entrants. Product diversification is one of the major components for obtaining success in the business. Without including a wide range of products into the stores, the organization would not be able to engage a huge number of customers (Rothaermel, 2015). In recent years, most of the retail organizations have been focusing on the non-retail food products for enhancing the business opportunities. Hence, the particular organization may include diversified products for the enhancement of the business. By conducting the external analysis, it can be identified that the political frameworks often create difficulties to the retail organizations in expanding their business in the international market. However, the local government often encourages the organization to create new job opportunities in the society (Mellahi Frynas, 2015). On the other hand, the high rate of unemployment reduces the demand for products in the business. Sometimes, the organization fails to include the product according to the social condition. Consequently, it decreases the business opportunities in both domestic and international market. Sometimes, the retail organizations face challenges in the execution business process due to lack of technology (Stead Stead, 2013). In the modern era of business, the technological advancement has brought a bunch of opportunities for the retail stores to enhance the business opportunities in an effective manner. However, the market entrants are often unable to involve enh anced technology in the business due to lack of financial resources. Consequently, it creates barriers for them. Most of the business analysts have agreed with the fact that the legislative frameworks often create difficulties for expanding the business in the international market (Keupp, Palmi Gassmann, 2012). The new entrants always need to follow the code of conducts of the business for executing the business in an effectual manner. By conducting the competitive analysis, it can be assessed that the existing retail organizations often face difficulties in competing with the new entrants, as the new organization follows low pricing policy for engaging a huge number customers in the business (Goetsch Davis, 2014). On the other hand, the suppliers also face several issues to deal with the retailers. Sometimes, the large retail organizations create pressure on the suppliers to supply products at the cheap pricing rate. Conclusion: It can be concluded that the success of the retail organizations depends on its strategic business applications. In the rapidly changing business environment, the organization needs to implement different strategies for enhancing its business opportunities in an efficient manner. For surviving in the competitive market, the retail organizations must adapt to the quick changing circumstances. Hence, the strategic formulation plays an integral role in the business. Moreover, the strategy formulation indicates the continuous process of learning about the market structure and its ever changing nature. With the involvement of the strategic business unit, the organization can understand different aspects of business including strategic foundation, size, and scope of the trade, product and brand identification, the promotional activities, and the financial targets, etc. In this particular assignment, the internal and external analysis on the retail industry has been conducted. On the other hand, the competitive analysis has been discussed on the particular organization. Hence, it can be assessed that the particular paper highlights the strategic analysis on the retail industry in an effectual method. References: Barney, J. B., Hesterly, W. (2015).Strategic management and competitive advantage concepts and cases. Pearson. Bloom, N., Genakos, C., Sadun, R., Van Reenen, J. (2012). Management practices across firms and countries.The Academy of Management Perspectives,26(1), 12-33. Eden, C. and Ackermann, F., 2013.Making strategy: The journey of strategic management. Sage. Ellram, L. M., La Londe, B. J., Weber, M. M. (2013). Retail logistics.International Journal of Physical Distribution Logistics Management. Fernie, J., Sparks, L. (2014).Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan Page Publishers. Goetsch, D. L., Davis, S. B. (2014).Quality management for organizational excellence. pearson. Hamilton, R., Chernev, A. (2013). Low prices are just the beginning: Price image in retail management.Journal of Marketing,77(6), 1-20. Harrison, J. S., John, C. H. S. (2013).Foundations in strategic management. Cengage Learning. Hill, C. W., Jones, G. R., Schilling, M. A. (2014).Strategic management: theory: an integrated approach. Cengage Learning. Hitt, M. A., Ireland, R. D., Hoskisson, R. E. (2012).Strategic management cases: competitiveness and globalization. Cengage Learning. Hbner, A. H., Kuhn, H. (2012). Retail category management: State-of-the-art review of quantitative research and software applications in assortment and shelf space management.Omega,40(2), 199-209. Keupp, M. M., Palmi, M., Gassmann, O. (2012). The strategic management of innovation: A systematic review and paths for future research.International Journal of Management Reviews,14(4), 367-390. Lasserre, P. (2012).Global strategic management. Palgrave Macmillan. Mellahi, K., Frynas, G. (2015).Global strategic management. Oxford University Press. Rothaermel, F. T. (2015).Strategic management. McGraw-Hill. Slack, N. (2015).Operations strategy. John Wiley Sons, Ltd. Stead, J. G., Stead, W. E. (2013).Sustainable strategic management. ME Sharpe. Varley, R. (2014).Retail product management: buying and merchandising. Routledge. Ward, J., Peppard, J. (2016).The Strategic Management of Information Systems: Building a Digital Strategy. John Wiley Sons. Ward, K. (2012).Strategic management accounting. Routledge.