Categorization of Multiple Channel Retailing †MyAssignmenthelp.com

Question: Discuss about the Categorization of Multiple Channel Retailing. Answer: Introduction Most business managers are urged to take wise decisions regarding their businesses. In order to evaluate the direction, goals, objectives and plans of a business a basis of reference is needed. Strategic management is a goal based management of resources to achieve a specific objective; it helps the managers to focus on effectiveness and efficiency of their decisions and actions(Hillet al.2014). Most practitioners and researchers may agree that strategic management of a company involves at least three elements i.e. strategic goal setting, management of core competence and corporate governance. Fixing appropriate goals based on the core competences and resources available helps the business position itself favorably in the market. Core competences of a business are the things an enterprise does best or better than others. Researchers have identified three major factors to qualify core competence of a business i.e. competences that are difficult to copy by the competitors, competences that are used to produce specific products and services, and competences that lead to solutions to customer problems or create customer satisfaction (Bharadwaj et al 1993). Corporate governance is the manner in which a company is run and its shareholders are managed. Corporations are different from other business structures such as partnership, Limited Liability private enterprise, etc. (Smith 2017). Corporations are required to meet certain legal requirements such as incorporation rules, listing in stock exchanges, etc. and are considered as separate from the promoters or owners. Often, corporations are owned by many people through shareholding i.e. a set of individuals share the profit and losses generated by the company through its intended operations. The shareholders and Board of governors have limited liability to the creditors of the company and the enterprise continues to exist beyond life span of its owners because the shares of a company can be transferred to others through sales or gift of shares. Analysis of strategic management helps the business managers to evaluate their business direction (Wheelenet al. 2015); and it helps the investors to assess the present and future position of the company. In order to demonstrate the strategic management of a company, an analysis of a listed company in the Australia i.e. Adairs is performed. Adairsproduct and service portfolio Adairs is a well-known retail brand in Australia and New Zealand that offers specialty home furnishing materials to its customers (AO, D.R.H.M 2017). It operates through specialized retail stores across Australia and New Zealand and through a dedicated e-commerce web site. The major strategy of the organization is to offer their customers trendy materials for home furnishing, backed by strong values and enhanced shopping experience (Mall 2017). Adairs has relatively large product portfolio. A product portfolio is a set or categories of all the products or services offered by a business enterprise. Information on product portfolio provides an opportunity to understand the market segment of a company, the current trends related to the product consumption, the probable profit margins, future growth prospects, market leadership of the company, etc. Information on product portfolio is critical for investors to assess the potential of the company. Currently, Adairs product portfolio has a wider range than its nearest competitor. The variety of home decorator product is large (Adairs 2018). However, the business managers in the small business units balance the range of products to meet the customer demands, optimally utilize the floor spaces in retail outlets, and create an ambience for shopping experience. It is reported that Adairs have included wall art, bedroom chairs, household fragrances, floor carpets, bed side lamps, decorative mirrors, etc. to the product portfolio. The critical aspects of product selection for offer depend on the Adairs strategy of categorizing products on fashionability, quality, aesthetics, and value for money. The product categorization helps the customers to have an integrated view of products and enables the retail staff to provide superior service (Varley 2014). The company focuses on enhancing living in the customers homes. Adairs operation includes, rolling out new points of sales i.e. specialized stores, manage the merchandise in it, and provide customer friendly web platform for the customers to do shopping sitting in their places of comfort. Adair focuses on four kinds of specialty stores (Adairs 2018). i.e. Adairs home maker, Adairs Kids, Adairs Outlet and Urban Home Republic. Each outlet of the Adairs, functions as a business unit of a larger system. Astrategic business unit(SBU) is considered as aprofit centerthat offers specific product range to a market segment with a discrete marketing plan to capture local market share, may be a city, town or a region. Adairs Product and Service lines The product portfolio of Adairs include, bedroom accessories, bathroom accessories, furniture division, home wares and kids section. In each of these product portfolios, specific product lines mark the retail inventory. A product line is a set of interrelated products under a category, brand or utility. Adairs sell multiple product lines in each of its portfolio, for example bedroom accessories portfolio included product lines such as pillows, quilts, blankets, bed spreads mattresses, etc. And, within each of product lines there are various brands and variants to meet the demands of the customers. Inventory of Adairs is complex. Having wider product portfolios and product lines helps the company to meet the specific needs of the customers (Beck Rygl 2015). From the media reports , it is evident that Adairs have not been doing good in terms of earning profits, but have increased revenues from the retail outlets and e-commerce. The reports indicate that revenues from online sales have increased by 26 percent and retail sales have increased by 7 percent in the year 2016. Revenue is the income from sale of products or use of capital / assets associated with the major operation of a company (Bannikovaet al. 2015). The revenue is indicated on the top of the profit and loss statement. Subtracting all costs, overheads, expenses and charges from the revenue, net income of an organization can be calculated. Revenues are sometimes equated with total sales and turnover. The operational environment or external environment of an organization stands for political, economic, social, technological, environmental and legislative factors around it. These factors are critical in accomplishing strategic plan and typically a strategy must effectively address these factors (Edelman Webster 2015). The local conditions of each store also affect its business. With respect to operational environment, there are a number of risk factors specific to Adairs and in general for the lifestyle retail. The performance of the Adairs is affected by a range of economic and business conditions such as changes in consumer spending for lifestyle products, inflation rate, interest on loans, and exchange rates in the international market. Government policies regarding taxation, people management, etc. also affects the retail business. The risk factors that are to be considered by Adairs include the following. Changes in consumers buying pattern General economic condition in Australia and New Zealand Entry of new competitors and strategic changes of existing competitors Management may lag in execution of the strategy Rented retail locations may have to be vacated Product range expansion and retail store expansion must be backed by sufficient resources. SWOT Analysis of Adair would help to understand the effectiveness of the strategies that have been implemented by the organization. Strength: Being one of the largest retail industries in Australia covers a larger area of market share. Moreover, the leader position of the organization promotes the company in exploiting the target market with the help of its strong resources. The organization has strong resources in the form of human and technological resources and also has a very good presence of the industry (Culley et al. 2017). Apart from that, one of the strength of the organization is its large number of quality products and services that targets large number of customers from Australia and from other parts. Prior to this, Adair has a strong commitment to the environment and the sustainability. Weakness: Apart from the strength, the organization has certain weakness also, as its presence in the International market is very low. Till now, it could not able to make a profitable market share in the International market. One of the major weaknesses is the impact of the external environment in the growth strategy of the organization (Jain 2015). Moreover, Adair has failed to sustain the competitive advantage of the market and entering the online retail lately had resulted negative impact on the organization. Opportunities: Retail industries in Australia shows a good growth within the market area and the organization tries to promote its brand through advertising, sponsorship and more. Apart from this factors such as the lifestyles of the consumers in Australia, advent technologies, supply chains provides good opportunities for the retail industries to expand their market share in Australia. In order to increase their productivity and revenue growth, the organization tends to implement strategic acquisitions in the emerging economies (Segarra et al. 2016). Threats: The major threats for the Adair organization is mainly from the larger retail industries in Australia such as Woolworths and the Coles Supermarket. Another threat to Adair comes from the intervention of the Government in their business procedure (Kew and Stredwick 2017). Apart from this, economic recession in the country could hinder the growth of the organization. Porter Five Forces Analysis Bargaining Power of the Buyers: In respect to the Australian retail market, the bargaining power of the buyers is higher as there is large number of retail industries that provides variety of products to thee customers (Corona 2015). It has been stated that the strong power of the customers forces the organization to decrease their products process in order to target large number of customers. Bargaining Power of the Suppliers: In the context of porter, it has been stated that higher the importance of suppliers, higher is the power of the suppliers. Therefore, Adair organization tends to have lower dependence on their suppliers, that means the bargaining power of the suppliers are low (Wanjohi 2017). The main reason behind this is the amount of shares of retail market in Australia and the large number of products that are being sold to the industries. Threat of new Entrants: In case of Adair, the threat from new entrants tends to be lower as the bigger retail industries do not keep any pace for the entry of new players in the market. And if any new player enters the market, it becomes difficult for them to survive in that particular retail industry and therefore it tends to reduce the threat from the new entrants (Kew and Stredwick 2017). Apart from this, Adair is consider as a dominant player with larger access to various distribution channel and trusted brands in the retail sector. Rivalry among the Existing Firms: The threat from the existing firms in case of Adair organization is higher, as there are major competitors in the Australian supermarket. Dominant market players include Woolworths, Coles supermarket and more that tends to exercise their power in the overall retail industries in Australia and for dominating the largest supermarket they tends to fight among themselves. Threat of Substitutes: As Adair is mainly a retail industry that deals with products that are essential for daily needs, therefore consumers need to avail those products as there are no other substitutes of those products (Segarra et al. 2016). Therefore, the threat of substitutes for the organization is low; consumers need to buy all those retail products that are important to them. Profit and loss figures shares in stock exchange 2017 (Net Revenue) 2017 (Sales) Adair $ 6.8 billion $ 15.04 B Woolsworth $ 25.7 billion $ 41.15 B Tesco $ 19.2 Billion $ 78.43 B From the above table, it could be seen that in case of the generation of revenue in terms of profit and loss, Adair ranks third. Woolsworth being one of the largest retail industries in Australia ranked at the top most level by earning $ 25.7 billion. Tesco ranks second by generating profit of $ 19.2 billion, whereas, Adair earned $ 6.8 billion, whereas in terms of sales, Adair has a low sales profit than its competitors (Wanjohi 2017). In order to increase its profit, Adair needs to target larger customers in order to sell more products. Factors of sustainable competitive advantage The company has been following a strategic direction for long but has recently attempted to improve the execution of the plans. The company believes that improvement in execution will have corresponding improvement in results i.e. some of the key drivers of Adairs strategy are discussed here(Rosemann vom Brocke 2015). One of the major strategies followed by Adairs to attract more customers to its stores is product differentiation and product line expansion. Presenting high quality and appealing products to the customers is critical in home dcor business. Adairs, over the years have developed an ability to address broad range of customer needs by offering differentiated products that are superior in quality but at attractive prices. This strategy of Adairs has been successful so far and the trend shows the company is likely to pursue incremental steps in adding new range of products and reaping corresponding increments in sales. Second strategic measure by Adairs is increasing their retail store network. In spite of the reduced profit margins, the company is betting their luck on not only expanding store network but also upgrading the floor spaces in existing network. One of the executives has said that the company plans to open at least eight new outlets in Australia and New Zealand every year. However, the history of two to three years indicates that the company has opened only four outlets on average. The finance managers have reported that stores that upgraded their physical space have stated to give better returns in terms of revenue and profit margins. Company has learnt that providing customers with broader range of products, and differentiated customer experience can lead to better profitability (Shockleyet al. 2015). Recently, Adairs have started a concept called omni channel retailing. The customers have the choice to buy the products from retail outlets or from online site (Gao Su 2016). Irrespective of the customers style of buying, the company has decided to provide flexible customer experience. The company has introduced loyalty programs to retain customers and enhance engagement with the company. It is apparent that online sales is likely to post higher rate of growth and company is focusing in developing various services around it such as hassle free returns, etc. Capable staff is considered as part of the strategy at Adairs. The company values passionate and high performing team members as critical for the success of the company. The company aims to provide excellent shopping experience to its customers along with service. Great service can be provided by people only, for which the company encourages and trains the staff to provide excellent service (Vieiraet al 2017). Overall, Adairs is placed to expand its international presence, especially in New Zealand. The executives in the company are confident that with their competitive advantage of larger product range, omni channel sales, and appealing price it can do better in the coming years in terms of profitability. Competitive advantage of company is the reason for sustained business from the customers. As per the five forces analysis, the entry barriers to a new competitor are high as the capital needed to start a retail chain is huge. The threat of substitutes is high as there are many retailers who provide home dcor items. The bargaining power of suppliers is neutralized by the brand value of the Adairs and the bargaining power of the customers is high as they have many alternatives to satisfy their needs. The industry rivalry in home dcor retail is neither intense nor trivial; the company needs to respond to the customer needs quickly.It is a set of attributes that allow a company to perform be tter than the competitors. The increase in sales in retail outlets and online site indicates strong competitive advantage for the company. Recommendations for Future Strategic Direction It appears that strategic direction of the company is right, but the management should focus on the execution of the strategy i.e. product differentiation and store expansion. The correlation between the new stores development and store up gradation, and the growth of revenue and profitability are strong, and it must be pursued (Davcik Sharma 2015). The company managers have acquired unique ability to include new products that meet the needs of the customers; the company must encourage and nourish such initiatives of the managers. The product differentiation with affordable price range and product category expansion also needs to focus to keep away the competitors. The ambition of starting eight stores per year appears to be a bit impractical, looking at the profitability and the resources of the company. It would be safe to start four new stores per year for next two years and four floor expansion projects. Physical floor expansion in the existing stores has been more profitable than opening new stores (Nishida Yang 2015). The managers must pay attention to the profitability of the retail store differentiation i.e. home maker, kids, urban republic, etc. Overall the company may adopt the following recommendations. Continue the loyalty programs Strengthen online presence and develop web pages to enhance shopping experience Facilitate broader range of products availability Provide realistic and precise product information in the online facility Reduce number of clicks in the purchase process and simplify payment procedures Expand to new and unrepresented areas depending on the recognized demands Look for newer international markets Initiate mobile marketing and mobile commerce Conclusion Analyzing a companys strategic management has several benefits (Puntet al. 2016). Strategic evaluations present an opportunity to objectively analyze the effectiveness and efficiency of the current strategy. To helps the investors and job seekers to assess the future potential of the company. For the managers and decision makers, it provides an opportunity to take corrective actions bring back the company to right direction. 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