Strategic Analysis of Hornby Hobbies Limited: Corporate Strategy

This report provides a comprehensive analysis of the strategic issues confronting Hornby Hobbies Limited, a UK-based toy train company. It identifies key challenges such as significant technology investments, supply chain problems, and issues with financial resources. The report explores the resources available to the company, including technology, high production capacity, and a quality workforce, while evaluating their key capabilities. It examines the impact of the company's competitive strategy on these strategic issues, providing insights into how the company can overcome its hurdles and improve its financial position within the competitive toy industry. The analysis also provides an overview of the company's strengths, weaknesses, and potential areas for improvement in the face of its strategic challenges.

CORPORATE
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
STRATEGIC ISSUES OF HORNBY HOBBIES LIMITED..........................................................1
RESOCURES AVAILABLE TO THE COMPANY AND THEIR KEY CAPABILITIES ..........3
IMPACT OF ORGANISATIONS COMPETITIVE STRATEGY ON STRATIGIC ISSUES
..........................................................................................................................................................5
CONCLUSION ........................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Every company has some vision, they make long term plan for forwarding towards their
mission. Strategy is the planning of actions for attaining overall aim of the firm. Hornby Hobbies
Limited is Britain based by toy trains company (Grinblatt and Titman2016). They manufacture,
develop and supplies hobby and supplies hobby. They are running their business in UK and they
offer variety of products in various categories like locomotives, spares and accessories, wagon
coaches etc. This assignment will discuss about three strategic issues of mentioned enterprise.
The factors which give competitive advantages to the firm will also become part of this project.
The role of competitive strategy regarding strategic issues will be included in this report, this file
will also cover some suggestion for improvement.
STRATEGIC ISSUES OF HORNBY HOBBIES LIMITED
If a company do not work according to plan then it is impossible for them to reach the
target which they have set for attaining organisational objectives. Strategic planning focuses on
finding the key issues which may become significant hurdle for the company in present or
upcoming time. The day a day problems can be resolved by making good tactics but the main
trouble need special attention because they have capacity to the derail the compete operation of
the organisation (Purce, 2014). Their was a time when many companies were not focusing on
making plans, but gradually they understood its importance that it can save them from
unexpected loss and it can assure optimum utilisation of the available resources.
The actual definition of strategic planning is '' finding and addressing unresolved main
issues''. Their is general perception that an ''issue'' is always negative, it will create trouble for an
organisation but this thinking is not completely right as the sometime problems can be positive
and it can make a favourable impact on an enterprise. Hornby Hobbies Limited is current facing
loss because they are failing to resolve some of they key hurdles. The future of mentioned
company is in dark and they can solving key strategic issues:
Huge expenditure of technology – Every organisation know that if they will not
upgrade their technology then other companies may earn some competitive advantages on them.
Hornby Hobbies Limited started online services, their customers could buy their products
through without making any physical contract. This company signed a deal with the subsidiary
of PayPal (Rugman and Verbeke, 2017). Their most significant problem for cited firm is that
their profit is going down but still they have to invest huge sum in adopting latest technology so
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they maintain their position in the industry where they are operating from many years. This
organisation want to increase their sales like of all companies, but the financial burden of
adopting latest techniques of working is hampering their profit. They are decreasing their product
line so they can reduce their capital spending. This firm is trying to minimise their losses but the
expenditure on technology is failing their effort. The main objective of this company is to
improve their financial position, if this key strategic issue is solved in upcoming 2-3 years then
they may face much bigger problems in upcoming time.
Why it is ''Strategic''
For earning more money, Hornby Hobbies Limited has to upgrade their services and
products. They have to use new technology and spend large sum on buying modern equipments
but their condition is not sound (Sethi, 2012). Senior managers of this company wanted to
increase profit of firm, they thought that if they will adopt latest technology then customers will
get better product and services and this will make a positive impact on their revenue, but this
strategic did not work according to their plan because the revenue did not grow according to the
expectation.
Problems with suppliers - Hornby Hobbies Limited was increasing their dependence on
the Chinese suppliers because they were providing goods at low price. Their quality was also
fine. Some of they key vendors has stop their supply and this is making a negative impact on
operation of the company. This firm want to increase their profitably but reducing cost of
production and increasing their sale by entering in emerging market but these small hurdle
become key strategic issues because they they stop have significant amount of contribution in
widening the losses of Hornby Hobbies Limited. This is not a new problem fir cited firm, it
started in 1990 but the top level management of the enterprise face to solve this key issue. They
always focused on finding temporary solution and never worked on permanent answer of
strategic matter.
Why it is ''Strategic''
When Hornby Hobbies Limited shifted their production from UK, they thought that it
will help them in reducing their cost of business (Kleinbaum and Stuart, 2014). Manufacturing in
European country is much expensive compared to Asian region. Their strategy was clear, reduce
the amount of production cost and earn more profit. But they fail to keep good connection with
their foreign suppliers and it raise a severe strategic issue in-front of the enterprise.
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Issues relating to financial resources – Strong financial position always provide some
extra edge to a company. Hornby Hobbies Limited is facing some key strategic issues regarding
monetary resources. They want the support of shareholder for fundraising program. The demand
of their items down because some of their major planning got failed in last 2 decades. The prime
reason behind their weak financial position is that they did not know the right time of investing
money. Some of their investment did not pay out according to their expectations and it ultimately
end up in underperforming assets for the company. Hornby Hobbies Limited is the leading firm
of their industry so it was their prime objective to attain a good financial position.
Why it is ''Strategic''
Hornby Hobbies Limited wanted took many steps like shift move their production units
to developing nations, invested in technology etc. so they can execute the plan of earning more
profit by reducing cost. But it did not work out according to their expectation because some of
the key people like CEO of the company resign from their position as they know that they could
not do something that will make this firm profitable. Some shareholder also decline their support
because they did not think that this enterprise can do better in upcoming time.
RESOCURES AVAILABLE TO THE COMPANY AND THEIR KEY
CAPABILITIES
This firm may be facing they some financial troubles in current scenario but they still
have capability to survive because they have faced this kind of issues in past but they never came
into the situation of shutting down the business. Below are some key resources of the company
along with their capabilities:
Technology – Most of the companies did not invest much amount when their financial
condition is not sound but this firm did not followed the same strategy. They know that in order
to survive in this competitive market, they have to continuously update their business and this is
the prime reason that they are now selling their product through online mode. This firm has
adopted latest technology and now they are capable of facing any major challenge which they
can get from other players of the industry. They knew that young generation do not like to shop
from physical stores. They want to accomplish all of their task their mobile and internet. This is
the main reason that they started a online payment for the items which customers want to buy
from their website. Subsidiary of PayPal is their partner in this work. Latest technology is one
the prime resource of this company.
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This firm is capable of changing the trends that is present in this sector. If they decrease
the prices of their product by decent percentage then other companies also have to reduce the
price of the items which they are offering in the market. They are investing huge amount of
installing latest in their organisation, this will motivate other firms to the same (Lamberti and
Noci, 2012). Other companies who are operating in this industry have not adopted many latest
technology. Hornby Hobbies Limited is getting some extra edge on them by proving updated
services like online shopping. They have successfully increased their sale in hard time by using
technology. The toy and game industry has saw negative growth in year 2009, this was a hard
period for many firm are running their business in toy and games industry. Hornby Hobbies
Limited survived this period when many small and medium firm of this sector got shut down.
Technology helped them in gaining this success.
High production capacity – This is firm knew that if they want to remain a top player of
their industry then they have to bring down their cost of production. They shifted their
manufacturing units in China because they knew that labour in this country was cheap and they
can produce large number of products without hampering quantity. Their sound production
division can be considered as the hey resources which is present in the company. In general, an
organisation can enhance their revenue either by lowering down their cost of business or by
increasing their sale. Hornby Hobbies Limited is leading in train toys market because the cost
price of these products is low and they are sold at high price. The are capable of producing more
units at low cost. This company has capacity to change the current market by offering variety of
products. If they will launch some new toys other companies of same industry also have to make
some necessary changes in their items otherwise they may see decline in their sale.
Hornby Hobbies Limited is a very old company and they have seen many ups and downs
in their business. They are earning benefit of the capacity to produce more goods in less time and
at cheap price. This factors is making positive impact on their revenue (Ingley, Mueller and
Cocks, 2011). Their main competitors like Hasbro is not very active in the sale of model training
and some other game. The have limited capacity of production and this the a significant reason
that they are still failing to the capture the market of Hornby Hobbies Limited.
Quality workforce – In this era, every firm want to recruit skilled people in their
organisation because if the a company have right employee in the enterprise then they can cope
up with any kind of trouble. Hornby Hobbies Limited do not believe hiring more workers, their
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main aim is to improve the skills that is present in their employee (Adamides, 2015). They have
made some crucial efforts regarding training and development and their human resource is
considered as one of their prime asset. They are continuously going through bad phase but the
workers is helping them in fighting many hurdles in effective way. They have around 400 people
in the organisation but they are capable of delivering better results compare to the work of 800
staff members. Most of them are experts of their field and they have necessary experience to
tackle the different kind of problems. Quality workforce is giving competitive advantage to this
company. Their competitor basically focus in expanding their workforce but they did not believe
in quantity, their main focus is on quality. When the number of employees in a company is more
then managing them is a difficult task. Hornby Hobbies Limited do not have much employee
strength so they do not have wastage much resources on fulfilling their need (Brunsman, DeVore
and Houston, 2011). This is decreasing the financial burden in cited firm because other
companies have to spend huge amount of paying remunerations to the workers. The chances of
conflicts and confusion is also low when employee strength is less.
IMPACT OF ORGANISATIONS COMPETITIVE STRATEGY ON
STRATIGIC ISSUES
Hornby Hobbies Limited know that they have some key strategic issues which are need
to be solved on priority basis. Their financial position is weak and their relations with their
suppliers is also not in a good condition. In present scenario, they are facing many challenges
and they need some radical changes bring the firm on right track. Competitive strategy is the
long term plans which help a company in earning competitive advantage of the other firm of the
same sector (What Does Corporate Strategy Mean? 2017). These plans main focus on improving
the position of the enterprise in the industry. This kind of strategy can provide some help to the
top level management of the company in resolve key strategic issues.
Cited firm main have three major problems, first is that they are spending heavy sum on
adopting of new technology, specially, when their financial condition is weak. Other matter is
that, their relationship with their suppliers is not working and they have stopped supply to them.
This is affecting their profit and other operational activity. The issue is related to the crucial
problem of bad financial condition of the firm. The trust of shareholders has gone down and they
are not supporting the management according to the assistance which they are seeking from the
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side of shareholders. Following are some of the competitive strategy of Hornby Hobbies Limited
and the extent up-to which they are addressing strategic issue:
Cost leadership – This firm always focus on decreasing the cost of business because they
know that it will provide them some extra edge over their competitors. This company is using
latest technology so they can reduce various kind of expenditure. They made a deal with chines
suppliers because they know that it will help them lowering down the total cost of product and
business also (Brunsman, DeVore and Houston, 2011). This competitive strategy is helping them
in solving a crucial strategic issue i.e. problem regarding financial resources. Their financial
troubles could have been much bigger if they would not have taken various steps for earning
competitive advantages. Technology like online sales is helping this company in increasing their
sale. It has decreased their financial troubles because they sale did not fall according to the
expectation of the market. This company survived in economic crisis of 2009 because a
significant part of this company is connected to chines market. They production unit in Europe
got severely impacted at the time of economic crises but the support from Chinese suppliers
helped them in facing some significant problems.
Differentiation – The industry of toys has wide scope but Hornby Hobbies Limited
mainly focuses on making toy trains and other similar toys. They do not enter in various segment
like making toys of star wars characters and Lego etc. This company is surviving in this poor
financial condition because they are keeping their focus on a specific segment. Some may
believe that they are spending more money on technology but actually their expenditure on
technology was limited due to the less the competitive strategy of product differentiation. If they
were offering their products in many segment then the expenses relating to technology would be
much higher. This could have also raised the financial burden on the cited firm.
The suppliers would have also asked for more amount for supplying variety of items in
different segments. The relationship between both parties can improve it cited firm keep their
focus in training toys segment. It may improve their revenue and if their profit will rise then they
can fulfil the demand of Chinese suppliers which is related to more money to the suppliers
(Fernando, 2012). The labour rate in China is increasing and thee cost of raw material is also
enhanced in past few years. This is the prime cause behind the more demand of money from the
side of Chinese suppliers. The competitive strategy of differentiation can provide help in
resolving some key strategic issues but up to a specific limit.
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Suggestions for improvement
First of all, Hornby Hobbies Limited should try to focus on improving their financial
condition which is currently in a very bad situation (Park, 2014). They should must try to reduce
the expenses relating to marketing and advertisement. It they concentrate on decreasing the cost
of business by upsetting Chinese suppliers then they can never attain a good financial status
because their foreign suppliers is crucial part of the business. They should not decrease the
investment which they are doing in technology because if they will provide them some extra
edge over their competitor. This sum may look bigger in current scenario but actually soon it will
help them in increasing their market and it will also reduce their cost of business in forthcoming
time. They should also try to expand their business in Asian market because this will help them
in increasing their total sale. The market in this region is huge and if this company get significant
amount of share in this territory then they most of their financial troubles will automatically get
resolved.
They should also think about reducing their dependence on Chinese suppliers, their
relations were never good so now they should try to explore other options otherwise they will
face same kind of strategic issues in upcoming time. In order to enter untouched market, they can
sign a deal with a logistic firm so they can start selling their products in Asian and African region
(Kruehler and Pidun, 2011). They can use latest technology for expanding their business, instead
of focusing on problems they should try to use their competitive advantages in such a way that
they earn huge amount of revenue and solve all the major strategic issues at the point of their
generation.
CONCLUSION
From the above report, it can be concluded that making effective strategies is essential for
every firm. It assist them in moving towards organisational aims. An organisation can face
different strategic issues, competitive strategies can resolve this problems up-to an extent. They
basically try to provide competitive advantages to a company by minimising cost and increasing
the level of production.
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strategy: will this mean shareholders in the boardroom?. Journal of Management &
Governance. 15(4). pp.557-587.
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Sethi, S.P., 2012. Multinational corporations and the impact of public advocacy on corporate
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