Strategic Issues Faced by High Flyers Limited and SCH

This report discusses the strategic issues faced by High Flyers Limited and SCH, including external and internal factors, evaluation on Ansoff Growth Matrix and SAF framework, and recommendations for growth opportunities.

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06th July, 2018

Scenario 1
High Flyers Limited (HFL) which is a famous United Kingdom based company which
specialise in manufacturing and wholesaling of high quality gymnastics wear and the
associated products for this sport. There are certain strategic issues which the company or
the whole industry is facing, it is important that such issues are discussed in details so that
proper strategy can be drafted for the future of the company (Scholes, 2015). There are set
of both internal and external issues which company need to look into so that a proper
future growth plan can be chalked out for the company. For ease of understanding we are
dividing the issues under two different heads.
External Issues
These set of issues are the one which impact the industry in which HFL is operating.
These are set of conditions which are impacting the industry as a whole and as a major
player HFL need to look into the same with precision. If one evaluates this in proper
perspective one can see that UK sports market is expected to grow as seen from external
factors, with some minor disturbance from the tax perspective. The exports of UK sports
good are expected to raise substantially post BREXIT (Grant, 2016).
Existence of Competition and Parallel Low Quality Market
There are around 6 companies which operate in the same segment as HFL. These are
the ones who provide similar products as HFL and work in organised sector. Couple with
these there are some 100 other small companies which focus on low quality fashion market.
As the case suggests, the average price of HFL product is somewhere in range of $65 while
that of its low quality rivals is around $25. This price difference is huge; however the

branding strategy of the HFL product focusses on premium quality offering and this is the
primary reason why the brand positioning is designed in such a manner.
Status of the Gymnastics a sport in United Kingdom
The Government in United Kingdom has been very proactive and have a very strong
positive outlook towards sports as a whole. There are number of sports related initiatives
taken by the government and that is one of the prime reasons behind the rise of sports
apparel sales in the country (Scholes, 2015). On this external factor one can say that things
look pretty strong. The number of sports initiatives taken by the Government has helped in
promotion and youth of the country has taken this up in a positive manner.
Recent Changes in the taxation structure and impact of BREXIT
This is one of the main factors which are of important consideration for HFL. The
United Kingdom Government has suggested recently that they will impose VAT of 22% on all
sporting goods (Grant, 2016). This is done so that additional tax receipts can be generated in
the country. As per the industry experts, if the proposed VAT increase goes ahead than this
would lead to shrinkage of market by 5%. However one must note the fact that post BREXIT,
the cost of imported products in country has increased dramatically and export demand for
products made in UK is expected to rise. So 5% shrinkage in the market locally due to
change in taxation structure will be covered by growth in exports. This decision is more in
line with external conditions, however internally if HFL can reduce the prices by some
amount in such changing industry conditions they might be in position to capture larger
market share from the competition (Nagle, 2017).
Internal Issues

Recruitment of skilled designers
In the industry under which HFL is operating there is a huge challenge of over hauling
design conditions from time to time. HFL has 150 employees; however they find it very
difficult to recruit able designers from time to time. In fashion industry market share can
drop sharply if one does not keep improving from time to time. The supply chain in the
industry is very well developed, however difficulty in finding suitable designs is very difficult
and a very big challenge for the company.
Supply chain concerns
There are some minor supply chains concerns which HFL needs to tackle. These are
more internal but some of the concerns which are discussed above also impact the same.
The company has invested heavily in technology and this goes in long way in addressing
supply chain concerns. Some of the initial cutting stages are already been automated and it
is good to see that stress on automation exist in the corporation. The whole process is
labour intensive and hence keeping proper management of the same is very important for
the organisation.
New Initiatives taken by the company
HFL has taken up some new initiatives such as option of designing costumes whereby
sports club can create whereas bespoke items and which can then be submitted for final
price quotation. This is where HFL is trying to move to customisation product operation
mode whereby they would be able to serve end customers and charge premia. The focus on
technology and providing customers options to customise will only provide better margins
to the company.

Sales segmentation mix
HFL’s sales segmentation is defined under three categories. The three categories
here are UK sports retailers (60%), exports (35%) and 15% is sold directly to sports club. This
is one of the major ways in which HFL operates. If one evaluates this in proper perspective
one can see that UK sports market is expected to grow as seen from external factors, with
some minor disturbance from the tax perspective. The exports of UK sports good are
expected to raise substantially post BREXIT. The company is already working on
customisation service for the third segment which is expected to be a game changer for the
industry (Elmes, 2017).
Final Perspective
The industry is aligning for challenges and low quality service providers have flooded
the market. HFL’s strategy as a premium service provider works in line with brand
positioning. The recent taxation changes will hurt the market a bit, however it would be
largely be offset with other sports related initiatives taken by the Government. The BREXIT
will open up more demands in the export segment and since company is operating at 100%
capacity level they need to increase capital expenditure so that they demand can be
fulfilled. The challenge faced by the company in respect to hiring designers need to be
addressed at the earliest (Nagle, 2017). This is one major area where the whole fashion
industry is factored upon. The investment in technology to develop robust supply chain and
continuous improvement in such areas is the need of the hour. The facility to develop
custom designs in sports club segment is a very decisive move and it needs to be assured
that this vertical is managed properly. The company has invested heavily in technology and
this goes in long way in addressing supply chain concerns. Some of the initial cutting stages

are already been automated and it is good to see that stress on automation exist in the
corporation. This can be one of the game changer moves for the company. The external
environment is changing and HFL need to be prepared to make small changes to address the
situation. The future strategy of the company is a function of how company addresses these
challenges and keep innovating in such an external locus. There are certain strategic issues
which the company or the whole industry is facing, it is important that such issues are
discussed in details so that proper strategy can be drafted for the future of the company.
There are set of both internal and external issues which company need to look into so that a
proper future growth plan can be chalked out for the company

Scenario 2
SCH operates in space of privately owned care services and this space is gaining huge
traction in the whole of United Kingdom. The changing population dynamics and the
growing need of the elderly patients are some of the factors which are helping in the growth
of such privately owned care services. However increase transportation cost, lower priced
government provided options, new emerging competitors and the need of more
sophisticated medical equipment at the premise are some of the major areas which all
operators need to work upon. This report intends to use some management tools and
provide adequate analysis on all the above mentioned factors and how each one of these is
shaping up the industry.
Key Strategic Challenges faced by the company
There are some key strategic challenges which the company is facing and are listing down
the same in this section. Some of the challenges which the company is facing are:
1. Increasing Transportation cost
One of the major components of cost is transportation in this space. The transportation
costs in the region are rising and since it is one of the major components in the cost
perspective, it is a very big challenge which needs to be addressed by SCH. Some of the
other companies are already up for sales because of the rise in motoring cost and their
inability to pass this cost down to customers.
2. Lower Priced Government Options

Government oriented and funded service care provider is also a good option. There biggest
advantage being the fact that they can provide service at lower cost compared to privately
owned players like SCH. They are able to do so because of the Government grants these
providers receive which is not the case with private players. The central Government
provides subsidies to local Government players and this is the reason why there overall cost
is lower compared to private players in the market (Escobar, 2018).
3. New Emerging Competitors
Although SCH has 20% market share in the region and they expect to maintain it over the
years, there has been news that a new competitor is arriving on the scene and this is one
concern which they cannot overlook in the near term. The news of emergence of
competition was seen in the local newspaper and this where SCH need to be aware of the
potential threat to the company’s fortune (Mendelberg, 2018).
4. Requirement of sophisticated medical equipment
Some of the patients which SCH addresses attend local hospitals or GP based surgery for
some very basic routine treatments. These set of patients expect organisations such as SCH
to cover these need at patients home only. This kind of servicing is although very basic, but
for SCH it would need some amount of investment in portable medical equipment and also
training to staff. This is something which SCH need to look into. Patients would like such
service to be provided in familiar surrounding like home.

Evaluation of SCH on Ansoff Growth Matrix
As one can see in the above matrix, we will evaluate SCH on the basis of four
quadrants and see where the possible growth areas for the company fall.
 New Markets with Existing Products and Services: This is probably one of the areas
where SCH can grow dramatically. Newer market with experience in hand can help SCH
grow strongly. However to penetrate such a market one would need capacity
expansion, more staff members and hence one would also need some amount of both
increase in revenue and capital expenditure. This is where SCH can explore the prospect
of developing new markets altogether.
 New Market with new products and Services: This is not an option for SCH as they
don’t have any other offering currently and there are no such plans for product
development.

 Existing market and Existing Products and services: This is another area where SCH can
work strongly. They have to penetrate the market with newer means. They have over
the years been positioning as quality service provider and one of the parameters they
highlight is the fact that the time spent with the patient. They intend to increase it
further, however that would need capacity expansion.
 Existing Market and new product development: There are some chances in this space.
In the current market we have seen that there are needs of some basic surgery or
treatment for which patients need to go to nearby hospitals or surgery centres.
Although such patients prefer if the same could have been done by SCH at the comfort
of home. This is where SCH can do some amount of spending on portable medical
equipment and staff training and can develop a new product altogether. This can be
one area which can provide high margin to the company.
Analysis of this opportunity using Johnson Scholes & Whittington framework
This model is also referred as SAF framework which evaluates the available
opportunities under the three conditions of suitability, acceptability and feasibility. The
three options which are considered as growth areas are market penetrations, market
development and product development. Market Penetration and Product development in
current market comparatively involves less investment and hence under SAF framework are
very suitable, acceptable and feasible. However the third option which talks about new
market development needs huge capital expenditure and hence feasibility study of the
same considering all factors need to be done (Moré, 2016).

Recommendations
SCH has a good product offered to customers and with some amount of investment
can increase margins and penetrate the market further. The organisation needs to evaluate
these opportunities and make proper investment in the space. Some of the factors like high
transportation cost need to be worked upon. The other area which cannot be avoided is the
emergence of new competition. SCH need to evaluate this opportunities with details and
then take a very informed decision. In the current market we have seen that there are
needs of some basic surgery or treatment for which patients need to go to nearby hospitals
or surgery centres. Although such patients prefer if the same could have been done by SCH
at the comfort of home (Madsen, 2015). This is where SCH can do some amount of spending
on portable medical equipment and staff training and can develop a new product
altogether. Increase transportation cost, lower priced government provided options, new
emerging competitors and the need of more sophisticated medical equipment at the
premise are some of the major areas which all operators need to work upon. This report has
analysed the situation for SCH and provide adequate analysis on all the above mentioned
factors and how each one of these is shaping up the industry. As per analysis there are three
available options of which two of them don’t have a major Capital expenditure attached to it
while the third one commands some amount of expenses. This is where the three
opportunities need to be researched in detail by SCH to finally take a decision.

References:
 Scholes, M.S., 2015. Taxes and business strategy. Prentice Hall
 Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John
Wiley & Sons
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growing more profitably. Routledge
 Elmes, M. and Barry, D., 2017. Strategy retold: Toward a narrative view of strategic
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