This report discusses the strategic management of Dick Smith, a retail chain in Australia. It includes an analysis of the internal and external environment, industry analysis, competitor analysis, and strategy formulation.
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Running head: STRATEGIC MANAGEMENT Dick Smith Strategic Management 5/15/2019
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STRATEGIC MANAGEMENT1 Table of Contents Introduction................................................................................................................................2 Overview of Dick Smith........................................................................................................2 The mission of Dick Smith....................................................................................................2 Environment Analysis............................................................................................................3 Internal Environment Analysis..........................................................................................3 External Environment Analysis.........................................................................................5 Industry Analysis...................................................................................................................7 Porter Five Force Analysis.................................................................................................8 Competitor Analysis...............................................................................................................9 Strategy Formulation............................................................................................................10 Ansoff Matrix...................................................................................................................10 Implementation of Strategy..................................................................................................11 Conclusion................................................................................................................................13 References................................................................................................................................14
STRATEGIC MANAGEMENT2 Introduction Strategic management in an organization can make or break a business. It has been observed that without any strong strategy, a number of businesses failed in the market. Leaders in the company with a strong vision and understanding of the business always have a strong hand in comparison to competitors in the market. Establishing the goals of the business and aligning them with the vision of the company is one of the most critical jobs while developing a growth roadmap (David, 2011). When the business grow in the market, there is need to create a strategic plan because it supports in attaining success. Hence, a strategic plan is considered as the blueprint for achieving success in the market against competitors (Pamfilie, Petcu and Draghici, 2012). The aim of this report is to discuss the business environment of Dick Smith in which it operates. The analysis also highlights the industry and competitors analysis in order to analyse what forces are influencing the operations of the company. Overview of Dick Smith Dick Smith is the retail chain of Australia that is involved in vending consumer electronics goods,electronicprojectskits,hobbyistelectroniccomponents,etc.Thechainhas productively expanded its operations in the New Zealand market but has unsuccessful operations in other nations. The business was established in 1968 in Sydney by Dick Smith. The company has sold its 60% of the shares to Woolworths Limited (Dick Smith, 2019). The mission of Dick Smith The mission statement of Dick Smith is "Australian Made and Australian Owned". The motive of the company is to market a variety of food and consumer electronic products with best quality and taste. The company believes in offering increased employment opportunities
STRATEGIC MANAGEMENT3 to the young people, hence, it had planned to bring into a market number of jobs for people especially in Australia (Dick Smith Food, 2019). Environment Analysis Internal Environment Analysis SWOT Analysis Strength Experience– One of the major strength of Dick Smith is its vast experience in the Australian market. Dick Smith has complete knowledge regarding the ups and downs that take place in the market and the changing consumer behaviour and taste for any specific product or technology. With this vast knowledge, the company is able to gain the trust of the customers as well as other stakeholders. Employee Policies– The Company is known in the market for implementing different policies for the benefit of its employees as well as customers. Dick Smith is known as a people savvy employer. Besides hiring a diverse group of employees, the company has been always alert regarding confirming that all the employees hired are well trained and courteous. In order to confirm the satisfaction of the employees, the company is also involved in offering perks and bonuses to the employees. Weaknesses Financial Stability– Dick Smith is known in the market for dealing with various troubles in the market as its investors and customers are leaving the floor and moving towards its competitors.All the customers who purchased the gift cards during the Christmas in the year 2016 have become the unsecured creditors whereas investors of the company who purchased
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STRATEGIC MANAGEMENT4 the shares of the company at $ 2.2 per share in the same year lost all their invested money (The Conversation, 2016). Weak Strategies– Apart from weak financial performance, the strategies of the company are also weak, which are not able to produce best results for the company. Like other retailers JB Hi-Fi, Bunnings, Harvey Norman, and Aldi, Dick Smith also introduced different discounting offering, however, it failed in attracting a large number of customers. Opportunities Change in Business Model– In order to have successful operations in the market, it is viable for Dick Smith to change its business model and adopt a business canvas model through which it will be able to concentrate on nine different elements of the business. Market Expansion and Market Development– Dick Smith can plan to grow its business activities in the Asian market in order to offer its services, because in the Australian market, the organization is dealing with intense competition, due to which it is unable to survive in the market successfully.In addition to this, the company can focus on advanced household electrical devices. Threats Global Financial Crisis– One of the major threats for Dick Smith is the global financial crisis. The ongoing global financial crisis has majorly impacted the financial position of the organization due to which it is not able to pay off its debts as well as other liabilities, which is resulting in the raising number of questions over the image and capability of the company. Competition– The key competitors of Dick Smith in the Australian market are JB-Hi-Fi, Aldi, Bunnings, and Harvey Norman. All these players are raising number of threats in the direction of the company through their cost leadership and focus strategies. To deal with
STRATEGIC MANAGEMENT5 these issues, it is suggested that company must plan to adapt focus strategy such that it can work on focusing on its key operations and offering the best services to the customers. External Environment Analysis PESTLE Analysis Political Forces The political environment of Australia is stable and offers a number of business opportunities todifferentbusinessesbothdomesticandinternationalbusiness.Thestablepolitical conditionofthecountryresultsintheintroductionofanumberofpoliciesforthe development and growth of the people as well as business. There are a number of government policies that have a major influence on the retail business (Frue, 2018). These regulations of the government also impact the buying behaviour of the customers, trade laws, and the economy of the country. However, Dick Smith presently does not face any challenges from the political condition of the country. Economic Forces Australia possesses 13thposition in the list of the largest worldwide economy. In the year 2017, the economy grew to around 2% (Frue, 2018). But, the ongoing financial crisis at the global level has majorly impacted the number of business operating their activities across the world. Same like other companies, Dick Smith has also experienced the financial crisis due to which it was unable to pay its debts (Financial Review, 2016). In the year 2016, Dick Smith was unable to pay the returns to its investors during Christmas, which had a major impact on the company's position in the market and decreasing trust of the customers. Social Forces
STRATEGIC MANAGEMENT6 Preference of the customers is the major influencing factor that has impacted the retail industry. For example, people like to purchase products in bulk in the Australian market, due to which different retail business offer number of discount offers to the customers on bulk purchases. In addition to this, the activities and actions of the business also impact the perception of society towards business. Today, people like to purchase a product from those businesses that are responsible for society and meeting their corporate social responsibilities. In case of Dick Smith, it has been analysed that company has gained 36% as its CSR rating which highlights that the company is presently not effectively being part of society and meeting its responsibilities towards the community (CSR Hub, 2019). In order to improve this, the company has to get involved in different social causes and show its contribution to the development of the community. Technological Forces Australia is known across the world for its technological innovations. It has adopted different innovative technologies more often in comparison to other nations. The acquisition of technology in the Australian market is anticipated to touch around $65 billion. Even in the country, there are various laws passes by the native government in relation to encryption. The government of the country has allowed a contentious law which allows security agencies and police to have access to anyone's encrypted messages. Encryption is introduced for hiding the information; however, the motive of the government is security for introducing this law (Dodgson, Hughes and Metcalfe, 2011). Similarly, the retail industry of Australia is benefited with the internet, as it has allowed offering their services through online medium. Legal Forces
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STRATEGIC MANAGEMENT7 The retail industry in Australia is obliged to encounter judicial conditions before initiating the business operation in the market. The legal conditions comprise enduring by taxation laws, labor laws, etc. The legal factors become very tough when a business thinks of expanding the operations in the foreign market (Adamkasi, 2016). In addition to this, the recruitment and human resource management law is the portion of the general retail industry framework. Dick Smith does follow all the legal requirement of the country by offering quality products to the customers and offering employment opportunities to the people of Australia. Environmental Forces The environmental force of the retail industry is imitated in the form of utilization of the business practices that are environmentally friendly and contributing to the activities that are focused towards reducing the harm to the environment (Hahn and Kühnen, 2013). Dick Smithissuccessfullyinvolvedin theenvironment-friendlyoperationsby focusing on reducing its carbon emission and negative impact on the environment. In addition to this, it is also focused on the residual use of natural resources like water and decreasing the wastage in the environment due to the operations of the business. Industry Analysis Retailing in the Australian market has highlighted the subdued performance in the year 2018. However, the retailing market of Australia is very competitive and challenging which is increasing the pressure for both small and large businesses. Besides this, the suitability factor, events of seasonal sales have performed a major role in inspiring the customers of the Australian market to get involved in online shopping in the present years (Euromonitor, 2019).
STRATEGIC MANAGEMENT8 Porter Five Force Analysis Threat of New Entrants New entrant threat in the Australian retail industry is high, as there are a number of players who are taking an entry or planning to take entry in the market. Particularly, the new entrants that are entering the market are from the foreign market. However, for the existing big playersof theindustry,thenewentrantthreatintheAustralianmarketismoderate (Management Study Guide, 2019). Substitute Product Threat The substitute product threat in the Australian retail industry is also high because there are a limited number of businesses dealing with consumer electronic products. Competition from Existing Players The Australian retail market is very competitive which reflects that the competition power is high. The competitors of Dick Smith in the Australia market like Aldi, JB Hi-Fi, etc who are the leading players of the market and planning to raise a number of barriers and challenges for different small and medium range players (Richards, Bjørkhaug and Hickman, 2013). Customers Power The customer bargaining power in the Australian retail industry is high because the available number of players offers a similar type of products. The switching cost for the customer in the retail market is low, due to which customer can switch from one retailer to another in order to get a better product at low prices (Management Study Guide, 2019). Suppliers Power The suppliers bargaining power in the retail industry is low because they do not have a high scope for differentiation between diverse retailers. The buying habits of the customer are dynamic and they can select a retail store depending on the complex parameters such as
STRATEGIC MANAGEMENT9 promotional offers and proximity of the store. In the retail industry, only brand conscious customers can give advantages to a specific supplier. Competitor Analysis The competitive analysis enables a business to perform a detailed assessment of the strength and weaknesses of the competitors. This study signifies the desirable adjunct for directing an examination regarding the current circumstances of the industry (Upson, Ketchen and Ranft, 2012). The analysis provides a comprehensive examination of the present competitors of the company and the adopted strategies for attaining success in the industry. This competitor analysis is providing the evaluation of Dick Smith and JB Hi-Fi. Basis of AnalysisDick SmithJB Hi-Fi OverviewDick Smith is the retail chain of Australia that is involved invendingconsumer electronics goods, electronic projectskits,hobbyist electronic components, etc. JBHi-FiistheAustralian retailer which is involved in selling consumer goods (JB Hi-Fi, 2019). StrengthThekeystrengthofDick Smith is its experience in the retailingindustryof Australia. The company has detailed knowledge regarding consumerbehaviour(Dick Smith, 2019). The strength of JB Hi-Fi is the availability of a number ofoutletsinalmostevery state which is supported by a strong distribution network. WeaknessesDick Smith is known in theJBHi-Fiispresentlynot
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STRATEGIC MANAGEMENT10 marketfordealingwith varioustroublesinthe market as its investors and customersareleavingthe floor and moving towards its competitors. majorlyinvolvedinthe research and development of innovative products, which is resultinginimpactingits image in the market. Marketing FocusDickSmithisfocusedon Australia and New Zealand Market. JB Hi-Fi is majorly focusing onAustralianandNew Zealand market. Market PositionThe present poor marketing strategies of the company are impactingitsfinancial positionaswellasits reputation in the market. JBHi-Fiistheleading organization that is offering consumer electronic products tothecustomers.Itis presently one of the desirable brands that are demanded by thecustomerinthe Australian and New Zealand Market. From the market analysis of Dick Smith, it has been analysed that company’s promotional strategies and distribution channel is not effective which is resulting in losing competitive advantage in the market. On the other hand, the key competitors of Dick Smith like Aldi, JB Hi-Fi have attained the competitive advantage in the market by offering low cost products through their effective distribution channel.Whereas, the low cost strategy of Dick smith
STRATEGIC MANAGEMENT11 failed because it was unable to offer the promised benefits to the customer and is unable to pay off its debts. Strategy Formulation Ansoff Matrix The Ansoff Matrix is the strategic planning framework that offers an outline to support the senior managers, marketers, as well as executives in devising the strategies for the future growth of the business. The Ansoff Matrix is comprised of four different strategies that are Market Penetration, Marketing Development, Product Development, and Diversification (Kipley, Lewis and Jeng, 2012). Market Penetration Under this strategy, the business plans to grow by making use of its current offering in the present market. For this, the business exerts maximum efforts to augment its share in the market considering the present condition of the market (Arkolakis, 2010). This comprises increasing the share of the market in the present market sections. This could be achieved buy selling more services and products to the existing target audience and by finding new customer segment in the existing markets. Here, the business tries to increase its sales for its initial offering in the current market with the help of more aggressive distribution channel and promotion strategies. In order to again cover the Australian and other markets, Dick Smith must get involve in adopting market penetration strategy under which it will re-design its distribution channel and introduce different aggressive advertisement that could support it in enticing customers. For the promotion, the company can plan to promote its business through online as well as the offline medium. In terms of changing its distribution channel, it can contact different
STRATEGIC MANAGEMENT12 suppliers who can provide the delivery of the product on time at a reasonable cost. Through this, the company will also be able to offer products to the customer at low rates. Implementation of Strategy The formulated strategy must be implemented with proper care; otherwise, the business has to deal with a number of issues. The implementation procedure of the planned strategy must be guided and supervised by the superior management of the company such that any type of deviation could be eliminated from the procedure which can have a major impact in the performance of the company. Implementation of Market Penetration Strategy Responsible teamTime Duration Market ResearchResearch and Development2 months Assigning ResponsibilitiesTopManagement (Executivesandgeneral manager) One week HiringEmployeesand Suppliers Human Resource Department and Marketing Department 1 to 2 Weeks Promotion StrategyMarketing DepartmentAfter every three months The above-specified table is highlighting the actions that will be taken by the company for the implementation of the planned market penetration strategy for Dick Smith. For the market Penetration, company first has to perform proper market research which will be executed by the research and development department of the company. Under this, the company will analyse the demand of the market and present offers which is available to meet their demand. After the analysis, the heads of the company will take the accountability of assigning the
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STRATEGIC MANAGEMENT13 responsibilities to different departments and employees. In order to successfully implement the strategy, it is very important for the company to hire employees for the increased promotions of the business. The employees will be hired by the human resource department. In addition to this, the company will also need to hire new suppliers for the company who can provide the products at a low cost. In the end, intense and aggressive promotional strategies will be framed by the marketing department of the company for increasing the awareness of the products among customers. Conclusion The above report has analysed the internal and external market of Dick Smith in order to identify the issues and challenges it is dealing with in the market. The paper has also highlighted its market position in the competitive market with the help of porter five force analyses and competitive analysis. From the study, it has been acknowledged that the organization is dealing with a financial crisis due to the global economic downturn. In addition to this, the company is getting failed to meet its commitment of offering different offers and gifts during Christmas where all its competitors have offered the best services and discounts to the customer. This has majorly impacted the image of the company in the eyes of the customers and investors. The above report has suggested Dick Smith toadopt a market penetration strategy in which it will make improvements in its existing offering and provide it in the existing market. The company will increase the intensity of its promotional strategies for attracting a new market segment. Besides this, the company has planned to offer low cost products to the customers for which it will contact different suppliers who can provide raw material at low cost. The paper has also highlighted the implementation plan for the suggested strategy such that the company can get the direction where to move for success.
STRATEGIC MANAGEMENT14 References Adamkasi(2016)PESTLEAnalysisofWoolworths[online].Availablefrom https://freepestelanalysis.com/pestle-pestel-analysis-of-woolworths/[accessed 15 May 2019] Arkolakis, C. (2010) Market penetration costs and the new consumers margin in international trade.Journal of political economy, 118(6), pp.1151-1199. CSR Hub (2019)Dick Smith Holdings Ltd CSR / ESG Ranking[online]. Available from https://www.csrhub.com/CSR_and_sustainability_information/Dick-Smith-Holdings-Ltd [accessed 15 May 2019] David, F.R. (2011)Strategic management: Concepts and cases1sted. U.S: Peaeson/Prentice Hall. DickSmith(2019)AboutDickSmith[online].Availablefrom https://www.dicksmith.com.au/da/about/[accessed 15 May 2019] DickSmithFood(2019)MissionStatement[online].Availablefrom https://dicksmithfoods.com.au/about-us/mission-statement/[accessed 15 May 2019] Dodgson, M., Hughes, A., and Metcalfe, S. (2011) Systems thinking, market failure, and the development of innovation policy: The case of Australia.Research Policy, 40(9), pp.1145- 1156. Euromonitor(2019)RetailinginAustralia[online].Availablefrom https://www.euromonitor.com/retailing-in-australia/report[accessed 15 May 2019]
STRATEGIC MANAGEMENT15 Financial Review (2016)Dick Smith the latest in profit boosting scandal[online]. Available fromhttps://www.afr.com/chanticleer/dick-smith-the-latest-in-profit-boosting-scandal- 20160712-gq3jqr[accessed 15 May 2019] Frue, K. (2018)PESTEL/PESTLE Analysis of The Retail Industry[online]. Available from https://pestleanalysis.com/pestel-analysis-of-retail-industry/[accessed 15 May 2019] Hahn, R. and Kühnen, M. (2013) Determinants of sustainability reporting: a review of results, trends, theory, and opportunities in an expanding field of research.Journal of cleaner production, 59, pp.5-21. JBHi-Fi(2019)Aboutus[online].Availablefrom https://www.jbhifi.com.au/General/Corporate/Consumer-Matters/About-Us/[accessed15 May 2019] Kipley, D., Lewis, A.O. and Jeng, J.L. (2012) Extending Ansoff’s Strategic Diagnosis Model: Defining the Optimal Strategic Performance Positioning Matrix.Sage Open, 2(1), p.215. Management Study Guide (2019)Challenges to the Retail Sector (As per Michael Porter’s FiveForcesModel)[online].Availablefrom https://www.managementstudyguide.com/challenges-to-the-retail-sector.htm[accessed15 May 2019] Pamfilie, R., Petcu, A.J. and Draghici, M. (2012) The importance of leadership in driving a strategic Lean Six Sigma management. Procedia-Social and Behavioral Sciences, 58, pp.187- 196. Richards,C.,Bjørkhaug,H.,andHickman,E.(2013)Retailer-drivenagricultural restructuring—Australia, the UK and Norway in comparison.Agriculture and human values, 30(2), pp.235-245.
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STRATEGIC MANAGEMENT16 The Conversation (2016)Dick Smith couldn’t compete and that is why it failed[online]. Availablefromhttps://theconversation.com/dick-smith-couldnt-compete-and-that-is-why-it- failed-52755[accessed 15 May 2019] Upson, J.W., Ketchen Jr, D.J., and Ranft, A.L. (2012) Competitor analysis and foothold moves.Academy of Management Journal, 55(1), pp.93-110.