Strategic Management of Dick Smith: Analysis and Recommendations

This report analyzes the strategic management of Dick Smith, a failed Australian retailer, using various tools such as SWOT analysis and value chain analysis. It identifies the key contributing factors to the failure and recommends effective strategies for future success.

Running head: STRATEGIC MANAGEMENT
Strategic management
Name of the student
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Table of Contents
Introduction......................................................................................................................................2
Determination of the general environment......................................................................................2
Determination of the industry competitiveness...............................................................................4
Competitive analysis........................................................................................................................5
Internal analysis...............................................................................................................................6
Value chain analysis........................................................................................................................7
SWOT analysis................................................................................................................................9
Strategy analysis of Dick Smith......................................................................................................9
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................11

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Introduction
The current business scenario is much challenging for the business entities than it was a
few years ago. This is due to the reason that market trends along with the taste and preferences of
the customers are changing at much rapid pace and posing challenges for the business entities in
coping up with. There are number of organizations got failed in the current competitive market
situations due to not being able to cope up with the changes. One such example is Dick Smith of
Australia, which was closed in 2016. Lack of proper and effective strategies in aligning with the
current business trends caused the closure of their business. However, in addition, there are
number of other external factors that further contributed in the failure of Dick Smith.
This report will discuss about the business situations of Dick Smith on the basis of
different strategic management tools. In addition, the key contributing factors will be identified.
The existing strategies that caused failure of Dick Smith will be discussed and on the basis of
these, effective strategies will be discussed.
Determination of the general environment
Economical factors The global recession of 2008 reduced the purchasing power of the
customers and thus the demand for electronic appliances got reduced
as well as the business viability of Dick Smith. Turbulence in the
national economy of Australia also reduced the business viability of
Dick Smith (Eaton et al. 2016).
Physical factors Dick Smith was having presence only in the Australian market as
other foreign business of them got failed. Thus, dependence only on
single market caused higher risks for Dick Smith. Moreover, the

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turbulence in the Australian market for Dick Smith cannot get
overcame from the business in foreign business.
Sociocultural factors Change in the social factors and trends in Australia are evident due to
the high level social globalization in the country. In line to this
scenario, the buying mediums and trends of the customers got
changed such as emergence of online mediums (Scott 2013). In this
case, it posed challenges for the traditional retailers in coping up with
the change.
Global factors Emergence of new global brands and entry of them in the Australian
market posed challenges for the domestic firms. The global firms are
more effective and efficient with better technical holds compared to
the domestic firms. It increased the challenges for the domestic
Australian retailers.
Technological factors Technology played an important role in changing the business
scenario in the retail sector. The customer convenience process
drastically changed with the evolution of technologies such as
introduction of self checkout system. This caused challenges for a
few brands in investing more in developing the technologies (Inman
and Nikolova 2017).
Political legal factors Australia is having favorable political and legal environment but the
foreign investments friendly approach of the governments increased
the competition in the domestic market, which posed the challenge
for the domestic players.

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Demographic factors The ever increasing average age level of the population in Australia
posed challenge for the retailers. This is due to the reason that the
older will be the age groups; the lower will be the market demand,
which reduced the viability for the retailers (Mitchell and Boustani
2015).
Determination of the industry competitiveness
Bargaining power of the buyers Bargaining power of the buyers is high in the electronic
retailing industry due to the reason that there are number of
retailers operating in the market. Hence, the pricing decisions
are highly influenced by the market factors. This caused
limited profitability of the retailers. In addition, the customers
are having lower cost of switching between the retailers, which
also posed challenge for the entities in managing the customer
loyalty (Lauermann 2013).
Bargaining power of the
suppliers
Bargaining power of the suppliers is high for the electronic
retailers due to the reason that they are just reselling the
manufactured items. Thus, the pricing of the suppliers or the
original equipment manufacturers determine the end pricing of
the retailers. This is also concluding the fact that retailers are
having low influence in the business decisions.
Threat of new entrants Threat of entrants is moderate due to the fact that countrywide
presence is difficult for the new entrants but small scale

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business is highly evident. In addition, number of global
brands entered in the Australian global scenario is having the
capability of competing with the existing players (Dobbs
2014).
Threat of substitutes Threat of substitute is high as number of retailers is offering
same products and services. Emergence of online mediums
further intensified the substitutions threat. Due to the lack of
point of differences between the retailers, brand loyalty among
the customers is low (Porter and Heppelmann 2014).
Competitive rivalry Competitive rivalry is high in the Australian retail scenario due
to the presence of high number of competitors. Different
retailers are offering discounts and seasonal benefits to attract
the customers.
Competitive analysis
Dick Smith is having number of competitors in its strategic group including Harvey
Norman, JB Hi-Fi and Aldi. The rivalry in this strategic group is intense due to the reason that
majority of the competitors are following cost based business strategies. However, in the case of
Harvey Norman, their major capabilities include high market presence across Australia with
having good number of stores across the country. On the other hand, the major competitive
advantage of Aldi is high product assortment and varieties. Thus, the major challenge for Dick
Smith is to cover the entire Australian region and offering larger varieties to the customers. In
addition, ALDI is also gaining from the cost leadership advantages due to their diversified

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product portfolio (Richardson, Taylor and Lanis 2013). Thus, the lower profit margin from the
electronic items is getting adjusted from the profitability from other goods. This is not in the case
of Dick Smith due to the fact that they offered only the single product line of electronic goods. It
can be concluded that almost all the competitors of Dick Smith are having some sorts of
competitive advantages over them. This further contributed in the failure of the business of Dick
Smith.
Internal analysis
It is identified that the tangible resources of Dick Smith include their stores across the
country and the stock inventory. On the other hand, the intangible resources of Dick Smith
include their trademarks, brand identity and value, financial resources and the employees. The
intangible resources such as the trademarks and brand value are the major differentiating factors
for Dick Smith over their competitors. In terms of identification of capabilities of Dick Smith,
one of the major capabilities of Dick Smith is the ability to change the product portfolio
according to the change in the market trend and demand. For instance, they offered more of split
air conditioners in the recent time over the traditional window air conditioners due to the change
in the market trend. On the other hand, it is also identified that Dick Smith is having the
capability of extensive market intelligence process. This is due to the reason that the product
strategy of Dick Smith is based on the feedback from the customers and it is well evident from
their business approaches.
Valuable Rarity Inimitability Organizational
capability
Product strategy Yes No No Yes

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Market
intelligence
Yes No Yes Yes
From the above analysis of the competency of Dick Smith, it is identified that majority of
their capabilities are not competent enough. This is due to the reason that he product strategy and
market intelligence process initiated them is not rare as it can be initiated by their competing
forces also. This lead to the fact that Dick Smith is having lower points of differences with their
major competitors and thus they have not being able to gain the competitive advantages in the
market.
Value chain analysis
Primary activities
Inbound logistics Inbound logistics of Dick Smith involves getting the supplies
delivered from the OEMs. Thus, they do not have the liabilities
or responsibilities for this process.
Operations Operations include of delivering the goods from their warehouse
directly to the customers.
Outbound logistics Outbound logistics of Dick Smith include delivering the goods
and this process if initiated by them. Thus, the responsibility and
risks involve in incurred by Dick Smith.
Marketing and sales Dick Smith is following extensive process of marketing and
sales, which is further helping in gaining the larger market reach.
This also helping in staying relevant in the competition and

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increasing the brand recall value among the customers.
Service Dick Smith is having dedicated and effective service process
including the after sales services. Customers are provided with
the highest level of service standards along with the after sales
services after the purchase. Dedicated customer care process is
maintained by Dick Smith.
Support activities
Firm infrastructure Infrastructure of Dick Smith includes stores across the Australian
region and warehouses in different strategic locations. It is
helping them in ensuring the lowest and faster transportation
process and delivering process to the customers.
Human resource
management
Human resource management of Dick Smith involves different
employee related elements such as workplace diversity. Dick
Smith is having their stores across Australia and thus they are
having employees from different social backgrounds. Employees
are also being provided with proper workplace environment.
Technology development Dick Smith is not the market leader in terms of the usages of
latest technologies. This is one of their major gaps in terms of
the value chain analysis. However, the existing technologies
being used by Dick Smith are effective enough but not at par to
some of their competitors.
Procurement Procurement process of Dick Smith involves simpler form due to
the fact that they are directly procuring the electronic items from

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the OEMs without the involvement of any intermediaries.
SWOT analysis
Strengths One of the major strengths of Dick Smith is the country wide presence, which
is helping in catering to larger target segments. In addition, cost leadership
strategy of Dick Smith is also helping in gaining competitive advantages in the
market.
Weaknesses The major weakness of Dick Smith is the lower profit margin due to the
practice of cost leadership. This is affecting their long term business viability
for Dick Smith. Moreover, Dick Smith is also lacking in terms of deeper
product assortments and varieties.
Opportunities Opportunities of Dick Smith include tapping the foreign markets such as the
developing countries. These countries are witnessing huge growth and huge
market size. Thus, Dick Smith will be able to increase their business revenue
and volumes.
Threats Emergence of global recession is a major threat for Dick Smith along with the
increase in competition in the forms of new entrants.
Strategy analysis of Dick Smith
Dick Smith followed unplanned way of growth strategies as it is stated that they were
doing good with 100 stores across the country but they went on to open 300 stores, which caused
the downfall. Thus, their business expansion strategy is not got aligned with the market trends

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and standards (Hallback and Gabrielsson 2013). In addition, they also faced issues due to
initiation of the growth strategy without the development of new products. Thus, it eventually ate
up the business of one another of their stores.
It is recommended that Dick Smith should initiate differentiated approach in terms of
services. This is due to the reason that products are similar across all the retailers while service
process can be made different. It is recommended that they should offer certain trendy products
such as smartphones and other modern day electronic items especially the music gadgets. This
will help them to increase the target segments and larger revenue.
Conclusion
This report concludes that there are number of gaps identified in terms of the business
process of Dick Smith. Different strategic management tools are leveraged in determining the
gasp areas of Dick Smith. It is identified that Dick Smith is facing lack of point of differentiation
with their competitors. In addition, presence only in the Australian market for further challenge
for Dick Smith in managing profitability. Their existing cost leadership strategy is also affecting
the profit margin. It is recommended that they should initiate service differentiation strategy to
gain competitive advantages in the market.

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Reference
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), pp.32-45.
Eaton, J., Kortum, S., Neiman, B. and Romalis, J., 2016. Trade and the global
recession. American Economic Review, 106(11), pp.3401-38.
Hallbäck, J. and Gabrielsson, P., 2013. Entrepreneurial marketing strategies during the growth of
international new ventures originating in small and open economies. International Business
Review, 22(6), pp.1008-1020.
Inman, J.J. and Nikolova, H., 2017. Shopper-facing retail technology: a retailer adoption
decision framework incorporating shopper attitudes and privacy concerns. Journal of
Retailing, 93(1), pp.7-28.
Lauermann, S., 2013. Dynamic matching and bargaining games: A general approach. American
Economic Review, 103(2), pp.663-89.
Mitchell, V.W. and Boustani, P., 2015. The effects of demographic variables on measuring
perceived risk. In Proceedings of the 1993 Academy of Marketing Science (AMS) Annual
Conference (pp. 663-669). Springer, Cham.
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming
competition. Harvard business review, 92(11), pp.64-88.
Richardson, G., Taylor, G. and Lanis, R., 2013. Determinants of transfer pricing aggressiveness:
Empirical evidence from Australian firms. Journal of Contemporary Accounting &
Economics, 9(2), pp.136-150.

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Scott, A., 2013. Introduction—Globalization: Social Process or Political Rhetoric?. In The limits
of globalization (pp. 13-34). Routledge.