Analysis of Dixons Carphone's Strategic Management and Data Protection

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STRATEGIC MANAGEMENT
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Executive summary
Strategic management is a very important aspect of the business organizations as it helps them to
manage all kinds of risks and secure the confidential data of the employees and the customers.
Dixons Carphone is a very well known multinational electrical and telecommunication retailer of
United Kingdom. This present context is about the strategic management of this company which
includes the effects of the internal and external factors of business on the strategy making
process. It also describes the data protection policies and risk management process of the
concerned company. The relationship between the stakeholders and the organization as well as
the CSR practices of this company is also explained in this study.
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Table of Contents
Question 1........................................................................................................................................4
a. Evaluation of internal and external environment and approaches for strategic development.....4
b. Areas of concern in external environment...................................................................................9
Question 2......................................................................................................................................10
Strategic development and strategic management.........................................................................10
Risk management in the strategic planning process......................................................................13
Question 3......................................................................................................................................14
a. Stakeholder theory and stakeholders of Dixons Carphone along with critical analysis of the
organisation’s relationship.............................................................................................................14
b. Corporate Social Responsibility and CSR of organisation’s strategic framework....................17
References......................................................................................................................................19
Appendices....................................................................................................................................22
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Question 1
a. Evaluation of internal and external environment and approaches for strategic
development
Concern of data breaches is increased and the organisations require developing data protection
and data strong strategies to improve their services. A multinational telecommunication and
electrical retailer company namely Dixons Carphone has faced data breaches issues that has
reduced their revenue and operating income. Headquarter of the company is in Hemel
Hempstead of the UK and it has been formed in 2014 by the merger of Dixons Retail and
Carphone Warehouse Group. It has been listed in London Stock Exchange and FTSE 250 index.
Net income of the company has been £386 million in 2017 and operating income has been £501
million in 2017 (Dixonsscarphone.com, 2019).
The company need to re-evaluate their strategies due to external and internal environment that
increases data hacking possibilities.
External environmental approaches - PESTEL analysis
Factors Evaluation
Political Political stability of the UK is stable and effective for maintaining a
business successfully. The business organisation also gain support from
the UK government that helps Dixons Carphone to provide proper
investment in innovation and maintain trade in foreign countries. On
the other hand, the company faces issues due to BREXIT and it
increases the price of the raw materials that increases their
manufacturing and service costs. UK has also faced data protection
issues due to BREXIT and as Dixons has not acquired scope of
following EU regulations and authority regime under GDPR of the UK.
Dixons has faced high costs to meet data protection rules of EU
(Mostert et al., 2016).
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Economic Economic factors such as GDP rate, exchange rate, inflation rate and
disposable income of the customer have an impact on Dixons
Carphone. It has been identified that GDP growth rate of the UK has
been 1.4% in 2018 which has decreased from 1.8% in 2017. It has
affected the business of Dixons as it reduces investment and production
of the organisation. Present minimum wage of labours aged 25 and
over has been increased to £7.83 in 2018 from £7.50 in 2017 (Tugcu
and Topcu, 2018). It enhances labour costs of the company. Inflation
rate of the country has been decreased to 2.7% in 2018 from 3.58% in
2017 which has reduced price of raw materials.
Social Power distance, basic value and knowledge of the customers and
purchasing of the technological products affect sales of Dixons.
Population growth rate has been 0.6% in 2018 that has enhanced
demand of their products and number of customers in the UK. the
company can also obtain a large number of customers as 29.5% of the
UK population are in age group between 18 to 39 years and demand of
the products is also high among the people are in this age group. As
lifestyle and income of the people of the UK is high, it increases their
sales of electrical products. However, lack of knowledge of the people
in data protection increases data breaches and reduce company's profit.
Technological Data protection technologies of the UK change the market. However,
complex technologies cannot be maintain by the companies as well as
these technologies are not safe for protecting data. Advanced AI and IT
helps the company to maintain flawless services and protect data.
Environmental Environmental Act 1996 can be followed by Dixons Carphone to
maintain carbon emission rate in the UK. Green economy, hazardous
waste management of the UK also helps them to incorporate green
technologies.
Legal Data Protection Act 2018 can help the organization to protect their data
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and avoid data breaches. This data protection act includes General
Data Protection Regulation (GDPR) and GDPR of cookies includes
cookies for analytics, advertising and functional services
(www.itgovernance.eu, 2019). As per the rule, everyone is responsible
to follow strict data protection principles and manage data lawfully,
fairly and transparently. Post-Brexit data protection increases issues for
the businesses and legitimate cross-border transfers. Employment Act
1996, Fair Trading Act 1973 and labour law of the UK is followed by
Dixons Carphone to provide equal opportunities and fair wages to their
employees.
Table 1: PESTLE analysis
(Source: Created by the learner)
Figure 1: Pricing and share of electrical products of Dixons Carphone
(Source: (Dixonsscarphone.com, 2019)
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Internal environmental analysis - SWOT analysis
Strengths
● Innovation in technology and growth
strategies
● Increment in revenue and operating
income due to growth
● High market share
● 4% increment in revenue
● Building of expertise to increase
performance in new market
● Strong dealer community
● Effective distribution network
● Relationship marketing increases sales
of the products
Weaknesses
● Selling proposition is not clearly
defined
● Investment in R&D is low than other
fastest growing companies across the
world
● Lack of financial planning
● Organisational structure is not
compatible
● Low range of products
Opportunities
● Free trade agreement of the UK
government improves technology
adoption standard
● Low costs of transportation reduce
manufacturing and shipping costs
● New taxations policy makes tax range
between 0.5%-075%
● Stable free cash flow and government
green drive increases sales
Threats
● Lack of security in the data
processing system that increases data
breach
● Large number of competitors in the
market such as Vodafone, O2,
BrightHouse, Argos, Tech Data,
Waitrose & Partners and others
● Currency fluctuation reduces stability
of business
● Low quality products
Table 2: SWOT analysis
(Source: Created by the learner)
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Dixons Carphone has brought innovation in technology and adopts growth strategies to gain
competitive advantage in the market. It increases the revenue and creates opportunities for
market share and expansion global market. Low transportation costs reduce manufacturing costs
that increases profit of Dixons Carphone. Free trade agreement of UK government increases
business stability. However, low range and low quality products increases number of competitors
in the UK and across the world. Lack of security in data increases the possibility of security
breach and reduces customer trust on the organisation (Claxson, 2018).
Strategies of Dixons Carphone
Dixons Carphone uses target costing tool for strategic costs management that is used by them to
reduce costs and assist the management to take better business decisions. It is effective for
gaining competitive advantage in the UK market as they can gain an opportunity to analyse the
competitive advantage environment effectively and set prices based on the customer demand.
The company has taken growth strategy by improving IT services. The company has gained top-
line growth and market share in the UK market due to innovation. The growth margin of the
company has been 3.5% in 2018 that has increased their revenue to 1.052 billion in 2018
(Dixonsscarphone.com, 2019).
Figure 2: Market share of Dixons Carphone
(Source: Dixonsscarphone.com, 2019)
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The organization has grown online stores quickly that has increased their multi channel business
scale up to £2 billion. Like-for-like growth has been identified for the company to identify long-
term direction and high market share. It is effective for them to gain competitive advantage in the
market. Like-for-like revenue of the company has grown 4% due to strong performance in the
UK and Ireland (Dixonsscarphone.com, 2019). However, it is identified that the company has
faced huge issues related to data breaches and it has involved 5.9 million payment cards and 1.2
million personal data breaches due to cyber-attacks (www.bbc.com, 2019). 105.000 cards
without chip-and-pin protection has been leaked and this incident has decreased share price of
the company by 3% in 2018. Lack of security measures in the operations of Dixons Carphone
has increased data hacking issue. Therefore, it is required for the company to create a strategy
that can reduce data breach and improve security of the operations.
b. Areas of concern in external environment
Security and data breaches of Dixons Carphone have also reduced customer trust that has
become a huge concern for the company. The company has faced multiples threats due to
security issues and data breaches in the organisations (Ceross, 2018). Dixons Carphone has low
threat for the new entrants as this multinational company has high revenue and operating income
and brand image in the market. It is difficult for new companies to become a threat for this
organization. Competitive rivalry and threats for substitutes are high for the concerned company
as there are multiple organisations which provide same type of services to the global customers.
They also have a good customer base and effective operating income with wide range of
products that are effective for competing with Dixons Carphone. The competitors also have low
issues in data breach; therefore, it is effective for Dixons to create a data protection strategy to
gain competitive advantage (Vainio and Miettinen, 2015).
However, it has been observed that data protection act of the UK has not been effective and
Dixons Carphone has faced issue in following EU regulations for data protection. UK is in the
process of revising their data protection laws and it has not been very strict and effective to
prevent data breaches (Bhaimia, 2018). It has been observed that the company has not monitored
their data protection regulations and provide security in the employee and customer data that has
affected 10 million customers in 2018. The company has maintained GDPR regulations for the
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data protection. In this breach, emails, names, home addresses of the customers have been leaked
that has included in the information system of the Dixons. As personal information of the
customers has been revealed, it has reduced customer trust and organizational profit. However,
as per data protection act, maximum fine would be imposed in the organisation is £500,000
which is lower than fine with GDPR rule such as £17.6million for Dixons (www.bbc.com,
2019).
Question 2
Strategic development and strategic management
As Dixons Carphone faces high security issues and data breaches in their information system, it
is required for them to create a new strategy that can decrease data hacking possibilities. The
company has undermined credibility of GDPR as well as the employees have not been
responsible for rights of individuals regarding data usage. It increases cyber-attacks and reduces
organizational reputation and brand image (Paton, 2016). Profit-maximizing and competition-
based theory can be followed by Dixons to reduce risks and create strategies planning. This
theory can help the company to create long-term profit and gain competitive advantage in
external marketplace (Honggowati et al., 2017). The organisation can bring innovation in the
security measures and include regulations relating to data protection and data breaches to prevent
cyber-attacks. Data protection strategy is also required to gain long-term profit.
The strategic management plan can be created to reduce data breaches which are explained
below,
Objectives Action Implementation and
impact
Feasibility
To improve
security in the
internal
information
● Keeping the system up-
to-date
● Strong encryption in the
information system
The managers of Dixons
need to identify the
security issues in the
internal systems and
It is
required to
plan audit
and allocate
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system ● Backup of data
● Scanning of websites for
vulnerabilities
● Anti-virus software
● Creation of protocols and
provide cryptographic
solutions
provide appropriate
security measures to
appropriate places. The
company can hire excerpts
to provide anti-virus and
cryptographic solutions
and protocols to the
internal information
system (Theriou, 2015.).
budget for
the
assigning
security
software.
Revenue of
the
company is
sufficient
enough to
create
security
measures.
To develop
regulations
regarding data
protection
● Maintaining of GDPR is
required to strengthen
rights of data protection.
● It provides tight to the
customers demand
company to reveal and
delete personal data
(GOV.UK, 2019)
● Information and
communication of data
should be under the
regulatory environment
of the data protection law
Vision of the companies
should be developed and
the company needs to
collect personal
information from the
employees and the
customers based on the
law. It is effective for
maintaining, structuring
and storing personal data
to maintain transparency
and fairness of
information
Revising
rule of the
UK can
help Dixons
to develop
regulations
To provide
training to the
employees for
maintaining
● Training is required to
enforce password
practices.
● Segmentation of data can
Experts need to be hired to
provide training. Segment
of data and providing
security is possible
Training is
financially
feasible for
Dixons
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data securely be provided
● Secure host can be
created
because of it. Therefore, it
reduces the possibilities of
data breaches as the
employees can determine
the processes to securely
keep the customer data in
the system.
Carphone
Table 3: Strategic management plan
(Source: Created by the learner)
Customer data can be protected effectively with the help of this strategic planning and it reduces
the possibilities of hacking cards of the customers. Dixons Carphone can segment the data and
provide security to the services. Cryptographic solutions improve the security and it helps them
to gain customer trust as well as brand image, reputation and profit margin of the organisation.
The IT experts of this company takes three strategy such as ensure the data security, train the
employees properly that they secure the data and create data protection policies. This present
study is based on the strategic management process of Dixonss Carphone. The company
evaluates their strategy and planning by focusing on various internal and external factors that
influenced the business operation (Brewster, 2017). The concern area of the external
environment of this organization is also described in it. The company also develops different
strategies to imply the data protection policies and limit the risks of this company. The company
creates strategies to fulfil three major objectives such as trained the employees to stop the data
breach, make a data security policy and provide more security to the customers’ data. The
company also make decision to achieve advance technology to fulfil this strategy properly.
Ensure data security
Dixons Carphone creates the strategy to increase the level of security of the data of customers. It
is an effective plan but the company also concern about the privacy of the customers. As per the
law of UK, the private data of customers can not be stored in the data centre of the
telecommunication companies. Therefore, the company has to maintain a transparency in the
data security process.
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