Strategic Management Analysis of Harvey Norman's Strategy

This report provides a comprehensive analysis of Harvey Norman's strategic management, focusing on its history, structure, and current strategies, particularly the flagship strategy. It evaluates the suitability of this strategy, considering factors affecting performance such as competition and changing customer demands. The report identifies potential alternative strategies, including Greenfield ventures and strategic alliances, and discusses their implementation, key issues, and recommendations. It examines the impact of political and economic factors on Harvey Norman's performance and analyzes the company's omni-channel strategy. The report also delves into the company's financial performance, market position, and the challenges posed by competitors and changing consumer behavior. The conclusion summarizes the key findings and recommendations, offering insights into how Harvey Norman can adapt and thrive in the dynamic retail landscape.

Running Head: HARVEY NORMAN 0
BUSINESS AND STRATEGIC MANAGEMENT
Student Details
11/23/2018

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Executive Summary
This report presents the detailed discussion about the strategic management and its
implementation in an organization. Harvey Norman is one of the biggest retail companies in
Australia. This report contains the history and the structure of Harvey Norman. Harvey
Norman was established by Gerald Harvey and Ian Norman in 1982. Since then it has come a
long way and has become one of the biggest organizations in retailing. Company provides its
franchisee to other independent organization and has created its business out of Australia in
different countries including New Zealand, South Africa, Ireland, Singapore, Slovenia, and
Malaysia. Company adopted Flagship strategy with opening of Millenia walk store in
Singapore in 2015. This strategy has made record breaking financial success for Harvey
Norman by the end of 2017 year. But due to the technology advancement, changing customer
demands and the tough competition by competitors demands some improvement in the
existing strategy of the Harvey Norman and inclusion of some new and better strategy to
remain and sustain in the business. This report talks about the two important strategies that
Harvey Norman can include to grow its business; these include Greenfield Venture and the
Strategic Alliance. Some key issues and the recommendations regarding these strategies are
also discussed in the report.

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Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Background Information of Harvey Norman.........................................................................4
Strategic Management............................................................................................................4
Strategy of Harvey Norman...............................................................................................5
Factors Affecting Harvey Norman Performance...................................................................6
Strategic Factors of Harvey Norman..................................................................................7
Alternative Strategy Recommendation for Harvey Norman......................................................8
Greenfield Strategy................................................................................................................8
Strategic Alliances.................................................................................................................9
Implementation of Greenfield Strategy..................................................................................9
Implementation of Strategic Alliance..................................................................................10
Key Issues in Greenfield Strategy........................................................................................10
Recommendations for Issues in Greenfield Setup...............................................................11
Key Issues in Strategic Alliance..........................................................................................12
Recommendations for Issues in Strategic Alliance..............................................................12
Conclusion................................................................................................................................13
Reference..................................................................................................................................15

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Introduction
Strategic management of an organization or a business defines the business strategy
with goals of the organization, developing plan to achieve these goals , alignment of business
activities in order to support the goals, and then allocating organization resources to achieve
the goals (IMD, 2018). This report presents the detailed discussion of the business strategies
of one of the biggest retail organization in Australia naming Harvey Norman. Harvey
Norman was founded by Gerald Harvey and Ian Norman in 1982. Product categories that are
sold by Harvey Norman includes furniture, computer and communication, electrical
appliances, bathroom and tiles bedding, flooring and many more. Harvey Norman gives
franchisee to other independent organizations in different countries like New Zealand,
Singapore, Malaysia, Ireland, Slovenia, and South Africa (Bloomberg, 2018). Currently
Harvey Norman is working on the flagship strategy. This strategy was adopted by the
company in 2015 and after that company has achieved huge financial success by the end of
the year 2017. Strategic management involves planning, monitoring, analysis and the
assessment of steps that are required for an organization to achieve its goals. Every company
has their own strategy for the business and to make maximum profit from the business
(Twarowska & Kakol, 2013). As due to the advancement in the technology and the increasing
and changing demands of the customers have created tough competition for the Harvey
Norman, hence Harvey Norman has to develop and make improvements in the strategy they
are working to remain on top among its competitors. Factors like political, economic also
affects the business of an organization. In this report, it is discussed about the improvements
in the existing strategy like renovation of the existing flagship stores of Harvey Norman and
by omni channel strategy (Barwick, 2014), Harvey Norman is interacting with users online
those who prefer shopping online and solving their queries. Other strategies like Greenfield

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strategy and Strategic Alliance can be adopted by Harvey Norman in order to improve their
business growth.
Background Information of Harvey Norman
Harvey Norman Holdings Ltd. is one of the biggest and successful names in retail
group in Australia. The organization was founded in 1982 by Gerald Harvey and Ian Norman.
It is based in Homebush West in Australia. It grants franchises to other independent
franchisees. Product categories that are sold under franchises of Harley Norman include
electrical appliances, computer and communications, furniture, bedding and Manchester,
bathroom and tiles, kitchen appliances, carpet and floorings, and small appliances
(Bloomberg, 2018). The company operates under three new formats apart from Harley
Norman; these include Domayne, Space, and Rebel Sport. Under Harvey Norman, Joyce
Mayne, and Domayne, company has around 195 franchised complexes and around 89 stores
that are run under Harvey Norman brand (Harveynormanholdings, 2018). Harvey Norman
has around 20 stores in New Zealand and five stores in South Africa. In 2000, company
started to expand its business in Southeast Asian market with launching in Singapore with
giving around 14 stores. In 2003, company moved to Malaysia and also targeted its expansion
in Eastern and Western Europe, started with Ireland and Slovenia in 2002. Chairman of
Harvey Norman is the first ‘retail billionaire’ of Australia (Referenceforbusiness, 2018).
Strategic Management
All the steps taken by an organization like planning, monitoring, analysis and
assessment that are needed for an organization to achieve its goals and objectives is known as
strategic management (Jurevicius, 2013). Strategic management is necessary as the world is
developing at fast pace and new technologies, innovation, and expectations of customers are
increasing day by day (Godfrey, 2015). It requires organizations to make decisions

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strategically in order to remain successful. Steps involved in strategic management process
include assessing the present situation of the company by company leaders, developing
strategies, implementation of strategy and then analysing the effectiveness of the organization
(Rouse, Roy, & Rawson, 2018).
Strategy of Harvey Norman
In 2015, Harvey Norman implemented flagship strategy by opening Millenia Walk
store in Singapore. Success of Millenia Walk store validated the flagship strategy and leads
the company to develop unique flagship strategies for the stores and franchised complexes in
every country it operates. Due to this flagship strategy, company achieved record breaking
financial success by the end of year 2017 (Mentis, 2017 Annual Report, 2017). This strategy
creates a physical space which helps in establishing the tone of the brand in that particular
region in terms of aspiration and achievements. It has raised the bar higher for retail
experience and tells that how a retail experience should be. Company opened Tallaght
flagship store in Dublin and this was the first freehold land purchase of the company in
Ireland (Bencic, 2017). Harvey Norman stated that its flagship strategy is the future for the
organization as the profit and growth resulted from the flagship strategy. Company is aiming
to get benefited more with the completion of franchised flagship complex in Australia and the
other flagship stores in different countries including Malaysia, New Zealand and Croatia by
2018. In order to provide the finest shopping experience to its customers in Central European
region, company renovated Slovenian flagship store in Ljubljana (Mentis, 2017 Annual
Report, 2017).
From 2011 omni-channel strategy of Harvey Norman when it launched an e-
commerce website has come a long way. The motive behind developing online website was
to connect all its stores across the world and bringing retail options to online by connecting
customers with salespeople through live chat (Bender, 2012). This model is continuously

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working to develop and enhancing the services offered to the each franchisee. Apart from live
chat capabilities, this strategy offers real time inventory, same day delivery services, click
and collect app, and providing facilities of connecting customers to the installation providers
(Barwick, 2014).
Harvey Norman franchisee model is growing its strength to strength and still the
dominant player in the Home and Lifestyle market. In 2017, company’s franchisee sales
revenue hiked 5.4% and reached from $287.05 million to $5.62 billion (Mentis, 2017 Annual
Report, 2017).
Factors Affecting Harvey Norman Performance
Harvey Norman is operating in more than 10 countries and each country has its own
political environment and political system risks. To achieve success in such a dynamic
retailing industry across different countries, diversifying the risks of political environment is
important. Harvey Norman has to analyse some factors before entering in a certain market
such as bureaucracy and interference of government in retailing sector, importance of
retailing sector in the economy of the country, trade regulation, anti-trust laws related to
retailing, tariffs, level of corruption in retailing sector, taxation, industrial safety regulation
for the retailing sector, pricing regulation, and product labelling in retailing
(Fernfortuniversity, 2018).
Economic factor that Harvey Norman can consider in order to determine the growth
of organization in a particular country include growth rate, inflation rate, consumer spending,
retailing industry growth rate, exchange rates, efficiency of financial markets, education
level, labour cost, and interest rate (Fernfortuniversity, 2018).

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Strategic Factors of Harvey Norman
Harvey Norman is currently working on the flagship strategy. Each flagship store of
Harvey Norman provides best-in-class product range for home and lifestyle. Although, this
strategy has made a huge profit for the company in previous years but this year report stated
that the company’s net profit fell 16.4% to $375.38 million from $448.98 million (Mentis,
2018 Annual Report, 2018). The two main factors that affected the results include the net
property revaluation increment factor and the loss because of joint venture with the Holdings
dairy (Franchisebusiness, 2018). Harvey, CEO of Harvey Norman on the launch of auburn
store said that it is not possible to create a brand and letting it stand still. Company faced 7%
fell in the earnings from Australian Harvey Norman and also the share price of the company
was at the lowest of three years. In recent years flagship strategy has developed by working
with its major suppliers in order to identify how organizations want their shoppers to
experience their products (Somma, 2014). As per the analysis, it has shown that with the first
flagship store in Singapore, Harvey Norman has improved its sales by 50%. The flagship
strategy of Harvey Norman has strengthened their long held, and as per the surveys
conducted, it is clear that online shopping will never be able to dominate retail market. As per
Harvey, as compared to the bricks and mortar, running an online business is more expensive
(Bell, 2014). Reasons of decrease in profits are due to the changing demands of the customer
and not upgrading their existing stores. Hence, company has decided to redesign, upgrade,
and renovate its existing eight stores to attract customers in order to meet the changing trends
in technology and products. Also, company’s omni-channel strategy is providing customers
online experiences those who prefer online shopping and also giving tough competition to the
other retailers and online shopping websites like Amazon (Hatch, 2018). One of the most
common factors that affect the performance of an organization is competition from other
companies. There are several other companies in the retail sector that gives tough competition

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to Harvey Norman such as Woolworths and Wesfarmers. To survive in the market it is
necessary for Harvey Norman to invent something that is unique from their competitors
(Owler, 2018). It is required to be aware of Harvey Norman’s competition and what their
position in the market and then finding the ways that differentiate company from other
competitors in as many ways as possible (Quain, 2018). In 2017, Harvey Norman changed its
accounting treatments for franchisee receivables and after some days of that analyst observed
increased competition from JB Hi-Fi, The Good Guy, and the fast arrival of Amazon.
Customers are unpredictable and so their demands. It is not possible or an easy task to
determine the behaviour of customers. Internet has made consumers more aware and
informed about their needs, options available in the market, quality, and accessibility of the
products they want. Due to this, there is high competition in retail industry. In order to meet
the changing customer needs, Harvey Norman has to deal with different aspects such as
Internet of Things (IoT), availability of products, delivery, comparison of products, product
return, fast fashion, and sustainability (Loon & Eijk, 2016). Therefore, when customers give
indication about something that is not provided by the organization, Harvey Norman has to
listen to the consumer demands and provide what customers are asking for before Harvey
Norman’s competitors do so.
Alternative Strategy Recommendation for Harvey Norman
Greenfield Strategy
One of the alternatives of flagship strategy is Greenfield Venture. It is a type of
market entry strategy where a company build a wholly owned subsidiary in the market of a
foreign country. This type strategy comes under foreign direct investment and is also known
as Greenfield investment. Through Greenfield Venture, an organization or business enters a
new market without taking any help from the other already existing business or organization.

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In this strategy, organization builds everything that is required from the ground which
includes all aspects of the business, from constructing plant to marketing and distribution
methods (Hyatt, 2015). In most of the cases, setting up a Greenfield venture is expensive and
complex because it requires an organization to acquire complete knowledge and expertise
about the local market of that country and needs to develop relationship with various
stakeholders to set up a new business in a new country, but it gives maximum control to the
company as company developed the entire project from the starting thereby constructing its
own structure and culture. Apart from flagship strategy, Harvey Norman can adopt this
strategy in order to enter new markets of different countries and grow its business throughout
the world (Mbaskool, 2018).
Strategic Alliances
A strategic alliance refers to the variety of cooperative agreements between different
organizations and firms which includes joint ventures, shared research, and minority equity
participation. Strategic alliance is becoming popular rapidly and has three different
characteristics like its main aim is to create new products and technologies, these exist
between firms of high industrialised nations, and they are only for short period of time. Main
advantage of strategic alliance is technology exchange, as it is difficult and not feasible for a
single firm to have all the necessary capabilities and resources to conduct its own Research
and development, so strategic alliances provide options for the same (Twarowska & Kakol,
2013).
Implementation of Greenfield Strategy
Greenfield investment strategy will allow Harvey Norman with advantage of
increased control; eliminate intermediary costs and forming marketing partnership. Harvey
Norman will have a high level of direct control over the investment enterprise. Also Harvey

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Norman will have total control over the manufacturing or sale of services and the products.
This investment will provide Harvey Norman with ability to control quality of the product
and the rate at which production is done. Product and pricing of the products can be decided
according to the needs of the local market. Greenfield strategy has high expenditure but it
will provide Harvey Norman total control over everything related to the product and its
marketing and organization (Maverick, 2018).
Implementation of Strategic Alliance
Harvey Norman can adopt strategic alliance in order to reduce its expenses on
research and development. Harvey Norman can make agreements with different organization
in different countries and share their experiences, hire highly skilled workforce from other
organizations. Different organizations of a particular country have knowledge and the
expertise about the market conditions and the behaviour of consumers in that particular
country. This will help Harvey Norman with the elimination of need of market research and
the demand of the customers of that country (Twarowska & Kakol, 2013).
Key Issues in Greenfield Strategy
There are several issues that Harvey Norman can face while implementing Greenfield
setup (Btglegal, 2018). List of seven issues is discussed below:
1. Method of Entry: It is not necessary that a country always incorporate an organization
to operate in their country. In that case Harvey Norman can enter into a joint venture
with an existing organization in that country and set up branch office, project office,
and liaison office. But these are also entitled under different laws.
2. Land Acquisition: To construct plant or the outlet for an organization requires
acquisition of land in that country. As it is not easy for Harvey Norman with foreign
investment to acquire a land in other country.

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3. Regulatory Approvals: It requires approval from different a wide range of regulatory
bodies of a particular country to set up an industrial or manufacturing unit.
4. Financing: To set up a manufacturing unit, it requires capital or financing at different
stages of the construction. And it is a slow procedure to fund an entity of a certain
country from the foreign country.
5. Different culture and Working Models: Harvey Norman is an Australian company.
And there is always a big difference between the culture, working models, consumer
behaviour, and the demands of the customers of different countries.
6. Labour Law compliance: Most of the countries have strict employment and labour
laws. These laws are pro-labour laws and it is expected from the organizations to
compile these laws strictly.
7. Tax and Duties: Every country has various tax and export/import laws for goods and
these laws are amended and re-assessed regularly which lead to uncertain tax regime.
Recommendations for Issues in Greenfield Setup
- It is advisable to take tax advice and legal advice before choosing the mode of
entering into market of another country.
- Long term lease would be better option for resolving the land acquisition problem.
- Dedicated resources like third party and meticulous planning are needed to get
approvals from regulatory bodies.
- Planning at the each stage of lifecycle is necessary for regulating funding.
- It is important for Harvey Norman to not impose its model on another country’s
operations, rather try to integrate with different working cultures.
- Appoint a resource team for compilation of labour law properly. To deal labour laws
is to managing employees and employment management techniques are the key.