Strategic Analysis of HMV Retail Ltd: PESTLE and Five Forces

This report provides a comprehensive strategic analysis of HMV Retail Ltd., a prominent UK retail company. It begins with an internal analysis using the VRIN framework to assess HMV's resources and capabilities, identifying strengths like its brand name and skilled employees, as well as areas of competitive parity and temporary advantages in innovation. The report then employs a PESTLE analysis to examine the external environment, considering political, economic, social, technological, environmental, and legal factors impacting HMV. The political section discusses government policies and their influence on the industry, while the economic section highlights the impact of recession and online retail. Social factors cover changing consumer preferences, particularly the shift towards digital music. Technological advancements, including the rise of online music platforms, are analyzed as both opportunities and threats. Environmental factors and legal challenges, such as piracy and illegal downloading, are also considered. Finally, the report applies Porter's Five Forces analysis to assess the competitive landscape, evaluating the industry's competition, potential new entrants, bargaining power of suppliers and buyers. The analysis includes an overview of HMV's challenges and recommendations for strategic improvements, like the use of Blue Ocean Strategy.

Strategy, Enterprise and
Innovation

Table of Contents
INTRODUCTION...........................................................................................................................1
Pestle analysis for HMV.............................................................................................................1
Five forces analysis for HMV.....................................................................................................4
Blue ocean strategy ....................................................................................................................5
CONCLUSION ...............................................................................................................................5
REFERENCES ...............................................................................................................................5

INTRODUCTION
This report will conduct a strategic analysis of HMV by using Porter’s five forces analysis and
PESTEL analysis. This will help to evaluate the current position of the company and suggestions
Will be given in order to enhance their positions by taking suitable action. The company will
Make use blue ocean strategy in order to do marketing of its products in
Ways that help to differentiate themselves from competitors.
HMV Retail Ltd is a well-known retail company in the United Kingdom. The acronym for HMV
is His Master's Voice. The specialist and miscellaneous range of services, products and
experiences are provided by HMV. Across all genres and platforms HMV presents entire
selection of music, film, games and also books. At site such as www.hmv.com the free home
delivery is also provided by this company (HMV, 2017). In over 50 HMV stores they provide
gamer base play-to play gaming. In the record retail industry HMV has earned its name.

(a) Internal analysis of resources and capabilities of HMV
Resource/
capability
Is it
valuable
Is it rare Inimitable Non-
substitutable
Competitive advantage
Innovation
for games
Yes Yes Yes No Realized temporary
competitive advantage
Talented
and skilled
employees
Yes No Yes Yes Realized sustainable
competitive advantage
Digital
cinemas
Yes No Yes Yes Realized competitive
parity .
Strong
brand name
Yes Yes Yes Yes Realized sustainable
competitive advantage
In this strong brand name and the talented and skilled employees rare the Realized
sustainable competitive advantage of the octonary .And the digital cinemas is being used by
company in order to gain Realized competitive parity. The innovation for game is done for a
temporary baies as the demand for this is low in comparison with other so on temporary basis it
is used by the company.
The VRIN framework
Valuable - The most valuable resources of HMV are the brand name and relationship between
HMV and its suppliers.
Rare - In HMV differentiate products are available that makes its resources rare for the
competitors.
Costly to imitate – The company launched digital kiosks but the same feature was intimidated
by another competitors .From HMV the local retails are not able to copy.
1

Exploited – In order to generate more sales HMV is able to exploit its available resources.
Through the current sales channels company offer more products to the customer.
Despite the continued success and leading position of HMV within the UK industry, the
evidence shows the slow growth and stagnant and decline in profits suffered by this company
from last couple of years. This is mainly due to innovation and advancement of technology that
is taken place. The pestle analysis is conducted on this industry in order to study the external
environment.
(b) Pestle analysis for HMV
Political factors
The external environment for HMV's can be influenced by several key drivers of change
from PESTEL factors. For example, the policies of government can promote rivalry war through
promotions of electronic commerce, liberalization of telecom and legislations. In national
infrastructures of ICT there may be investment of ground government. The more convenient
access of internet can make HMV faster, better and more accurate for users across world. The
rapid expansion into new market can be achieved by this company by making internet access
affordable and the internet users need to be increased by the company (Xue and Xu, 2017.). As
in record industry there are chances towards piracy and unauthorized access. There some
2

politician who does not take this action seriously while on other hand some action can be taken
by politicians on these matters. This may influence the sales of the company. These sectors are
affected by decisions of political as these sectors is not a sector of economy. In the Channel
Islands the HMV internet site is there which has VAT exemption on items under $20.This
exemption was ended by UK government. The factors of political are basically in context of
government that has an impact on entire industry. In the entertainment industry the change in
political factors can have little or no effect. The cases are rare where the government ban music
and videos that may harm the sentiments of people. The content that is not appropriate is also
prohibited from being delivered among people. Such type of content should not be published by
HMV that can be dangerous for the reputation of the company.
Economical
There are considerable impact on business due to economic factors. The recession
periods, monitory policies, exchange rates and changes in fiscal are included in economic
factors. The operations and structure of company is affected due to all these factors. The
spending of customers will be decreased if the rates of interests will be high. In recent years the
retailing of internet is very popular. In the internet retail business the growth can be achieved by
HMV. A lot of time is required in the retail HMV stores as the clients have to travel the outlet
and different products and catalogues need to be browsed which also increases the cost of travel.
The preference of customers today have shifted to online stores. The most prominent rival for
HMV's is I tunes as it runes online stores in which the cost of investment is saved as well. The
direct impact is not there on music industry due to recession. The people are however conscious
regarding spending their money. While sitting at their home they can purchase music at less
price. Due to this there was a decline in sales of the company as there are no online stores where
music is available at cheaper rates for customers. The economy of UK was string before
recession but due to recession the financial losses are examined by people and unemployment in
the country have increased which have led to decrease in purchasing power of customers.
Social factors
The strategies of organization are shaped by social factors such as psychological and
demographics change. The different marketing strategies need to be sued by company in order to
3

target younger generation who wants to purchase entertainment products. The need for quicker
responses is identified by psychological change. The desired colour products are preferred by the
customers. The innovative and reliable products need to be delivered by HMV in order to satisfy
the need so customers (Phillips and James, 2015). The mind-set of people towards purchasing of
music have been changed today. Now music is sold is digital format. Now people still prefer
material format for music albums. As it is easy to understand them. Over 40 different digital
platforms people have access to music through TV, streaming and downloading facility. As older
generation are not able to enjoy albums of ITunes so they prefer to purchase physical format.
The older generations sees HMV in a different way so they do not want it to close down. But for
younger generation digitation and online music stores are important they want to purchase music
from their only.
Technological
This will allow the companies to be more innovative and responsive. The advancement in
technology is achieved due to globalization is increase in pace. HMV should try to bring
innovate and technologically sophisticated products (Pan and Xu, 2015).The music can be vied
and shard by people with help of internet without having to pay due to advance of technology.
This can be a risk factors of HMV as the sales of the company can be decreased due to this
innovation. The recording company are facing decline as there have been advancement in
technology that allow fewer downloading of songs and videos. The company have failed to
response to fast technological change. The proper response was not given by company to fast
growing download trend from internet. The main reason for decline can be they were not able to
bring a transition from CD's and VDD's to products of digital. Due to which sales of CD's and
DVD's fall in large numbers.
Environmental factors
The direct impact may be not there due to environment factors. The some areas of the
company may be affected due to these factors. The health and safety, management of
environment, community affairs etc can be affected by this factor. The world carbon footprint is
increased due to its online store products in jersey. The packaging of CD's have change under
influence of change in environment. There are fewer hazards that is taking place in the sector as
4

music is now sold online. The advantage can be gained by the company by engaging in green
groups. Engaging in such groups will develop a goodwill for the company and in the mind-set of
customers a positive image will be created about company. The reputation of company will also
be grow in the market as today more and more companies are involving in green practices in
order to keep the surrounding clean. Today the people are being more conscious about
environment so postage and packaging need to be done according to sustainable practices. HMV
can offer cloud drive and cloud computing that can be used to store music eliminating
requirement for hardware and storage devices (Lambert and Davidson, 2013.).
Legal
The biggest challenges was faced by company are due to illegal downloading and piracy.
The retail process that HMV changes from its product is undercut due to un- legal download of
product. These issues will continue to rise until the government will take strict actions and
measure against it. The digital economy act was made in 2010.In the UK, this law regulated the
digital media and it also secured the intellectual property and illegal sharing of file. For HMV
this law was important .But the effect of this law was not much as not much face penalties were
there for music and film piracy.
5

( c) Five forces analysis for HMV
Competition in the industry
For the industry the downfall in music have become a continuous phenomenon. This may be due
to rivals that are represented in the market. From downloading platforms such as iTunes,
play.com, amazon etc people find it easier to download music. The music have shifted to digital
format and the completion for HMV have been increased due to this. The apples Itunes, amazon
are major competitors for this company today. Due to change in technology the level of
competition has increased (Jin and Xia, 2017).
Potential new entrants
Today people prefer more to listen music on MP3 players, personal computers and
mobile phone etc. rather than on CD player. The decrease in sales have been faced by HMV due
to these new entries in the market. Over the internet music is accessible easily and by sitting in
6

front of their computers people can don; load music at much lower prices. In this sector the
chances of new entrants are very low as in next years the number of legal and illegal platforms
will increase (Hervas-Oliver, Sempere-Ripoll and Boronat-Moll, 2014).
Bargaining power of suppliers
Due to decline in sales HMV is facing huge isues. By negotiating with major suppliers to
stick back catalogue CD's on sale the company want to attain some space. Sony,EMI and warner
etc. Are main suppliers of HMV the bargaining power of the company was high few years back.
But due to advancement in technology the bargaining power of this company is low today.
Bargaining power of buyers
There is a wide range of choice as at much lower rates music can be accessed on internet.
It is also easily accessible on Internet. HMV as cut down its process of CD's and DVD's due to
this reason (Carraher and Paridon, 2015.). Today people are able to get CD's and DVD's on slow
process which is not so costly in comparison with original price. The bargaining power of buyers
is high. This is due to reason that they have a wide range of options available from where they
can access much at much lower rates (Han and Xue, 2016.). A lot of time is also saved due to
easy availability of music.
Threat of substitutes
The physical formats purchase or paid downloads are now substituted with free streaming
of online music, TV and radio channels. In terms of accessing the music customers have a wide
range of music. In order to stream or download music people can use you tube .The threat to
substitutes is high .The movies, games etic can substitute it as music is not only means of
entertainment. With the advancement in technology and internet new forms of entertainers are
gain attention of consumers such online free music .In more compact forms music is made
available to consumers
7

Section 2: Two strategic options for HMV
2 (a)
Strategic option 1:
Market penetration justified using SAFE criteria
Safe criteria Yes/no Reason
Suitability Yes This will provide opportunities
for the company to improve
quality of product or services.
In the same product the
company will introduce the
new feature.
Accountability No There is a high risk whether it
will be accepted by customers
or not. The mindset of all
customers is not same so the
chances of risk is
high .Whether that product will
be accepted by customer or not.
Feasibility Yes HMV is a well-known brand so
there will no issues related to
funds. All the resources and
skilled employees are there in
this company.
Examples of market penetration that is done by the company is that it selling out products
such as CD's ,DVD's ,video games currently in the market. In order to bring a slight change it as
changed the cover of these CD's and DVD's in order to make it more attractive for customers
who purchase them.
Strategy option 2:
Product development justified using SAFE criteria
8

Safe criteria Yes/no Reason
Suitability Yes In order to face the competition
and to gain competitive
advantage this will be an
opportunity for the company.
Based on the research this new
product will be developed by
the company.
Accountability Yes As the lifestyle of customers is
changing so it will meet out
expectation of customer.
Feasibility Yes The company has both skilled
workers and appropriate fund is
also there with company. For
an example the company will
offer its services online also
such as will sell out its films
online.
In order to implement strategy of product development this company is recently offering
its selling of products such as film and downloadable online to the existing market.
From the above table it can be concluded that the company will not use the strategic
option 1 that is market penetration justified using SAFE criteria as there is a high risk in this
whether it will prefer by customers or not. The mindset of all customers is not same and it
differs from one person to another. For an instance in the UK, the company is currently selling
range of products such as books, video games as well as range of movie etc. The company will
make use of another strategic option 2 that is Product development justified using SAFE
criteria .In this HMV company will develop new products to sell it to existing market. For an
instance this company has enhanced its services by offering downloadable TV and film selling
online to existing market. The option 2 is more suitable choice for the company has in this
9