Strategic Management Report: Analyzing Adair's Business Strategies

This report provides a strategic management analysis of Adair's, a retail brand in Australia and New Zealand specializing in home furnishing materials. It examines Adair's product and service portfolio, strategic business units, and revenue management strategies. The analysis includes an evaluation of the external environment, identifying factors of sustainable competitive advantage, and a SWOT analysis to assess strengths, weaknesses, opportunities, and threats. Furthermore, the report utilizes Porter's Five Forces to analyze the competitive landscape. Based on the analysis, the report offers recommendations for Adair's future strategic direction, including potential areas for growth and improvement. The report concludes with a summary of the key findings and implications for Adair's strategic decision-making.

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Strategic Management: Adair’s
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3/23/2018
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Contents
Introduction.................................................................................................................................................2
Identification of Corporation...................................................................................................................2
Adair’s product and service portfolio......................................................................................................3
Strategic Business Units of Adair’s.........................................................................................................3
Adair’s Product and Service lines............................................................................................................4
Adair’s Revenue Management.....................................................................................................................4
External Environment Analysis...............................................................................................................4
Factors of sustainable competitive advantage..........................................................................................5
Recommendations for Future Strategic Direction........................................................................................6
Conclusion...................................................................................................................................................7
References...............................................................................................................................................8

Introduction
Most business managers are urged to take wise decisions regarding their businesses. In order to
evaluate the direction, goals, objectives and plans of a business a basis of reference is needed.
Strategic management is a goal based management of resources to achieve a specific objective; it
helps the managers to focus on effectiveness and efficiency of their decisions and actions(Hillet
al.2014). Most practitioners and researchers may agree that strategic management of a company
involves at least three elements i.e. strategic goal setting, management of core competence and
corporate governance.
Fixing appropriate goals based on the core competences and resources available helps the
business position itself favorably in the market. Core competences of a business are the things an
enterprise does best or better than others. Researchers have identified three major factors to
qualify core competence of a business i.e. competences that are difficult to copy by the
competitors, competences that are used to produce specific products and services, and
competences that lead to solutions to customer problems or create customer satisfaction
(Bharadwaj et al 1993). Corporate governance is the manner in which a company is run and its
shareholders are managed.
Identification of Corporation
Corporations are different from other business structures such as partnership, Limited Liability
private enterprise, etc. (Smith 2017). Corporations are required to meet certain legal
requirements such as incorporation rules, listing in stock exchanges, etc. and are considered as
separate from the promoters or owners. Often, corporations are owned by many people through
shareholding i.e. a set of individuals share the profit and losses generated by the company
through its intended operations. The shareholders and Board of governors have limited liability
to the creditors of the company and the enterprise continues to exist beyond life span of its
owners because the shares of a company can be transferred to others through sales or gift of
shares.
Analysis of strategic management helps the business managers to evaluate their business
direction (Wheelenet al. 2015); and it helps the investors to assess the present and future position

of the company. In order to demonstrate the strategic management of a company, an analysis of a
listed company in the Australia i.e. Adair’s is performed.
Adair’sproduct and service portfolio
Adair’s is a well-known retail brand in Australia and New Zealand that offers specialty home
furnishing materials to its customers (AO, D.R.H.M 2017). It operates through specialized retail
stores across Australia and New Zealand and through a dedicated e-commerce web site. The
major strategy of the organization is to offer their customers trendy materials for home
furnishing, backed by strong values and enhanced shopping experience (Mall 2017).
Adair’s has relatively large product portfolio. A product portfolio is a set or categories of all the
products or services offered by a business enterprise. Information on product portfolio provides
an opportunity to understand the market segment of a company, the current trends related to the
product consumption, the probable profit margins, future growth prospects, market leadership of
the company, etc. Information on product portfolio is critical for investors to assess the potential
of the company.
Currently, Adair’s product portfolio has a wider range than its nearest competitor. The variety of
home decorator product is large (Adair’s 2018). However, the business managers in the small
business units balance the range of products to meet the customer demands, optimally utilize the
floor spaces in retail outlets, and create an ambience for shopping experience. It is reported that
Adair’s have included wall art, bedroom chairs, household fragrances, floor carpets, bed side
lamps, decorative mirrors, etc. to the product portfolio. The critical aspects of product selection
for offer depend on the Adair’s strategy of categorizing products on fashionability, quality,
aesthetics, and value for money. The product categorization helps the customers to have an
integrated view of products and enables the retail staff to provide superior service (Varley 2014).
The company focuses on enhancing living in the customer’s homes.
Strategic Business Units of Adair’s
Adair’s operation includes, rolling out new points of sales i.e. specialized stores, manage the
merchandise in it, and provide customer friendly web platform for the customers to do shopping
sitting in their places of comfort. Adair focuses on four kinds of specialty stores (Adair’s 2018).
i.e. Adair’s home maker, Adair’s Kids, Adair’s Outlet and Urban Home Republic. Each outlet of

the Adair’s, functions as a business unit of a larger system. A strategic business unit (SBU) is
considered as a profit center that offers specific product range to a market segment with a
discrete marketing plan to capture local market share, may be a city, town or a region.
Adair’s Product and Service lines
The product portfolio of Adair’s include, bedroom accessories, bathroom accessories, furniture
division, home wares and kids section. In each of these product portfolios, specific product lines
mark the retail inventory. A product line is a set of interrelated products under a category, brand
or utility. Adair’s sell multiple product lines in each of its portfolio, for example bedroom
accessories portfolio included product lines such as pillows, quilts, blankets, bed spreads
mattresses, etc. And, within each of product lines there are various brands and variants to meet
the demands of the customers. Inventory of Adair’s is complex. Having wider product portfolios
and product lines helps the company to meet the specific needs of the customers (Beck & Rygl
2015).
Adair’s Revenue Management
From the media reports , it is evident that Adair’s have not been doing good in terms of earning
profits, but have increased revenues from the retail outlets and e-commerce. The reports indicate
that revenues from online sales have increased by 26 percent and retail sales have increased by 7
percent in the year 2016. Revenue is the income from sale of products or use of capital / assets
associated with the major operation of a company (Bannikovaet al. 2015). The revenue is
indicated on the top of the profit and loss statement. Subtracting all costs, overheads, expenses
and charges from the revenue, net income of an organization can be calculated. Revenues are
sometimes equated with total sales and turnover.
External Environment Analysis
The operational environment or external environment of an organization stands for political,
economic, social, technological, environmental and legislative factors around it. These factors
are critical in accomplishing strategic plan and typically a strategy must effectively address these
factors (Edelman & Webster 2015). The local conditions of each store also affect its business.
With respect to operational environment, there are a number of risk factors specific to Adair’s
and in general for the lifestyle retail. The performance of the Adair’s is affected by a range of

economic and business conditions such as changes in consumer spending for lifestyle products,
inflation rate, interest on loans, and exchange rates in the international market. Government
policies regarding taxation, people management, etc. also affects the retail business. The risk
factors that are to be considered by Adair’s include the following.
• Changes in consumers buying pattern
• General economic condition in Australia and New Zealand
• Entry of new competitors and strategic changes of existing competitors
• Management may lag in execution of the strategy
• Rented retail locations may have to be vacated
• Product range expansion and retail store expansion must be backed by sufficient
resources.
SWOT Analysis
SWOT Analysis of Adair would help to understand the effectiveness of the strategies that have
been implemented by the organization.
Strength: Being one of the largest retail industries in Australia covers a larger area of market
share. Moreover, the leader position of the organization promotes the company in exploiting the
target market with the help of its strong resources. The organization has strong resources in the
form of human and technological resources and also has a very good presence of the industry
(Culley et al. 2017). Apart from that, one of the strength of the organization is its large number
of quality products and services that targets large number of customers from Australia and from
other parts. Prior to this, Adair has a strong commitment to the environment and the
sustainability.
Weakness: Apart from the strength, the organization has certain weakness also, as its presence
in the International market is very low. Till now, it could not able to make a profitable market
share in the International market. One of the major weaknesses is the impact of the external
environment in the growth strategy of the organization (Jain 2015). Moreover, Adair has failed to
sustain the competitive advantage of the market and entering the online retail lately had resulted
negative impact on the organization.

Opportunities: Retail industries in Australia shows a good growth within the market area and
the organization tries to promote its brand through advertising, sponsorship and more. Apart
from this factors such as the lifestyles of the consumers in Australia, advent technologies,
supply chains provides good opportunities for the retail industries to expand their market share in
Australia. In order to increase their productivity and revenue growth, the organization tends to
implement strategic acquisitions in the emerging economies (Segarra et al. 2016).
Threats: The major threats for the Adair organization is mainly from the larger retail industries
in Australia such as Woolworths and the Coles Supermarket. Another threat to Adair comes from
the intervention of the Government in their business procedure (Kew and Stredwick 2017). Apart
from this, economic recession in the country could hinder the growth of the organization.
Porter Five Forces Analysis
Bargaining Power of the Buyers: In respect to the Australian retail market, the bargaining
power of the buyers is higher as there is large number of retail industries that provides variety of
products to thee customers (Corona 2015). It has been stated that the strong power of the
customers forces the organization to decrease their products process in order to target large
number of customers.
Bargaining Power of the Suppliers: In the context of porter, it has been stated that higher the
importance of suppliers, higher is the power of the suppliers. Therefore, Adair organization tends
to have lower dependence on their suppliers, that means the bargaining power of the suppliers
are low (Wanjohi 2017). The main reason behind this is the amount of shares of retail market in
Australia and the large number of products that are being sold to the industries.
Threat of new Entrants: In case of Adair, the threat from new entrants tends to be lower as the
bigger retail industries do not keep any pace for the entry of new players in the market. And if
any new player enters the market, it becomes difficult for them to survive in that particular retail
industry and therefore it tends to reduce the threat from the new entrants (Kew and Stredwick
2017). Apart from this, Adair is consider as a dominant player with larger access to various
distribution channel and trusted brands in the retail sector.
Rivalry among the Existing Firms: The threat from the existing firms in case of Adair
organization is higher, as there are major competitors in the Australian supermarket. Dominant

market players include Woolworths, Coles supermarket and more that tends to exercise their
power in the overall retail industries in Australia and for dominating the largest supermarket they
tends to fight among themselves.
Threat of Substitutes: As Adair is mainly a retail industry that deals with products that are
essential for daily needs, therefore consumers need to avail those products as there are no other
substitutes of those products (Segarra et al. 2016). Therefore, the threat of substitutes for the
organization is low; consumers need to buy all those retail products that are important to them.
Profit and loss figures shares in stock exchange
2017 (Net
Revenue)
2017 (Sales)
Adair $ 6.8 billion $ 15.04 B
Woolsworth $ 25.7 billion $ 41.15 B
Tesco $ 19.2 Billion $ 78.43 B
From the above table, it could be seen that in case of the generation of revenue in terms of profit
and loss, Adair ranks third. Woolsworth being one of the largest retail industries in Australia
ranked at the top most level by earning $ 25.7 billion. Tesco ranks second by generating profit of
$ 19.2 billion, whereas, Adair earned $ 6.8 billion, whereas in terms of sales, Adair has a low
sales profit than its competitors (Wanjohi 2017). In order to increase its profit, Adair needs to
target larger customers in order to sell more products.
Factors of sustainable competitive advantage
The company has been following a strategic direction for long but has recently attempted to
improve the execution of the plans. The company believes that improvement in execution will
have corresponding improvement in results i.e. some of the key drivers of Adair’s strategy are
discussed here(Rosemann & vom Brocke 2015). One of the major strategies followed by

Adair’s to attract more customers to its stores is product differentiation and product line
expansion. Presenting high quality and appealing products to the customers is critical in home
décor business. Adair’s, over the years have developed an ability to address broad range of
customer needs by offering differentiated products that are superior in quality but at attractive
prices. This strategy of Adair’s has been successful so far and the trend shows the company is
likely to pursue incremental steps in adding new range of products and reaping corresponding
increments in sales.
Second strategic measure by Adair’s is increasing their retail store network. In spite of the
reduced profit margins, the company is betting their luck on not only expanding store network
but also upgrading the floor spaces in existing network. One of the executives has said that the
company plans to open at least eight new outlets in Australia and New Zealand every year.
However, the history of two to three years indicates that the company has opened only four
outlets on average. The finance managers have reported that stores that upgraded their physical
space have stated to give better returns in terms of revenue and profit margins. Company has
learnt that providing customers with broader range of products, and differentiated customer
experience can lead to better profitability (Shockleyet al. 2015).
Recently, Adair’s have started a concept called omni channel retailing. The customers have the
choice to buy the products from retail outlets or from online site (Gao & Su 2016). Irrespective
of the customer’s style of buying, the company has decided to provide flexible customer
experience. The company has introduced loyalty programs to retain customers and enhance
engagement with the company. It is apparent that online sales is likely to post higher rate of
growth and company is focusing in developing various services around it such as hassle free
returns, etc.
Capable staff is considered as part of the strategy at Adair’s. The company values passionate and
high performing team members as critical for the success of the company. The company aims to
provide excellent shopping experience to its customers along with service. Great service can be
provided by people only, for which the company encourages and trains the staff to provide
excellent service (Vieiraet al 2017).
Overall, Adair’s is placed to expand its international presence, especially in New Zealand. The
executives in the company are confident that with their competitive advantage of larger product

range, omni channel sales, and appealing price it can do better in the coming years in terms of
profitability. Competitive advantage of company is the reason for sustained business from the
customers. As per the five forces analysis, the entry barriers to a new competitor are high as the
capital needed to start a retail chain is huge. The threat of substitutes is high as there are many
retailers who provide home décor items. The bargaining power of suppliers is neutralized by the
brand value of the Adair’s and the bargaining power of the customers is high as they have many
alternatives to satisfy their needs. The industry rivalry in home décor retail is neither intense nor
trivial; the company needs to respond to the customer needs quickly.It is a set of attributes that
allow a company to perform better than the competitors. The increase in sales in retail outlets
and online site indicates strong competitive advantage for the company.
Recommendations for Future Strategic Direction
It appears that strategic direction of the company is right, but the management should focus on
the execution of the strategy i.e. product differentiation and store expansion. The correlation
between the new stores development and store up gradation, and the growth of revenue and
profitability are strong, and it must be pursued (Davcik & Sharma 2015). The company managers
have acquired unique ability to include new products that meet the needs of the customers; the
company must encourage and nourish such initiatives of the managers. The product
differentiation with affordable price range and product category expansion also needs to focus to
keep away the competitors.
The ambition of starting eight stores per year appears to be a bit impractical, looking at the
profitability and the resources of the company. It would be safe to start four new stores per year
for next two years and four floor expansion projects. Physical floor expansion in the existing
stores has been more profitable than opening new stores (Nishida & Yang 2015). The managers
must pay attention to the profitability of the retail store differentiation i.e. home maker, kids,
urban republic, etc.
Overall the company may adopt the following recommendations.
 Continue the loyalty programs
 Strengthen online presence and develop web pages to enhance shopping experience
 Facilitate broader range of products availability

 Provide realistic and precise product information in the online facility
 Reduce number of clicks in the purchase process and simplify payment procedures
 Expand to new and unrepresented areas depending on the recognized demands
 Look for newer international markets
 Initiate mobile marketing and mobile commerce
Conclusion
Analyzing a company’s strategic management has several benefits (Puntet al. 2016). Strategic
evaluations present an opportunity to objectively analyze the effectiveness and efficiency of the
current strategy. To helps the investors and job seekers to assess the future potential of the
company. For the managers and decision makers, it provides an opportunity to take corrective
actions bring back the company to right direction. Performance assessment and corrective
actions are two significant outcomes of strategy analysis. Though Adair’s had low profitability
in the past few years, the coming years appear to be positive for the company.
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