Strategic Analysis of Warehouse Group Limited
The Warehouse Group Limited is a retail merchandise company headquartered in North Shore, New Zealand. The company offers a range of products to consumers such as apparels, sporting equipments, entertainment products, gardening, grocery, music and technology among other related products. In addition to these products the retail store also provides its customers with insurance products and credit cards. Currently the company has a total of 87 warehouse stores including 47warehouse stationery in New Zealand. The company has enjoyed significant growth and profitability since its inception in 1982. The high level of competition in the retail industry exposes the organization to various challenges that are mainly attributed to stiff competition from the rival firms. This report seeks to provide a comprehensive strategic analysis of Warehouse Group Limited as it leverages itself in the competitive global business environment. The report gives analysis of macro environmental factors, competitive environment and SWOT analysis. In the macro environmental analysis, the report considers PESTLE to evaluate various environmental factors that affects the operation of the company. Various elements under porters five forces model such as supplier power, buyer power, threats of new entrants, competitive rivalry and threat of substitute products are analysed. It also analyse the competitiveness of the company by considering porters five forces model. SWOT analysis is also used to evaluate the strengths, weaknesses, opportunities and threats of the company. The report ends by giving a brief conclusion based on the strategic analysis.
Table of Contents
Warehouse Group Limited is one of the largest retail store companies that is based and operate in New Zealand. The company operates various discount retail stores that sells a variety of products that ranges from non grocery to grocery products (Warehouse Group Limited, 2014). The company corporate headquarter is based in North Shore, New Zealand and operates in various locations within New Zealand. The retail industry in which the company operates is characterized with high level of competitions and the rapid changes in technological advancement. The industry is also capital intensive and has high operational costs that are mainly attributed to labor cost. Due to high level of competitions and high operational costs, companies operating in the retail industry regularly review their strategic plan to remain competitive and profitable in the marketplace (Ireland, 2010). This report provides a strategic analysis of The Warehouse Group Limited through evaluation of the macro environment, competitive environment and SWOT analysis.
Macro environmental analysis is a strategic management tool that assists managers in assessing external environment such as political, economical, social, technological, legal, and environmental factors of organizations (Hamer, 2006). The evaluation of the macro environment analysis of The Warehouse Group Limited considers a strategic analysis tool known as PESTLE. PESTLE is a strategic analysis tool that evaluates the political, economic, social, technological, legal and environmental factors of organizations (Gamble, Thompson, & Peteraf, 2013).
New Zealand is a politically stable country and this provides the company with a favourable business environment that can enable the company to meet its short term and long term objectives. Various policies such as taxation policies and regulations are conducive to the organization and this facilitates the development and growth of the company. The government of New Zealand also provides necessary support to various businesses in the country and this also strengthens the position of the retail store in the marketplace.
Economic uncertainties and opportunities can have various effects on the operations of businesses in a country. The effects of global financial crisis affected many businesses including the retail industry. The effects of global financial crisis and recessions can affect the business of The Warehouse Group Limited through a reduction in purchasing power of customers. Many of the customers have to cut their budget due to a reduction in income as a result of recessions and global financial crisis. This reduces the demand of the retail products hence negatively affects sales and profitability of the company. The inflation rate in New Zealand has been favorable thereby reducing the risks associated with fluctuations of prices in the country. The economy is also having steady growth rate and this is an encouraging factor to various investors in the country. The economy is also characterized with a stable rate of interest making business to incur low cost when financing their business activities. From economic perspective it can be argued that New Zealand provides favorable economic environment for Warehouse Group Limited to thrive.
New Zealand is composed of various social classes of people with different demographic characteristics. The products offered by the company should be able to cater for all the social groups in the country such as both high and low income earners, gender groups, ages and different cultural and ethnic groups (Hanson et al, 2011). This forces Warehouse Group Limited to structure its costs in a manner that can cater for all social classes of people in the country. There is also an increase in population growth in Asian and African regions. Rapidly increasing population often leads to an increase in market share for organizations (Pinto, 2007). This also provides an opportunity for the company to expand its market share in these regions.
The advancement in technology has provided the company with necessary technological changes that are important for improving its operational and management efficiency. The company uses modern computerised payment, billing and tracking systems and this contributes significantly to its improved performance. The advanced level of technology in New Zealand enables the company to employ new technological advancement techniques to improve its productivity. New Zealand has also efficient communication and transport network system that makes it easy for the company to transport its products to and from different destinations. The advancement in communication system in the country also reduces the communication cost of the company in the country and this is important in improving the performance of the company.
The threat of climatic changes and global warming has become a critical factor in all industries. There is an increasing pressure from both governmental and non-governmental environmental agencies for companies to reduce environmental pollution and degradation. The packaging materials that are used by the retail stores are subject to various environmental legislation and regulations. The company is required to use environmental friendly packaging materials so as to help protect the environment. Changes in climatic condition such as poor weather conditions can cause shortages in supply to certain products such as agricultural products to the Warehouse Group Limited. Some of the regions within Europe and New Zealand are characterized with poor weather conditions and this can affect the supply of various agricultural products that depends on weather conditions to the company.
Since Warehouse Group Limited deals with a variety of products, it is faced with various regulations from different authorities within the country such as health, environmental, food regulations and safety standard among others. As such, the company must follow and comply with the strict legal requirements from different regulation authorities. The company also operates a number of stores in different parts of the country and this again exposes it various legislation and policies from the respective regions of operations. Strict environmental regulations and policies in New Zealand therefore increases the operation cost of the company since it has to comply with the regulations and policies.
The competitive analysis of Warehouse Group Limited uses Porters five forces model. There are five elements considered in Porters five forces model and include threat of substitutes, competitive rivalry in the industry, buyer power and supplier power. These elements are important in determining the competitiveness of firms in an industry through evaluation of their influence on organizations (Prasad, 2011).
Threat of substitute products refers to a situation where customers of a product within an industry can be able to find a similar product from other companies in the industry. The threat of substitute products is high in industry with large number of rival firms (Prasad, 2011). The retail store industry has many rival companies hence the threat of substitute products is relatively high. High threat of substitute products makes it easy for customers to find substitutes products from other rival firms. Warehouse Group Limited has high threat of substitute products hence expose it to potential reduction in market share and profitability. The presence of high number substitute products make it easier for customers to switch to other companies offering similar products hence reduces the income and sales of the company.
Competitive rivalry in the industry is another factor that Warehouse Group Limited should focus on in order to be competitive in the market. This force is common in the industry since there are numerous retail outlets in New Zealand that offers similar products and services in the market. Some of the major competitors of the company include Farmers Departmental stores, Kmart discount departmental stores, Briscoes Group and Super Cheap Auto. The presence of numerous firms in the retail industry makes the level of competition for prices, customers and market share to be intense. Focusing on the competitive rivalry force can enable the company to maintain its competitive advantage in the market and enjoy profitability (Grantet al, 2014). It can also ensure that the company maintains its customers in the market hence maintain adequate demand for its products. The competitive rivalry in the industry can therefore be argued to be very high.
Buyer power refers to the ability of organizations customers to drive prices of the products within the industry downwards. The power of buyers can be determined by the number and importance of buyers in an industry. If a firm deals with powerful buyers then the prices of its products will be dictated by the buyers. An industry characterized by high bargaining power of buyers can experience low pricing of their products (Hsieh & Chen, 2011). The retail industry deals with a large number of customers who are so powerful. The strength of buyer power is high in the industry as there are many buyers and potential customers of the products. The power of buyers is also high in the retail industry since buyers can easily swift to other retail outlets that they consider as favorable.
Supplier power is involved with the determination of how easy or difficult it is for suppliers to push up the prices of products. The number of organizations supplying various inputs, the importance that is attached to their products, the strength of the suppliers and the cost incurred when switching from one supplier to the other can determine the supplier power in the market. Strong supplier power can push the price of inputs hence increase organizations cost (Halawi et al, 2006). The strength of supplier power in the retail industry is low due to the availability of high number of suppliers in the industry. The presence of high number of suppliers increases the level of competition in the market hence influence the prices of products. There is also low cost of shifting from one supplier to the other. This makes it easy for the firms in the industry to shift to other suppliers if there is an increase in cost of supplies from a particular supplier. Warehouse Group Limited is therefore faced with low supplier power in the industry.
Threat of new entrants in the retail industry is a major force that can affects the operation of Warehouse Group Limited in New Zealand. Due to the high profitability in the industry, many firms are attracted to the industry and this increases the threat of new entrants in the industry. The entry of new firms in the industry can reduce the profitability for Warehouse Group Limited as well as other firms in the industry. The profits and market share of the company can therefore reduce due to the new entrants of firms and this can make the industry to become less attractive in the future (Levy, 2003). The industry however requires large amount of initial capital and this can also reduce the threat of new entrants of firms in the industry.
SWOT analysis can be used to assess the internal and external environment of organizations. It involves the assessment of strengths, weaknesses, opportunities and threats. The essence of SWOT analysis is to enable organizations to develop appropriate strategies that can help them utilize their opportunities and strengths while reducing their weaknesses and strengths (Valentin, 2001).
Warehouse Group Limited has a strong reputation in New Zealand and is the preferred retail outlet to a number of people in the country. The company is well established in the marketplace as opposed to other retail outlets in the country. The reputation and the brand image of the company in New Zealand make it to have competitive advantage over other retail shops in the country. The company also operates in several cities across New Zealand hence has a large customer’s base. This makes it to have a steady flow of revenue hence it is financially stable (Lee et al, 2001). The company has a good brand image making it attract attention of various customers across the country.
One of the major weaknesses of Warehouse Group Limited is that it has weak brand awareness as compared to other major retail companies that operate in the country such as Wal-Mart and Kmart retail stores. The number of retail outlets of Warehouse Group Limited is also less as compared to other global giants. The company market share is also small due to intense competition from the rival firms in the market. This is because there are various businesses that deal in similar products as the company and this reduces its market share.
There is a potential growth in the market due to increase in international trade and rapidly growing population. The company can take advantage of the available market in other countries so as to increase its market share. The growing population in the Asian and African markets also provides an opportunity for market growth due to the increase in number of customers. This again provides an opportunity for the retail company to increase its market share and profitability in these regions. Outsourcing is also another opportunity that can enable the company to acquire resources and services that are not at its disposal from competent suppliers. This can increase the efficiency and productivity of the company (Kadiyali et al, 2001). There is prospect of merger and acquisition with leading retail companies both in the domestic and global market with an aim of exploiting new markets. Strategic alliance with other retail companies can also help strengthen the market position of the Warehouse Group Limited in the industry.
The industry is characterised with high number of retail outlets companies in New Zealand as well as Europe thus increasing the level of competition in the retail industry. The company is also faced with a challenge of the ever rising cost of operation that is attributed to high wage bills and high inflation rate. This significantly affects the profitability of the company. The difference in government policies and legislation regarding different products that the company deals with also offers significant challenge to its operation (Harrison, 2012). Market uncertainties such as global financial crisis, terrorism and adverse weather conditions can affect the operations of the business hence reduce its profitability Economic factors such as the ever increasing wage rates, fluctuating interest rates and influence of the trade unions also affect the operations of the business.
Warehouse Group Limited is an international retail company that has enjoyed continuous growth since its inception in New Zealand. The company has grown from a single retail store to a number of retail stores that are spread across different regions in the country. However, the market continues to be highly competitive, and Warehouse Group Limited must seek ways of leveraging its strengths and opportunities to remain competitive in the industry. This report has presented a comprehensive strategic management case analysis of Warehouse Group Limited. One of the major strength of the company is that it is well establish in the country and enjoys loyalty from a number of customers. The company can utilise its reputation in the country to increase its image and brand awareness in the market. The company is however faced with some challenges such as intense competition and increase in operational cost. It is therefore advisable for the company to develop strategies that will ensure that its operation cost is reduced. The company should also use various marketing strategies to ensure that it remains competitive in the marketplace.
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