Kingfisher assignment

Kingfisher assignment

• 1.
  Module name: SustainableStrategy - from Planning to Implementation Title of the assignment: Strategic Analysis of Kingfisher PLC UK Student name : Student ID:
• 2.
  Executive Summary Every companywho engaged in business needs a strategy which drives the company to success. Irrespective of the resource availability, if the company adopts a wrong strategy such company will not be able to maximise its share holder‟s value which is the ultimate goal of a company. Therefore it is clear that strategy of a company is the power that drives the company. In this assignment strategy of kingfisher was analysed carefully in terms of its positioning and the direction using model such as PESTLE, SWOT analysis and five forces .The direction of the strategy was analysed using BCG matrix. Further suitability, acceptability, feasibility and sustainability of the strategy were described. Finally recommendations were given in the light of potential of the company. Page 2
• 3.
  Contents 1. Introduction.......................................................................................................................................... 4 2. Strategic position ................................................................................................................................... 5 External Environment ............................................................................................................................ 5 3. Strategic Directions ............................................................................................................................. 11 4. Suitability, Acceptability, Feasibility and Sustainability............................................................... 14 Suitability ............................................................................................................................................... 14 Acceptability .......................................................................................................................................... 14 Feasibility ............................................................................................................................................... 14 Sustainability ......................................................................................................................................... 14 5. Conclusion and recommendation .................................................................................................. 14 6. References ........................................................................................................................................ 15 Page 3
• 4.
  1. Introduction Kingfisher PLCis a multinational company engaged in home improvement business. The company‟s headquarter is located in London. Currently the company is speeded its stores in more than 950 locations around 8 countries in Europe and Asia. In 1982 the company was founded after a buyout of British Woolworth supermarket chain by Paternoster stores Ltd. After the incorporation the company expanded its business by series of mergers and acquisitions such as B&Q, Comet, Castorama and Superdrug. Listed in London Stock exchange and FTSE 100 the company has recorded revenue of £ 10.4 billion in 2001 while the operating profit for the same year was £704 million. The company is employed around 80,000 employees around its super market chain. The company planned to acquire Asda in 1999 and failed due to the competition form Wal-mart, the largest supermarket chain in the world. The sales from outside UK provide more than 50% contribution for the total revenue of the company. Due to the high involvement of corporate social responsibility activities, The Company was listed in two corporate social responsibility indexes, Dow Jones Sustainability index and FTSE4Good. (http://www.kingfisher.com) The company‟s major brands are B&Q, Brico Depot, Castorama and Screwfix. Page 4
• 5.
  2. Strategic position Jonsonand Scholes describe that the strategic position of an organisation is refers to identification and analysing of the impact of the external environment, resources available in the organisations internal environment and different stake holder competencies. (Jonson & Scholes, 2005) External Environment Following techniques and models can be used to analyse Kingfisher‟s external environment.  PESTEL Analysis It is evidenced that there are several external factors which affect to kingfisher‟s strategic position. (Appendix 1) It can be noted that the political situation of those countries where kingfisher has its supermarkets affects its strategic position. More that 50% of the revenue is generated out of UK market and thus it is very important that the political situation of those countries to the operations of the kingfisher. After considering economic factors it is evidence that the economic stability of the countries where kingfisher operates have a significant impact to its operations. Among other economic factors inflation, interest rates, exchange rates plays key role. Further, in the countries that‟s facing economic crisis such as Greece the company may also face to same problems. Moreover the fiscal and monetary policy may also affect to kingfisher‟s operations as those may disturb the market activities of those countries. High demand for new and stylish home products shows the impact from those goods to the operations of kingfisher. Those are the new opportunities where company can execute to its growth. Page 5
• 6.
  Cutting edge technologytogether with innovation may have impact on the operations of kingfisher. Accordingly the customers may make their choice on the products which has superior quality and technology. Environment factors such as corporate social responsibility and sustainability development are one of the major concerns of various stake holders of the company including customers and suppliers. Activities which reduce carbon emission and promoting product which require minimum level of energy are encouraged by various pressure groups. Those factors may affect to the way the company carry out its operations. Finally the legal factors relating to operation of supermarket chain in various countries may different to each other and kingfisher needs to comply with those laws and regulations in respective countries.  Michel Porter’s five forces This gives an analysis of forces that affects to the operation of kingfisher in the retail industry in UK. (Source,www.hbr.org) Page 6
• 7.
  1. Threat ofnew entrants Since kingfisher is offering wide range of products which are required for a house there is a high threat of new entrants. Kingfisher can eliminate those threats by implementing entry barriers such as , Increasing entry cost by investing in technology Promoting eco friendly products Offering new stylish products with high quality Improving economies of scale through increasing efficiency and effectiveness. 2. Bargaining powers of Customers Since kingfisher offer large range of products customer has the option to buy those products from different shops around the country .Bargaining power of the customers can be eliminated through following activities, Increase brand loyalty among customers such as B&Q etc Customer loyalty programs Further new stylish products offered by the company reduce the bargaining powers of customer as customers don‟t have much choice in the market. 3. Bargaining powers of suppliers Kingfisher purchases various range of products for household consumption thus suppliers can make a great influence for its operations. Thus to eliminate or reduce such threat the company entered in to long term supplier contract with suppliers and obtain best price from customers. Further kingfisher buys products from several customers and therefore the bargaining powers of each supplier is controlled. 4. Threat of substitutes Since kingfisher operates in retail market the availability of substitutes are very low. Page 7
• 8.
  5. Competitive rivalrywithin the industry Competition among the players in the market is very high and therefore the company has taken server steps to reduce such competitiveness. Build strong brands which competitors don‟t have Offer lowest price in the market Offer new and stylish products and obtain early mover advantage.  SWOT Analysis Strengths, weaknesses, opportunities and threats that the company has in its operations is discussed in below, Strengths Weaknesses 1. Loyal customers- the company have a 1. Low investment in Research and portfolio of loyal customers who never developments - The Company pays leave the company little attention in to research and 2. Strong brand value- Kingfisher is having development activities. strong brands such as B&Q, Brico 2. Low market share in other Depot, screwfix and Koctas which countries- other than UK an France competitors does not have. kingfisher has lower market share 3. Pricing- kingfisher offers the best price in home improvement products. among the competitors which cannot be 3. Weaknesses in the management matched. team – the recent performance of 4. New and stylish product range- the company shows that the kingfisher offers new and stylish range management team of kingfisher is Page 8
• 9.
  of products which are unique to weak. kingfisher. Opportunities Threats 1. Global level competition in UK- with 1. Acquisitions – There are lots of small the acquisition of Asda by wall mart companies where company can acquire there is a severe competition and expand its operations. among companies to increase the margins and volume. In this 2. Expansion in to foreign markets- the scenario kingfisher needs to face to company‟s operations are limited to the completion at global level. Europe and Asia. Company has the 2. The technology used by the market potential of expanding its operations in is very cheap and thus it will threat to American and African region. to kingfisher as they use latest technology at high cost. 3. Innovation - Kingfisher can improve its 3. Economic recession product range by undertaking research In a situation where economy faces and development activities and innovate recession the company may exposed to new products which can offer to threat where the consumers may not customers. interested in home appliances thinking that those are unnecessary costs. 4. Diversification- without limiting to home appliances and products sales kingfisher can expand its operations in to other suitable business sectors using its knowledge and experience. Capabilities of Kingfisher 1. Ability introduce new and innovative products with eco friendly manner 2. Ability to expand operation in to foreign countries with a lower level of risk Page 9
• 10.
  VRIN Analysis 1. IdentifyingKingfisher resources Strong brand portfolio Geographically dispersed supermarket chain Highly skilled labour force 2. Valuable Above mentioned resources are capable of helping the firm to create value creating strategy. 3. Rare The resources kingfisher has is rare compared to the competitors of the company 4. In- imitable Those resources are hard to in-imitable as its involves high cost to imitate 5. Non substitutable Those resources cannot be substitute by any other resources. Page 10
• 11.
  Value chain The value chain of King fisher is as follows (Soruce,WWW.hbr.org) 3. Strategic Directions Kingfisher launched seven point “Delivering value „ plan in the year of 2008. Accordingly such seven objectives are as follows, 1. Driving up B&Q UK and Ireland profits 2. Exploiting our UK opportunities 3. Expanding our total france business 4. Rolling out Eastern Europe 5. Turning around B&Q China 6. Growing group sourcing 7. Reducing working capital (Source, www.kingfisher.com) Page 11
• 12.
  .In order tomonitor whether the objectives are achieved kingfisher has established following Key Performance Indicators (KPI) Operating margins Total trade sales Net profits Direct shipments Working capital balance Results of staff engagement survey Eco product sales value as a percentage of total sales. (www.kingfisher.com) When considered the strategic direction of kingfisher it can be analysed using Ansoff‟s growth matrix as follows, Products/Services Existing New Existing MARKET PENETRATION PRODUCT DEVELOPMENT  Increase the revenue in  Promote other retail UK and Europe products such as food countries where the items in the existing company is already retail markets having operations.  Develop new and Markets  Expand retail shops in stylish products to the the Asian region existing market and customers New MARKET DEVELOPMENT DIVERSIFICATION  Start operations in new  Expand operations foreign markets with through diversifications same products.  Start offering new  Expand operations in products in new foreign UK and Europe region markets. Page 12
• 13.
  When carefully analysingkingfisher‟s seven strategies it is understand that the company is concentrating market penetration strategy. The company‟s strategy is to grow its operations in the existing market such as UK, France and Asian countries such as china. However it is clear that kingfisher is having a lots of potential to consider other 3 strategies as its has all resources to execute such strategies. (Peter, 1995) Kingfisher and BCG Matrix (source ,www.bcg.com) Once we considered the BCG matrix it can be suggest that all the brand of kingfisher, “B& Q”, “Castprama”, “Brico Depot”, “Screwfix”, “Koctas”, and “Hornbach” are in Star position as it has launched its seven step strategy in 2008 and from that time onwards company was improving its performance over the period. Accordingly over the four years from 2008 to 2011 the Key Performance Indicators (KPIs) of the company shows positive improvements and therefore it is concluded that kingfisher is in the star position. Page 13
• 14.
  4. Suitability, Acceptability,Feasibility and Sustainability Suitability The vision of the company is to “Be the world‟s leading local home improvement retailer” and this vision is evidenced by the seven step strategy formulated by the company. Accordingly the strategy of the company was formulated to accomplish the vision of the company. (www.kingfisher.com) Acceptability The strategy of the company can be accepted as such strategy has formulated with the intention of increasing the cash returns of all parties. Accordingly it is clear that the objective of such strategy was to increase the shareholders value. Feasibility The feasibility of the strategy of kingfisher is proved by achieving Key Performance Indicators set by the company from the year of in which the strategy was initiated. Sustainability The strategy of kingfisher concentrates on the sustainability as well. This is evidenced by the introduction of “Eco product sales as a percentage of total sales” as a Key Performance Indicator to its strategy. (Johnson G, Scholes, 2005) 5. Conclusion and recommendation It is evidenced through this analysis that kingfisher is a company where they can explore lots of their potentials. Further it has lots of strengths and opportunities where company and concentrate on. Having a loyal customer portfolio and strong brand portfolio i propose following strategies to kingfisher. Expand in to new markets both in UK Europe and other continents with strong brand portfolio such as B&Q, Castorama, Brico Depot etc. Realign its marketing strategies to grow UK and Europe operations so that it can remain in the star position in the BCG matrix. Divest in to new sectors such as food items, Gas stations ect using knowledge and experience kingfisher has in the retail industry. Page 14
• 15.
  6. References Porter, M.E. (2008) "The Five Competitive Forces That Shape Strategy", Harvard Business Review, January 2008, pp. 79-93 Chisnall, Peter: Strategic Business Marketing, 1995 Johnson G, Scholes K, Whittington R. (2005): The Environment: Exploring Corporate Strategy, Pearson Education Kingfisher PLC,2012,United Kingdom, Available (online) www.kingfisher.com, [viewed on 18 March, 2012] BCG Matrix, Available (online) http://www.bcg.com/about_bcg/history/history_1968.aspx [viewed on: 15/3/2012]  Johnson G, Scholes K, Whittington R. (2005): The Environment: Exploring Corporate Strategy, Pearson Education Page 15
• 16.
  Appendix 1 PESTEL Analysis 1. Political Factors 1. Political situation in the countries where kingfisher carrying out its business operations. 2. Economic Factors 1. Specific economic situation of countries where kingfisher operate. 2. Monetary and fiscal policies adopted by the government of those countries. 2. Social/Cultural Factors 1. High demand of new and stylish home products. 2. Demand in Europe market to home products. 3. Technological Factors 1. Cutting edge technology used in retail shops. 2. High demand and recognition of online sales. 4. Environmental Factors 1. Corporate social responsibility activities 2. High concentration for sustainability development 5. Legal Factors 1. Laws and regulations relating to sale of retail goods. Page 16
• 17.
  Page 17