Kingfisher assignment

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Kingfisher assignment

  1. 1. Module name: Sustainable Strategy - from Planning to Implementation Title of the assignment: Strategic Analysis of Kingfisher PLC UK Student name : Student ID:
  2. 2. Executive SummaryEvery company who engaged in business needs a strategy which drives the company tosuccess. Irrespective of the resource availability, if the company adopts a wrong strategy suchcompany will not be able to maximise its share holder‟s value which is the ultimate goal of acompany. 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 andthe direction using model such as PESTLE, SWOT analysis and five forces .The direction of thestrategy was analysed using BCG matrix. Further suitability, acceptability, feasibility andsustainability of the strategy were described. Finally recommendations were given in the light ofpotential of the company. Page 2
  3. 3. Contents1. Introduction.......................................................................................................................................... 42. Strategic position ................................................................................................................................... 5 External Environment ............................................................................................................................ 53. Strategic Directions ............................................................................................................................. 114. Suitability, Acceptability, Feasibility and Sustainability............................................................... 14 Suitability ............................................................................................................................................... 14 Acceptability .......................................................................................................................................... 14 Feasibility ............................................................................................................................................... 14 Sustainability ......................................................................................................................................... 145. Conclusion and recommendation .................................................................................................. 146. References ........................................................................................................................................ 15 Page 3
  4. 4. 1. IntroductionKingfisher PLC is a multinational company engaged in home improvement business. Thecompany‟s headquarter is located in London. Currently the company is speeded its stores inmore than 950 locations around 8 countries in Europe and Asia.In 1982 the company was founded after a buyout of British Woolworth supermarket chain byPaternoster stores Ltd. After the incorporation the company expanded its business by series ofmergers and acquisitions such as B&Q, Comet, Castorama and Superdrug.Listed in London Stock exchange and FTSE 100 the company has recorded revenue of £ 10.4billion in 2001 while the operating profit for the same year was £704 million. The company isemployed 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 corporatesocial responsibility activities, The Company was listed in two corporate social responsibilityindexes, 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. 5. 2. Strategic positionJonson and Scholes describe that the strategic position of an organisation is refers toidentification and analysing of the impact of the external environment, resources available in theorganisations internal environment and different stake holder competencies. (Jonson & Scholes,2005)External EnvironmentFollowing techniques and models can be used to analyse Kingfisher‟s external environment.  PESTEL AnalysisIt is evidenced that there are several external factors which affect to kingfisher‟s strategicposition. (Appendix 1)It can be noted that the political situation of those countries where kingfisher has itssupermarkets affects its strategic position. More that 50% of the revenue is generated out of UKmarket and thus it is very important that the political situation of those countries to theoperations of the kingfisher.After considering economic factors it is evidence that the economic stability of the countrieswhere kingfisher operates have a significant impact to its operations. Among other economicfactors inflation, interest rates, exchange rates plays key role. Further, in the countries that‟sfacing 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 maydisturb the market activities of those countries.High demand for new and stylish home products shows the impact from those goods to theoperations of kingfisher. Those are the new opportunities where company can execute to itsgrowth. Page 5
  6. 6. Cutting edge technology together with innovation may have impact on the operations ofkingfisher. Accordingly the customers may make their choice on the products which hassuperior quality and technology.Environment factors such as corporate social responsibility and sustainability development areone of the major concerns of various stake holders of the company including customers andsuppliers. Activities which reduce carbon emission and promoting product which requireminimum level of energy are encouraged by various pressure groups. Those factors may affectto the way the company carry out its operations.Finally the legal factors relating to operation of supermarket chain in various countries maydifferent to each other and kingfisher needs to comply with those laws and regulations inrespective countries.  Michel Porter’s five forcesThis gives an analysis of forces that affects to the operation of kingfisher in the retail industry inUK.(Source,www.hbr.org) Page 6
  7. 7. 1. Threat of new entrantsSince kingfisher is offering wide range of products which are required for a house there is a highthreat of new entrants. Kingfisher can eliminate those threats by implementing entry barrierssuch 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. 8. 5. Competitive rivalry within 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. 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 Kingfisher1. Ability introduce new and innovative products with eco friendly manner2. Ability to expand operation in to foreign countries with a lower level of risk Page 9
  10. 10. VRIN Analysis1. Identifying Kingfisher resources Strong brand portfolio Geographically dispersed supermarket chain Highly skilled labour force2. 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 company4. In- imitable Those resources are hard to in-imitable as its involves high cost to imitate5. Non substitutable Those resources cannot be substitute by any other resources. Page 10
  11. 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. 12. .In order to monitor 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 growthmatrix 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 andMarkets  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. 13. When carefully analysing kingfisher‟s seven strategies it is understand that the company isconcentrating market penetration strategy. The company‟s strategy is to grow its operations inthe existing market such as UK, France and Asian countries such as china. However it is clearthat kingfisher is having a lots of potential to consider other 3 strategies as its has all resourcesto 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 haslaunched its seven step strategy in 2008 and from that time onwards company was improving itsperformance over the period. Accordingly over the four years from 2008 to 2011 the KeyPerformance Indicators (KPIs) of the company shows positive improvements and therefore it isconcluded that kingfisher is in the star position. Page 13
  14. 14. 4. Suitability, Acceptability, Feasibility and SustainabilitySuitabilityThe vision of the company is to “Be the world‟s leading local home improvement retailer” andthis vision is evidenced by the seven step strategy formulated by the company. Accordingly thestrategy of the company was formulated to accomplish the vision of the company.(www.kingfisher.com)AcceptabilityThe strategy of the company can be accepted as such strategy has formulated with the intentionof increasing the cash returns of all parties. Accordingly it is clear that the objective of suchstrategy was to increase the shareholders value.FeasibilityThe feasibility of the strategy of kingfisher is proved by achieving Key Performance Indicatorsset by the company from the year of in which the strategy was initiated.SustainabilityThe strategy of kingfisher concentrates on the sustainability as well. This is evidenced by theintroduction of “Eco product sales as a percentage of total sales” as a Key PerformanceIndicator to its strategy. (Johnson G, Scholes, 2005) 5. Conclusion and recommendationIt is evidenced through this analysis that kingfisher is a company where they can explore lots oftheir potentials. Further it has lots of strengths and opportunities where company andconcentrate on. Having a loyal customer portfolio and strong brand portfolio i propose followingstrategies 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. 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. 16. Appendix 1PESTEL 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
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