Strategic Management in Small and Medium Enterprises - Case Study Example

Table of Contents Table of Contents 1 3. Service 3 3.1. Description 3 3.2. Service Features 3 3.3. Service Adoption 4 3.4. Value Proposition 5 4. Direction 5 4.1 Mission Statement 5 4.2. Vision Statement 5 5. Strategic Analysis 5 5.1. Market Analysis 5 5.1.1. Market Size 5 5.1.2. Market Trend 6 5.1.3. Market Economics 7 5.2. Competitive Analysis 8 5.2.1. Suppliers 8 5.2.2. Customers 8 5.2.3. Substitutes 9 5.2.5. Competitors 10 5.3. Environment Analysis 12 5.3.1. Regulatory Influences 12 5.3.2. Economic Influences 13 5.3.3. Environmental Influences 13 5.3.4. Societal Influences 14 5.3.5. Technological Influences 15 5.4. SWOT Analysis 16 5.4.1. Strengths and Weaknesses 16 5.4.2. Opportunities and Threats 17 5.4.3. Competitive Advantage 18 6. Marketing Plan 18 6.4. Promotion 18 6.4.2. Promotional Strategy 18 References 19 3. Service 3.1. Description       Services in this industry involve providing photofinishing services for dealing out with analogue and digital images. This majorly consist of the photograph digital processing, adjusting and printing, but also comprises of the creation of analogue film, image scanning and production of the slides. This signifies a critical transformation in the structure and emphasis of the sector over the recent years. The fast emergence of digital technology has made processing of digital image to surpass the analog platform. The professional photofinishing services involve the application of software for editing images is approximated to contribute nearly 10 percent of annual sector revenue. According to Ibisworld (2013) these forms of services are increasing in significance because of the existence of methods for digital image processing. 3.2. Service Features   Competitor     Quality of Services     Timely delivery of services     Technology Adoption     Customer handling services     Effective Policies   Eastmon Online Pty Ltd  Excellent and good reputation in terms of service delivery  fast service delivery  Has implemented current technology in delivering its services Excellent customer service  Effective policies like expansion online operations and establishment of business-to-business division Wesfarmers Limited   Good delivery of services  Delivery of services is not in time  Has adopted digital technology and provides online services  has a good customer service (one on one and online)  acquisitions and mergers Photo Direct Pty Ltd Limited   Good delivery of services  It has some delays to some extent compared to others.  Has adopted technology  Poor handling of customers  service provision through national, state and local retailers 3.3. Service Adoption As reported in the 2013 IBIS Report on Photographic Film Processing in Australia, The industry is presently undergoing a downfall as photography changes from usual analogue to digital technology platform. The embracement of digital technology is going to change the face of this industry once most customers get on board. As observed the adoption service is fairly slow but and positive due to the fact that the industry is facing transition. The influences unfavorable because the services this industry are not requested as such because of other substitutes like Smartphone and tablets which consumers can buy on the own and use for photography. However the higher value proposition and value added can be attributed to the fact that most company compete on price, quality and service delivery (IBIS 2013). A higher complexity is that it is difficult to enter in this market without enough capital to invest in technology\, especially minilab and online photo processing services. 3.4. Value Proposition      In the previous years when Kodak Expression was in operation, the retail segment of the industry demonstrated higher degree of concentration with, however Kodak has since left the retail industry to go for online services. Technological changes and major players providing photo services for a value-adding proposition to consumers has lessen concentration, just as competition from larger retailers like Harvey Norman and Kmart increased. Companies try to add value by means of image printing on alternative media such as canvas, T-shirts, mugs, and among others (Ibisworld 2013). 4. Direction 4.1 Mission Statement The business in this industry offers photofinishing processing services for analogue and digital images. 4.2. Vision Statement As the Australian consumers embrace digital technology such as mobile phones, iPods, tablets, and camcorders the industry customers will mainly remain couples carrying out big wedding and would like to get wide camera coverage. 5. Strategic Analysis 5.1. Market Analysis 5.1.1. Market Size The industry presently generates total revenue of $400.0 million making unattractive industry. This revenue represents a decline of nearly 3.6% of the previous year. It is unfortunate that the revenue is still forecasted to fall over the next five years $340 million if the players do not use good marketing strategies (Ibisworld 2013). Number of companies operating in this industry has also gone down from 1,384 to 700 from the year 2000. Only four companies now compete based on technology. Eastmon Online Pty Ltd leads the pack with a market share of 7.5% followed by Wesfarmers Limited with 6.0% and Photo Direct Pty Ltd with 3.75% (Ibisworld 2013). 5.1.2. Market Trend The performance of Australian Photographic Film Processing industry has declined considerably from the 2000s which is attributed to growing of technology. Currently the industry makes total revenue of $400.0 million demonstrating a decrease by nearly 3.6% on the previous year and declining by an annualized 6.0% in the last five years (Ibisworld 2013). The industry presently employs roughly 1,650 individuals, a decline 2,500 jobs in 2000s. The decline in revenue has forced several small firms to shut down. The sector revenue is still projected to decline by an annualized 3.2% in the next five years through 2017-18 to total just $340 million (Ibisworld 2013). It however recommended that the surviving firms to embrace marketing and diversification strategies to increase market share. 5.1.3. Market Economics One factor in the Photographic Film Processing Industry which results to volatility is technology advancement. Companies in this field have to invest in sophisticated processing, printing and internet-based technology to meet the demand of the customers (Berry 1998, p.461). Another factor that influences this industry is the economic fluctuation. As one industry that depends on disposable income, an increase in tax, interest rate and employment affects its performance negatively. 5.2. Competitive Analysis 5.2.1. Suppliers 5.2.1.1. Description   Major Supplier     Supplied Items    Google , Yahoo  Internet  Hewlett Packard  Online systems  Kodak, Fuji  Digital cameras             The industry is adopting digital technology therefore the main suppliers are well-established company that provide internet, online services and digital cameras. Major suppliers are summarized in the table below 5.2.1.2. Competitive Influences Major competitors use their strengths to influence the industry and dominate the market share. Strong capital base has enabled the big three players to invest strongly on technology on compete on online photo processing services. The competition is also influence by regional and country wide presence. The key players in the industry have a large network of store in major cities across Australia enabling their brand awareness. Competition is also influence by product diversification. Companies like Wesfarmers as other also venture into supermarket chains, coal mining and chemical companies in order to increase its market share. 5.2.2. Customers 5.2.2.1. Description     Customers in this industry include event organization companies, couples conducting weddings, leisure pursuant and families with young children. The demand in this industry is actually determined by economic situation; that is family disposable incomes that is also influenced by fluctuations in a tax, interest rates and unemployment levels (Hitt, Ireland, Camp & Sexton 2002P.9). The industry is segmented into two; the analog and digital technology. While the analog is being faced out, the competition in digital processing segment is pitted between retail minilabs, online services and self-service kiosks. 5.2.3. Substitutes 5.2.3.1. Description   Major Substitute Industry     Substitute Items     Competitive Advantage    personal computer  webcam  preferred by most companies  mobile phone industry  mobile phone  easy to carry and use   5.2.5. Competitors 5.2.5.1. Market Concentration       This market has a low concentration of competition. With this concentration, even four major players are reported to generate not more than 20% annual revenue. It also claimed that just only three firms employ more than 200 individuals (Ibisworld 2013). Competition has forced several in a country like Australia to shut down, but a company such as Wesfarmers Limited is still going strong. This company has grown to become a major player since its establishment in 1914. With stores 185 both in Australia and New Zealand, Wesfarmers provide digital photo printing services such as photo books, prints, posters, calendars, greeting cards and canvas posters with the use of Hewlett Packard systems, Photo Create wholesale printing service and online through Snapfish. Ibisworld (2103) approximates the company annual sales of all photo processing services to be $24 million. Wesfarmers Limited is estimated to have a market share of 6.0%, trailing the first placed Eastmon Online Pty Ltd who has a market share of 7.5% and annual sales revenue of $30 million (Ibisworld 2013). Other several players such as Photo Direct Pty Ltd, PTO Consolidated Limited and Worldwide Online Printing Pty Ltd among others share the remaining 86.5% of the market. Even though there are many competitors in this industry, the market share concentration is very low. Only the top four major players accounts for not more 20% of the annual sector revenue while just three companies employing over 200 people. This is attributed to technology advancement in the industry where major companies embrace image storage based on internet and display services associated with the largest internet companies such as Google, Yahoo and Apple. They also provide just like services that is also provided by worldwide image technology companies like Kodak, Hewlett-Packard and Fuji. This locks out small companies out of competition, making the competition based of market very low. With regard to this, two-thirds of companies in this industry generate annual revenue estimated to be less than $200,000 whilst only 18 companies make over $2 million. 5.2.5.3. Competitors' Strategies Ibisworld estimate that this industry is facing a down fall for the next five years though to 2017/2018 and therefore for surviving firms to compete favorable, they must employ market research, use competitive Pricing, good service delivery and  brand Positioning,. 5.2.5.4. Key Success Factors Ibisworld state key success factors for the Photographic Film Processing in Australia are several distribution channels, strong brand, large capital base and Competitive Pricing. 5.2.5.5. Competitor Alignment     Competitor    Services   Eastmon Online Pty Ltd  online photo processing service Wesfarmers Limited   online photo processing services Photo Direct Pty Ltd Limited    online photo printing services   Even though the three major competitors offer similar services in online photo processing, merger and acquisition can be ruled out since they are all competing for market. They can only merge with small firms showing potential in the industry. 5.3. Environment Analysis 5.3.1. Regulatory Influences Assessing market attractiveness trends based on regulatory influences on this sector, IBISWorld (2013) point out a reasonable degree of influence form regulation. It is also indicated that Photographic Film Processing industry in Australia is neither regulated nor licensed apart from normal occupational health and safety concerns entailing handling of chemicals. If the sector was still pursuing analog film it would have been a matter of debate with regard to considerable regulatory prerequisite controlling the analogue film processing using prospectively toxic minerals and chemicals particularly silver (Ibisworld 2013).. However the change to digital technology has considerably lowered the prospective environmental protection concerns. The sector is not exposed to tariff protection or any other types of protection or even direct assistance. It is however important to note that the federal and the state governments support domestic film production that influences the demand for image processing services in the segment. In supporting local domestic industry, the government encourages more local content as a way of providing jobs. Owing to the unregulated state of this sector, the stability of the government is at risk.  In a nutshell, the stability of is unfavorable. With this sate of situation in this industry, suppose there is a change with policies, this could adversely affect the film industry in Australia. Without regulation and licensing, there is no barrier to entry. The deregulation nature of the industry also may encourage unfavorable business behaviors and trade restrictions. The chart below summarizes the regulatory ratings Photographic Film Processing industry in Australia. 5.3.2. Economic Influences Photographic Film Processing sector's performance has declined considerably ever since the 2000. Households and organization have adopted digital technology and depend more largely on in-house inkjet printers and color laser for processing photographic images. The film sectors presently makes a total revenue of $400.0 million, signifying a drop by approximately 3.6% in the preceding year and declining by an annualized 6.0 percent in last five years through to 2012/13 (Ibisworld 2013). The sector presently employs nearly 1,650 individuals. The computerization of the printing services and the image processing digitization has resulted to the industry to get rid of about 2,500 jobs since the early 2000s. The declining revenue and demand has led to decline in a number of firms from 1,384 in 2002/03 to presently nearly 700 companies (Ibisworld 2013). 5.3.3. Environmental Influences The industry attractiveness for environmental impacts is portrayed as moderate. The Photographic Film Processing sector in Australia is not regulated apart from normal occupational health and safety concerns entailing dealing with chemicals. If the sector was still pursuing analog film it would have been a matter of debate with regard to considerable regulatory prerequisite controlling the analogue film processing using prospectively toxic minerals and chemicals particularly silver (Ibisworld 2013). An environmental factor which exists in this sector is related to environmental occurrences like climate change and natural disasters. This is a major issue to this sector, on how to deal with climate change, owing to the increasing number of cases in natural disasters. With new technology it can be perceived that new platform plays a big role in conserving stability of the environment. Policies will turn out to be more expensive because households will probably attempt to get more coverage. 5.3.4. Societal Influences Various factors that film industry with regard to societal adoption include aging population, regional population, globalization, and increase in the density of urban centers and access to skilled labor among others. Aging population normally has less demand for filming service because they view it as leisure and luxury. The older generation also does not have adequate disposable income since they have stopped working and no longer earn salary they can use in filming services which they view as luxury. The regional market is positive with information stating that Australia is quite urbanized, with nearly 80% of the populace residing at the coast. This favorable for the filming industry because most people like to pursue their leisure at the coast and will probably by filming gadgets to use to take pictures. This will boost sales in this industry. This growth the population density in key cities will also facilitate a larger market to target. Globalization in this sector is perceived as favorable because it assists firms target other overseas markets although large sum of capital is needed for that strategy. Ageing infrastructure does not helps film industry of inadequate disposable income they can use photo and filming services. The emergence of digital photography is not both positive and negative for security and terrorism. Even though it gadgets like CCTV is now used in various urban centers to cub security, it only reduces insecurity to a small extend but does to prevent it.  In general the societal influences can be considered favorable, which is a demonstration of a solid market expansion. Technology changes have led to a stable stream of skilled labor for this sector which brings professionalism in photography and film industry. 5.3.5. Technological Influences Technological impacts in this sector are favorable. Digital technology has changed the Photographic Film Processing sector in the recent years, adding to this sector's sharp downfall and closure of several businesses. The rapid changes in technology have resulted to capturing of images with the use of mobile phones, digital cameras and tablets. The technological influence is shaping up the industry and many customers are rushing to embrace digital transferring and imaging technology such as digital cameras, mobile phones and tablets. Usual analogue technology platform is currently left to the photography fanatic as digital technology represents the major change of in image processing. The pace of innovation is however indicated to be slow because the industry is in its transition phase because photography is changing from analogue platform to digital technology. The digital change has facilitated larger market penetration from for major players using internet based technology. The major players also have an upper hand in the industry due to the adoption of display service mainly used by Google, Yahoo and Apple. This locks out smaller firms which are yet to adopt these services. Having modified options is critical in this sector to diversify firm's service portfolio. IBISWorld indicates that product innovation is critical as a major factor for success against other market within this sector. This has actually helped major players such as Eastmon Online Pty Ltd, Wesfarmers Limited and Photo Direct Pty Ltd to have a bigger market share compared to other insignificant small firms. A big expenditure in this sector is influenced by the demand for having outstanding distribution and communication channels. Only the top three competitors have managed to have several distribution centers in major cites across Australia and New Zealand. 5.4. SWOT Analysis 5.4.1. Strengths and Weaknesses Strengths     Wesfarmers Limited is the second major company in the Photographic Film Processing in Australia in Australia just after Eastmon Online Pty Ltd. Being a large corporation as such, this company has several strengths such as excellent marketing, good reputation, good positioning, international presence and brand loyalty.     With stores 185 both in Australia and New Zealand, Wesfarmers provide digital photo printing services such as photo books, prints, posters, calendars, greeting cards and canvas posters with the use of Hewlett Packard systems, Photo Create wholesale printing service and online through Snapfish. Its presence in most parts of Australia and New Zealand ensures brand awareness to its customers home and abroad. Wesfarmers adoption of technology and high quality service delivery has attracted most customers making it one of the highly rated retailers in Australia. Weakness    As a larger company with having several stores in Australia and New Zealand communications network becomes a challenge to the organization. Another weakness facing this company is that decision making becomes a bit difficult because several stores in different parts of the country face its on challenges. One major success factors for getting into this market as is indicated by IBISWorld as the capability in targeting niche markets. Wesfarmers as one of the major players has no potential to target a specific market. Therefore other companies and smaller firms can take this as an advantage and attain market share. 5.4.2. Opportunities and Threats Opportunity       Wesfarmers being the second largest company photography and filming processing company is itself an opportunity opportunities in terms service. Has started in the strengths merger and acquisitions forms a great opportunity for this company to increase brand awareness and grow its market share. This will also help the company grow in different in different locations where their newly acquired companies are without necessarily opening other stores. Advancement of technology also forms a great opportunity for Wesfarmers to lock out smaller companies which are yet to adopt digital platform in its entirety. Targeting several markets within Australia and New Zealand is an opportunity for market penetration and brand awareness.   Threats As a large firm, Wesfarmers has several threats that are both internal and external. With all the companies want a share of the market in this industry, Wesfarmers must understand all the threats in the industry so as to cope with any changes. Currently Wesfarmers faces threats like non regulation of the industry, new entrants, economic situation, and competition. 5.4.3. Competitive Advantage         Industry competition is based on price, service and quality. Considerable price competition is present for the film advancement and print service, whilst in the film processing for skilled photographers and business clients' competition concentrates on quality. So as to compete effectively, companies need to offer value-added services, and take assume advantage of technological changes. Wesfarmers derives its competitive advantage from its strengths including segmentation, diversification, international presence, god marketing strategy and brand loyalty among others.  In digital processing segment, Wesfarmers use self-service kiosks, online services and retail minilabs as a competitive advantage to increase its sales revenue. From 2003/04 to 2009/10, the kiosks lost their status in favor of minilabs, whilst online services steadily gained their share of the market, competing by reducing prices and providing a number of delivery options. 6. Marketing Plan 6.4. Promotion 6.4.2. Promotional Strategy The promotion strategies for this company are favorable. Wesfarmers' Kmart runs a network of 185 stores both several cities in Australia and New Zealand where they provide services in digital photo printing using HP systems. Having many stores promotes its services through brand awareness. Having its presence in many regions communicates a message to its targeted customers. The company has also invested heavily in online photo processing supplying photo books, calendars and notebooks. Having an online presence ensures that the company targets online customers. Another form of promotion used by this company is through its differentiated products. The company runs a supermarket chain, coal mining company, chemical and insurance company. The company can use some of these divisions as its distribution channel, particularly the supermarket. Wesfarmers is reported to have opened their first radio station in 1924which demonstrates the company's strong media plans. As such the company has attracted a large audience making it one of the strongest brands in Australia. References Analoui, F & Karami, A 2003, Strategic management in small and medium enterprises, London, Thomson. Berry, M 1998, Strategic planning in small high tech companies, Long Range Planning, 31(3), 455-466. Honig, B & Karlsson, T 2004, Institutional forces and the written business plan, Journal of Management, 30(1), 29-48 Hitt, MA, Ireland, R, Camp, M & Sexton, D 2002, Strategic entrepreneurship: Integratingentrepreneurial and strategic management perspectives. In M. A. Hitt, R. Ireland, M. Camp & D. Sexton (Eds.), Strategic Entrepreneurship: Creating a new mindset (pp. 1-13), Oxford, Blackwell. Ibisworld 2013, Ibisworld Industry Report S9532: Photographic Film Processing in Australia, viewed on 12th 2013 http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/au/industry/default.aspx?entid=673 Wesfarmers 2013, Wesfarmers Limited : 2013 Third Quarter Retail Sales Results, viewed on 12th September 2013 http://www.4-traders.com/WESFARMERS-LIMITED-6491330/news/Wesfarmers-Limited--2013-Third-Quarter-Retail-Sales-Results-16741422/ Read More