Analysis of Harvey Normans Business Planning and Strategy - Assignment Example

Strategic Business Management and Planning Name: Course: Institution: Tutor: Analysis of Harvey Norman’s Business Planning and Strategy Executive Summary The following paper gives a report on Harvey Norman’s strategic business strategy. In specific, the report gives a critical investigation of the company’s strategic mission, vision and goals, and how they have been aligned with the company’s objectives to enhance efficiency and competitiveness. Harvey Norman is an Australian based retailer with a considerable investment in a couple of countries. The company has effectively engaged a cost leadership approach to dominate the Australian retail market and expand into the foreign market. The report finds that although the company has a good command of the domestic market, its prospects are under threat of increasing competition. Contents Name: 1 Course: 1 Institution: 1 Tutor: 1 Contents 3 6.Harvey Norman’s Environmental and Social Sustainability Practices 12 8.Recommendation 14 The following recommendations are based on the arguments raised above and are related to the respective external and internal factors affecting the company: 14 i.Political factors: Since the company is rapidly expanding into the international market, it is essential to develop mechanisms for dealing directly with the authorities in the markets that the company intends to operate in. This will be a good way of establishing relationships with the respective foreign governments. It is advisable that the company rests on good practices by accomplishing all prescribed acts and procedures. 14 ii. Economic factors: Before opening up new stores in foreign countries, the company should carry out a comprehensive market research especially movements in economic systems. The frequency of fluctuations in interest rates and shifts in inflation should be examined carefully as they directly affect the success of foreign investments. 14 iii.Socio-cultural factors: It is imperative for the company to obtain important information such as changes in market demographics, shifts in consumer behavior and purchasing patterns of the market. Such information is crucial in executing a sound customer relationship management system. 14 iv.Environmental factors: It is advisable for the company to establish the respective environmental regimes that govern business operations in each of the markets in which it operates. To this end, the company should among other things develop an appropriate waste disposal policies and minimize the use of non-biodegradable materials. 14 1. Introduction and Background Information about the Organization Harvey Norman is an Australian franchisor of several independent retail companies that sell a wide range of products for office and home use. Some of the products sold by Harvey Norman franchises include computers and communication equipment, beddings, furniture, carpets, lighting equipment and a wide assortment of small office and home appliances. Harvey Norman was established in 1961 as a small retailer of common home appliances and office equipment. Through strategic business planning, the company has grown dramatically to dominate the Australian retail market. In addition, the company has extended its business operations to overseas markets- the company has stores in Europe, Asia and the Pacific region. Currently, there are more than 200 Harvey Norman franchised retail chains operating in Australia (Macquarie, 2012). The company’s long term plan is to increase and consolidate its domestic market share as it expands into foreign markets. The company has long term plans to open stores in selected countries in Europe, Asia and North America. Being a leading domestic market player, Harvey Norman has a strong financial background and is actively working on this strategic capability to explore new markets, both domestically and internationally. The company targets both high and low income earners and offers affordable, reliable and high quality products. 2. Harvey Norman’s Strategic Business Objectives, Mission and Vision i. Mission Statement Analysis Harvey Norman’s mission objective is to deliver an innovative and the best retail experience in Australia and beyond by providing its customers with high value, cheap and easily accessible products and services. The company intends to achieve this mission by opening up more retail outlets and by developing a lean its supply chain process both in the domestic market and also in the foreign countries where it operates. Harvey Norman’s other mission is to offer a consistent and unique retail experience that appeal to customers of all levels of income hierarchy. To achieve this mission objective, the company has developed mutual relationships with its customers and other stakeholders in the industry (Macquarie, 2012). ii. Vision Statement Analysis In its vision statement, Harvey Norman is committed to developing a realizable business that appeals to the interests of its customers while remaining responsive to contemporary issues in the industry. The company prides itself of offering high quality products and meeting customer demands promptly. Harvey Norman’s franchises cherish and value timeliness, self improvement, personal excellence and respect for customers, employees and other partners. The company shall always hold itself accountable to its customers by delivering high quality products and honoring its commitments (Macquarie, 2012). iii. Strategic Goals and Objectives a. Harvey Norman’s long term strategic objective is to have the largest retail share in Australia. Such a market position will enable the company achieve strong revenue growth and build on key competencies to establish a remarkable presence in the international market. b. To offer the lowest prices among all Australian retailers. This objective will stimulate domestic demand for Harvey Norman’s products. The objective will be achieved by targeting price conscious households. c. To provide the best customer service experience among all competitors. The retail giant will achieve this objective by developing products and deals which will attract customers in long term strategic relationships. This objective will be achieved through a customer focused and product focused strategies. The product strategy will entail among other things price reduction, efficient distribution, maximum volume and thin margins. On the other hand, the customer focused strategy will involve creation of special segments for specific customers. In addition to the objectives above, Harvey Norman has always aimed at increasing sales revenue through friendly prices. This image has remained an essential characteristic of the company for a long time. Not only is Harvey Norman associated with low prices but it stocks a wide variety of items under one roof, which favors a wide range of clientele. Harvey Norman is committed to business excellence and this is evidenced by the quality of personalized experience accorded to customers. In addition, the company has cultivated a culture of perfection and always wants to be at the top. Harvey Norman’s business objectives are driven by pursuance of technological improvements and are achieved through use of new theologies in service delivery. Creativity and innovation are an important driving force for the company’s growth and success. Through the efforts of its employees, the company aims to increase its market position by looking for new ways of attracting more customers. Harvey Norman uses ubiquity as an important business strategy and has opened up locations in several parts to attract more customers (Macquarie, 2012). 3. Macro-Economic Analysis of Harvey Norman’s Business Environment and How Changes In The Environment Will Impact On The Company’s Strategic Business Planning Depending on how well the company responds to the challenges inherent in Australia’s retail industry, it will be difficult for Harvey Norman to compete into the future. Generally, the main external factors affecting the Australian retail industry include interest rate fluctuations, entry of foreign brands into the market, growth of online shopping, tightening of financial facilitates and high cost of doing business in Australia (ABS, 2007). Some of the internal factors affecting the Australian retail industry include resistance to change and the culture of young management teams. By understanding these factors, Harvey Norman can develop strategic plans to enable it stay afloat despite the current and possible future challenges facing the Australian retail industry. In the past few years, online shopping has dramatically grown in popularity prompting many retailers to establish online presence (PWC, 2011). The growth of online retail has provided new opportunities for Harvey Norman to expand its market scope. Growth of online shopping has been necessitated by the relative stability of Australian dollar, low cost technological advancements and the willingness of overseas suppliers to reduce profit margins. However, these factors have collectively created strong competitive risks for online retailers (AGPC, 2011). Since Australia joined the World Trade Organization (WTO) it has significantly reduced its tariffs on imported goods. This move has paved way for a number of overseas retail brands to enter the Australian market. Some of these foreign brands are well known and very competitive in the international market and they therefore pose a considerable threat to local establishments such as Harvey Norman (Access Economics, 2003). Frequent interest rate fluctuation is a major factor affecting Australian retail businesses. High interest rates discourage consumers from making purchases and hence place pressures on retailers. Since the 2007/2010 global economic crisis, the Australian retail industry has been faced with a general lack of confidence among investors. Moreover, financiers such as private equity banks have been less reluctant to lend funds to retail investors. As such, the Australian retail market may become less competitive than other markets (Wade & Bradley, 2002). There is need for Harvey Norman to develop an internationalization strategy in order to cope with the ever increasing pressure for local adaptation in foreign countries. Failure to adapt to local culture and market dynamics in foreign countries is a costly mistake that any internationalizing company can make (ARA, 2011). Moreover, observance of foreign country’s local laws, rules and regulations can significantly enhance Harvey Norman’s foreign business prospects. Although the cost of doing business in Australia is very high, Harvey Norman is well positioned to offset these costs through its well coordinated franchise system and a lean supply chain management system. In Australia, the company is working on a strategy of establishing new stores in suburban areas where there is a high demand for its products and the cost of doing business is low. 4. Harvey Norman’s Generic Business Strategy and Basis for Business Planning In order to overcome the challenges posed by the volatile Australian retail industry, Harvey Norman has focused its business model on the cost leadership strategy. Essentially, Harvey Norman is domestically known as the Australian’s retail cost leaders for the following key reasons. i. Harvey Norman has eliminated all middlemen in the supply chain process and delivers products directly to customers. Absence of middlemen enables Harvey Norman to sell its products at cheaper and competitive prices than most of its rival retailers. ii. The company’s marketing efforts targets customers from all income categories. As such, the company’s customer base is very large especially in rural and suburban areas. In addition, the company provides a wide range of products including brand names in close proximity to consumers (Macquarie, 2012). iii. Harvey Norman has for a long time maintained its price competitiveness by streamlining the sourcing process. The company’s inventories are owned by franchises and this helps reduce the accounts payable. As soon as consumers purchase items, the transaction gets reflected immediately on the suppliers who take a prompt step to refill the in store inventory level accordingly. This process eliminates the need for the costly procurement process and hence helps make the company’s products cheaper. iv. Harvey Norman has progressively accumulated so much that its suppliers are competing among themselves by cutting costs so as to remain the company’s supplier of choice. Essentially, Harvey Norman has developed an aggressive business strategy through which it aims to expand its market presence both domestically and internationally. The company’s medium term plan is to double the value of its revenues and aims plans to achieve this plan by opening more stores abroad. Over the years, the company has successfully sectored its market by directing different marketing campaigns and strategies at different market segments. Being a highly successful and big business, Harvey Norman has the necessary resources to adopt modern and standard marketing techniques. Online marketing has given the company unique opportunities to target specific market groups including the youth (Smith, 2004). 5. Harvey Norman’s Strategic Competencies and Resource Capabilities for Coping with Market Competition Harvey Norman has a number of strategic competencies and internal resource capabilities which if aligned well with the company’s strategic mission will enable the company outdo its competitors and survive future competition. Some of the internal resources and strategic competencies which Harvey Norman uses in its business planning and strategy formulation include: a. Harvey Norman has successfully opened new retail stores in various countries including Malaysia, Singapore, Ireland, Northern Ireland and New Zealand. These foreign retail outlets have fully adapted to the local culture and market conditions and together with the company’s dominion of the domestic market, they are a major source of competitive advantages (Harvey Norman Financial Report, 2011). b. Harvey Norman enjoys an unparalleled brand reputation in Australia where its franchised chain stores dominate the retail market. The exceptional brand reputation has been attained as a result of the company’s commitment to excellent customer experience and responsiveness to social and environment issues. c. Harvey Norman has cultivated an excellent employee loyalty and an innovative workforce. In Harvey Norman, employees are treated like owners and are allowed to have shares in the company. The company’s policy of involving employees in profit sharing motivates employees to work like the real owners of the company. d. Harvey Norman has a strong financial background. The company enjoys strong revenue growth through its massive investment in the domestic and foreign markets. Unlike other companies which rely on external financing to support expansion plans, Harvey Norman uses its profits to sustain its internal investments and to attract the most skilled and talented human resources (Gans & King, 2004). e. Harvey Norman has strategic competencies in its flexible supply chain management system and strong focus on customer service excellence. The company has developed a well coordinated supply chain management system through which inventory requirement is communicated to the suppliers in real time and delivery done promptly. The company has developed an efficient, state-of-the-art information management system through which it tracks inventory movements. f. Harvey Norman conducts its operations as a supplier, distributor and retailer of a wide variety of goods. Because of the company’s huge financial size and market share, it has established itself in a strategic position in the supply chain process. The company’s strategic positioning in the supply chain allows the company to obtain price discounts from suppliers. Its strategically entrenched position with customers is evident of its position as the lowest cost retailer. g. Harvey Norman has developed and maintains a sophisticated online presence through which it communicates with various stakeholders. The company interactively engages with customers in business-to-consumer interactions and has in the process developed the ability to fulfill large quantities of orders efficiently (Gans & King, 2004). Additionally, Harvey Norman has an efficient backend fulfillment system which enables it to optimize large shipments of supplies to a small number of locations. 6. Harvey Norman’s Environmental and Social Sustainability Practices Beginning in 2005, Harvey Norman laid out a foundation for its environmental and social footprint, which focuses on three important areas: waste management; renewable energy and sustainability. This environmental and social footprint has been integrated into the company’s long term and short tem objectives and its aim is to help the company sell products that sustain people and the environment. Through the footprint, the company aims to create a zero waste business and to be supplied by 100% renewable energy (Macquarie, 2012). In an effort to sustain the company in using renewable energy resources only, Harvey Norman has devised a greenhouse gas strategy whose aim is to make its stores increase their energy efficiency. This way, Harvey Norman aims to eliminate thousands of metric tones of greenhouse gas emission by 2015. In addition to improving dependence on renewable energy, Harvey Norman aims to create zero waste. This objective requires examining all functions of the supply chain process. Specifically, the company has made packaging a cornerstone of the zero-waste goal (Harvey Norman Annual Report, 2010). Harvey Norman values being considered a strategic community and social partner. The company’s image as a low priced retailer has helped many consumers consider the company has a friendly retailer. The company has cultivated this image through satisfactory prices, excellent customer service experience and convenience as a one-stop shopping centre. 7. Conclusion Even though Harvey Norman is a domestic leader in the Australian retail market and is marking a remarkable entry into the international market, what it requires as revealed in its business processes is the need for flexibility. The regular changes that occur in the market have a significant effect on the company’s business operations. This implies that having information on the impact of these changes will give the company the opportunity to take fine-tuning actions on its business strategy. As implied in the main body of this paper, the Australian retail industry manifests a cutthroat competition with many companies, both foreign and domestic struggling to establish a reputable market presence. Therefore, Harvey Norman, despite its reputable brand name and business size should brace for a very volatile future. 8. Recommendation The following recommendations are based on the arguments raised above and are related to the respective external and internal factors affecting the company: i. Political factors: Since the company is rapidly expanding into the international market, it is essential to develop mechanisms for dealing directly with the authorities in the markets that the company intends to operate in. This will be a good way of establishing relationships with the respective foreign governments. It is advisable that the company rests on good practices by accomplishing all prescribed acts and procedures. ii. Economic factors: Before opening up new stores in foreign countries, the company should carry out a comprehensive market research especially movements in economic systems. The frequency of fluctuations in interest rates and shifts in inflation should be examined carefully as they directly affect the success of foreign investments. iii. Socio-cultural factors: It is imperative for the company to obtain important information such as changes in market demographics, shifts in consumer behavior and purchasing patterns of the market. Such information is crucial in executing a sound customer relationship management system. iv. Environmental factors: It is advisable for the company to establish the respective environmental regimes that govern business operations in each of the markets in which it operates. To this end, the company should among other things develop an appropriate waste disposal policies and minimize the use of non-biodegradable materials. References ABS (Australian Bureau of Statistics) 2007, Information paper: Experimental Estimates of Industry Multifactor Productivity, Cat. no. 5260.0.55.001, ABS, Canberra. Access Economics 2003, The impact of deregulating retail trading hours: Submission to the Western Australian review of retail trading hours, Report prepared for the Shopping Centre Council of Australia, March. ARA (Australian Retailers Association) 2011, Federal Minimum Wage Review, Submission to Minimum Wage Panel of Fair Work Australia, March. Australian Government Productivity Commission (AGPC) 2011, Economic Structure and Performance of the Australian Retail Industry. Productivity Commission Inquiry Report No. 56, 4 November 2011. Gans, J.S. and King, P.S. 2004, ‘Supermarkets and shopper dockets: the Australian experience’, Policy Forum: Competition Issues in the Australian Grocery Industry, Australian Economic Review, vol. 37, no. 3, pp. 329–36. Harvey Norman 2010, Annual Report, available at http://www.harveynormanholdings.com.au/pdf_files/2010_Annual_Report.pdf Harvey Norman Financial Report 2011, Available at http://www.harveynormanholdings.com.au/pdf_files/2011_Annual_Report.pdf Harvey Norman, (n.d) Harvey Norman Product Care. Accessed 15 August 2012 at http://www.harveynorman.co.nz/docs/harvey-norman-product-care-NZ.PDF Macquarie 2012, Harvey Norman. Available at http://www.legalsuper.com.au/files/asx200/snapshots//HVN.pdf PWC, (2011) 2012, Outlook for the consumer and retail product sector in Asia. Accessed August 15, 2012 at http://www.pwchk.com/webmedia/doc/634593712079638863_rc_ap_products_outlook_ 2012.pdf. Smith, R.L. 2004, ‘The Australian grocery industry’, Policy Forum: Competition Issues in the Australian Grocery Industry, Australian Economic Review, vol. 37, no. 3, pp.304–10. Wade, M. and Bradley, M. 2002, ‘Woolies the worm in that plastic fruit’, Sydney Morning Herald, 9 July. Read More