HMV Group has to comply with many laws and government rules; which might change on a regular basis, so it is useful for HMV Group to keep a close watch on the government practices. These laws and rules will also be different in the different countries HMV Group trades in. Some of the laws HMV Group has to comply with are; fair trade act, copyright, licensing, importing and exporting, Data Protection Act.
Economic Factors
The economy in which HMV Group plc operates and trades in is subject to constant changes in interest rates, exchange rates, inflation, unemployment levels, tax rates, economic growth, and income rates. All of these will affect trading for HMV Group, and if enough attention is paid to the economic environment the changes can be closely predicted and HMV Group can plan for them more efficiently. For example, if the strength of the pound was to increase, international trade may decrease because HMV Group’s products will become dearer.
The economic state at present is poor with Unemployment at highest level for a decade (Swaine, 2008), which means less people with disposable income, reducing sales. This also means people with jobs may be worried about losing them so they are saving instead of buying.
Social Factors
Social factors change from country to country and even in different areas within the same country. These factors include aspects such as religion and beliefs, cultural rules and norms, and quality of life. Understanding the different social needs will enable HMV Group to better understand the customers and their market, enabling them to correctly place their products. A simply example would be; different tastes in music in different countries. This will mean putting the title popular music over certain types of music would be different in some countries.
Environmental Factors
These factors apply to the physical environment. This for example could apply to the layout of the country in which HMV Group operates in. Different terrains may require different delivery options, meaning adjustment will have to be made to cater for the differences. Natural disasters fall under this category and may be of high importance to HMV Group. For example if HMV Group had one of its major factories in a country that suffers from devastating natural disasters, HMV Group would have to plan for this so that they can deal with the consequences of one occurring.
Technological Factors
Technological factors will have a huge effect on HMV Group, because nearly all their products are subject to forever changing technology and for HMV Group to stay competitive they need to be able to predict or afford any new popular technology. An example of this is the invention of the digital book. If HMV Group customers buy one, they will stop buying normal books. A way in which HMV Group can overcome this problem is to stock and sell digital books.
Two possible organisational audit techniques that can be done on a company like HMV Group plc are the product portfolio and the Value Chain analysis.
Product Portfolio – The Boston Matrix
(Source: learn premium, 2005)
The Boston matrix lets HMV Group classify its products in terms of potential cash generation and cash expenditure requirements (BPP 2004a, page 54).
Star
HMV’s star products would be there gaming and technology products, because they hold high market share and produce high revenue but it requires a lot of attention and thus finance form HMV Group.
Cash Cow
A star product for HMV would be there DVDs because for two years running they have been their best selling product, even though most HMV’s focus has been on Gaming (HMV Group, 2008a).
Problem Child
HMV Groups problem child seems to be their online store for Waterstone’s. Needs a lot of capital expenditure to enhance it, but it doesn’t seem to be worth it in at the moment (HMV Group, 2009b)
Dog
Digital video is definitely a dog for HMV Group. It has the lowest market share and is not expected to rapidly increase over the next few years. If HMV are making a profit on the product but the time spent developing the product is much better served on other areas of the business, then HMV Group need to decide whether or not to keep the product.
Value Chains
The objective of using value chains is to give a bird’s eye view of the HMV Group and what it does. It allows HMV Group to see how it organises and performs their activities, which gives competitive advantage (BPP 2004b, page49).
(Source: 12Manage, 2009)
Inbound Logistics
This includes transportation, stock handling and storage, communications, testing and information systems.
Operations
This includes processes, packaging, maintenance, testing, and customer services.
Outbound Logistics
This includes packaging, storing of products, testing products, communications and transportation to customers.
Marketing and Sales
This includes information systems, advertising and promotion and persuading and enabling customers to buy products.
Services
This includes after and pre sales customer services, in store customer services, guarantees and warrantees, installation and product testing.
Support Activities
The support activities are there to improve the primary activities. Value is added to the primary activities by improving the support activities. For example, HMV Group acquired a new Chief Executive Officer and MD in 2006 (HMV Group, 2009c) which has had a massive positive impact on the group by improving the primary activities.
Strategic Positioning Techniques
Ansoff’s Matrix
Ansoff’s matrix is used to indicate the risks and rewards involved when launching new products.
(Source: Wall, Marcouse, Lines, Martin 2003)
A new product that HMV are launching is the release of pre-played games. This is the lowest risk tactic, according to this model, because it is an existing product in an existing market. This means in theory there should not be any problems with the launch and success of this product.
SWOT Analysis
Strengths
One of HMV Group’s strengths is their buying power. This is due to their market share from growth of both HMV and Waterstone’s and the takeover of Ottakar’s in 2006 (BBC, 2006). Another strength of HMV Group is the diversity of its product range. This helps them because they are not putting all their eggs in one basket by have a few specialised products. With a wide range of products it means that if some aren’t selling then they can be easily discarded, because there is still revenue being generated by the other products.
Weaknesses
According to the Chief Executive Officer and MD HMV UK & Ireland, Simon Fox, HMV suffers from being late and inadequate when it comes to the recognition of pace of market structure change and there is a lack of direction, leadership and action during these market changes (HMV Group, 2007a). Due to this, HMV could be losing customers because they not responded to the market fast enough, and not meeting the demand of the customer, which means their customers/potential customers will find an alternative supplier.
Opportunities
One of HMV Group’s strategies is to improve their delivery service (HMV Group, 2007b). If this is achieved, it could potential improve HMV Group’s competitive position against downloads, because if customers get their products faster it means it is almost the same as downloading it. Improving delivery system may come as a greater cost in the short term but improved delivery, means improved efficiency, which will reduce costs in the long term.
Threats
A threat that HMV Group may face for a while is as a result of the integration of Ottakar’s. Integration of any companies no matter how similar they are can be a very difficult process (Thompson 1997, page 611). This is due to different cultures, management styles and work ethics. Staff may be reluctant to change which will produce and reduce in productive.
Alternative Strategies
There are many possible strategies that HMV Group can adopt, but before they are selected they have to be evaluated to see if they are a suitable and feasible strategy (BPP 2004c, page 152). They also have to be accepted by the stakeholders, who have to consider the benefits and risks, such as the financial implications.
A possible alternative strategy that might work for HMV Group is to concentrate more on the online aspect of the business, with possible download capabilities, because this is becoming ever more popular. “The way we buy music has also changed, with consumers preferring to download individual tracks rather than purchase Top 40 CD singles” (National Statistics, 2009). According to the predictions made in HMV Groups Strategic and Operational review (HMV Group, 2007c), they expect to be sell most of their books through their online store.
This strategy would be appropriate for HMV Group, because the cost implications would be minor, which has low risk and is likely to make profit.
Another possible strategy would hat could benefit HMV Group is to start selling digital books, which are becoming very popular “with the total net value of digital sales from the companies providing relevant information at £45.1m in 2008. This was 27% higher than the £35.4m sales recorded by the same companies in 2007” (Jones, 2009) and if HMV Group doesn’t enter the market soon they could miss the opportunity to becoming a market leader. This strategy has slightly higher risks because the cost implications are higher and the market is newer, which means more uncertainty.
Chosen Strategy
The chosen strategy for HMV Group is the selling of digital books and digital book readers. Although this strategy has higher risk, the rewards are greater because the market is new which means less competition and more chance of being a market leader. Although the product is new and slightly diversified, it is still in essence the same as the products Waterstone’s sells already, so marketing would cost less than if HMV Group was to completely diversify. With the knowledge of the market of digital books increasing less market research would need to be done, because HMV Group already know the product is popular.
By increasing digital book stocks and lowering physical book stocks, it would mean less space would be needed to stock the products. This would reduce the cost of stocking, which either means more profit r the opportunity to lower prices, enticing more customers to HMV Groups products.
If this strategy was to me a success, it would mean the possibility of closing down some of the Waterstone’s stores which might be a cost to the business. However caution must be taken when closing stores, because of the social implications of making people unemployed; bad press may hinder HMV Groups success.
Objectives for New Strategy
Objectives are to be completed within 36 weeks.
Modified Mission Statement
The Group has a very focused strategy for the turnaround of the business over a three-year period to 2009/10. This three-year plan is to, firstly, protect and revitalise our stores by managing our mix away from declining products to faster-growing ones, understanding in greater detail the needs of our customers and their behaviours and evolving the HMV store format to become a more inspiring and interactive place for our customers to shop. Secondly, we are growing revenue from new channels, including investing in our existing transactional websites and digital activities. By adapting our products to suit new technology, we hope widen our target market which will set us up for new technological products in the future. Thirdly, we are driving cost efficiency by streamlining the supply chains for HMV and Waterstone's and by reducing stock levels. We hope to do this by exploiting Group synergies in the areas of procurement and consolidating certain back office functions.
Resources Changes
In order to implement this strategy and complete the objectives, a few additions will need to be made to HMV Group’s resources. First of all more staff will need to be hired or contracted to partake in the additional research. Specialist staff may need to be hired who know more about the digital book technology, support both HMV Group and their customers. Additions will need to be made to staff training to ensure they understand the new product. New delivery resources may be needed because the products will be coming from somewhere new.
A possible major resource change will be in the purchase/ download system. If HMV Group designs it themselves then the financial resources needed would be vast. Installing the systems in stores is another resource change and hiring/training staff to know how to use it is too.
Summary
HMV Groups current competitive position is very good, because it has a high market share and still keeps their customers in main focus. Their drive to be innovative puts them at a leading edge next to their competitors. With experienced management all moving in the same direction behind HMV Group, the success of the company will proceed to increase due to the constant forward moving decisions made on a daily basis; and with new strategies in place, HMV Groups future only looks brighter with higher market shares and profit margins. With HMV Group already having a foot in the international market, prospects of gaining a huge variety of market segments are likely, and if managed well HMV Group could become a leading company worldwide, offering all varieties of entertainment.
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