The remote environment is comprised of factors that are external to the firm and these factors are generally not under the direct control of the firm. These factors include: political/legal, economic, social-cultural, technological, ecological and global factors. Even though the degree varies, the external environment factors influence every industry and the firms within it.
3.1.1 Political/Legal Factors
According to Wright, Kroll and Parnell (1996, p.23), ‘Political-legal forces include the outcomes of elections, legislation, and court judgments, as well as the decisions rendered by various commissions and agencies at every level of government’.
In the case of Kleenmaid, one of the regulations impacting its business is that all products within the scope of energy labelling and/or MEPS must be registered (). A wide range of products are now regulated for energy efficiency in Australia. For example, electric dishwasher and clothes washer which are intended for household or similar use are regulated for energy labeling in Australia. Currently, energy labelling applications for an approved energy label are accepted by New South Wales, South Australia, Victoria and Queensland. A registration for energy labelling in any of these states are accepted as valid in all Australian states and territories (). In addition, a number of products, including most household appliances, must be approved to the relevant electrical safety approval and test specification before they can be sold in Australia.
Moreover, a broad-based consumption tax called Goods and Service Tax (GST) took effect from 1 July 2000 at a rate of 10% on the supply of goods and services in Australia and on goods imported into Australia has significant influence on Kleenmaid’s business. Customers now need to pay 10% more on original price for the product they purchase. In addition, Kleenmaid in 2001 had achieved sales of A$120 million and would therefore be required to be GST registered. As Deutsch, Fischer and Orow (2003, p.203) discuss, ‘An entity that carries on an enterprise is required to be registered if its annual turnover is at or above the registration turnover threshold, which is $50,000’.
Third, on 2 March 2005, the Reserve Bank of Australia increases the cash rate by 25 basis points, to 5.5 per cent in order to prevent the economy from being over-expanding (). As the interest rate increase, households contemplate on buying white-good may now decide to save up their money. This monetary policy change ahs adverse effect on the Kleenmaid business.
Finally, as Australian household appliances industry faces overseas intensive competition, the import regulations and the value of Australian dollars all influences the business of Kleenmaid. For example, the appreciation of Australian dollar will encourage domestic consumer to purchase foreign product as foreign product becomes relatively cheaper than domestic products. The foreign white-goods appliance manufacturer will also be encouraged to export more to Australia in order to earn Australian dollars as the value of the Australian dollar is relative higher than foreign currencies.
3.1.2 Economic Factors
According to Hanson, Dowling, Hitt, and Ireland (2002, p.48) ‘The economic factors refer to the nature and direction of the economy in which a firm competes or may compete’. Economic indicators that may influence an industry include: level of disposable income, interest rate, inflation rate, propensity of people to spend and monetary policies. In the case of Kleenmaid, the most important economic indicators are consumer confidence and the construction of new housing. High consumer confidence and high level of new housing construction would imply a greater demand for the Kleenmaid products.
The general conditions prevailing in Australia and abroad are likely to continue to encourage spending growth in the period ahead. In Australia, there are high levels of confidence in both the business and household sectors, credit growth is providing ample support for spending, employment is growing strongly and national income and spending will continue to be boosted this year by the rising terms of trade (). The general economic environment can therefore say to post an opportunity for Kleenmaid. However, as discussed in previous part, in order to prevent the high inflation rate caused by economy over-expanding, on 2 March 2005, the Reserve Bank of Australia increases the cash rate by 25 basis points, to 5.5 per cent. This monetary policy change partially offsets the opportunity that the general economic condition creates. Kleenmaid needs to be aware about this policy change.
In addition, there has been a major demand shift for different categories of goods and services. Since 1987 to 2002, washing machines comprised 30.8 percent of all products purchased, but only 8.6 percent of products purchased from Apr 2001 to Apr 2002. Kleenmaid may need to redesign its product mix.
3.1.3 Social-Cultural/Demographic Factors
As a trend of shift to a service economy, customers are now more aware of the customer service that organizations provide. Kleenmaid has several strategies to counter this change, for example, free delivery and installation, a five year parts and labour warranty, a six month money-back guarantee and a unique best-value guarantee. The trend towards a service economy implies that Kleenmaid must be able to provide customers exceptional customer service in order to successfully conduct its business.
Second, the white-good appliance industry has a strong regional presence. At 2001, about 43.2% of total sales came from NSW, which is more than double of the sales in any other state (see Appendix 2). In addition, the population growth rate also suggests that other states can provide substantial business growth opportunity (see Appendix 3). These two facts imply there is an opportunity for Kleenmaid to generate more sales from other states.
3.1.4 Technological Factors
The rate of technological change facing businesses today makes this factor amongst the most important of all the remote environment forces for many businesses. According to David (2001, p.93), ‘Technological advancements can create new competitive advantages that are more powerful than existing advantage’. The most significant technological change in the last century is the emergence of Internet. The prevalence of Internet facilitates the communication between customers and organizations and provides customers more information on making more informed decisions. For example, Kleenmaid has recognized technology as a source of competitive advantage and in 1997, a new in-house customer database system called Calls & Services had been custom written to accommodate fifty users simultaneously. The network system uses the industry approved MFG PRO as its framework. However, as technology advancement occurs very fast, Kleenmaid still needs to keep it update with the technology advancement and be aware of new information.
3.1.5 Ecological Factors
Similar to technological factors, ecological factors are becoming more and more important in today’s business environment. Ecological factors include: pollution control, energy conservation and greenhouse gasses. According to Pearce and Robinson (1997, p.67), ecological environment is ‘The relationship among human beings and other living things and the air, soil, and water that support them’. To produce environmental friendly products usually involve extra expenditures and thus poses a potential threat to the company. For example, firms in chemical industry may need to increase its research and development expense in order to seek ways of producing environmental friendly products.
Kleenmaid has a philosophy of distributing not only high quality but also environment friendly appliance. It has three appliances winning their respective product categories in the Galaxy Energy Awards (2000). These awards recognize the market’s top-energy-rated electrical appliances. In other words, Kleenmaid has been successfully in producing environmental friendly product. Therefore, the potential threats posed by environmental protection law to the operation of Kleenmaid are in fact reduced.
3.1.6 Global Factors
The trend of globalization forms opportunities for some firms. On the other hand, it also creates threats for some firms. For example, in the case of Kleenmaid, even though it has more than 1,500 service agents throughout Australia, it has made no progress towards the international market. The entry of WTO and the reducing trade barriers between Australia and other countries provide potential growth opportunities for Kleenmaid in the global market. Kleenmaid should consider whether it is worthwhile to compete on the global market. On the other hand, the Australian household appliances industry has a trend of imports outweighs exports (see Appendix 4). This indicates that the major competition comes from overseas. Kleenmaid also needs to take this overseas threat into account when developing strategic plan.
3.2 Industry Environment Analysis
The industry environment influences the whole industry in which a firms operates. Under Porter’s five basic competitive forces, the industry environment includes: the threat of new competitors entering the industry, the intensity of rivalry among existing competitors, the threat of substitute products or services, the bargaining power of buyers and the bargaining power of suppliers.
3.2.1 The Threat of New Competitors Entering the Industry
According to Thompson and Strickland (1998, p.78), ‘A barrier to entry exists whenever it is hard for a newcomer to break into the market and/or economic factors put a potential entrant at a disadvantage’. In the case of white-good appliance industry, factors which influenced the threat of new entrants include: economies of scale, proprietary product differences, brand identity, switching cost, and capital requirement. (Lewis, Morkel, Hubbard, Davenport and Stockport, 1999, p.105-106) The threats of new competitors entering the white-good appliance industry are low to moderate based on several reasons. First, in order to be cost-efficient in the production of white-good appliance, manufacturers need a large-scale production which requires huge amount of capital. Second, Kleenmaid is able to produce products with unique design which are difficult to be replicated. In addition, new entrants may lack the critical know-how of the manufacturing of white-good appliance. Third, Kleenmaid has already established a well-known brand in the industry. This is an effective barrier to new entrants. Finally, the cost of establishing a new white-goods appliances manufacturing factory is very high. This further discourage new entrant to enter the industry. However, as the switching cost of changing brand is not very high for customers, this partially reduces the entry barriers.
The combining effect of the above fact indicates that the threats of the new entrants are low to moderate.
3.2.2 The Intensity of Rivalry among Existing Competitors
In the white-good appliance industry, the rivalry is focused on factors such as performance features, new product innovations, quality and durability, warranties, after-the-sale service and brand image. The rivalry among existing competitors is moderate to high as: 1) Kleenmaid was the first one to offer customers five year warranty, but many competitors are matching that warranty period now; 2) as fixed costs are a high proportion of manufacturers’ total costs, pricing below full cost will exist and will be profitable (Lewis et al, 1999, p.108); 3) the low switching costs further increase the rivalry among the industry; 4) as withdraw from the industry is very costly and difficult, for example, it may be very difficult to find buyers of the manufacturing factory, competitors may decide to stay in the industry even if they are making losses. As Thompson and Strickland (1998, p.77) discuss, ‘Rivalry tends to be more vigorous when it costs more to get out of a business than to stay in and compete.
3.2.3 The Threat of Substitute Products or Services
Firms in one industry may face close competition with firms in another industry as their products are good substitute. According to Thompson and Strickland (1998, p.81), ‘The threats of substitute products/services depends on three factors: (1) whether attractively priced substitute are available, (2) how satisfactory the substitutes are in terms of quality, performance, and other relevant attributes, (3) the ease with which buyers can switch to substitutes’. Strictly, from the research conducted, there is no close substitute to the white-good in the other industry, for example, washing machine and dishwasher. However, white-goods manufacturers face fierce competition arising from the second hand market. For example, second hand washing machine has attractive price and it has similar quality and performance with brand new washing machine. In addition, the switch cost from an existing product to second hand product is not high. Customers can switch to second hand washing machine if they wish. The threat of substitute produces arising from second hand market is therefore said to be high.
3.2.4 The Bargaining Power of Buyers
In the case of white-good industry, the factors which influence the bargaining power of buyers include: switching costs of buyers, presence of substitute, differentiation of output, number of firms in the industry, buyers information about the industry output. As discussed previously, the switching costs of buyers are low, and there is a substitute from the second hand industry. The bargaining power of buyers are therefore said to be high. In addition, as there are many white-goods suppliers in the industry and customers are more informed by the exceptional customer service, the bargaining power of customers are thus further increased.
3.2.5 The Bargaining Power of Suppliers
As discussed in the Assumption Part, there are numerous small suppliers supplying similar parts in the industry. Kleenmaid can switch to other suppliers at any time with very low costs as there are perfect substitute existed. Thus, the supplier power is said to be relatively low. In addition, as Kleenmaid only purchases small amount of parts from each suppliers, each supplier’s bargaining power is relatively low.
3.2.6 Summary of the Industry Environment Analysis
The summary of the analysis of the industry environmental analysis is provided in Table 1. From table 1, it is clear to see that the rivalry among existing firms, bargaining power of buyers and the threats of substitute product are high. This phenomenon may first suggest that the industry has low profitability. However, as Lewis et al (1999, p.110) point out, ‘The conclusion that an industry has high or low profitability does not mean that all firms in the industry will be similar. Firm profitability will depend on its position within the industry’.
Table 1.
3.3 Operating Environment Analysis (Stakeholders Analysis)
The operating environment includes the interrelations between firms and their stakeholders, including: competitors (discussed in the Competitor Analysis part), creditors, customers, employees and suppliers. All stakeholders are in an exchange relationship with the company. This section discusses the four major stakeholders in the case of Kleenmaid.
As Hill and Jones (2001, p.44) discuss, ‘Stockholders provide the enterprise with capital and in exchange expect an appropriate return on their investments’. If Kleenmaid’s performance does not meet stockholders’ expectation, then they may withdraw the capital from Kleenmaid. Second, employees provide their skill and effort in exchange of salary, reward, job satisfaction and job security. In the case of Kleenmaid, it places strong emphasis on staff support, encouragement and development. For example, it provides formal induction training for its new employees and rewards its staff with competitive remuneration. Kleenmaid’s staff in turn provides exceptional customers service and holds sufficient knowledge as a result of training and effective rewarding system.
On the other hand, customers provide revenue for Kleenmaid in exchange for the quality and unique design product they want. The customer can be viewed as the core corporate value of Kleenmaid. For example, in order to attract more customers through exceptional customer service, Kleenmaid builds fully functional store in which customers can have in-store product trial, in-store comparison and in-store cooking demonstration. In addition, to keep customers well informed about the product information, Kleenmaid has built an information system in 1992 and has made several efforts to upgrade the system. The other outstanding customer service that Kleenmaid offers is the Clever Kitchen Concept seminars in which experienced kitchen professionals provide advice on kitchen design and the trends in appliances.
Finally, suppliers provide a company with inputs and in exchange seek revenue and dependable buyers. (Hill and Jones, 2001, p.44) To keep a good relationship with suppliers, Kleenmaid must pay for the purchase before the agreed date. Currently Kleenmaid has several small suppliers, in order to be supplier cost-efficient, Kleenmaid should seek a larger supplier with a stable long-term contract. If possible, Kleenmaid should negotiate the implementation of just-in-time system with its suppliers in order to reduce the inventory costs.
4.0 Competitor Analysis
Competitors analysis enables a firm to assess whether or not it can compete successfully within a given market condition. As Lewis et al (1999, p.70) point out, ‘The purpose of the competitor analysis is to evaluate: the nature and success of the strategies each competitor might pursue, competitors’ likely responses to possible moves by each firms in the industry, each competitor’s probable reaction to the array of possible exogenous trends and events and industry shifts’. This section exams the positioning strategies used by the Kleenmaid’s four major competitors.
4.1 Electrolux
This company is the dominators of the appliance category in Australia with sales of more than A$1 billion and holds about 50% of the market share. Electrolux is the world’s biggest producer of powered appliances for kitchen, cleaning and outdoor use. The Electrolux group, which employs close to half of the Australian industry’s workforce, has several plants in Adelaide, South Australia. It exports some of its products to ASIA Pacific countries. The Electrolux’s mission is to be the world leader in profitably marketing innovative product and service solutions to real problems ()
From its mission statement, it is clear to see that Electrolux defines itself on the innovation positioning platform. The competition strategy that Electrolux adopts can therefore at least be classified as ‘differentiation’ product from its competitors through innovating new products. According to Johnson and Scholes (1997, p.254), ‘The differentiation strategy seeks to be unique in terms of dimensions widely valued by buyers, and which is also different from competitors’. The main purpose of using differentiation strategies is to achieve higher market share than competitors.
4.2 Fisher & Paykel
Fisher & Paykel is the relatively new entrants in the market and also defines itself to be competing with the innovation positioning platform. For example, its two-drawer dishwashers is the result of pursue of innovation. Appendix 5 depicts the positioning of different white-goods producers. Fisher & Paykel Appliances Limited designs, manufactures and markets a range of innovative household appliances developed with a commitment to technology, design, user friendliness and environmental awareness. ()
Similar to Electrolux, the strategy that Fisher & Paykel adopts is also differentiation as it tries to provide customers products that are unique and distinctive from its competitors’ products.
4.3 LG
The LG Electronics brand was launched in Australia in 1997. An innovative product range, supported by extensive marketing campaigns has led to strong sales growth. () As the same as Fisher & Paykel, LG is a relatively new entrant to the Australian white-good industry and define itself as competing on innovation positioning. The competition strategy that LG adopts is also differentiation.
4.4 GWA International
GWA International Limited listed on the Australian Stock Exchange in May 1993, and is one of Australia’s largest designers, manufacturers, importers and distributors of household consumer products. The company has more than 2,500 employees with manufacturing facilities throughout Australia and overseas. ()
GWA International is another leading company in the white-good industry. It can also be viewed as positioning itself on innovation site and adopting a differentiation strategy.
4.5 Other High-End Brands
For example, Miele, Maytag, Smeg, Gaggenau, Ilve and Blanco are all compete for the same premium dollar that Kleenmaid targets. As Johnson and Scholes (1997, p.260) point out, ‘The aim of the focused differentiation strategy is to offer higher value to the customer at a price premium’. Thus, the competition strategies of those high-end brands can be viewed as ‘focused differentiation’.
5.0 Kleenmaid’s Competition Strategy
Different from that of its competitors, Kleenmaid views the customer service positioning peak is vacant and therefore defines itself as competing on ‘service’ positioning platform which is different from the ‘innovation’ positioning that competitors adopt.
The competition strategy that Kleenmaid used can be classified as focused differentiation as it offers customer higher values at premium price and targets its market on women over the age of 40.
6.0 SWOT Analysis
SWOT is a strategic planning tool that is commonly used in business. As Hill, Jones and Galvin (2004, p.9) discuss, ‘SWOT brings together the external environment, which identifies opportunities and threats, and the internal environment which identifies strengths and weaknesses’. This part illustrates the Kleenmaid’s strength, weaknesses, opportunities and threats.
6.1 Strengths
- A well-known brand name.
- Fully trained employees.
- Strong emphasis on staff support, encouragement and development.
- The only one direct retailer of kitchen and laundry appliances.
- Exceptional customer service provided by staff.
- Exceptional customer services provided by the company, for example, free delivery, installation and full after-sale service.
- Functional stores and Clever Kitchen Concept seminar to provide consumer in-store experience.
- Unique design, outstanding performance, environmental friendly, reliable and high quality of its products.
- The managing director, Andrew Young, has a strong background in the appliance industry.
- An extensive network of dealers in regional areas of Australia.
- Well-established information system.
6.2 Weaknesses
- Too heavily rely on the sales generated from NSW (43.2% of total sales).
- The production mix does not suit the shifting demand.
- From a market share perspective, the company’s product penetration is too low (estimated at less than 5% of all households).
- Advertising expenditures is too small comparing with other retailers.
- No progress made towards international market.
- Centralised decision making system lowers the ability of first-line managers to make informed decisions (head office manages its major functions and Andrew is the final decision-maker).
6.3 Opportunities
- The future of the Australian economy is perceived to be good.
- Potential to generate more sales from states other than NSW.
- Potential to generate more sales through product mix redesign.
- Potential to gain better customer availability through expanding its retail network.
- Export its products to overseas countries.
- Spend more on advertising to attract more consumers.
- Develop new brand.
- Negotiate with suppliers to obtain long-term and stable contract.
- Implement just-in-time inventory system to reduce the inventory keeping cost.
6.4 Threats
- Competition from overseas is very high.
- Industry analysis suggests the industry has low potential profitability.
- Demand shift (over 15 years, demand for washing machine declined substantially).
- More and more competitors are now matching the Kleenmaid exceptional customer service.
- Competition from second hand market is fierce.
7.0 Key Success Factors
From the external environment analysis conducted, the factors that contribute to the success of the Kleenmaid’s business can now be summaried. These factors are called key success factors. Neeson and Jackson (2005, 3-15) points out the possible key success factors for retailer industry include: margin, theatre, location, closeness to the consumer, merchandising strength, buying power and personnel management.
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Margin: Each franchise store is expected to provide a franchisee return of A$300,000 per year.
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Theatre: Kleenmaid’s functional stores provide in-store experience and Clever Kitchen Concept seminar.
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Location: Kleenmaid has stores across Australia. In addition, it has a network of more than 1,500 service agents throughout Australia to provide after-sale service.
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Closeness: Through exceptional customer service, Kleenmaid builds very close relations with its customers
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Merchandising strength: Kleenmaid has already built up a well-known brand name.
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Buyer power: as Kleenmaid targets the top 40 percent of Australian households from an income perspective, the buyer power of its customers is very high.
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Personnel management: Kleenmaid places strong emphasis on its staff development and staff support. This makes its staff to hold outstanding knowledge about the company’s products.
In addition to the factors above, other key success factors include:
- The implementation of appropriate competition strategy and positioning.
- The strong background of management in the appliance industry.
- Transfer from being a wholesaler to retailer. This ensures Kleenmaid to uphold its commitment to providing unique products and exceptional service.
- Well-established information system.
8.0 Strategies Planning and Development
In order to achieve the goals described in section 2.4 of increasing its brand annual sales to A$200 million by June 2004, it would then necessary to set up a strategic plan. This can now be done as external environment has already been analysed. Several strategies can help Kleenmaid to achieve this objective. This section discusses the possible strategies that Kleenmaid can adopt.
8.1 Brand Development Strategies
Through brand development, Kleenmaid may be able to increase its annual sales to A$200 million by 2004. There are four types of brand strategies that Kleenmaid can adopt, including: line extension, brand extensions, multibrands and new brands. (Kotler, Brown, Adam and Armstrong, 2001, p.360) The relationship between the new items introduced, the product category and brand name is depicted in Table 2 in next page. Line extensions occur when an items is introduced in existing categories under the existing brand. Brand extensions occur when a new product category is introduced under the existing brand name. Multibrands occur when a firm introduces an item under existing product category but with a new brand name. New brands occur when a new product category is introduced with a new brand name.
8.2 Product Mix Redesign Strategies
Over the last 15 years, there has been a major shift in Kleenmaid product portfolio. Washing machine comprised 30.8 % of all products purchased from 1987 to April 2002, but only 8.6 % of products purchased in the twelve months to April 2002. As the demand for washing machine has declined substantially, Kleenmaid must reduce the quantity of washing machine produced in order to cater for new customers needs.
Table 2.
Source: Kotler, Brown, Adam and Armstrong, 2001, Marketing, p.360.
8.3 Positioning Strategies
As Kleenmaid’s competitors’ use innovation positioning strategy, the use of service positioning strategy successfully distinguishes Kleenmaid from its competitors. This positioning strategy so far works very well. Therefore, Kleenmaid does not have an urgent need to change this strategy.
8.4 Advertising and Promotion Strategies
Kleenmaid expected to spend about A$7 million on advertising, direct marketing and promotion in 2002-03. This amount is relatively small comparing with other retailer. For example, Harvey Norman spent close to $60 million in 2002. In order to attract more sales and increase consumer awareness about Kleenmaid, Kleenmaid should implement a marketing strategy of increasing its expenditures on advertising and promotion.
8.5 Strategies for Expanding Franchisees
As discussed in the social-cultural factors in external environment analysis, lots of Kleenmaid’s sales came from NSW. Kleenmaid should expand more franchisees into other states as the population densities warrant increased sales.
In addition, the entry of WTO and the reducing trade barriers between Australia and other countries provide potential growth opportunities for Kleenmaid. Kleenmaid should assess whether it is viable to expand its business to global market.
9.0 Recommendation
This part provides three different combinations of the strategies discussed in previous part and selected only one as recommendation for Kleenmaid to achieve its objective. The method used in the selection process is called devil’s advocacy. Both devil’s advocacy and dialectic inquiry are two ways of improving decision-making. According to Hill and Jones (2001, p.32-33), “Devil’s advocacy requires the generation of both a plan and a critical analysis of the plan’. The advantage of using devil’s advocacy is that it avoids the pitfalls of groupthink. Each of the strategic plans is outlined below:
Strategic Plan 1--This strategic plan combines the new brands strategy, product mix redesign strategy and expanding the business to overseas.
Strategic Plan 2--This strategic plan combines the product mix redesign, brand extension strategy, advertising and expanding franchise.
Strategic plan 3--This strategic plan combines the product mix redesign, advertising strategy change and expanding franchise.
9.1 Recommended Strategic Plan
Strategic plan 1 contains the new brand strategy which involving creating new product categories with new brand. The development of new brand has very high risk and requires large amount of capital investment. Second, strategic plan 1 contains recommendation of expanding business to overseas. This recommendation may be viable in the near future, but at the current stage, it is too risky for Kleenmaid to explore the global opportunity. Therefore, strategic plan 1 is not accepted because it involves huge risk that Kleenmaid cannot accept.
Strategic plan 2 contains advertising strategy, product mix redesign strategy, brand extension strategy and expanding franchise. Each of these strategies can work well if implemented individually. However, to implement all of them at once requires huge amount of capital. Kleenmaid simply does not have sufficient capital to implement all of the strategies. In other words, Kleenmaid cannot afford strategic plan 2. Therefore, strategic plan 2 is also rejected.
Strategic plan 3 is more conservative when comparing with strategic plan 1, and cheaper when comparing with strategic plan 2. Each of the strategies contained in strategic plan 3 provides substantial business opportunity for Kleenmaid. The combining effect of redesign product portfolio, change advertising strategy and expand franchise into other states in Australia makes it very possible for Kleenmaid to achieve annual sales A$200 million by June 2004.
Based on the use devil’s advocacy, strategic plan 3 is recommended to be selected as the strategic plan required for an action. The detail of the action plan will be discussed in the next part.
10.0 Implementation Plan
The implementation of strategic plan 3 involves the product mix redesign, advertising strategy change and expanding franchise. To redesign the product mix, manufacturing managers will need to purchase machines used to manufacture other more demanding products. The product mix redesign is anticipated to take about 1 year to complete and cost around $1,500,000. Other activities include the training of more workers to produce the more demanding products, the research of the consumer preference by marketing and sales directors and supply and distribution managers to ensure there is sufficient supply of material used in producing the more demanding products.
To change its advertising strategy, marketing and sales directors must ensure that the increase advertising expense has positive economic benefit. This promotion and advertising activity is expected to take 2 years (from 2002-2004) with a cost of A$32 million, which is much higher than the expected advertising expense of A$7 million for 2002-03. As this activity requires large capital investment, financial controller also needs to ensure that there is sufficient capital for use in emergency, short-term and long-term use.
In order to expand its franchise in other states of Australia, regional business managers and retail development managers are required to explore more business opportunity in the state they represent. This strategy can at least last for two years. The anticipated total cost of expanding its franchise is about A$40 million. Training managers also need to train more employees to ensure that the every franchise store has sufficient labour to cater for customers’ needs.
11.0 Conclusion
Every business and organization need to be aware about the opportunity and threats that external environment forms. Ideally, the firm’s strategy should be one that takes advantage of internal strengths, reduces internal weaknesses, exploits external opportunities and avoids external threats. The external environment forms several opportunities and threats for Kleenmaid. The macro environment analysis suggests that some of the political factors and global factors provide threat to the Kleenmaid’s business. On the other hand, the economic factors indicate that Kleenmaid can have a prosperous future. The social-cultural/demographic factors suggest that Kleenmaid can increase its sales through further expanding its franchise to other states. The ecological factors imply that Kleenmiad must adhere to the environmental protection law and be energy conservation. In other words, Kleenmaid needs to take social responsibilities while conducting its business. The technological factors point out the importance of technology in today’s business environment.
Second, the industry environment analysis conducted through Porter’s five forces suggests that the white-good industry has low profitability. However, firm’s profitability ultimately depends on its position within the industry. Third, the operating environment analysis indicates that Kleenmaid has very good relationship with the two most important parties: customers and employees.
Competitor analysis, on the other hand, provides information about the competition strategy and positioning strategy that competitors adopt. The result of competitor analysis shows that Kleenmaid’s service positioning strategy has distinguished itself from its competitors. However, in recent years, more and more competitors are now matching the service that Kleenmaid provides to its customers.
In addition, a SWOT analysis and key success factors analysis are performed. Both SWOT analysis and key success factor analysis suggest that the company has great opportunities and lots of factors contribute to its success.
After conducting an external environment analysis, competitor analysis, SWOT analysis and key success factor analysis, several strategies and 3 strategic plans arise as a means to achieve the company’s goal. Strategic plan 1 involves too much risk that Kleenmaid cannot accept. Therefore, strategic 1 is rejected. Strategic plan 2, on the other hand, requires huge amount of capital that Kleenmaid also cannot afford. Thus strategic plan 2 is also rejected. Strategic 3 is selected as it is not very expensive and aggressive. It contains product mix redesign strategy, franchise expanding strategy and advertising strategy, which can help Kleenmaid to achieve its objective.
On the implementation stage of the strategic plan, relevant department and personnel in the organization must contribute their effort to the success of the strategic plan. For example, human resource managers need to hire more workers in order to prevent labour shortage. The adequate implementation of the strategic plan 3 and continuous monitor will ensure that Kleenmaid to achieve its objective by June 2004.
Reference List:
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Pearce, J. and Robinson, R., 1997, Strategic Management: Formulation, Implementation, and Control, Chicago: Irwin.
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Web Source:
ABS: Population, Australian States and Territories
Access at:
Access on: 2 Apr 2005.
Electrolux: Mission
Access at:
Access on: 2 Apr 2005
Energy rating
Access at:
Access on: 31st Mar 2005
Fisher & Paykel
Access at:
Access on: 1st Apr 2005
LG: Overview
Access at:
Access on: 2nd Apr 2005
RBA: Monetary Policy Media Release 2005-04
Access at:
Access on: 2 Apr 2005
Appendix
Appendix 1
Source: Extracted from Pearce & Robinson (1997) ‘Strategic management:
formulation, implementation, and control’ p.63
Appendix 2
Source: Group marketing manager, Kleenmaid St George. Adapted from the case study of Kleenmaid St George Whitegoods appliances made by Bishnu Sharma and Paul Corcoran,
University of the Sunshine Coast
Appendix 3
Source: Extracted from ABS: Population, Australian States and Territories
Appendix 4
Source: Commonwealth Department of Industry, Tourism and Resources calculations based on ABS data. Extracted from the case study of Kleenmaid St George Whitegoods appliances made by Bishnu Sharma and Paul Corcoran, University of the Sunshine Coast.
Appendix 5
Market Positioning
Source: A Khamgaonkar, ‘Strategic marketing issues’, Kleenmaid St George. Extracted from the case study of Kleenmaid St George Whitegoods appliances made by Bishnu Sharma and Paul Corcoran, University of the Sunshine Coast.
