Argos LTD is a part of Home Retail Group, the UK’s leading general goods retailer. The company has a range of competitors such as Amazon, Currys and Ikea. It could be said that the organisation faces a high level of competitors as there is no particular product for consumers to become loyal to and therefore consumers will purchase goods from a particular store they notice a particular convenience or value by doing so. ” Argos’ core customers belong to the C2 & D socio-economic groups, earning between £7,000 and £25,000 annually. This consumer group has been one of the hardest hit by the 2008 financial crisis and the resulting fiscal tightening policies put in place by the government to repair the damage caused”.(loveconsulting.2011)
Since 2008 the company has refrained from losing much market share by offering store cards to attract its target market (C2 & D socio-economic groups) and keeping up to date within the technological environment and globalisation, through efficient distribution technology such as online sales, quick delivery and online catalogues. “Argos, which is also working on enhancing its website, will roll out more self-service tills in its stores and introduce a “much clearer” layout, which includes shifting the browser units to the middle of stores and displaying products on walls”(Harrison, N . 2010). By taking a resource based view in relation to changes within the external environment and the use of environmental scanning, The organisation has managed to keep prices competitive and adjust the structure of the internal environment to suit a wider market segment by adding a range of new products to suit a higher income category customers and modifying channels of distribution such as the store layout and website stay up to date with the technological environment.
An organisation must understand the varied effects of technological change and have a sound knowledge of the impact this can have on the different aspects of the business. For example an organisation who implements a new technology into its processes may have a higher chance of exploring a new market or offering a more efficient service which will result in them becoming a stronger competitor in their chosen sector. “In most industries, organizations must be flexible and be ready to innovate and to adopt new technologies as they come along. The way in which (and the extent to which) organizations do or do not employ the latest technology can be an important determinant of its competitive advantage“. (James, E. 2008)
A firm should also pay close attention to key political factors such as government economic policies, government social policies and the extent of government intervention. For example the increase of regulations on retail outlets in particular has altered marketing particles within the recent years. “Argos, Comet and Dixons as well as DIY chains Homebase and B&Q are running last-gasp promotions to pull in shoppers. VAT is increasing from 17.5% to 20% just as higher rail fares and petrol and domestic fuel price rises kick in.”(Wood, Z. 2010). Although the VAT increase affects all businesses at large such costs are normally passed on to consumers which exemplify the relation between the macro and micro environment.
Business legislation, environmental legislation, the laws surrounding contracts and consumers are just a few examples of different legal sources to which an organisation must be fully aware of and comply with, such regulations in place to rule out biased competition and protect customers against businesses. Ignoring new laws and legislations both within the internal environment and the way the company chooses to deal with the external environment such as customers and suppliers can cause the brand image to deteriorate.
The economic conditions have a strong impact on consumer purchasing power. With a cut in consumer spending within the recent years and the rise in inflation, marketers should develop innovative strategies to convert weaknesses to strengths. One of the strategies used by (Argos LTD) in recent years has been through issuing store credit cards, giving itself advantage of the limited availability of credit for consumers within tough economic climate.
Analysing the competition is one of the most vital ways in obtaining, and sustaining competitive advantage in order to stay ahead of rivals, “Professor Michael Porter of Harvard University Business School’s contribution to our understanding of the competitive environment of the firm has wide implications for many organisations in both the private and public sectors“(Lynch, R, 2003). It is useful to recognize the implications of Porters five forces for discussion of the different impacts, such factors can have on the organisation. Porter suggests that there are five basic forces that can act on the organisation which are the bargaining power of buyers and suppliers, the threat of new entrants, substitutes and the extent of competitive rivalry.
To provide an example, it is useful to look at (Argos) which holds a prominent reputation in the industry, a large customer base is able to reduce the rivalry of other competitors by distinguishing itself as the UK’s largest general goods retailer” Terry Duddy, chief executive of Argos owner Home Retail said he believes Asda’s quest to be “number one in non-food” to be more “about fashion” than the categories Home Retail operates in. The overlap of categories is relatively small,” said Duddy, adding that Asda is “not an Argos model” (MacDonald,G. 2009). An organisation must also be aware of the conditions of the market they are conducting business in. if they are operating in a well saturated industry and they have a good market share then there is a much smaller threat of new entrants where as if they were in a relatively new market, the threat of new competition would be much higher.
The given facts illustrate the importance of organisations continually monitoring and gathering intelligence in the competitive environment and implementing new strategies to ensure they can compete and survive in this ever changing environment. The extent to which the business succeeds in the competitive environment heavily depends on the organisation ability to adapt to the continuous changes in these factors, and to ascertain the correct timings for these changes. The value chain analysis can be used as tool; assuring value is added in all stages of marketing the product and if this cannot be maintained, competitive advantage will be increased. For example a company that provides home delivery and is unable to provide an efficient and professional service to customers, the brand image may decline as it no longer providing its purpose.
Although, fully established companies such as Argos are able to reduce threat, in terms of the bargaining power of customers through providing convenience in all aspects of the shopping experience, it could be said that they are obliged to monitor the macro external environment, even more rapidly than other competitors for a range of reasons. A company with such a high customer base and diversity of products should pay particular attention to the ecological aspects of the organisation not only by implementing corporate social responsibility in terms of helping the environment but also continually monitoring products sold to assure they are safe and secure.
In 2008 a range of leather sofas sold by Argos, contained a poisonous substance causing skin reactions. Although the product was not produced by the company itself this has a damaging effect on the company’s brand name.” Argos imports a significant proportion of its stock from the Far East, although it is relatively unclear as to what extent trade is conducted with potential ‘hot-spot’ countries such as China. A high dependence on manufacturers and suppliers from countries like China could pose a problem on the international arena, in part due to human rights concerns but also due to the unpredictability of these non-democratic regimes.”(Unsworth, R. 2009).
SWOT Analysis
Strengths
- One of the core strengths of Argos, is the ability to sustain a good relationship with it suppliers which improves the other aspects of the micro environment such as attracting new customers and through an efficient delivery system and also rules out many competitors.
- The company is also able to provide customers with the latest technology both in terms of products and the purchasing process and by maintaining a competitive price.
Weaknesses
- The company may find it challenging to alert all customers of immediate price cuts, as they only release them twice a year.
- Offering a wide range of products can cause problems tracking down unsafe manufacturers e.g. the leather sofas imported.
Opportunities
- Providing further training to employees may improve the image within the company and also improve their efficiency.
- Modifying the technology and adopting to change can bring about a competitive advantage.
Threats
- The rapid growth of globalisation and the purchase general goods online for a lower price may negatively affect the company as it increases the bargaining power of customers.
- Other major competitors such as Asda, are a big threat as they can provide a larger segment by offering similar products.
Conclusion
In conclusion, the external environment is continuously changing and highly undeterminable even when a trend is detected. The approach used by organisation to survive in this globalised and modern business world is to scan the environment continuously and gather as much intelligence as possible in regard to trends ”management information system”. The key is to ensure the organisation itself is highly adaptable and has good change management strategies. This can be achieved by focusing and investing in the organisational behaviour aspect of the business. Organisations take different approaches to these changes. “Various types of organisation which possess quite different capabilities, motivations and behaviours in this respect, they are Defenders, Prospectors, Analysers and Reactors” (Miles and Snow 1978). The main differences are firstly how they interpret the environment and secondly how they react to it. Therefore an organisation that adopts a proactive approach will be better prepared for such changes compared to the reactors.
Businesses use methods such as Porter’s five forces, SWOT analysis and PESTLE analysis to establish which factors can affect them and the severity of such affects.
It is then for the organisation to determine its core internal capabilities and critical success factors to prepare for reaction to external forces by developing its organisation behaviour and cultures to achieve its best possible outcome. Therefore, we can say that external factors are extremely contributory to the success of an organisation, and if not suitably addressed or acknowledged, can have a damaging affect.
Recommendations
Through analysing the weaknesses of the organisation it is clear that a number of changes could be implemented. The company could digitally alert customers with the latest deals and price cuts. Collecting internal ad-hoc data via the marketing information system on trends such as the popularity of certain products and consumer preference could also help the organisation to remain a prime competitor. The threats opposing by improving efficiency with stores by improving customer service and staff training, providing faster delivery and in general maximising convenience for customers.
References
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