Dixons Plc

University Degree Business and Administrative studies

. For this specific assignment I have chosen the major leader in the electronics industry, Dixons Plc. Dixons Plc started off as a photographic studio founded by Charles Kalms in 1937. There was high demand for portrait photography. Above all conditions for growth, there must be a gap in the market. The belief that the firm can quickly recognise and profitably supply some area of consumer demand.

Stanley Kalms, the son, was quick to recognise the public’s new-found interest in photography, which was growing rapidly. They started selling simple cameras and accessories. The challenge to the firms is to market the product so that the value to consumer exceeds its price and price exceeds costs of production.
Dixons customers valued their products higher than the price charged. Consumers priced the cameras and accessories as exceeding its retail price. By very clever management and efficiency Dixons were able to produce the goods as a lower cost than the retail price. The gap between consumer valuation and producer cost is the source of profit but also the “potential difference”, the energised gap that drives business activity.

Growth of sales was achieved by gaining market share relative to competitors. Consumers were convinced that Dixons´ products offered better value for money. Diversification of product range and services.

Expansion of Dixons through Sales & Their Effects

Dixons were operating in a mass market, as there were many consumers for a relatively standard product. The camera and accessories offered widespread source of satisfaction through its consumption. There was lack of competition in the market as Dixons was the main electrical retailer of that time and other than themselves, there were the small one-shop businesses in Central London.

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Dixons expanded so rapidly it was forced to find a new head office to accommodate the growing number of staff dealing with 60,000 mail order customers and provide administrative back-up for 6 stores. They were growing organically, meaning that they grew only by growth of sales. This is internal growth as compared to external growth, which is a faster method of growth involving mergers and take-overs.
Almost every firm hopes for increased sales as a source of profitability and growth. In some markets, price is the key factor that determines levels of sale. This is true in conditions of perfect competition. But, as we are living in the ‘real world Dixons was involved in an oligopoly, making non-price competition a crucial factor on gaining sales. Their competitors being the departmental stores of those times, John Lewis, Alders, etc. other competitors would include the small privately run businesses within central London

Choosing A Faster Way of Growth

Stanley Kalms took trips to the Far East forging vital links with Japanese manufacturers who supplied Dixons directly with products often made to the company’s specifications and sold under the brand name of ‘Prinz´, meeting UK standards. Importing products from as far a country as Japan costing Dixons quite a bit more than they expected but buying in bulk/ achieving economies of scale they were able to cover the costs and still maintain a lower price for their customers.
Hard bargaining and bulk buying gave Dixons the competitive edge over its rivals. Achieving economies of scale led to a fall in their average total costs. So being able to lower their prices and still make a profit, Dixons thrashed their competitors Ascotts and Bennetts. Until 1962, Dixons were growing externally, through growth of sales, but then suddenly they decided to take a faster way of expanding the chain by taking over their rivals acquiring the method of external growth. In 1962 they took over Ascotts and Bennetts, both adding 13 and 29 retail outlets to the Dixons chain.

In 1972 they acquired the 15 Wallace Heaton shops in London. All the integration that took place was horizontal integration meaning that the firms being combined are in similar types of business. Dixons acquiring all their major competitors were actually going for total market domination. One may think that this could lead to a monopoly power in that market but there are regulatory bodies that control these things. In the UK we call it the Monopoly and Mergers Commission. Integration does not improve overall business performance. Firms may find that their cultures are very different. Fortunately for Dixons, this hasn’t been the case, which is why they are so successful today. An example of such a disaster would be the take-over of Rover by the German motor giants, BMW. The group was acquired in 1994 when it was undergoing a rapid downfall of sales. Since then BMW were not able to do anything for the company as they met various obstacles. Firstly the different cultures in the managerial sides of the business and the ideas that BMW would come out with could not successfully relate to Rover which is why even after producing new cars, they are still no better than before.
The cultures of Dixons and the other firm may have been entirely different and so the employees from both firms could not work as efficiently under one management. The techniques of motivation would differ and so the employees of the business taken over would have difficulty getting used to the new management style. Also Dixons could have faced a very difficult situation when the technical systems of two firms are entirely different and it would have been too costly to combine. And so in the end they’d realise that working separately is the efficient way to go ahead. Human integration costs could be high as the new employees would need a further training scheme to go through to understand ‘Dixons´ policies. The one major negative impact that mergers have on businesses is that an economic boom leaving problems with indebtedness and under performance when the next recession begins may fuel them.

Conclusion

Dixons´ external economic strategy led to Currys, Mastercare and PC World becoming part of the Dixons Group. The development of the business across a horizontal plane provided growth and enabled it to stay close to its expertise in electronic retailing. They increased market share by taking over their competitors and because of Dixons´ size and power, its competitors and suppliers regard it as a threat. The combination of resources across the business allowed Dixons Group to gain from economies of scale and improve its commercial efficiency. The groups strength has come from its entrepreneurial approach to doing business, as well as its size. It has developed into a non-bureaucratic organisation, which is quick to respond to new ideas.

Looking at their five-year financial accounts we can come to a conclusion that overall Dixons Plc has grown. Whether we calculate in terms of sales, profits or net assets.
Accounts all show how the firm has grown internally, through growth of sales. It was again in the time period of 1996/97 that percentage change in gross profits peaked, being 106% up from the previous years. Overall it can be said that Dixons Plc is growing as every time their turnover increases, their gross profit and their net assets also increase.

One can say that overall Dixons have actually achieved their proposed primary objective- To become market leaders. This is mainly down to their strategies which they used within the European market, and which I will now analyse and explain in depth.