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Puma Business Strategy
The following report describes and analyses Puma business ‘s generic and distinctive marketing strategies, as well as providing accurate industry, competitor, market, and SWOT analysis’. Evaluation of Puma business’s marketing strategy is conducted, thus analyzing the strengths and weaknesses of the strategy. Lastly the report recommends probable future courses of actions obtainable to Puma business, in order to get better profits and stop mistakes in the future.
According to the company’s annual report “The Puma business was originally founded by legend fashion designers who first patented a disinfectant fashion in France which is still marketed today as Puma Fluid. Puma was granted the Royal Warrant in France and is still a proud supplier to the Royal Household”.
If we analyzed then we come to know that Puma be familiar with that ultimately the consumer buys products which solve consumer desires and requirements. These desires repeatedly expand and it is vital that products are developed to assemble these requirements. Puma has two research & growth centres in France and the UK where the solitary focal point is to produce ground-breaking new products.
According to the annual report of Puma Business:
- Puma Group Management Team
Managing Director Operations
UK Managing Director
France Managing Director
International Managing Director
Chapter # 2 – Literature Review
- Research Objectives
The main objective of this dissertation is to improve the company’s supply chain or strategic management and the relations with its suppliers to reduce costs so that company will support its cost-saving competitive advantage. Supply chain partnerships are relationships between two or more independent entities in a supply chain to attain specific objectives. Basically, these partnerships are generally created to augment the financial and operational performance of each channel. These objectives are accomplished throughout reductions in total costs, reductions in inventories, and augmented levels of common information. Over a period of time these partnerships can develop and lead to improved service, technological improvement, and product design. The biggest portion of the duties is left to the company to direct and improve the suppliers.
Chapter # 3 – Project Design Methods and Techniques to Gather Data
Exploratory research is the research into an area that has not been studied and in which a researcher wants to expand initial ideas and a more alert research question. I will be using this method supporting the research with a sturdy literature review.
I have mainly used secondary data from the previous researches, surveys and some contemporary issues to support the idea. The minor information services register and describe main documents for the reason of retrieval and documentation. Secondary literature such as subject bibliographies, citation indexes, library catalogues and databases analyses, describes and registers primary literature (mainly but not exclusively) in these bibliographical instruments. The central working processes of the secondary sources are analysis, storage and dissemination. In the model abstracting and indexing services, libraries, information centres, clearinghouses and data centres are considered secondary information services, but each with particular functions to perform.
One of the foremost advantages of using secondary data is that it helps the researcher formulate and understand better the research problem, broadening at the same time the base for scientific conclusions to be drawn. Nevertheless, it should be taken under consideration that other researchers, organization or government departments for studies with different objectives and purposes collected the data; therefore, it might not be suitable for the current research.
I will also use conclusive research design techniques. Conclusive research is designed to support the decision maker in determining, evaluating, and selecting the best course of act to take in a given situation. There are two research types; 1. Descriptive, 2. Causal. Descriptive studies are also called observational, because you observe the subjects without otherwise intervening. The simplest descriptive study is a case study, which reports data on only one subject.
Descriptive Statistics will help me to evaluate the success of the management:
Like with most studies, this research had limitations and will offer suggestions for future studies. To get a more whole portrait of the method, one needs to study the host organization (in this case TOFAS-FIAT), top management of the supplier companies. Second, this study needs to be simulated over time to view if advantages are retained over a period of years. Describing the observations and the relationships among variables will help me to assess the situation as well as the circumstances under which precise relationships exist. This might be completed and presented in the form of a discussion using secondary data as proof to check the supposition.
3.1 Products Or Services And The Geographic Scope
According to the company annual report Puma sells a variety of domestic and industrial hygiene and cleaning products all through the world. Branded products account for about 40% of the Group sales and comprise all strategic management policies.
Chapter # 4 – Strategic Position And Business Model
4.1 The Industry Analysis
Puma is in the department store/large retailer industry, an industry that has very high levels of competition. Although this industry is extremely competitive and growing at a fast pace in Australia, it is still not as large as the department store industry elsewhere in the world, such as the USA. This is partly due to the fact that there are boundaries in this industry, particularly in Australia, as there are few retail stores that can classify themselves as large department retail stores. Puma is a very competitive and key participant in this industry, as it is both a producer and a seller. The large retailer industry can be very volatile due to the impact the environment has on its participants .
Due to the introduction of the GST in year 2000, retail turnover has been increased and there has been a sharp sales slump in the retail sector (Inside Retailing, 2001). According to the estimation of ARA, total sales were up 5%; however there had been a drop in department store sales of 3% for the seven months prior to July on the previous corresponding period. The Australian Bureau of Statistics (ABS) also estimated that department store turnover was up 27.8%, or approximately $1 billion.
4.2 Context For Strategy
4.3 Porter’s Five Forces Analysis
- Threat of new entrants:
There are obvious barriers for the industry in terms of economies of scale, capital requirements, and government policy. Economic scale comes into play as large companies can decrease of units as volumes rise. For instance, large retail stores may incur cost savings by buying products in great quantity however; smaller stores do not have the ability to do so.
Government policy could also be another entry barrier; such as the introduction of a new tax system, which could to a great extent influence the industry. E.g. GST. In addition to this, the establishing of a new brand becomes a vital aspect for success in this industry, due to the fact that entry into this industry is difficult due to the size and scope of existing brand competition.
The most likely new entrants to the industry are from companies, which have been well established in other businesses areas. In many cases it would be financially impossible to enter into a competitive industry with little seed capital and for many organizations large resource investment requirements deter them from entering. This is especially true for a large department store such like Jeye, which needs to have a number of different business sectors, such as: administration, marketing, finance etc. Therefore, entry barriers are considered to be high.
- Bargaining power of suppliers
Large retailers or department stores could choose where to get products from many suppliers; therefore, suppliers have less power. Retailers are gaining more power in the industry, described by Craven et al (6). There are a small number of large retailers (e.g., Jeye, Kmart, Target, David Jones) that could use ‘systemic relationship power’ over their suppliers. Brookes systemic power is defined as “the power that one party has to affect the whole system of the other”. Retailers are increasingly gaining more bargaining power; therefore this trend indicates that suppliers are becoming less powerful than they used to be.
- Bargaining Power Of Buyers
The influential part is that the price of products can be different mainly, even for the similar group of product, in a large department store and also of those in a further discount type of department store. Due to the dissimilarity, buyers have additional products to select from, when trying to locate and purchase an exacting product; thus switching costs of buyers are low.
This normally means that customers in the retail industry have high bargaining power. On the other hand because of Jeye’s position and its image, customers do not have much influence on price, because Puma cannot simply reduce its prices by sacrificing quality, due to their brand image.
For Puma, which has large-scale department stores selling a wide range of products, individual retailers of apparel, kitchen appliances, furniture, fashion e.t.c could be substitutes for consumers. Furthermore, electronic stores such as Harvey Norman may be cheaper and have a high standard of quality or discount department stores could also be alternative choices, if the buyer doesn’t mind forfeiting quality for price. The new trend of online shopping is another possible substitute for certain consumer groups.
- Industry rivalry
There are many competitors existing in the large retailer industry, the biggest of which is Nicholas Goodwin; even though they direct their promotions at different target markets. Nicholas Goodwin sells very similar products to Puma and so rivalry can be intense at times. In addition, dissimilar types of department stores, which include reduction department stores like Target, Kmart are competing inside the similar industry.
Chapter # 5 – Competitor Analysis
The main competitors of Puma stores are middle- upper class department stores that stock a wide variety of products. Competition mainly comes in the form of premium positioned stores in the high-class category. In Australia, the main higher class competition would come from Nicholas Goodwin and Michel Jones, which are both fashionable stores that offer alike products at a competitive price.
However, due to the fact that John Adam has just recently announced that two of its Australian stores will close down at the end of 2001, Puma has experienced a slight fall in the competition in this industry sector. On the other hand the middle class sector of the industry is still highly competitive, with the likes of main rivals Sports girl, Kmart, Target and Harvey Norman insuring the need for regular in-store monitoring and maintenance.
5.1 Market Analysis
Puma main customer base, thus their main target market; are predominantly female. As the products are of best standing, i.e. premium pricing and brand categories; the market is customer based, not demand-based. The products fulfill wants and desires based on image, not needs. Customers seek the product and service benefits of the image of Puma. Geographically speaking, the market for large department store such as Puma is mainly concentrated in large shopping centers or downtown. In a large shopping center or downtown shopping district, the market is strong, with good profit potential.
Department stores positioned as premium are hard to imitate and start because they are built on the prestige of the brand.
5.2 SWOT Analysis
The first strength of Puma is that of its store positioning within a shopping environment. Puma is a market leader in Australian retailing industry and is also is the largest department store chain in Australia.
Another strength of Puma is their strong brand identity with consumers. Puma customers think of them as a upper class department store, which sells high quality products. This is the image that Puma is successfully projecting to their consumers, and is precisely why Pumas’ target market is the middle-upper social classes.
Product quality and range is also a major strength of Puma. The company has built up a wide range of well-known and prestigious brands. For instance, the ground floor of Puma sells most well known brands of perfume such as Gucci, and YSL etc.
Another strength of Puma lies within their strong customer relationship marketing techniques. There are special benefits available to customers who hold a Smarter Shopping Card that gives customers great features and exclusive benefits at favorite Coles Puma stores; such as Puma, Grace Bros, Target, Kmart and Megamart. The exclusive benefits include special interest free promotions, up to 62 days interest free. no annual or joining fees, flexible payment options, online account management and interest rates from as low as 15.5%.
Another card customers can obtain is the popular Fly Buy card, which is Australia’s leading customer loyalty program. The Fly Buy card offers members a range of awards for regular everyday shopping, with over two million households of active Fly Buy members.
Members can earn one Fly Buy point for every $5 spent at Puma of Megamart stores. Fly Buy points can be exchanged for over 1000 ‘escape’ related awards, including restaurant dinners, shows, air travel, accommodation packages around Australia, store vouchers and special attractions (http://www.Puma.com.au/cards/cmcard.asp).
Customer service is a principal strength of the company, which is carried through to its well-known product strategy and Pumas’ store image. Puma’s uphold this strong moral custom with its staff and is an attribute that the company carries through to its promotions, helping to establish warm, personal brand association.
Price is one of the main weaknesses of Puma; this is because the main perception of Puma prices along with customers is that of high prices, consistent with their prestige image, therefore price is a weakness of Puma.
Puma’ product positioning can be seen as a weakness of its strategy, for instance, if spending and overall activity in the economy is down, Puma can’t reduce its price. Similarly, Puma can’t reduce its prices in the form of sales promotions to compete with competitors as easily as other stores can. The reason is that low prices and sales promotions would not be consistent with its brand image; therefore, it would have a negative effect.
An opportunity lies within the potential expansion of Pumas’ online shopping. Development of this strategy in the future is an opportunity for Puma to increase sales and customers’ loyalty.
The trends of increasing services and increasing customer relationship managements as described by Cravens et al (8) form opportunities for Puma. Increasing services means that Puma can extend its operations into more service oriented functions. Puma can attempt to increase efforts towards its loyalty programs to extend its customer base in days where customers are demanding more attention.
The external environment is a large potential threat for Puma. This threat may come in the form of government policy e.g. tax, economic downturns, industry changes, etc.
The threat to Puma’ online shopping is from the extensive number of competitors who have online shopping services. Threat of new entrants into the market lies in the form of competing department stores from overseas.
Generic marketing strategies provide a useful, broad structure to guide the formulation of a firm’s marketing strategy (9). It means the ultimate need of each firm is to develop its own, unique marketing strategy that draws upon its own capabilities and its own assessment of market opportunities. The four generic strategic focus areas are branding, innovation, low price-cost and channel management.
Chapter # 6 – An Analysis Of Resource And Capabilities On Its Competitive Advantage
Definition of Competitive Advantage and Strategy
The competitive advantage can be achieve if the organization is able to expand an overall cost leadership with no ignoring quality and service. The competitive advantage of being the low cost producer of a product is that, even in powerfully competitive markets, the firm will earn over average returns. Those returns can be reinvested into the firm and used to acquire new utensils and facilities that will help effect the firm’s low cost position.
Porter defines three general strategies for competing efficiently: cost leadership, separation, and focus. Each involves a dissimilar route to competitive advantage, and winning firms make a clear choice between these strategic options without forgetting the significance of the others. Management of such firms recognizes that trying to do all of them jointly generally lead to poor relation position within its industry.
6.1 Cost Leadership
Cost leadership is possibly the clearest of the three generic strategies. In these days, most winning firms use this strategy to increase the main market share. Firms pursuing cost leadership resist to be the low-cost producer in their industry and sell their products/services either at average prices (to earn senior margins than competitors) or at below-average prices (to produce market share). A low-cost producer must find and develop all sources of cost advantage, counting economies of scale, asset utilization, proprietary technology, special access to raw materials, best outsourcing, and vertical addition, or avoid some costs all jointly. Instance of firms competing on the basis of cost leadership includes Easyjet and TESCO.
Achieving a low in general cost position often requires a high relation market split or further advantages, such as positive access to raw materials. Porter also defines that a cost leader is the awareness that, within any given industry, only one firm can be the cost leader. When there is further than one hopeful cost leader, rivalry among them is typically fierce because every point of market share is viewed as critical. Discrepancy access to factors of production and technological software advantages sovereign of scale have the most possible to create cost-based continued competitive advantages.
The second general strategy is differentiation. In a differentiation strategy, a firm look for to be sole in its industry along a few dimensions that are broadly valued by buyers. To adopt this strategy, a firm must have a product/service donation unique attributes that are respected by customers and apparent to be more attractive than those offered by competitors.
Differentiation provides lagging against competitive rivalry since of brand royalty by customers and ensuing lower compassion to price. A firm must offer amazing truly sole if it is to garner a best price. Though, in contrast to cost leadership, there can be more than one winning differentiation strategy inside an industry. A cost leader must attain equality in the basis of differentiation virtual to its competitors to be an above-average performer.
Porter describes the last strategy: focusing on a exacting buyer group, section of the product line, or geographic market; as by differentiation, focal point may take lots of forms. The basis is that the wants of the segment can be best addressed by alert attention. And the focuser seeks a competitive advantage with its aim, even though it may lack a competitive advantage generally.
If a firm achieves sustainable cost leadership or differentiation in its section and the segment is structurally beautiful, then the focuser will be an above-average player in its industry. Most industries have a diversity of segments, and each that involves a dissimilar buyer require or a dissimilar optimal production or release system is a candidate for a center strategy.
6.4 Competitive Strategies through the Supply Chain
A company’s competitive strategy defines the set of customer needs that it seeks to satisfy through its products and services. To see the relationship between competitive and supply chain strategies, we start with the value chain for a typical organization. To execute a company’s competitive strategy, all the value chain functions play a role and each should expand its own strategy. A supply chain strategy determines the nature of procurement of raw materials, transportation of materials to and from the company, produce of the product or operation to offer the service, and sharing of the product to the customer, along by any follow-up service.
A key strategic issue is the aptitude to leverage a partner’s capabilities outside touchable assets and open knowledge. Some of these assets comprise employee know-how, standing and culture that is resident in the fabric of the firm. It is not easily codified, often not instantly recognized; yet, it gives the firm a relation advantage.
One important relationship that firms appoint in is with their supply chain partners. Supply chain management is a continuous improvement process, make certain customer approval from raw material provider to the vital finished product customer. Using SCM, companies can make a source for differentiation or cost reduction. Though, coordinating the supply chain among raw material suppliers, distributors and customers is not an easy job. Two issues that preserve rising are ensuring quality all through the supply chain at a competent cost and managing relationships crossways organizational and international borders.
Another important management is managing the quality. The total quality management (TQM) is an integrative management philosophy intended at incessantly improving the quality of products and processes to attain customer satisfaction. TQM is based on the basis that both internal and external customers are the focal point of all activities of an organization. TQM authorities advocate that organizations work straight with raw material suppliers to ensure that their materials are of the highest quality probable.
In the present worldwide business environment, firms must expand a competitive strategy that determines the position of the firm with respect to other firms in the industry. A structural study, which is basic in developing a competitive strategy, relates the firm to its environment. The firm have to determine what its serious strengths and weaknesses are, and in what areas a alter in strategy will yield the most benefit.
6.5 An External Analysis
Pumas’ overall marketing strategy incorporates a few key aspects that help to define its position in the large retailer market. These key aspects are:
1. Large range of goods in all departments, with a single important relation, that is quality.
2. A competitive pricing strategy that allows Pumas to maintain its large customer base, while gaining an advantage with its high quality range of goods.
3. A strong branding strategy, that projects the Pumas image as a stylish large retailer catering for the needs of the middle-upper class society.
4. A store layout and presentation that is in keeping with the overall branding strategy.
It is these basic key aspects that have helped Pumas clearly define its overall marketing strategy and have helped to firmly establish them as the market leader for large retailers in Australia.
6.6 Generic Marketing Strategies For Pumas
Pumas uses a “branding strategic focus”, as a generic marketing strategy for their organization. However it isn’t as straightforward, as it sounds, they adopt a unique branding strategy, due to the fact that they sell such a wide variety of different products and brands. Pumas uses their branding strategy to portray an overall quality assurance and a pleasing shopping experience. In other words they don’t sell a Pumas brand as a product, so much as an opportunity to use their services to obtain high quality products, which consumers need at affordable prices in a very comfortable shopping atmosphere.
Chapter # 7 – Organization’s Current Strategies
Branding Strategies Focus
When consumers hear the words Pumas, they associate words such as quality, comfort and accessibility. This proves that Pumas is successfully promoting their overall marketing strategy. They aim their advertising at a predominantly middle-upper class consumer group and this reflects in their marketing campaigns. This image is also boosted by their store layouts and presentation, as well as their genuine concern to stock quality products.
As previously stated, Pumas doesn’t have its own line of products as such, but they do try to ensure that the product lines that they stock are of a high standard of quality. By high quality, it doesn’t necessarily mean that the product will last the required time period and provide a satisfactory service for the consumer. It also means that the products that they stock are not your ordinary products that competitors sell, but that each product has a higher standard or offers unique features.
The distribution of Pumas products also coincides with the high standard of quality that they aim for. They stock expensive brand names such as: Gucci and Country Road, which are not the sort of products that you would anticipate to find in great retailers like Target or Kmart.
Although Pumas is definitely not the majority reasonably priced place to shop, their prices are in keeping with their branding strategy. They sell high quality products and charge accordingly. They can afford to do this because their target market is for the middle-upper classes, which can afford to pay for high quality goods and fashionable brands.
Chapter # 8 – Conclusion
This report has discussed the generic and distinctive marketing strategy of Puma. It has also covered the background of the company and a situational analysis.
According to the report has evaluated the strategies of Puma and found that its strengths lie inside its branding strategy (place, image, and identity) and pricing strategy. Further strengths comprise association marketing, product range and status, customer service, and e-commerce strategies. Weaknesses lie inside the company’s pricing strategy and standing image.
The report has completed with suggestion for development of the Puma marketing strategy. These comprise rising advertising of its price assure, taking benefit of its competitor’s closing, and closing its food store process. As well recognized Puma makes its stores appear available to a wider market segment, and they ought to augment the high classes customer by provide or generate its own private product by important brand image. Raising its customer association management and its online strategies is also suggested.
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