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Nowadays, many of organizations are faced with challenges of strategic development. To overcome significant problems, all organization desire to grasp new opportunities. In 21st Century, changes in strategic direction very important, we can’t keep using the traditional way to operate a corporate. Strategy can help a firm how such decisions are taken and the concepts that can useful in understanding these issues. Overall, a definition of a strategy is required. However, the characteristics can provide the definition (Johnson, Scholes & Whittington, 2005):
‘Strategy is the direction and scope of an organization over the long term which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.’
This report is give information about the strategic analysis of Blacks Leisure Group PLC.
This report includes the following:
Background and History
Porters’ Five Forces
This process will help Blacks Leisure Group understand the company position and impact on strategy of the environment.
Background and history
Blacks Leisure Group plc is a British outdoor retailer. It owns 3 different brand names Blacks, Millets and Free Spirit. It is listed on the London Stock Exchange. It currently has around 308 stores. The company headquarter is based on Northampton and selling specific products like camping, walking, skilling, cycling, mountain equipment and others.
Blacks Leisure Group was formed in 1985 and faced financial difficulties in 1986 and 2009. But in year 1986, Blacks had survived because it received money injection from stakeholders to keep in afloat the following month. Until 2006, it engaged in an expansion of its business by opening many stores but it was short lived.
Blacks changed the name of its Blacks Camping stores to Blacks Outdoor in 1994. The reason Blacks changed it name because it try to capture wide range of outdoor products market. At the same time, Blacks only focus its retail outlet on city center.
In year 1999, Millets Leisure Plc became the outdoor Group which was bought by Blacks Leisure Plc.
Unfortunately in year 2008 and 2009, Blacks loss £6.8 million, pre-tax loss of £14.4 million. Blacks had loss before tax to £5.3m (2010:£43.6m) and in loss before tax and exceptional items to £6.6m (2010: £14.1m). In 2009, round 90 stores were close down as a part of restructuring (appendix 1). On November 2009, Blacks reached an agreement with the creditors which needed 75% backing. This saved Blacks from liquidation. In that time, it was a summer time, camping was a popular activity for many families. For those families member who could no longer afford an expensive holiday, outdoor activities are very good for Blacks. Blacks can capitalise the market to become market leader, it estimate £1.2 billion in UK market.
However, the problem with Blacks was its outdoor activities products conveyed for family and those people prefer outdoor activities.
To become a very successful company, the process of strategic analysis for Blacks Leisure Group is the examination of the external factors which effect on the activities of the company. A business environment analysis of Blacks Leisure Group Plc, the UK outdoor equipments’ retailer. The analysis of the industry is conducted using PEST, competitive and Porter’s Five Forces models. The internal analysis of Blacks is performed in terms of their assets, core competencies, primary and supporting activities, SWOT features, market, etc.
Porter Five forces and value chain analysis can help in understanding the environment and competitive advantage
The following shown porter’s five forces are as follows:
Threat of rivalry
Blacks need to think how to avoid this generic force because the leisure industry is very high competitive. Entry barriers are not very hard, other competitor can easily entry to this market. Investors have high risk to leave, if the capital costs are strenuous, if not enough. The overall effect is frequent advertisement like newspapers, radio, new product introductions and frequent price battles. Prices is one of the big issues, it can influence the sale such as buy 1 get 1 free, promotion, free delivery and others. In order, to become a market leader, Blacks need become aggressive. Leisure industries are very fierce rivalry. Only the most vigilant firm garner enough support.
Threat of new entrants
In this industry, it very easy to enter because this leisure industry’s capital cost requirements not as high as other industries like manufacture. Additionally, the patent requirement in the industry are not that high. So that Blacks has to be ready for intense competition. Blacks need think for unique and good strategy selling point to sustain their competitor. (Porter, 1985)
Threat of Buyers
This is because leisure industry is highly differentiated, Blacks has to think and plan how to do well to offer their service in a superior manner to their customers. However, it gives the buyers advantage, consumers can easily switch from one leisure company to another. To keep their brand awareness, Blacks Leisure Group need offering good and high quality to their consumers. Good service also very important, so consumers have no chance to complaint about their products.
Threats of suppliers
The company operates in an industry segment that has a lot for different substitutes for the products. Consequently, suppliers have a lot of bargaining power. The company can make to cope with threats of suppliers is by teaming up with other leisure company to be more influential in their respective market. Example, the company can fixed all the prices or without any permission, Blacks cannot increase or decrease the prices.
Threats of substitutes
There are a lot of substitutes in the leisure industry like Cotswold, Mountain Warehouse, Trespass and others company. Therefore, Blacks should invest in research to forecast some of this future threat.
Value chain analysis of Blacks Leisure Group
Human resource management
Marketing and sale
Inbound logistics, this include: transportation, material handling, material storage, communication, and test information system. This all inbound logistics are related to the suppliers. For those related to the consumer is outbound logistics. So that Blacks Leisure Group needs to plan and consider how it can outsource its information system which can help them to improve performance. All media are referring to marketing and sales technological. Audio and communication involved in selling the product. Blacks need consider incorporating technological system in service operations. Process and materials involved in the service offering of the company, it call operations technologies. Besides that, Blacks need to plan how to increase their sale, merging some of their business units to sustaining competitive advantage (Thompson & Strickland III, 1992).
Blacks have very good seller to guide customers to the right outdoor products and equipment, it shown that this as a unique selling point. Blacks also selling good range of products. Products will range in price to meet all customers’ needs and wants. A good brand name help Blacks developed a common ‘language of style’ among young people around the UK.
A lack of experience may affect the progression of the business and wrong decision. Blacks has face financial problems (appendix 1). It very important for Blacks to learn from mistake and overcome these problems.
Outdoor products are a powerful factor for those sports coming into fashion, providing opportunities for fast moving companies. The high street’s obsession with sporty fashion is creating opportunities for specialist to distribute performance products through other channels especially internet. The most important thing is know their customers well, all manufacturers and retailers have the option of adapting to any new trend and look.
In the event of severe recession, there is a danger of a retail price war breaking out on leisure products, with too many stores competing for the same customers. Retailers face the possible threat of more vertical integration by manufacturer (e.g. Mountain warehouse, Cotswold)
Based on Consumer Protection Act 1987, provides for the safety and protection of consumers by enabling Regulations or orders to be make controlling consumer goods. Provides for approved safety standards to enable compliance with general safety requirements. Next, all company need provides for liability for damage caused by defective products. Finally, prohibits misleading prices indications. The above rules, Blacks Leisure groups must follow the legistration, or else it will be take action by governments.
Economic stability is very important for all business. It allows a firm maintain a regular pattern of trade. Sometimes, inflation rate will affected the demand of the market. If the inflation rates grew up a lot mean that the products price will go up. In other ways, consumers purchasing power will decrease, consumers will spend less. This is an example, when governments increase the VAT from 17.5% to 20%
Sport plays important role in many people social life. So I believe leisure and sport is a big market and large demand. In the future, it will grow rapidly especially with the recent spate of news and media reports regarding heart disease and the dangers of without any exercise.
Advances in technology could be advantage to the company. Blacks can try to link or develop software which show all the details of the sales and keep up to date. Latest technology like internet can help Blacks reduce expenditures, in other way it can help firm increase profit. A good website will also help promote and advertise the business, it also a good opportunities to Blacks to open up a new market.
Environmental marketing dynamic and the need for strategic change in order to sustain competitive advantage
Nowadays, the world has changed it gaol regard to who are the real competitors. There are a lot of dynamics that come into play when trying to select which companies are Blacks Leisure’s competitors. Blacks assume that its competitors are other Leisure groups in the country. This is an example Barnes and Nobel used up a lot of resource to expanse many chain but it was underestimated the effect of technology like internet. The company who is call Amazon accessing numerous books without spending much inventory. In 21st century, many consumers want to access service in convenient way. Like Blacks, it online transaction have caused many consumers to leave tangible. Blacks had try to take their business to the internet. Blacks should give online transactions precedence because this has become a vital part of the marketing environment today. (Baird, 1994)
To understand a market dynamics, Blacks has necessary to look at competition through different angles. Competition may be defined in relation to industry concept or market concept.
Blacks Leisure Group is under monopolistic competition. Blacks offer only a specific range of service to consumer in superior manner. Blacks need to consider issue is entry vs. exit barriers within the industry. The leisure industry has minimal entry barriers and it require low capital to entry to new market. For exit, it rather high because it likely that the assets will be obsolete by the time to leave the exit industries. These dynamics need to be incorporated by Blacks to stay ahead.
Now the world has different industries with different level of globalisation. There are a lot number of companies to compete on a global platform, this mean that leisure industry is one of the most heavily hit. Blacks Leisure is not an exception, so Blacks need to break into other market segments owing to the fact that many leisure companies to do same. It would be necessary to check consumers that may be interested in their service (Aaker, 1984)
Marketers consider competition in different light. It can be define competitors as entity to meet the same consumer need. Even the service may not relate, but they may qualify as competitors.
When analysing competition, we can find out which companies are using same strategic path as Blacks Leisure Group. Blacks need always look at other companies whether the competitor under consideration has wide or narrow line. Blacks can analyse the manufacturing costs of its competitor, if the competitor have the same costs, Blacks ought to watch out of it. It can be followed by an analysis of service offering. It is a force worth reckoning, if Blacks’ competitor offers a high quality or service products. The following step, Blacks can consideration different type of price offer.
After doing an analysis of the strategies used by other company, Blacks need to look out for the objectives of their competitors. I will suggest Blacks look at their competitor’s strength, so it will know how large their share in the market. By examining all the latter issues, Blacks can figure out some loopholes among their competitors and establish itself in the market (Benter and Booms, 1981)
It is very important developing and sustaining competitive advantage for Blacks Leisure Group. Blacks Leisure ought to be sustaining competitive advantage because the world becomes increasingly interconnected. Globalisation has present new challenge to all leisure industries around the world and also UK.
Blacks Leisure Group should make sure that sustain competitive advantage, if they fail to do so the online companies might drive them out of the market. The high technology and internet have further aggravated the situation. It is necessary for Blacks to ensure that they can expand their business or distribution their chain in a cost efficient manner such likes online companies example Amazon. If Blacks is not enough to drive a new change to improve the financial debts, the company has to improve product offering, service and quality to battle with other larger competitor. Leisure companies have a lot of brand names or products, this may give advantage over Blacks to their company strength.
However, Blacks should develop and sustain an advantage or competitive advantage over its players in the leisure equipment industry. Blacks Leisure group’s stakeholders should not underestimate the effects competition. If they fail to do, it will make loss profits or profits decline. Consequently, Blacks Leisure group need vigilant about to built up a good market positions and managing their brand selectively.
The Blacks Leisure Group operates in highly competitive market with their competitors. Consequently, Blacks Leisure’s environmental dynamics cannot be ignored. What can Blacks do is try to sustain competitive advantage include offering superior service, outsourcing their inbound and outbound logistics, integrating business unit, teaming up with leisure groups to strengthen their buyer power from suppliers. Finally, integrating technological advancements and encompassing the global market more aggressively. All this strategic steps will help Blacks Leisure Group enhancing their position in the market (Amit, 2007)
Reference and bibliography
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Professor Raphael Amit (2007): Strategic Management , a journal for Faculty of Commerce and Business Administration, University of British Columbia, Vancouver, B.C., Canada
Thompson, A. & Strickland III, A. (1992): Strategy formulation and complementation: Tasks of the General Manager; Blackwell Publishers
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