Strategic Management Of Harvey Norman: Improvements In Existing Flagship Strategy

Background Information of Harvey Norman

Strategic management of an organization or a business defines the business strategy with goals of the organization, developing plan to achieve these goals , alignment of business activities in order to support the goals, and then allocating organization resources to achieve the goals (IMD, 2018). This report presents the detailed discussion of the business strategies of one of the biggest retail organization in Australia naming Harvey Norman. Harvey Norman was founded by Gerald Harvey and Ian Norman in 1982. Product categories that are sold by Harvey Norman includes furniture, computer and communication, electrical appliances, bathroom and tiles bedding, flooring and many more. Harvey Norman gives franchisee to other independent organizations in different countries like New Zealand, Singapore, Malaysia, Ireland, Slovenia, and South Africa (Bloomberg, 2018). Currently Harvey Norman is working on the flagship strategy. This strategy was adopted by the company in 2015 and after that company has achieved huge financial success by the end of the year 2017. Strategic management involves planning, monitoring, analysis and the assessment of steps that are required for an organization to achieve its goals. Every company has their own strategy for the business and to make maximum profit from the business (Twarowska & Kakol, 2013). As due to the advancement in the technology and the increasing and changing demands of the customers have created tough competition for the Harvey Norman, hence Harvey Norman has to develop and make improvements in the strategy they are working to remain on top among its competitors. Factors like political, economic also affects the business of an organization. In this report, it is discussed about the improvements in the existing strategy like renovation of the existing flagship stores of Harvey Norman and by omni channel strategy (Barwick, 2014), Harvey Norman is interacting with users online those who prefer shopping online and solving their queries. Other strategies like Greenfield strategy and Strategic Alliance can be adopted by Harvey Norman in order to improve their business growth.

Harvey Norman Holdings Ltd. is one of the biggest and successful names in retail group in Australia. The organization was founded in 1982 by Gerald Harvey and Ian Norman. It is based in Homebush West in Australia. It grants franchises to other independent franchisees. Product categories that are sold under franchises of Harley Norman include electrical appliances, computer and communications, furniture, bedding and Manchester, bathroom and tiles, kitchen appliances, carpet and floorings, and small appliances (Bloomberg, 2018). The company operates under three new formats apart from Harley Norman; these include Domayne, Space, and Rebel Sport. Under Harvey Norman, Joyce Mayne, and Domayne, company has around 195 franchised complexes and around 89 stores that are run under Harvey Norman brand (Harveynormanholdings, 2018).  Harvey Norman has around 20 stores in New Zealand and five stores in South Africa. In 2000, company started to expand its business in Southeast Asian market with launching in Singapore with giving around 14 stores. In 2003, company moved to Malaysia and also targeted its expansion in Eastern and Western Europe, started with Ireland and Slovenia in 2002. Chairman of Harvey Norman is the first ‘retail billionaire’ of Australia (Referenceforbusiness, 2018).

Strategic Management

All the steps taken by an organization like planning, monitoring, analysis and assessment that are needed for an organization to achieve its goals and objectives is known as strategic management (Jurevicius, 2013). Strategic management is necessary as the world is developing at fast pace and new technologies, innovation, and expectations of customers are increasing day by day (Godfrey, 2015). It requires organizations to make decisions strategically in order to remain successful. Steps involved in strategic management process include assessing the present situation of the company by company leaders, developing strategies, implementation of strategy and then analysing the effectiveness of the organization (Rouse, Roy, & Rawson, 2018).

In 2015, Harvey Norman implemented flagship strategy by opening Millenia Walk store in Singapore. Success of Millenia Walk store validated the flagship strategy and leads the company to develop unique flagship strategies for the stores and franchised complexes in every country it operates. Due to this flagship strategy, company achieved record breaking financial success by the end of year 2017 (Mentis, 2017 Annual Report, 2017). This strategy creates a physical space which helps in establishing the tone of the brand in that particular region in terms of aspiration and achievements. It has raised the bar higher for retail experience and tells that how a retail experience should be. Company opened Tallaght flagship store in Dublin and this was the first freehold land purchase of the company in Ireland (Bencic, 2017). Harvey Norman stated that its flagship strategy is the future for the organization as the profit and growth resulted from the flagship strategy. Company is aiming to get benefited more with the completion of franchised flagship complex in Australia and the other flagship stores in different countries including Malaysia, New Zealand and Croatia by 2018. In order to provide the finest shopping experience to its customers in Central European region, company renovated Slovenian flagship store in Ljubljana (Mentis, 2017 Annual Report, 2017).

From 2011 omni-channel strategy of Harvey Norman when it launched an e-commerce website has come a long way. The motive behind developing online website was to connect all its stores across the world and bringing retail options to online by connecting customers with salespeople through live chat (Bender, 2012). This model is continuously working to develop and enhancing the services offered to the each franchisee. Apart from live chat capabilities, this strategy offers real time inventory, same day delivery services, click and collect app, and providing facilities of connecting customers to the installation providers (Barwick, 2014).

Harvey Norman franchisee model is growing its strength to strength and still the dominant player in the Home and Lifestyle market. In 2017, company’s franchisee sales revenue hiked 5.4% and reached from $287.05 million to $5.62 billion (Mentis, 2017 Annual Report, 2017).

Harvey Norman is operating in more than 10 countries and each country has its own political environment and political system risks. To achieve success in such a dynamic retailing industry across different countries, diversifying the risks of political environment is important. Harvey Norman has to analyse some factors before entering in a certain market such as bureaucracy and interference of government in retailing sector, importance of retailing sector in the economy of the country, trade regulation, anti-trust laws related to retailing, tariffs, level of corruption in retailing sector, taxation, industrial safety regulation for the retailing sector, pricing regulation, and product labelling in retailing (Fernfortuniversity, 2018).

Strategy of Harvey Norman

Economic factor that Harvey Norman can consider in order to determine the growth of organization in a particular country include growth rate, inflation rate, consumer spending, retailing industry growth rate, exchange rates, efficiency of financial markets, education level, labour cost, and interest rate (Fernfortuniversity, 2018).

Harvey Norman is currently working on the flagship strategy. Each flagship store of Harvey Norman provides best-in-class product range for home and lifestyle. Although, this strategy has made a huge profit for the company in previous years but this year report stated that the company’s net profit fell 16.4% to $375.38 million from $448.98 million (Mentis, 2018 Annual Report, 2018). The two main factors that affected the results include the net property revaluation increment factor and the loss because of joint venture with the Holdings dairy (Franchisebusiness, 2018). Harvey, CEO of Harvey Norman on the launch of auburn store said that it is not possible to create a brand and letting it stand still. Company faced 7% fell in the earnings from Australian Harvey Norman and also the share price of the company was at the lowest of three years. In recent years flagship strategy has developed by working with its major suppliers in order to identify how organizations want their shoppers to experience their products (Somma, 2014). As per the analysis, it has shown that with the first flagship store in Singapore, Harvey Norman has improved its sales by 50%. The flagship strategy of Harvey Norman has strengthened their long held, and as per the surveys conducted, it is clear that online shopping will never be able to dominate retail market. As per Harvey, as compared to the bricks and mortar, running an online business is more expensive (Bell, 2014). Reasons of decrease in profits are due to the changing demands of the customer and not upgrading their existing stores. Hence, company has decided to redesign, upgrade, and renovate its existing eight stores to attract customers in order to meet the changing trends in technology and products. Also, company’s omni-channel strategy is providing customers online experiences those who prefer online shopping and also giving tough competition to the other retailers and online shopping websites like Amazon (Hatch, 2018). One of the most common factors that affect the performance of an organization is competition from other companies. There are several other companies in the retail sector that gives tough competition to Harvey Norman such as Woolworths and Wesfarmers. To survive in the market it is necessary for Harvey Norman to invent something that is unique from their competitors (Owler, 2018). It is required to be aware of Harvey Norman’s competition and what their position in the market and then finding the ways that differentiate company from other competitors in as many ways as possible (Quain, 2018). In 2017, Harvey Norman changed its accounting treatments for franchisee receivables and after some days of that analyst observed increased competition from JB Hi-Fi, The Good Guy, and the fast arrival of Amazon. Customers are unpredictable and so their demands. It is not possible or an easy task to determine the behaviour of customers. Internet has made consumers more aware and informed about their needs, options available in the market, quality, and accessibility of the products they want. Due to this, there is high competition in retail industry. In order to meet the changing customer needs, Harvey Norman has to deal with different aspects such as Internet of Things (IoT), availability of products, delivery, comparison of products, product return, fast fashion, and sustainability (Loon & Eijk, 2016). Therefore, when customers give indication about something that is not provided by the organization, Harvey Norman has to listen to the consumer demands and provide what customers are asking for before Harvey Norman’s competitors do so.

One of the alternatives of flagship strategy is Greenfield Venture. It is a type of market entry strategy where a company build a wholly owned subsidiary in the market of a foreign country. This type strategy comes under foreign direct investment and is also known as Greenfield investment. Through Greenfield Venture, an organization or business enters a new market without taking any help from the other already existing business or organization. In this strategy, organization builds everything that is required from the ground which includes all aspects of the business, from constructing plant to marketing and distribution methods (Hyatt, 2015). In most of the cases, setting up a Greenfield venture is expensive and complex because it requires an organization to acquire complete knowledge and expertise about the local market of that country and needs to develop relationship with various stakeholders to set up a new business in a new country, but it gives maximum control to the company as company developed the entire project from the starting thereby constructing its own structure and culture. Apart from flagship strategy, Harvey Norman can adopt this strategy in order to enter new markets of different countries and grow its business throughout the world (Mbaskool, 2018).

A strategic alliance refers to the variety of cooperative agreements between different organizations and firms which includes joint ventures, shared research, and minority equity participation. Strategic alliance is becoming popular rapidly and has three different characteristics like its main aim is to create new products and technologies, these exist between firms of high industrialised nations, and they are only for short period of time. Main advantage of strategic alliance is technology exchange, as it is difficult and not feasible for a single firm to have all the necessary capabilities and resources to conduct its own Research and development, so strategic alliances provide options for the same (Twarowska & Kakol, 2013).

Greenfield investment strategy will allow Harvey Norman with advantage of increased control; eliminate intermediary costs and forming marketing partnership. Harvey Norman will have a high level of direct control over the investment enterprise. Also Harvey Norman will have total control over the manufacturing or sale of services and the products. This investment will provide Harvey Norman with ability to control quality of the product and the rate at which production is done. Product and pricing of the products can be decided according to the needs of the local market. Greenfield strategy has high expenditure but it will provide Harvey Norman total control over everything related to the product and its marketing and organization (Maverick, 2018).

Harvey Norman can adopt strategic alliance in order to reduce its expenses on research and development. Harvey Norman can make agreements with different organization in different countries and share their experiences, hire highly skilled workforce from other organizations. Different organizations of a particular country have knowledge and the expertise about the market conditions and the behaviour of consumers in that particular country. This will help Harvey Norman with the elimination of need of market research and the demand of the customers of that country (Twarowska & Kakol, 2013).

Factors Affecting Harvey Norman Performance

There are several issues that Harvey Norman can face while implementing Greenfield setup (Btglegal, 2018). List of seven issues is discussed below:

1. Method of Entry: It is not necessary that a country always incorporate an organization to operate in their country. In that case Harvey Norman can enter into a joint venture with an existing organization in that country and set up branch office, project office, and liaison office. But these are also entitled under different laws.
2. Land Acquisition: To construct plant or the outlet for an organization requires acquisition of land in that country. As it is not easy for Harvey Norman with foreign investment to acquire a land in other country.
3. Regulatory Approvals: It requires approval from different a wide range of regulatory bodies of a particular country to set up an industrial or manufacturing unit.
4. Financing: To set up a manufacturing unit, it requires capital or financing at different stages of the construction. And it is a slow procedure to fund an entity of a certain country from the foreign country.
5. Different culture and Working Models: Harvey Norman is an Australian company. And there is always a big difference between the culture, working models, consumer behaviour, and the demands of the customers of different countries.
6. Labour Law compliance: Most of the countries have strict employment and labour laws. These laws are pro-labour laws and it is expected from the organizations to compile these laws strictly.
7. Tax and Duties: Every country has various tax and export/import laws for goods and these laws are amended and re-assessed regularly which lead to uncertain tax regime.

• It is advisable to take tax advice and legal advice before choosing the mode of entering into market of another country.
• Long term lease would be better option for resolving the land acquisition problem.
• Dedicated resources like third party and meticulous planning are needed to get approvals from regulatory bodies.
• Planning at the each stage of lifecycle is necessary for regulating funding.
• It is important for Harvey Norman to not impose its model on another country’s operations, rather try to integrate with different working cultures.
• Appoint a resource team for compilation of labour law properly. To deal labour laws is to managing employees and employment management techniques are the key.
• In order to maintain investment structure and the proposed operations, draft policies of that country must be kept in mind(Btglegal, 2018).

1. Choosing Right Partners: It is important to choose the right partners to alliance with. Partners that have innovative technologies, research and development methods to improve the product quality and enhance product quality as per the demands of the customers of the destination country. Hence, selecting a right partner is the key issue in strategic alliance.
2. Shared Information: What information is shared and what information is needed to hinder from their partner is important. Harvey Norman needs not to trust its partners in order to share information.
3. Negotiation in Deal: In order to deal with risks and making improvement in the benefits for both the organization, the deal should be negotiable.
4. Realistic Agreement for Market and Corporate Expectations: Contribution of each organization and expectations from each other should be realistic.
5. Flexibility to change: Both organizations should be open to change their work culture and other issues in order to meet the requirements needed to achieve the goals(Segil, 2002).

• Harvey Norman should make proper research and investigation in order to select its alliance in a certain country. Proper and complete background of organization should be researched before choosing a partner. A perfect match is must(Deploypartners, 2018).
• Harvey Norman should look for alliances that have a background of follow through. Sharing information and doing what is agreed is important in strategic alliance.
• Harvey Norman should have a process, approach, strategic commitment, structure, and metrics for making alliances work from the highest levels.
• Alliance should be well structured and negotiated. To achieve alliance goals, a strong planning and manageable expectations are required.
• It is required for both the organizations to negotiate and reshape their investigation if it is needed to get the outcomes that require customized solutions (Segil, 2002).

Conclusion

From the above discussion it is concluded that, for the proper growth and success of an organization, it requires a proper strategy and its implementation for the organization. Every organization requires a well maintained strategic management for its organization to achieve the set objectives and goals of the organization. Harvey Norman is one of the biggest retail companies of Australia founded by Gerald Harvey and Ian Norman in 1982. Harvey Norman has achieved huge success in so many years and still on top among its industries. In 2015, Harvey Norman opened its first flagship store in Singapore naming Millenia walk store and adopted this strategy as its main business strategy. Under this flagship strategy Harvey Norman opened around 20 stores in New Zealand, five stores in South Africa, and also marked its presence in Singapore, Ireland, Slovenia, and Malaysia with the opening of its stores in these countries also. As per the studies and the annual reports of the Harvey Norman it can be seen that, this strategy benefited the organization with record breaking financial success in the year 2017, but in 2018, company had to face huge loss. It was observed that with advancement in technology, changing demands of customers, and new and existing competitors, every strategy needs enhancement and improvement and some new strategies to give tough competition to its rivals and to meet the changing demands of the customers. Hence, Harvey Norman included omni-channel strategy to interact with customers in real time to solve their queries and provide them online shopping experience. In inclusion with flagship strategy this report suggests some other strategies such as Greenfield Venture and Strategic Alliance that Harvey Norman can adopt to maximise its business growth and profit.

Reference

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