Strategic management is one of the major factor considerations for the contemporary business organizations. This is due to the reason that the current business state of affairs is much more competitive in nature than it was a decade ago. However, in order to have an effective approach of strategic management, environmental audit should be done. This will help in determining the change in the external environmental factors for the organizations along with identifying the probable threats and opportunities for them (Vogel and Guttel 2013). Retail market sector is intensely competitive in nature with the presence of large number of players.
Germany is having large number of big brands operating in the retail sector along with numerous smaller players (Yu, Ramanathan and Nath 2014). In addition, as Germany is a developed country, they are having large number of global players in business. However, Germany will be favorable foreign market due to the reason that cultural differences are less between Germany and the United Kingdom. The Range is one of the leading brands from the United Kingdom. They offer huge product assortments and varieties ranging from home and household products to garden and leisure products. It is reported that The Range is having more than 65000 varieties of products. Currently, they are having 148 stores in the United Kingdom along with having more than 11000 employees (Therange.co.uk 2018). The Range follows the strategy of market follower by retailing the products of other brands and introducing same under their private level brands. Thus, they are having huge market penetration in the market of the Germany. However, with the increase in the competition in the market and rapid change in the external business factors such as customer choice and legal factors, The Range is facing the challenge of survival. Thus, they are initiating to enter in the market of Germany.
This report will discuss about the environmental position of The Range in the Germany. In doing so, PEST and VRIO model framework will be used. In accordance to the identified factors, SWOT analysis will be done to identify the gap areas from the side of The Range. This report will also discuss a number of recommended steps that will enhance their business operation and effectiveness.
The major political factor for The Range in the Germany is brexit due to the reason that brexit will close the opportunities of cross country trade between the Germany and with United Kingdom (Busch and Matthes 2016). Thus, The Range will have difficulty in coordinating between their host and home country. In addition, huge debt and aids by the government may lead to economic slowdown in the Germany, which will further reduce the market potentiality of The Range (Dhingra et al. 2016). Another major legal factor will be the German consumer law that calls for the retailers to maintain the exact quality and standards. This legislation is further being amended according to the current market situation and thus the strictness will get further increased and will pose further challenge for The Range. However, on the other hand, the favorable diplomatic relationship between the Germany and other major economies will help them to have the access to the globalized market.
Currently, the economic growth rate of the Germany is standing at 2 percent and thus the growth opportunities are less and stagnant. This is one of the major adverse impacts on The Range due to the reason that The Range is only having their presence in the United Kingdom outside of Germany and they wholly depended on the economy of their host country (Bateman et al. 2013). In addition, Germany is having some of the major retail giants such as Aldi and Walmart. Thus, The Range is having lower market potentiality and less probability of increasing the profitability. More and more foreign players are entering the retail market of the Germany further increasing the competition and restricting the potentiality for The Range.
The Range operates in the fast moving consumer goods category and thus the market trend and customer choice is rapidly changing with time. It is becoming more difficult for The Range to get adjusted with the change due to the fact that they are large assortment of products. In addition, the customer preference pattern of United Kingdom and Germany is also different. For instance, the number of population working with corporate is increasing and thus they prefer more convenient shopping experiences along with more ready to use products (O. Pappas et al. 2014). Thus, The Range has to change their existing product portfolio and introduce new products accordingly. Customers are also having the access to global products from the global players (Flemmig and Beikler 2013). This is another challenge for The Range in meeting the ever changing expectation of the customers.
Technology is one of the major areas in the current time that is witnessing rapid change and development. Germany is also one of the most technologically developed countries in the world. In the case of The Range, technology determines their effectiveness and efficiency. In addition, due to the fact that The Range is having their private level brands, technology also determines their production process. Contemporary retail sector includes automated check in and out facilities and involvement of online mediums (Blazquez 2014). Thus it is important for The Range to invest more in this sector in order to stay at par to the industry standards. However, it should also be noted that rapid change in the technology will pose challenge for The Range in investing and this will in turn reduce their profitability.
The above sections discussed about external environmental factors to be faced by The Range. However, it is also important to identify the industry competitiveness where they will operate in Germany (E. Dobbs 2014). Industry competitiveness determines the extent to which The Range will have upper hand in dealing with their external stakeholders. The following sections will discuss about the five major competitive forces for The Range.
Bargaining power of the buyers in the retail market of the Germany is high and strong. This is due to the reason that Germany is having large number of retailers from large brands to smaller ones. Thus, due to the presence of large number of players in the market, buyers are having more options for switching brands (Moatti et al. 2015). This will have adverse impact on the business operation of The Range due to the fact that they have to follow the market determined price in order to survive in the competition. In addition, their sales revenue and market share will get influenced by the operation of their competitors.
Bargaining power of the suppliers is moderate for The Range due to the reason that there are number of suppliers present in the industry. Thus, The Range is not depended on the single supplier for their sourcing of materials. In addition, the brand value and identity of The Range is also helping in having the upper hand in dealing with the suppliers. However, on the other hand, it is also being identified that major suppliers of The Range are the big brands who manufactures consumer goods (Fabbri and Klapper 2016). Thus, the pricing strategy of these brands is influencing the price level for The Range. This is also having adverse impact on them because increase in the cost of sourcing will lead to increase in the retail price. This will ultimately reduce the target customers for The Range.
Threat of substitutes is high for The Range due to the reason that large number of competitors are operating in the retail market of the Germany. In addition, almost all the retailers are offering same products of same brands. Thus, the competition is very close for The Range with having all the close competitors around (Schwenger, Straub and Borzillo 2014). This is also having negative impact on their business because presence of more substitutes is leading to lower power of The Range in dealing with the customers. Customer loyalty level will also be low due to have the access to same product range in same price across all the retailers.
Threat of new entry is low for The Range in the retail market scenario of the Germany. Entering in the retail market will require huge investments in infrastructure and branding, which will be difficult for the new entrants (Geroski and Jacquemin 2013). Moreover, the return on investments will not be more due to the reason that already the competition is high in the market and saturated. Thus, the attractiveness for the new entrants in entering in the retail market of the Germany will be less.
Competitive rivalry is more in the retail market of the Germany due to the reason that all the retail organizations are going all out and initiating aggressive marketing strategies to stay ahead over others. Seasonal discounts, rebates and offers are being given to attract more customers. Thus, The Range should also have to initiate and maintain aggressive marketing and promotional activities in order to survive in the market.
In the above sections, the major external forces for The Range are being identified. Hence, it is now important to determine the internal effectiveness of them in dealing with these issues. The following sections will discuss about the organizational readiness of The Range in regards to the identified challenges.
The Range is having experience and expertise in operating in the retail market as they are operating in the same market for many years. Thus they are having the idea and knowledge about how to deal with the change in the environment. This will help them in doing business in Germany. The Range is having different and diverse product portfolio such as they sale gardening products (Kang and Montoya 2014). These products are less exposed to frequent change as the consumer goods. Offering diverse products is also enabling The Range to cut off the intensity of the bargaining power of the buyers. This is due to the reason that diverse product portfolio is helping The Range in catering to different customer segments.
The Range is having lower brand identity compared to their global competitors and thus their attractiveness is also lower. In addition, it is also new in the German market. Thus it is important for The Range to enhance their brand identity in the market to have more market penetration. They are also less brand exposure and penetration compared to Aldi and other established players (Oehler, Horn and Wendt 2017). They should increase their market coverage in Germany by means of extensive marketing in order to enhance their identity.
Currently, The Range is having their presence only in the United Kingdom. However, they will have opportunities if they can expand their business outside of the country (Gourinchas and Jeanne 2013). Germany is having favorable growth in the retail sector and entering in Germany will help The Range to diversify their market area. The Range is also benefitting from the economies of scale due to the large operation in the United Kingdom. Thus, this can help them in sourcing products in lower cost for German market. They should use this advantage for further penetration in the new market in order to cater to larger section of the market.
The above analysis identified that The Range is having the threat of increased number of entry of the global players. It is also identified that threat of substitute is relevant for The Range and thus they should come up with distinctive products in order to have less intensity of the threat of close substitutes (Davcik and Sharma 2015). This will also reduce the bargaining power of the buyers. Another major threat for them is the rapid change in the social trend. It is important for them to be more consumers oriented in order to have coordination between the product strategy and market trend.
Increase the market share by 10 percent in next 5 years
It is recommended that The Range should initiate the strategy of cost leadership as per the Porter generic strategy. This is recommended due to the reason that initiation of cost leadership strategy will enable The Range to offer their products in minimal price in the market. The set target will be 5 years and within this time, the cost of operation will be reduced significantly by means of outsourcing the major activities and initiating lean manufacturing. The effects will be measured by means of determining the increase in the sales volume in these 5 years.
Increase product distinctiveness by 30 percent by next 5 years
Currently, The Range is having majority of standardized products that are having more substitutes in the market. Thus, it is recommended that The Range should initiate the differentiation strategy and introduce more distinctive products through their private level brands and in accordance to the German market. This will enable The Range to have less impact of substitute products in the market. It is also recommended that in the next five years, percentage of distinctive products will be increased as compared to the standardized products.
Conclusion
Thus it is can be concluded that doing business in Germany can help The Range in expanding their market as well as increasing the business opportunities. However, it also identified that they are having number of challenges from the side of their external environmental factors. In this report, the major factors are being identified and in accordance to that, the internal effectiveness of them is being discussed and evaluated. This report concluded with number of recommendations that will help The Range to enhance their business operation along with mitigating the identified challenges.
Reference
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