Kogan Company: Expanding Retail Operations To China

Organizational Structure and Strengths

As a retailer and service provider, Kogan Company wants to remain at its highest for a decade. The company focused on providing the high quality services, which can be affordable and acceptable in the market. The company focused on making in-demand products and services more affordable and accessible. Kogan.com aim is to bring those savings to a core range of everyday household’s items and no perishable groceries (AIA, 2016).  

Kogan Company is an online retail product and service provider, headquartered in Melbourne Australia. The company is famous for its leadership in price because of the company’s efficiency in digital marketing. The major focus of the company is on making the products that are in demand more accessible and affordable for the customers. The products in which the company is dealing are groceries, consumer appliances, electronic products, footwear and apparels, beauty and fitness products. The company is offering the variety of product range, which includes Kogan Mobile, Kogan Insurance, Kogan Travel and Kogan Internet (Kogan, 2018).

Kogan Company has a matrix structure in its organization. This structure is suitable for the organization as the company is providing the large variety of services, project types, client types and office location. The company is having the large organizational structure with differently and specialized department for every activity. This specialization in each department is working as the strength for the organization. The biggest strength of Kogan is a highly skilled workforce, which makes the organization different from its competitors. This is the reason the company can able to perform better in the new market and are getting the success. Kogan has the strong and fast distribution network that is available in all its potential market. On the other hand, Kogan is facing problem due to its old organizational structure, which are not compatible to the present business model. Due to this high attrition in the workforce has seen in the company (Kogan & Company, 2018). 

The company is planning to expand its business in China due to the large availability of the opportunities. The China market is full-fledged with the technology and resources. Kogan can explore in the market through its specialization in its services (Kogan.com, 2018).

Political factors

Political factors play a significant role in determining the factors that affect the Kogan in China. At present, the political system in the china found stable in nature and there are very fewer restrictions by the government. This will make the entry of Kogan easily in the China market (Autor, Dorn and Hanson, 2016).

PESTLE Analysis for Kogan in China

Economic Factors

The economic factors taken into consideration by Kogan Company are the Gross Domestic Product and the inflation rate in China. China found to have the high consumption pattern which demands more services and products to demand in the country. There is high foreign transaction ion the China due to which skill workforce can also be available in China. Another advantage that Kogan will benefit in China is the low labor cost in the economy, which makes the high production in the country (Bloomberg, 2018).

Social Factors

Shared values and beliefs in China market play a significant role for Kogan Company. The social culture in China found to be supportive and encouraging in nature. Therefore, Kogan Company has the probability to be accepted in the market easily.

Technological Factors

China market is considered the hub of technology globally. Kogan Company is also using the high and updated technology in its operations. Kogan can make use of its technology in the China market and get the acceptability from the customers. The technology used by the Kogan is affecting its retailing and distribution system (Business Insider Australia, 2018).

Legal factors

In all the countries including China, the legal framework is found to be different in nature. Kogan has to understand the China legal rules and policies while entering the Chinese market. The China laws are found to be strict regarding the consumer protection, e-commerce, patents and copyrights of the company (Lamb, Hair and McDaniel 2011).

Environmental Factors

China markets have different norms or environmental standard, which Kogan Company has to understand while entering the market. As these factors, also affect the company revenues and profitability. China market is conscious of using the eco-friendly product in its environment so the Kogan also has to introduce the product, which is eco-friendly in nature.

Segmentation

Selection of the Target market is described by demographic, psychographic, geographic, buying power.

• Demographics: Kogan Company will be targeting teenager to an elderly person with medium and high-income groups, any family size, both male and female (Business Insider Australia, 2018).
• Psychographic: As the Kogan Company has a strong brand positioning in the Australian market, this will help the company in creating its image in the China Market. The people in China will ready to accept the product as it will be available in a reasonable price.
• Consumption patterns: The people in China will purchase the product mostly offline from the stores so the company will start supplying the product to the retailers selling in that area to increase the demand for the product (Gay, 2016).
• Geographic: The Company will introduce the product in the different parts of China.
• Buying power: The Company is targeting the middle-class people of China, as the company aims to provide the good quality products and service (Smart Insights, 2018).

Targeting

The target market is the market where the company wants to sell its services and products to the customers. Kogan is targeting the teenager to an elderly group of the China market with its high-quality products and services (Kogan.com, 2018b).

Positioning Strategy

Kogan Company positioned itself in the market as an online retailer provider of product and service while offering the variety of services to its customers. The products and services offered by the company able to satisfy the targeted market in China. Kogan aims to position itself differentiated and unique in the mind of the customer.

Market Segmentation, Targeting, and Positioning Strategy

Bargaining power of Buyers:

• Switching on to different suppliers is very easy for the customers, due to the difference in the prices of products.
• In order to increase the customer base, the Kogan Company should focus on their transportation process and the promotional strategies in order to attract the customers.
• Proper Availability and innovation in the product are necessary for Kogan to remain its customers satisfied in another market also like China (Blanchard and Giavazzi, 2016).

Bargaining Power of the Suppliers:

• Suppliers bargaining Power has a noteworthy effect on the company. They have the power of increasing or reducing the prices of products and its services. They can change the prices of the items according to the market demand.
• Labor can also increase their wages. Therefore, the company should prefer hiring labor that is not charging higher wages and is easily available at lower wages in China, which in turn reduced the manufacturing cost of the company (Foundr, 2018).
• The Switching cost of Kogan Company is relatively low, as they maintain a good relationship with their suppliers by providing them payment on time.

The threat of new entrants:

• The company is facing competition from the existing firms. The entry of a new company with more innovative and creative method will create a threat for Kogan Company.
• The company should keep their prices moderate to retain their image in the market, as the new companies are coming with reduced prices and offering a better quality of products. This will shift the demand of their customers (Financial Review, 2017).

The threat of Substitutes:

• The customers have the option to move from one product to another. The presence of a large number of substitutes in the retail sector works as a threat for Kogan. It has become important for the Kogan Company to bring innovative promotional methods of launching their product in the markets of China.
• The company should focus on maintaining the quality to maintain the loyalty of their customers towards the Kogan products and services (Business Insider Australia, 2018).

Rivalry among the Existing Companies:

• The rivalry among the competitors in the china is increasing day by day. The Kogan Company should disclose its pricing and the promotional strategies in the market. This will give the competitive edge in the market to company (Business Insider Australia, 2018).
• The company like Amazon exists in the market of China. These companies are a threat to the Kogan Company in China. From the research, it was analyzed that the Kogan was offering better prices than the Amazon was. This will have the great impact on the sale by Kogan in China market (Finnacial Review, 2017).

Kogan Company has evaluated that they must provide customer-driven quality, building organizations relationship with customers, build trust, loyalty and confidence in the market of China. Logan Together Company needed to develop and design strategies for increasing demand for the customers (Solinger, 2016). 

Kogan Company must take customer feedback for its performance standards to determine customer satisfaction in China also. The Kogan must identify the customer needs, discovering customer priorities through social networking sites, hotlines and comment cards. The areas creating problem needed to improve to avoid reoccurrence of the problem in China (Entrepreneur, 2018).

Kogan Company will now focus on improved quality, design, and delivery time that is loved by Chinese customers and results in the profitability of the organization. Kogan company ensures that it delivers will remain fast and products can be delivered before the time to their customers. This will increases the customer base of the company.

Kogan Company should focus on new packaging of the product, which will work as a safeguard for the product. The company has evaluated that the promotional tool used by them should be advanced so that it increases demand for the product among the customers in China market too (Smartling, 2018).

Conclusion

On the basis of above discussion, it can be concluded that the Kogan Company as an online retailer providing the product and services in Australia. The company is planning to expand in China due to the availability of large market. Kogan Company has introduced its product and services at very lower prices to attract a large number of consumers. From the Pestle analysis, it can be analyzed threat the economic factors are in support of Kogan for entering in the market. The company has introduced an environmentally friendly product with its advanced technology to coordinate with the rules and social factors of the country. The company wants to be best in terms of quality, customer service, and satisfaction. Kogan is targeting teenager to the elderly group in the market of China and positioned itself to be the low-cost provider while providing the differentiated product.

Based on the above discussion, there are many areas where there is scope for the company to improve and boost its market position.

• Kogan Company should target the markets of China to increase its market as like in Australia.
• Kogan should aim to provide the after sale services to its customers.
• It should be the best in terms of customer service, customer value, and quality.
• The company can also move into the market of grocery, which can be available to the customer online.
• Targeting the China market will find to be more profitable for Kogan due to the high demand and consumption pattern of the country.

References

AIA. (2016)  Understanding Organizational Structure [online] Available from: https://www.kogancompany.com/wp-content/uploads/2016/05/3-bp_06_06_10_Understanding-Organizational-Structure.pdf [Accessed on:  17^thAugust 2018]

Autor, D.H., Dorn, D. and Hanson, G.H. (2016) The china shock: Learning from labor-market adjustment to large changes in trade. Annual Review of Economics, 8, pp.205-240.

Blanchard, O. and Giavazzi, F. (2016) Rebalancing growth in China: A three-handed approach. In seeking changes: The Economic Development in Contemporary China (pp. 49-84).

Bloomberg. (2018) Company Overview of Kogan.com Limited. [online] Available from: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=374923836 [Accessed on: 05/08/2018]

Buisness Insider Australia. (2018) ‘A stats business masquerading’ as a retailer: behind the growth of Ruslan Kogan’s company [online] Available from: https://www.businessinsider.com.au/this-is-how-ruslan-kogan-drives-massive-growth-at-kogan-com-2018-2/ [Accessed on: 05/08/2018]

Entrepreneur. (2018) 10 marketing Strategies to fuel your Business growth. [online] Available from: https://www.entrepreneur.com/article/299335 [Accessed on: 05/08/2018].

Finnacial Review. (2017) Ruslan Kogan says Kogan.com will have better prices than Amazon [Online] Available from: https://www.afr.com/business/retail/fmcg/ruslan-kogan-says-kogancom-will-have-better-prices-than-amazon-20170817-gxyp5r [Accessed on: 17^thAugust 2018]

Foundr. (2018) No Strategy, No customers: How to build a profitable Marketing Strategy [online] Available from: https://foundr.com/marketing-strategy/ [Accessed on: 05/08/2018]

Gay, R.D. (2016) Effect of macroeconomic variables on stock market returns for four emerging economies: Brazil, Russia, India, and China. The International Business & Economics Research Journal (Online), 15(3), p.119.

Kogan & Company. (2018) Services [online] Available from: https://www.kogancompany.com/services/ [Accessed on: 17^thAugust 2018]

Kogan. (2018) About us. [online] Available from: https://www.kogan.com/au/about/ [Accessed on: 05/08/2018]

Kogan.com. (2018a) Organizational structure [Online] Available from: https://www.kogancorporate.com/resources/pdf/Kogan-Organisational%20structure.pdf [Accessed on: 17^thAugust 2018]

Kogan.com. (2018b) Prospectus [Online] Available from: https://www.kogancorporate.com/resources/pdf/KGN_Prospectus.pdf [Accessed on: 17^thAugust 2018]

Lamb, CW., Hair, J F., & McDaniel C. (2011). Essentials of Marketing. United States of America: Cengage Learning.

Smart insights. (2018) The Segmentation, Targeting and Positioning model. [online] Available from: https://www.smartinsights.com/digital-marketing-strategy/customer-segmentation-targeting/segmentation-targeting-and-positioning/ [Accessed on: 05/08/2018]

Solinger, D.J. (2016) China’s Transition from Socialism?: Statist Legacies and Market Reforms, 1980-90: Statist Legacies and Market Reforms, 1980-90. Oxon: Routledge.