PESTEL and SWOT Analysis of Homebase

Homebase is the UK’s second largest home improvement retailer and is recognised for choice, style and customer service across the wider home enhancement market. It has more than 300 large, out-of-town stores throughout the UK and Republic of Ireland, and is planning to add to its store chain with around 15 new stores a year. It sells over 30,000 products across DIY and decorating, home and garden ranges, and has a growing internet offering. Homebase serves over 70 million customers per year through its stores and offers customers the convenience of home delivery for bulky, high-value items. Its Ideas magazine is the number one home interest magazine in the UK, with a circulation of almost half a million. In 2006 Homebase won ‘Britain’s Best Superstore Manager of the Year’ at Britain’s Best Retailer Awards and in 2005 it was awarded DIY Retailer of the Year in the National Home Awards. Homebase was the first UK DIY retailer to achieve Forest Stewardship Council Chain of Custody certification. More information on Homebase can be found on
Situation analysis
With sales of nearly £6bn in the past financial year, Home Retail Group is the leading home and general merchandise retailer in the UK.
Although company is already the number one in many of its product categories, there is still potential to increase its market share. Our combined position accounts for just 10% of a market valued at £60bn. As many of these markets are fragmented and its market share has built quickly, there are further opportunities for growth. Homebase proves there’s ‘No Place Like Home’ for charities In August 2006 Homebase launched its first two year partnership with Marie Curie Cancer Care (www.mariecurie.org.uk) and the Irish Cancer Society in the Republic of Ireland (www.cancer.ie), under the banner of ‘There’s no place like home’ ; The charities were chosen in a company-wide staff ballot where 39% of Homebase staff voted to support them ; The aim of the two year partnership was to raise £500,000 to pay for 25,000 hours of home nursing. Homebase staff and customers have exceeded all expectations in the first year of the partnership, smashing the original target and raising an astonishing £785,000 already ; Over the past 12 months, the campaign has seen everything from head shaves and dress down days to staff abseiling down buildings for the charities. The money raised in the first year will help to provide a fantastic 39,250 hours of nursing.
External Analysis-Macro Environment
Political

Employment rate in UK is increased to 74.7% since the last year and it is suppose to increase as well at the end of the current year which could be beneficial for the company because the purchasing power of the customers has increased and at the same time it will increase the cost of the company by increasing the pay rate of their own employees.
Terrorism is also affecting the customer little bit but it increases the online sale.
If the company go in the developing countries for manufacturing, it may reduce the cost because the low pay rate in the developing countries at the same time it may affect the reputation of the company.

Economical

Consumer price inflation rose up to 2.2% in January 2008 influenced by the oil and food prices which can influence the price strategy of the organization as well as the promotion and distribution and also can effect the purchasing power of the consumer.
Oil prices are increasing rapidly in these days and the prices has been reached to its record which increases the cost and in return the high prices.
The value of dollar against Euro is decreasing which can affect the profit margin.

Social

The rate of population in UK is increasing dramatically which is a big cause of unemployment.
Increasing number of visitors especially on London Olympics 2012 can be a opportunity to sponsor time or individual and increase globally the company’s image and recognition.

Technological

Due to the increasing internet awareness among the customer the online sale is increasing day by day. It saves the time and cost as well.
52% of business suffered a malicious premeditated e-security breach during 2005 which can affect the customer data, as well as the customer trust to by online. It can affect the reputation of the brand.
After the introduction of the new security system PayPal the online payment from credit card has become more secure which increase the customer confidence on the brand which increase the reputation of the brand.

Legal

The World Trade Organization members countries have the right to impose the safeguard measures and it has a legal processing to imports. When the company goes to importing it should be aware and follow the changes in the regulations.

Environmental

By following the government waste strategy the company should increase the amount of recycling which strengthen the reputation of the company.
The public of UK is environment conscious and may be a burning issue of the world in near future so the company should improve its recycling policies.

External Analysis-Micro Environment
The micro environment also known as task environment are the internal forces that have a direct affect in the company’s strategies. These factors include buyers, suppliers, all type of competitors, new entrants and substitutes employees and marketing intermediaries (media).
Industry analysis
The following analysis is based on Michael Porter’s 5 Forces Model (1996) and it helps understand the competitive environment for HomeBase
Threats of New Entrants
Factors
Level of threat
implication
Product differentiation
High
Home products are very common products so the marketing of the company sells.
Capital requirement
Medium
A lot of capital require to introduce a new product to compete the existing products
Brand identity
Low
Home base has a strong brand name in whole US and UK
Distributional channel
Low
Franchisee will be consider the brand identity in the first step
Economies of scale
medium
New entrant have to entrant in a large scale to compete in the market
Threats of substitute products
Factor
Level of threat
Implication

Few substitute products
Low
In household products there are very few products which can be replaced
Bargaining power of customer

Factors
Level of threat
implication
Product quality
High
Some of the competitors claim to provide similar quality products to the customer
Type of customer
high
As the management of the store is responsible for a good sale so there is a strong customer bargaining
Brand identity
Low
Marketing strategy is strong that’s why the brand is recognized all over the US and UK
Bargaining power of supplier
Factors
Level of threats
implication
Cost of supplier
High
This company is in developed countries that’s why the labour cost quite high
Supplier concentration
Low
The company support community traders
Competitive rivalry
Factors
Level of threats
Implication
Brand identity
high
The brand value of each company as well as the target market makes the differentiation to the customer
Industry grown
High
Due to the recent growth in the household items the competition is very high
Cost of structure
High
Competitors follow the same scheme of economies of scale with relatively low cost and high profit
Diversity of competitors
High
Now a days there are some companies who are introducing the efficient products
Conclusion: after analysing the Porter’s 5 forces in this company it is noticed that the retail market is attractive for Homebase. Though Homebase is a leader in the market the company has to develop more technological and attractive products to compete the other companies as well as company has to improve its growth strategies to keep the customers and to fulfil their needs.
Market segmentation
Consumer market
The Homebase has become the leader in its market because it covers almost every household item like from gardening to decorating. Now a days due to development in technology the customer is becoming more and more aware of the quality so they demand for high quality products because they have choice.
Products
Homebase concentrate on household products and the is still trying to cover everything regarding home. Company deals with the following types of products.

Kitchen items
Bathroom products
Furniture and homewares
Lighting
Flooring and tiling
Decorating
Home electrical
Heating and cooling
Tools
Building and hardware
Gardening
Outdoor living

Main competitors
following are some principal competitors for the Homebase,
Home Depot, Inc.;
Eagle Hardware and Garden Inc.;
Hechinger Stores Co.;
Builders Square Inc.;
Payless Cashways Inc.;
Orchard Supply Hardware Corp.;
Lumbermen’s Building Centers.
Though Homebase has quite strong competitors but still it is leading the market and providing the quality products as well as quality service to its customer and also it is successful to keep its customers till now. The company has to continuo the performance to maintain the standard.
Brand
Since last few years Homebase has worked focused on customer favour by providing products in low rates with a shopping experience that combines excellent service with a comprehensive range of household items.
Homebase proves there’s ‘No Place Like Home’ for charities In August 2006 Homebase launched its first two year partnership with Marie Curie Cancer and the Irish Cancer Society in the Republic of Ireland, under the banner of ‘There’s no place like home’ ; The charities were chosen in a company-wide staff ballot where 39% of Homebase staff voted to support them ; The aim of the two year partnership was to raise £500,000 to pay for 25,000 hours of home nursing. Homebase staff and customers have exceeded all expectations in the first year of the partnership, smashing the original target and raising an astonishing £785,000 already ; Over the past 12 months, the campaign has seen everything from head shaves and dress down days to staff abseiling down buildings for the charities. The money raised in the first year will help to provide a fantastic 39,250 hours of nursing. After doing this Homebase has become a strong brand in all over the UK and Irish republic.
Internal analysis
Resources
Physical resources
Number of stores: 310
Countries operating: UK & IRISH REPUBLIC
2. Human resources
More than 8400 employees including stores and offices are working in Homebase
3. Financial resources
Pro forma of 52 weeks to
3 march 2007
4 march 2006
Sales
£1,594.2m
1559.0
benchmark Operating profit
£53.4m
£51.4m
Benchmark operating margine
3.4%
3.3%
Like-for-like change in sales
1.4%
3.1%
New space contribution to sales change
3.6&
3.1%
Total sales change
2.2%
0.0%
Benchmark operating profit change
4%
n/a
Number of stores at period end
310
297
Of which contain a mezzanine floor
165
144
Competences and capabilities
Using the 5M’s is possible to analyse the competences and capabilities of the company.
Market
The Homebase is the leader in the retail market and it is providing quality products in cheaper rates and due to this Homebase is being recognized all over the uk as well as Irish republic.
Materials
The company is investing a lot of capital to introduce new stores so that the customers can buy quality products from their locality. The key element to the new store design is part of the business strategy to make-up merchandising fixture.
Men
More than 8400 employees including stores and offices are working on Homebase.
Money
Financial resources
Pro forma of 52 weeks to
3 march 2007
4 march 2006
Sales
£1,594.2m
1559.0
benchmark Operating profit
£53.4m
£51.4m
Benchmark operating margine
3.4%
3.3%
Like-for-like change in sales
1.4%
3.1%
New space contribution to sales change
3.6&
3.1%
Total sales change
2.2%
0.0%
Benchmark operating profit change
4%
n/a
Number of stores at period end
310
297
Of which contain a mezzanine floor
165
144
Machines
Number of stores  310
Countries operating  UK & IRISH REPUBLIC
S.W.O.T Analysis
Strengths

Leverage purchasing scale
High loyalty
Strong brand name
Increase share in large product markets
Expand homebase store network
Extend and exploit multi-channel leadership

Weaknesses

More capital require for new stores
High supply cost
High operation cost

Opportunities

Further to go on importing
Opportunity to explore other overseas sourcing locations
Additional benefits to come from supply chain
Other cost reduction processes

Threats

Strong competition in retail market
Customers are becoming more and more aware of quality due to improvement in technology and want high quality products on cheap prices
Increase in the sales of competitors
Though there is competition in the market the Homebase has a strong brand name and the company is improving their performance as well as it is investing in the product quality and opening new stores. There are still lot of opportunities for the company.

Market plan
On the basis of the previous audit marketing and the company strengths the objectives and the targets of the company are as follows;
Objectives and targets

Reduce plastic bag consumption by 25% by the end of 2008
Attain ISO 14001 status for 5 Distribution Centres
Attain recycling rates of 50% across the Group

Energy

Achieve energy accreditation for the Group from the Carbon Trust
Reduce energy consumption by 2% KwH/sq ft
Purchase at least 30% green power

Products

Review current policy guidelines for product selection
Attain accreditation for sustainable paper sourcing
Maintain existing recycled paper content of catalogue at 13%

Community

Raise at least £1.6m for charity partnerships
Achieve ‘gold status’ for payroll giving ( at least 10% of workforce)
Establish arrangements for community investment
Establish a volunteering policy for the Group

Workplace and HR

Improve ’employee engagement’ scores.
Improve take up of share save schemes
Reduce average absence per employee
Reduce RIDDORS by 10%

Customers

Increase levels of customer satisfaction (reduce no of orders which generate one complaint)

Group growth strategies

Growth through leveraging purchasing scale
Growth through increasing market share in targeted large product market
Growth through extending and exploiting multi- channel leadership
Growth through expanding the store network (10 homebase stores in a year)

Marketing mix
To implement the above strategies the following points can be applied:
Product / branding
Homebase is working efficiently in these days by following their strategies and because of this it is leading the market in all over the UK and Irish republic.
Well I believe that regarding to the objectives of increase the brand image is recommended that the company is to associate the environmentally friendly image such as reducing the use of plastic bags. And further more the company should go on importing as well as explore the other overseas resources locations so that the brand can win the global recognition. Though the company has started its own recycling program in which some products are totally recyclable and some are partly, but in future environment will be a burning issue so organization should do some more for this which protect as well as beneficial for the brand in future.
Price
The differentiation strategy allows the company to implement a value-based pricing approach.
Place
Develop a multi-channel distribution has been successfully implemented in the company. On the other hand company should increase its online sale.
Promotion target
People concerning about environmental issues
House wives
Communication

To promote the product benefits
To make the product known
To increase online buyers

The massage
It is suggested to use the objectives that concern with the knowledge or awareness in the mind of the customer.
Media selection

Advertisement on the magazines which are usually being sent to the houses monthly or weekly
Attracting customers by making sales on special occasions
Online advertisement
Using the logo in other web sites to link with the company’s web site
Series of the press releases to be sent to magazines and access online
TV campaign to roll out nationality on terrestrial TV

Posters
People

To monitoring services online as well as make available news tools to the customer shopping online
To incorporate orders online, to store products and others
To help increase the sells and to ensure the customer service quality

Process
Products purchase online delivery with in a week
Credit card to be charged at time on the shipment of the order and confirmed by e-mail
Use the latest security methods such as PayPal
Return policy should be with in the existing 30 days after the purchase
Physical evidence

Receipts and inventory bills
Software to develop the e-commerce

Budget breakdown
To achieve the above marketing planning objectives it is set an overall cost of £8.5 million. And this overall cost is divided into the following categories;
Product
16% of the total cost is for the market research and for the development of the product, R&D. The estimate cost in £1360015.7
Place
8% of the cost is to be spend on the continuous refurbishment and maintenance of the stores, distribution and transportation, and the estimate cost is £680,000.
Promotion
60% of the total cost is to be used for the promotion of the product which includes the media advertisement such as advertisement in TV programs, magazines, posters in public transport, etc. The estimated cost is £5100,000.
People
10% of the cost is to be spent on HR, training, recruitment and IT outsourcing. The estimate cost is £850,000.
Process
4% of the total cost will be spent on the development of the operation processes and for this the estimate cost is £394400.63
Physical evidence
2% of total cost is to be spent on the reservation for the physical evidence and process to maintain the e-commerce. And the estimated cost for this is £170000
Total cost
The total cost for the whole process of the above marketing planning to achieve the mentioned objectives is estimated as £8500000.