Strategies are those plans which are formulated in order to achieve the organisational goals (Freedman, 2015). The strategic management refers to the direction that is to be provided to the strategies formulated as they are designed with a view to achieve the objectives and also proper allocation of the resources for implementing those plans. It is the management of the resources of the organisation to attain the objectives of the organisation (Thompson & Martin, 2010). Strategic management is important because it improves the performance of the organisation by evaluating the goals of the company along with the efficiency and effectiveness of the company.
The topics to be covered in the following report is a brief description of the organisation, the analysis of the external environment which includes both the PESTLE and the Porter’s five forces model of competitive analysis, transforming the vision and mission statements of the company to enter into the Chinese market for the new strategic business unit, the SWOT analysis which includes the strengths, weaknesses, opportunities and threats of the company also recommending the business level strategy along with the mode of entry to enter into Chinese market and the conclusion of the report.
The company chosen for the current report is the WM Morrison Supermarkets commonly known as Morrisons headquartered at Bradford, United Kingdom founded in 1899 (The Success Story, 2017). It is a public limited company existing in the supermarket retail industry which is listed on the London Stock Exchange. It started as butter and egg business and hereafter became the very first self-service store along which had prices on all the products. The company is operating in five hundred plus locations majorly within England and is also does online home delivery. The company took over the British supermarket Safeway in order built a strong presence of the company in the south of England (Morrisons, 2017).
The analysis of the external environment will include the analysis of PESTLE and the Porter’s five forces model of the competition.
The government of China has shifted from being a central planned economy to market driven economy which has led to the emergence of the supermarket from that of the ancient street markets. All in all the market of China will be good choice of Morrisons to enter into the Chinese market as they are open for international companies to come in and operate there itself (Metzger, 2014).
The economic factors of China is good for the company as the GDP of China is showing a constant increase over the period of time as it was $10480.37 billion in 2014 and it grew to $11007.72 billion in 2015. Therefore; it will be beneficial to enter the Chinese market (Trading Economics, 2017).
China constantly growing as an economy and the increase in the trends of single family households which prefer living a standard life therefore; the demands for supermarket is found to be good in China. Apart from this, people are aware health wise as they want to consume the best of the products in reasonable prices (Webster, 2010).
The technological factors include the opportunities with respect to the technological advancements and innovation. Any company before entering a new market has to do massive research with respect to the upgrading the technology because in the supermarket industry the company will have to work upon the innovation to be brought in the distribution, suppliers and maintaining the Information and Communication Technology (Frynas & Mellahi, 2015).
The government of China is also liberalising the rules and regulations in China with respect to the foreign companies. The environmental factors have led to the eradication of the use of plastic bags in order to reduce pollution. They are also focusing on the recycle process of the waste materials therefore; being into the supermarket industry the organisation will be required to follow certain precautionary steps in order to sustain (Dransfield, 2013).
Porter’s five forces model is a strategic tool which helps in understanding the power that the organisation possesses. The model deals with the five aspects that can be understood from the picture given below:
(Source: CGMA, 2017).
The above five aspects constitutes the competition among the players of industry. The very first force is the rivalry among the existing competitors which are Carrefour, City Super, RT Mart and Tesco etc. The rivalry between the players is high because of the existence of number of local and international players in the industry (Magretta, 2012). The second force is the threat of new entrants as China has opened their economy for the foreign players therefore; there is a high degree of threat for Morrisons with respect to the new competitors entering the market. Apart from this, it requires huge capital to enter a highly competitive market and thereafter; establishing a brand name, its distribution and supply chain. The local government will also play a crucial role in that are required to be taken into consideration by the new entrants (Walder, 2013).
The third force is the bargaining power of the suppliers is about the local suppliers which control the whole market of China. Morrison itself being a big player owns their manufacturing units etc. In relation to this, to operate the company should tie up with the local suppliers because importing products form one’s home country will involve huge costs. Therefore; good terms with local suppliers will bring the company’s costs down. The threat is low with respect to the bargaining power of suppliers. The fourth force is the threat of substitute products or services is strong in terms of substitution. It is because the substitutes can be the nearby retail shops and other small stores which can satisfy the needs of people. The fifth force is the bargaining power of the buyers is related to how much the power is with the customer in relation to the options of other players in the market. In order to sustain the existing customers and attracting new ones the company has to satisfy the customers with good offers and deals therefore; this will enable the company to gain customer loyalty. After the discussion of all the five forces, it can be easily said that it would be a good market to enter into related to all the competitive forces (Miller, Vandome & John, 2011).
Vision depicts the minor image of any organisation whereas the mission statements depict the accurate purpose of the organisation which includes the aims and objectives and plans and policies of the organisation (Koontz, 2012). The vision and mission statement is very important for every company as it explains the whole idea of the company in a short and sweet manner to the audiences. The vision and mission are important because it provides focus to the company about where the company wants to go. The current vision of the company is ‘Different and Better than Ever’ which strives to create improvement always. The mission statement of the company is to give the best of the value to the customers for the money they pay for the products.
To enter in the new market of China the company should not change its whole vision and mission rather just modify it in order to cope with the needs of the people there. The company can introduce their original vision and mission statements of giving value to the customers every time and at the same time providing something different and better always. Apart from this, the company can transform their vision and mission in the new market by providing the best value to the customers for cheap prices. The reason behind this transformation in the vision and mission statements is that China being a highly competitive market where retail products are available at very cheap prices therefore; the company should bring all the products at prices which are affordable by each class of the society. The reframing of the vision and mission statements is good but the idea to change the whole vision and mission because these are for long-term which cannot be changed as and when needed.
The need that arises for reframing the vision and mission statements for entering the new market as it is required because the backgrounds are different of each country therefore; the company can position itself in order to raise the standard of living of the people. This can be done when people will be persuaded to go for weekly shopping to their stores as products of them are of good quality at cheap prices hence; the improving the living standard of people. Finally, this transformation will be beneficial for the company as it will create a brand value because the company will be perceived positively by the people.
The SWOT analysis comprises of the strengths, weaknesses and opportunities, threats of the company. The strengths of the company are that the company holds a strong presence in the UK market as it covers the whole belt across the country. The company also has its own manufacturing units therefore; the company holds a strong position in relation to managing the lower costs of the company. The company’s major strength is the fresh food which it provides to its customers therefore; the company can use it to get an edge over its other competitors. The weaknesses are that the company is not present on a global level therefore; to establish its presence globally it is required to enter new markets. The company do not provides with other non-food products as it restricts the customers to have alternate choices because it gives comfort to the customers of getting number of things under one roof. The company is wholly dependent on the market of UK as it operates there only on a huge level (Pahl & Richter, 2007).
The opportunities for the company can expand its businesses by coming into non-food products market and at the same time diversifying the business as that of Morrison pharmacy. Another opportunity can be that the company is provided to go online as customers these days are very much motivated to shop online therefore; this will hold the company in a strong position to that of its competitors. The threat is the highly competitive market as there are other international players like Tesco, Walmart and Sainsbury which are comparatively strong. The company enters into price wars as the supermarket industry is known for providing products at cheap prices. The threat of maintaining a sustainable environment as the company is into packaged products which generate waste to the environment (Zack, 2009).
The business level strategies refer to those which provide value to its customers to get a competitive edge relative to its competitors. They are important because it creates the base for the success of the company by attracting customers to achieve the goals of the organisation (Furrer, 2016). There are six strategies of the company which strengthen the brand value of the company. The strategies are to be more competitive, develop useful and popular services, making the supermarkets strong again, find local solutions, serve the customers better and speed up and simplify. The international business level strategies that can be recommended to the company are the cost leadership and best value cost leadership strategy as the market in which the company is entering is cost friendly as commodities are available at very cheap prices therefore; these strategies will help the company to sustain in the new market and at same time earn profits (Porter, 2011).
The mode of entry which the company can use to enter the new market should be the ‘Franchise’ mode as under this method a fee is charged to be paid by the franchisees to use the brand name of the company (Alon, 2006). This will be the best method through which the company will enter new market as under this the franchisor i.e. Morrisons in this case provides broad packages to the franchisee i.e. the one who might be operating the company in China. Package will include training, the managerial systems that are followed by the company in the home country, the approval of the site etc. as all these are a big advantage for franchise mode.
This will involve less of the political risk and with this the company can expand its business into different geographical regions of the world. It involves low cost as the business is not required to start from the initial level but it is just to be report rayed again the only difference will be the region. This method can be followed very easily keeping the USP of the company of providing the freshest food and always becoming better and different. For example; as McDonalds is following the same Franchise method around the world to become a renowned company at global level (Frynas & Mellahi, 2011).
It will be advantageous for the company to follow Franchise mode as it gives opportunities to the businesses to improve through innovation. It is also beneficial because the supervision of the business is very easy and also it increases the profitability as the franchisees are required to manage the whole working and other functions. The risk is also less as the responsibility is shifted to the franchisee who executes the whole processes to establish the business.
Conclusion and Recommendations
On the basis of the above report, it can be concluded that it will be beneficial for the company to enter the Chinese market. The above report has discussed the external environmental analysis of the new market. The reframe of the vision and mission of the company according to the market conditions prevailing in the new market. The report has also discussed the internal environment analysis of the company. The report has also thrown light on the business level strategy that the company must follow in the new market. In addition to this, the mode of entry is that the company will follow to enter the Chinese market.
The company is recommended to go for the idea of entering the Chinese market though the Franchise mode along with the cost leadership business level strategy. The company should also research the working of the competitors in the same industry as it will help them to analyse the factors which are to be taken into account before entering the market. The company should introduce its online business also in order to reach out to more customers because it gives an advantage to sustain for a longer period of time.
The resource analysis will include the physical, financial and human resources. The competencies analysis of the company includes the core and threshold competencies. The existing resources and competencies are able to create a competitive advantage in the new market. The below table will depict the financial, physical and human resource of the company.
|
Financial Resources |
Physical Resources |
|
Company being a very old firm is financially strong in UK. The brand image of the company is very strong on the basis of which it can avail financial help from the external institutions. Internal operations like adjusting discounts on various commodities according to their profit margins. |
The foremost resource will be the location of their stores which help in attracting the customers. The way of managing the products so that there do not occur any unavailability. The distribution facility of the company has to be aggressive so that they can reach out to more and more customers. |
|
Human Resources |
|
The human resource is very important part of an organisation. The company can hire people from China in order to overcome the language barrier. It will generate employment opportunities for the local people. China being a labour intensive country becomes a great advantage for the company. The new market will reduce the costs of the company as they are labour rich. |
The competencies of an organisation comprises of the set of resources and skills that the company possess which makes a difference in the industry. The below table will discuss the core and threshold competencies of the company.
|
Core Competencies |
Threshold Competencies |
|
The major and core competency is different and better every day. The company wants to deliver superior performance. Their competency is to achieve a competitive advantage always. |
Their competitive prices are their distinct quality. Services that are delivered to customers. Their resources are their strength as they possess the least level of the resources which gives them a competitive position. |
The company’s existing competencies will help them for creating a competitive advantage in the new market of China because it the core competency is a very significant aspect which will explain the whole vision and mission to its customers. The existing competencies like striving for becoming the best player of the supermarket industry will help them to search for various methods and innovation which will be able to settle the needs and wants of the local people. The company provides solid deals to its customers in order to attract more and more people and at the same time retaining the old ones. High discounts can be wrongly perceived by the people of China with that of inferior quality. In order to delete this misconception the company should hire local people of China and should work contact with the local suppliers of China as they will act as the face of the company. Therefore; it will bring out profits to the company and will gain a competitive advantage (Foss & Knudsen, 2013).
References
Allon, I., 2006, Service Franchising: A Global Perspective, Springer Science & Business Media.
CGMA, 2017, Porter’s Five Forces of Competitive Position Analysis, viewed 3 February 2017 from https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html.
Dransfield, R., 2013, Business Economics, Routledge.
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Freedman, L., 2015, Strategy: A History, Oxford University Press.
Frynas, J, G & Mellahi, K., 2011, Global Strategic Management, OUP Oxford.
Frynas, J, G & Mellahi, K., 2015, Global Strategic Management, Oxford University Press.
Furrer, O., 2016, Corporate Level Strategy: Theory and Applications, Routledge.
Koontz, D., 2012, The Vision, Hachette UK.
Maclntosh, R & Maclean, D., 2014, Strategic Management: Strategists at Work, Palgrave Macmillan.
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Morrisons, 2017, Company History, viewed 3 February 2017 from https://www.morrisons-corporate.com/about-us/company-history/.
Pahl, N & Richter, A., 2007, SWOT analysis: Idea, methodology and a practical approach, Grin Verlag.
Porter, M, E., 2011, Competitive Advantage of Nations: Creating and Sustaining Superior Performance, Simon and Schuster.
The Success Story, 2017, Morrisons Story, viewed 3 February 2017 from https://successstory.com/companies/morrisons.
Thompson, J, L & Martin, F, 2010, Strategic Management: Awareness & Change, Cengage Learning EMEA.
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https://www.tradingeconomics.com/china/gdp.
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