Situation And Analysis Of High Flyers Limited

Situation faced by High Flyers Limited

Being a reputed gymnastic wear firm, High Flyers Limited, at present is facing problems in all the three ways they deal in and therefore, the profit margin is not as expected. Especially while doing business with the sports retailers of UK, the company receives much late payment of the invoices that highly affects their profit. On the other hand, the orders they take on websites from the clubs are majorly for personalized and designer costumes, however, the problem is that these are ‘special orders’ and are few in numbers on which the company cannot rely entirely. Regarding the political situation of UK, the company is likely to be affected by the present level of VAT rate on the sports goods, which will result in the increase of HFL’s products.

Presently, High Flyers Limited sells its products in three ways, i.e. 60 percent they sell to the sports retailers of UK, 35 percent they export to USA and Canada and the rest of 15 percent products are directly sold to the sports clubs.

According to Dobbs, (2014), for HFL the suppliers are scattered in various places of UK from where the best of materials are picked. Thereafter, the materials are hand-woven, which increases the price of the gymnastic wears even more. Thus, the suppliers and labors have quite control over the pricing strategy of the company, which is not desirable at all. Moreover, the HFL has fewer choices of suppliers for premium quality garment materials and therefore, is completely dependent upon them giving them more power in the organization.

The more customers a business has, the profit margin increases. In addition, the bargaining power of the customers also highly affects the profit margin of a company (Rothaermel, 2015). In the case of HFL, the personalized costumes that the customers from premium club place orders are bargained highly. Moreover, due to the immensely low price that the other companies in this industry offer, HFL remains in continuous pressure of losing customers in the domestic market.

HFL both in domestic and international market faces high competition, as the industry of gymnastics wear is becoming crowded day by day. The number of competitors for HFL in the domestic market is six although they mainly operate in low quality fashion market. However, due to their excessively cheap price in comparison to HFL, these enterprises are being able to get a competitive advantage in the market (Porter and Heppelmann 2014). One such instance can be mentioned where for a product the price offered by HFL is £65, the rivals with lower quality charges merely £25 for the same category of product.

Again, there are some foreign brands like Adidas, Nike and the like who offer almost the same quality of products though not handmade and they have good market position as brands too. Therefore, the competition for HFL comes from both domestic and international level.

According to David and David, (2015), the intimidation of being substituted by other similar products remains always on the companies especially when the consumers find alternative solutions for a cheaper price. This is what exactly happening with High Flyers Limited, as the lower quality rivals are giving a tough competition to HFL in terms of price and only premium quality is not enough to survive in the market. On the other hand, according to Dobbs, (2014), the foreign brands like Nike and Adidas are about to take over the UK market and besides, the gymnasts playing on international level prefer to wear the costumes from these global brands. Due to these reasons, HFL has to deal strategically with the consistent threats of being substituted.

Porter’s Five Forces Analysis

Grant, (2016) pointed out that threat from entrant is basically measured by the time and investment needed for the new companies to enter in the market of a firm. For HFL, it does not apply great technological aspects to improve its production; rather it capitalizes on the chain of suppliers for specialized gymnastic material and the skilled designers who prepare the customized orders.

The incident of Brexit in 2016 i.e. the exit of UK from the European Union has deep impact on the market of HFL. In the first place, post Brexit in UK the price of imported products has started to increase dramatically and this has acted favorably for HFL. Due to the sudden increase in the import prices, companies like Nike and Adidas are not being able to offer a competitive price. On the other hand, according to Dhingra et al., (2016) Brexit is expected to increase the export business of UK, which means the sales in U.S and Canada for HFL is likely to rise. However, some political decisions will possibly not go in favor of High Flyers Limited; major among these remains the possible decision of U.K government to increase the level of VAT especially for the sports goods and that too by around 22%. This decision is almost certain to be implemented as the government intends to raise further tax receipts. However, HFL may highly be at loss for this because already the brand is suffering due to its high price in the market and with extra VAT levied on the goods; it will be compelled to raise the price range of its products with potential chances to lose a large number of customers (Rothaermel, 2015).

According to Kapoor, (2014), a consumer-facing organization in UK is about to face issues from huge unemployment rate. The business of HFL has been slowed down due to the increased rate of unemployment in the country and the sudden announcement of the U.K government about raising the interest level of the banks. With the increase in bank interest, HFL will face more difficulty to arrange the capital for its business.

Apart from the athletes and gymnasts, the increasing level of fitness consciousness among the common people is highly advantageous for the firms like HFL. This would directly result in increase of the market for the firm.

Towards cutting costs, HFL has recently started to invest in technology that helps them to reduce cost at initial stages. On the other hand, Porter and Heppelmann 2014 pointed out that existence in online platform through official website is extremely beneficial as it increases authenticity and reliability. It can be said that in the age of online shopping, HFL does not offer its product range online which is a great disadvantage for the brand although HFL takes customized orders on their website.

Although the firm’s major business is still limited in U.K, it has been searching for more export destinations other than U.S and Canada. For this, according to Grant, (2016), the firm will have to follow the policy and legal framework of those countries.

PESTLE Analysis

Demand products are made of eco-friendly materials, which have been increasing among the consumers and more importantly, due to the pressure of sports clubs. In addition, HFL has to look after its waste control procedures and carbon emission limits (Rana et al., 2017)

While concluding, it must be said that HFL is facing competitive issues at present along with the external environment changes that are likely to affect its business strategy. In these circumstances, HFL must set its target audience when looking for newer markets to export. Besides, the production has also to be increased to raise the supply in both the global and domestic market. The company should take strict actions against the unpaid invoices and must arrange skilled designers to completely take over the market of premium clubs. With these measures taken, HFL is likely to conquer its market again leaving all its rivals behind.

One of the key strategic challenges that SCH has been facing is the tough competition with the home care services run by the local governments in terms of service and facility charges. The home care under local government authorities charge considerably low to patients due to the subsidies they enjoy from the government. Apart from this, the expenditure to bear the staffs’ travelling costs is also considerably high in SCH for which many of the previously existing private care service firms have been closed. Moreover, the market for care services for elderly people has become quite saturated and especially SCH has only two prominent cities in which its market is limited. Moreover, it does not have the workforce to join the market of family care services that is on demand at present. Moreover, although SCH has trained nurses they do not yet have the facility to provide routine treatments to the elderly patients who visit the local hospitals. While some other privately-owned care service firms have been attempting to directly acquire customers from the hospitals. In addition, potential rival has been emerging for SCH in the same area of South East England, which clearly aims in its mission statement to give a competitive substitute for all other care service firms in the region.

The model of Strategic Triangle, also known as 3C’s model is highly useful to determine the organization’s competitive position in the market with relation to its competitors and customers (Johansson and Kask, 2017). Determining the competitive position is essential to explore the strategic options that the company must consider to retain its position in the market.

Based on the Strategic Triangle framework, the strategic position of SCH is to be decided optimizing the relationships between the customers, competitors and the company.

According to the 3C’s framework, SCH must form some customer-based strategies keeping in the mind the needs and concerns of their target customers (Alhomod, Alsadhan and Shafi 2014). In this context, SCH needs to employ some more staffs to increase visit timings by 10 to 20 percent within the next year. The services should be more personalized to justify the high prices that SCH charges in comparison to local authority services.

Strategies should also be made based on the organization itself, identifying the key areas where it functions. Now, the value chain of the company is majorly the aged people who are under treatment. In this context, the company can directly establish contacts with the hospitals or the old age homes to get the customers. Cost-effectiveness is also another aspect that SCH must focus on and take regular reviews from the customers (Grünig and Kühn 2015).

As for the competitor-based strategy, the company needs to market itself as a superior service provider to other local authority services and privately-owned care services. Strategies should be planned in this context to increase the market shares of SCH and exploit the tangible advantage of its huge consumer base and market reputation.

Ansoff’s Growth Vector Matrix is primarily used to suggest a business organization new opportunities to grow in the existing or new market with the existing service offerings or with something fresh and new (Yin 2016). Using this matrix, the market opportunities for SCH is to be explored with four major aspects.

The market share of SCH is not satisfying in the limited market of two cities where it operates. To secure its position in the market and to get a more advantageous position than its rivals, SCH must increase its mere 20 percent market share. Moreover,the firm should also focus on the existing customers for whom they should introduce some loyalty schemes (Hussain et al. 2013).

SCH presently operates in two cities, which is not enough to turn is a big corporate firm with widespread reputation. Hence, SCH can seek for newer markets in some of the remote cities of England. In these cities, the competition will be less and with low initial cost SCH is sure to conquer these new markets. Apart from this, if the pricing policies are revised, the services will be soon popular in the remote cities and towns (Yin 2016). For the existing market, SCH can include innovative and additional services in the packages or can offer discounts on existing service packages as a part of loyalty schemes.

To look for new opportunities in this area, SCH needs to obtain a detailed insight on the needs and preferences of the customers. According to the market investigation, SCH has opportunity to start offering care services for the families where one of the members need 24 hours care services. Moreover, SCH must look into the matter that they must be the first in the market to introduce any new service in the market.

Diversification of products is also the best way to sustain in the market and getting hold of newer markets. In the context of care service firms, presently there is demand for routine medical treatments to be carried out at home other than general care giving services. Arranging the required medical staffs and the medical equipments SCH can diversify its service provisions.

Johnson Scholes and Whittington’s SAF Model is mainly used to review the chances of the proposed strategies or opportunities that have been thought with respect to three major aspects: Suitability, Acceptability and Feasibility (Chiang, Chen and Ho 2016).

Opportunities	Suitability	Acceptability	Feasibility
Increasing market share	This strategy is absolutely suitable for it will give SCH more control on the market.	This strategy is also highly acceptable for the shareholders increasing their profit.	To increase market share SCH will need more capital and manpower, which makes this opportunity a bit difficult to realize at this moment.
Expansion in new potential markets	Expanding in new markets in the remote towns and cities where care service facility is less will help the organization to look out if the market for business can be expanded in new areas (Hammad 2015).	Expanding in these new markets will definitely earn more profit for SCH in the competitor less market and will help gearing the business in an unsaturated market.	This strategy will also need cashflow and spare capacity. However, expanding in these comparatively untouched markets SCH will not need much effort so this looks feasible.
Providing routine medical treatments at home	Introducing this will be one of the strong points for SCH as this is much in demand will be innovative in the market.	Realizing this strategy will certainly benefit the organization to obtain more customer as well as popularity as a care service company.	This will need trained doctors and more nurses who can be hired on requirement basis initially. Besides, the arrangement of medical equipments will also need funding. However, overall this idea looks feasible considering the profit the company will earn (Chiang, Chen and Ho 2016).
Introducing services for Family members	This will help to develop the service offerings.	The strategy is acceptable as this will increase the business of SCH benefitting the shareholders.	The company however will need about 50 new staffs as the family member care service providers will be 24 hours in job. Yet, this looks feasible to increase the customer base and also no transport fares will be needed.

Table 1: Johnson, Scholes and Whittington’s framework

(Source: Created by Author)

Conclusions

Thus, applying these strategies SCH can achieve a good competitive position in the market. The organization must try to offer something different and innovative to its customers and therefore, introducing medical treatment service at home or providing 24 hours care for one of the family members is highly needed. However, the heavy cash flow needed to implement these strategies can be exploited from the new ventures that SCH can start expanding in other less competitive places. The goal of the company should be to provide premium and on time services to the customers and create high customer loyalty. With these achieved, SCH can certainly achieve the desired position in the market.

References

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