Strategic analysis is the mechanism of conducting research on an organization and its environment so that it can develop and implement effective strategies accordingly. By analyzing its external and internal environments, it can identify the issues and implement the strategies (Grant, 2016). This report is emphasized on the strategic analysis of the chosen Australian organization i.e. Harvey Norman. Harvey Norman is one of the leading players in Australian retail industry that offer a wide range of products to its targeted customers. The report provides the insights about the external and internal environment of this organization in Australia. To analyze its environments, some strategic frameworks are used like PESTLE analysis, Porter’s five forces analysis etc. After conducting the analysis, some issues are identified which are affecting the growth of Harvey Norman’s business. At the end, recommendations are provided which can be practiced by Harvey Norman to enhance its market and financial position and overcome the identified issues.
Harvey Norman is the biggest companies among Australian retailers that are providing a wide range of retail products like furniture, consumer electronics, entertainment and fun products, kitchen appliances, computers, electrical products and communication products. Mainly, this company operates its business as a franchise with the chief brand and all the stores which are owned by ASX listed Harvey Norman Holdings Limited. Till 2016, it has 280 franchised and company-owned stores in Australia, Europe, New Zealand and South East Asia under different brands like Joyce Mayne, Harvey Norman, Domayne in local country and under Harvey Norman in overseas market. The company was established in 1987 by Gerry Harvey and it has purchased more two brands Clive Peeters and Rick Hart (Harvey Norman, 2018). The current CEO of the company is Katie Page who is a major contributor in the growth and success of Harvey Norman Organization.
However, Harvey Norman is able to establish its business in the Australian retail sector, but still it faces immense competitive threat from some other competing brands like Target Australia, Coles, Woolworths, David Jones, Safeway etc. It has won the award of Best Multi-Channel retailer in the year 2016. For this award, Harvey Norman was selected because it showcases effective processes in mixing online and offline retail by using effective and creative strategies. It is a large company that is engaged in offering several product lines such as:
External analysis is the systematic process that assists an organization to identify all external factors which can impact the performance and growth of organization. This analysis involves evaluating the level of opportunities and threats which these factors present (Bennett & Chorley, 2015). For analyzing the macro environment of Harvey Norman, PESTLE analysis is used. In context of Harvey Norman, external factors are discussed below:
There are various political factors which are affecting the growth of Harvey Norman’s business. In Australia, the company is taking the benefits of economic stimulus policy, implemented by Australian Federal Government to improve the purchasing power of buyers in the period of economic recession. The Australian retail industry is shaped by various disruptive factors like changing patterns of spending of Australian population and arrival of foreign firms who bring with them a new approach to retail business. The government has increased the tax rates in the country from 23 percent to 29 percent which have adverse impact on the profits and revenues of Harvey Norman (Richards, 2017). The country has a stable political and business environment that includes well-educated, skilled and multi-talented workforce that has enhanced the business of Harvey Norman.
In Australia, retail industry is continuing to maintain its push, driven by social and economic developments. It is a major contributor to the growth of Australian economy. Harvey Norman is one of the leading players that are growing its business due to various economic factors like increasing population, increasing purchasing power and strong economic development. In recent years, the total size of Australian retail sector is $122 USD. During these years, lower interest rates have provided a relief to retail companies including Harvey Norman (Dixon, Scura, Carpenter & Sherman, 2013). Due to this, there is an increase in the disposable income and purchasing power of people. It has increased the sales of Harvey Norman in the country. In the future, the company may have various benefits of growth of Australian economy.
The chosen organization i.e. Harvey Norman prides itself on creating a good and positive culture in the workplace. The organization is extending its hand towards society and it is engaged in the corporate social responsibilities. It attracts people by investing a significant percentage of its profits in the interest of Australian population. It has a great positive impact on the growth of Harvey Norman in both local and international market (López-Gamero & Molina-Azorín, 2016). Looking at company’s efforts towards them, community people have become very supportive to the company. It provides the company an opportunity to expand its business operations in various emerged and emerging nations.
Technological Factors
For a retailer, technological factors are very important whether in terms of customer service, supply chain or its sales (Gallagher, Ignatieva & McCulloch, 2015). Considering the significant and people’s awareness towards technology, Harvey Norman is providing its products and retail services using innovative technologies. In attempt to become more tech savvy, it is offering its products online. It connects with the people via different social media networking sites like Twitter, Facebook etc. About Harvey Norman, it can be stated that Harvey Norman is a great example of using internet to connect with international shoppers (Balaji & Roy, 2017).
Same as other industries in Australia, retail industry is also impacted by the sustainability and other related issues. Waste reduction, packaging, energy consumption and many other issues related to environmental sustainability are there before Harvey Norman Organization. Like other firms, this company has also been criticized for not becoming sympathetic to the environmental and natural resources (Arunraj & Ahrens, 2016). It has threatened the brand reputation of Harvey Norman among Australian population.
In addition to above factors, there are some legal factors which have affected the brand image of Harvey Norman in Australia. Recently, it is fined of $1.25 million by Federal Court for breaches of Consumer and Competition Act. It did not comply with various laws and regulations of retail industry that had an adverse impact on Harvey Norman’s business growth (Nikolic & Koontz, 2008).
Thus, it can be concluded from the PESTLE analysis that situation of Harvey Norman is good in Australia. There are only a few factors which have adverse effect on company’s image and its business.
In order to analyze the competitive position of Harvey Norman in Australia, analysis of Porter’s five forces is conducted (Dobbs, 2014). Competitive analysis of Harvey Norman is stated below:
The degree of this force is very high for Harvey Norman as there are various competing brands and larger retailers which pose competitive threat on this company. Some of the major players are like Aldi, Woolworths, Coles, David Jones and Myer etc. Apart from them, there are some direct competitors such as Action, Flemings, IGA, JB Hi-Fi, BI-LO and Safeway. It shows that Harvey Norman is running its business in highly competitive industry. It can be seen that customers are loyal to well-established retail brands (Fleisher & Bensoussan, 2015). The company needs to emphasize on the competitors’ strategies so that it can gain competitive advantage over other retailers.
For this organization, bargaining power of buyers is not high. It is majorly for the people who do not purchase in big amount. It can be evaluated that convenience and costs are the two major aspects of shopping which restrict the bargaining power of customers. Harvey Norman sells its products and services targeting the cost conscious families. The company considers the fact that this customer group switch to other brands looking at the products’ prices. This force is moderate for this retailer as it offers a wide range of products like computers to furniture. It is the major factor that can entice more customers than other competing brands with single product line (Dibb & Simkin, 2013).
For this organization, there are a number of suppliers for all types of products which the company offers to its targeted market. As there is a wide range of suppliers in retail industry, so suppliers have little bargaining power. The company can switch to other suppliers without facing major switching costs. Additionally, there is immense competition among suppliers so they are ready to lower the prices of raw materials.
For Harvey Norman, the threat of new entrants is low as there are some barriers to entry in retail industry like requirements of high capital, brand loyalty etc. The organization establishing new retail business will need high capital investment and staff. It is not easy to establish an extensive distribution channel (Robson, 2015). Thus, it is not a strong force for Harvey Norman in Australian retail industry.
Threat of substitutes is moderate for Harvey Norman Organization as the customers may have other substitutes to shop their grocery products. Generally, they shop at their nearby departmental and retail outlets as it is more convenient for them. Nowadays, people prefer to shop online so Harvey Norman needs to focus on enhancing its e-commerce site (Balasubramanian, Bhattacharya & Krishnan, 2015).
In this way, it can be concluded that competitive position of Harvey Norman is moderate in Australian retail industry. The level competition is very high in the industry because as large market share is covered by well-established retailers like Coles, Woolworths, Aldi etc.
In addition to external and competitive analysis, it is very important to conduct internal analysis to analyze internal components which can assist the organization to achieve goals and competitive advantage (Hill, Jones & Schilling, 2014). It includes analyzing different resources, capabilities and competencies of the Harvey Norman. These components are discussed below:
Human resources play an important role in the business operations and practices of Harvey Norman Organization. This company has skilled and talented employees and staff like its competing brands. Generally, it prefers to appoint the workers of 30 to 45 years who can work in its retail outlets actively. It provides training to fresher candidate so that they can attract more customers (Sutton-Brady, Kamvounias & Taylor, 2015).
Harvey Norman has established an extensive supply chain and distribution network that works in both the in-bound and out-bound logistics. It has developed good relationship with its suppliers, which is very much valuable for the company. It assists the company to save its costs and expenses. This capability of Harvey allowed the company to gain sustainable competitive advantage over smaller competing brands in Australian retail sector (Fernie & Sparks, 2014).
Over the past years, Harvey Norman is able to develop a good brand image in Australia and other nations. The company gained this by offering effective shopping experience to the customers with its products and services. It is a valuable resource for this company as it differentiates itself from rival brands like JB Hi-Fi. It contributes to provide higher level of satisfaction to Australian customers.
Harvey Norman’s in-store services are primarily emphasized on its strategic priority. It provides various in-store services to its customer for example delivery of specific goods and purchases in a single day on affordable rates. In order to improve its operations and processes, this retailer implemented different innovations (Wheelen, Hunger, Hoffman & Bamford, 2017). It has launched various programs and campaigns to introduce its new product range. It is one of the major competencies of Harvey Norman that assists it to stay competitive in Australian retail market. Additionally, it has integrated with the suppliers vertically that helps it to cover a larger market in the country (Schaltegger, Lüdeke-Freund & Hansen, 2016).
Thus, these are the key resources and competencies which support Harvey Norman to attain sustainable competitive advantage against other players (Weerawardena & Mavondo, 2011).
After analyzing the above internal and external environments, it can be stated that Harvey Norman is confronting some issues which can affect the sales of this retailer. In external environment, the most significant factor is competition from discounted retailers. There are various players in global retail industry like Wal-Mart, Target Australia, Aldi and Woolworths who offer the products by using discounted pricing strategy. It has an adverse impact on sales of Harvey Norman (Avenel, 2014). The second factor is the issue of increased volume faced by its franchised stores. Its franchise has number of reports like weekly, monthly and daily and management of these schedules is creating administrative workload to its staff. Third factor is the legal aspects which are faced by the company. It has confronted controversies under suspected illegal business practices.
In order to overcome the above issues, this company should adopt different strategies and processes. It should expand its business operations in other emerging countries so that it can enhance its brand presence. Additionally, it should decrease the prices of its products to overcome the threat of competition in retail sector. Harvey Norman should make efforts to regain its brand image and rebuild the trust among its customers (Mitchell, 2017). There should be an effective top management team that can organize its franchised and owned retail stores. By practicing these recommendations, Harvey Norman will be able to resolve the above issues and achieve competitive edge in global retail sector.
Conclusion
In the limelight of above discussion, it can be concluded that Harvey Norman is one of the major players in Australian retail industry. The above report analyzes both internal and external environments of Harvey Norman Organization. There are some external factors like economic, social and technological which have positive impact on Harvey Norman’s business operations. The company possesses some key resources and competencies which assist it to attain sustainable competitive edge in retail sector. After the analysis, it is found that it is facing some issues related to competition, legal practices and increased workload at franchised stores. The company should use more effective practices to overcome these issues and problems.
References
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