Strategic management is very vital constituent for the business mainly due to the reason that it is a procedure, by which organization can survive and thrive within the industry through the approaches used for achieving their objectives and goals. It sets some basic requirements on which businesses can achieve success and extend its survival in the market (Ansoff, 2016). This report is grounded on the assessment of strategic management in relation to its significance for Next Plc., a foremost company in United Kingdom retailing industry. Further, the report will be comprised of a detailed external analysis of the United Kingdom’s retailing industry. Here, priority will be provided to the evaluation of the external and internal environment by using PESTLE analysis and porter five forces framework for the company. Along with this, an assessment will also be performed to recognize the companies’ competitive advantage other than Next Plc., i.e. its rivals. Besides this, internal analyses of the organization will be included within the discussion of this report. In the end, the association between the present strategy of the company and its antiquity, along with the valuation of the strategic capabilities of the company will be deliberated.
Overview of Next Plc
Next Plc. is one of the prominent retailers of the United Kingdom that was established in 1982. The business majorly deals in the sector of clothing with a different range of clothes for women and men, home products and footwear (Next Plc., 2018). Additionally, the business entity also runs its operations in different variety of accessories and shoes. Very sooner, the organization has established a variety of collection for children, men, and women along with home equipment. Presently, the business has around 500 stores in Ireland and the United Kingdom. Besides this, it has around 200 franchised stores across its group (Next Plc., 2018). Next Plc. is placed at the second position in terms of biggest retailer of clothing in the United Kingdom after Marks and Spencer. The entity is also involved in an online business where it provides different products to the target audience. In this line, Next Plc. has established a catalogue of home shopping and website under the name NEXT Directory. The entity has around 4 million active consumers on its online market who are availing the services from 70 nations (Reuters, 2018).
As per the vision statement of Next Plc., it is committed towards providing quality stylish clothing, auxiliary, and fittings at an affordable price. The vision of Next Plc. is to attain the number one position in the United Kingdom’s retailing industry and to offer unique as well as innovative products to the customers in order to enhance the living standard (Next Plc., 2018). The business has established a space within the industry where people can get their lifestyle products on the regular basis.
The Next Plc. statement of mission performs an essential part in enhancing the market image in the mind of external and internal customers. The mission of Next Plc. is to be the usual choice for fashion in the whole market of United Kingdom. The business desires to be updated with the needs of fashion and people expectation regarding different styles such that quality and best products could be delivered in order to stay competitive in the market. With the motive of fulfilling, the customer needs and go beyond their expectations Next Plc. Company creates its products (Next Plc., 2018). The company delivers Brand values as per its commitment to confirm ethical practices. Along with this, the business wants that no one should be harmed due to the practices of business. In addition to this, it is concentrated towards running a liable and prosperous business, offering best service to consumers, and benefits to the shareholders. All the employees and suppliers of the company are treated equally in order to attain sustainable practices.
The objectives of the business need to be framed before the commencement of the justifiable practices in the market. The Next Plc. frames its objectives in line with the vision and mission of the business and it is completely dedicated towards attaining preferred place in the market through achieving objectives. The objectives of the company are defined in the following points:
External Environment Analysis
PESTLE Analysis
Political – Politics influence both customers and producer in different ways. A stable political environment is a foundation for lasting decisions within the country. The UK as the European Union’s member meets their prerequisite. The administration is intended to perform in a defined political structure in order to attain the settings of the European Union and this offers a higher possibility of economic movements to the Next Plc. (Fern Fort University, 2018). Another benefit of the European Union is the opportunity of open goods transfer. This supports Next Plc. to vend its products in diverse European nations. There is absence of trade barriers that magnify sales and offer an opportunity for direct participation within the operations of foreign market.
Economic – Economic drifts are very essential for the entity and that they are largely based on the politics’ of the government. Investment in the European countries for Next Plc. is very fruitful because of the currency of British presently exceptionally strong. However, company needs to monitor properly the influence of exchange rates (Fern Fort University, 2018).
Social – Recently, there has been a considerable increase in the trends of fashion, where Asian customers for fashion brands are increasing. With the rise in the aspiration and income level, affordable brands are working to meet the demands of the customer of being trendy and chic (Fern Fort University, 2018).
Technology – In every part of the industry, advanced technology is creating excessive inroads to order to enhance the quality of life and speed up the manufacturing quality. The entry of new media and age of internet disclose huge possible opportunities for Next Plc. to increase profit. Some of the businesses in the UK have started providing online-orders where the consumer can define his/her desire and measurements, and direct it at the production place. After 48 hours, the customer gets their package (Fern Fort University, 2018). With the help of this technique, businesses can instantly react to the alterations in the behaviours. Few of the social networking sites such as Facebook offer a means of education and information that helps Next Plc. to advertise its offerings.
Legal – Same like other companies, Next Plc. should also ensure with the legal standards that are enforceable in an authority. Considering the Next Plc. the case, it is very complex because it has to comply with the European as well as the United Kingdom’s law (Frue, 2018). Few of the regulations that influence Next Plc. in the United Kingdom are Minimum wage legislation and Equal opportunity legislation.
Environment – The physical environment is the main concern for the businesses working in a given countrywide market, it considers how the business prevent the physical environment with its operations and the influence it has on the business. Generally, the physical environment in which Next Plc. operates in the United Kingdom market can be considered as gentle in comparison to the different regions in the world that deals with natural disasters like forest fires, hurricanes, and earthquakes (Frue, 2018).
Next Plc. offer its services in the market of UK where it deals with intense competition from the rivals such as John Lewis Partnership, Marks & Spencer, and Debenhams (D&B Hoovers, 2018). The increasing competition is affecting the business of the company that could be observed in the declining profit margins. However, the company is bringing different trendy fashion for the customers in order to attain a competitive advantage against its competitors. The competitive advantage helps a business in creating superior services and products from other available choices to the customers. In order to create a competitive advantage a business needs to be clear about the determinants i.e. benefit, competitor, and target market (Porter, 2011).
The Generic Competitive Strategy is a practice intended to deliver businesses with a strategic plan to strive and attain an advantage in the market. GCS is dependent on three strategies i.e. differentiation, focus, and cost leadership. All three strategies possess a diverse mechanism for attaining success (Amadeo, 2018). Businesses in the industry might not select the similar strategy as per their objective and products. Next Plc. has adopted a differentiation strategy according to which it offers better services to the customers than anyone else in the industry. An entity can attain differentiation by offering high quality and unique products. Next Plc. is offering trendy and unique clothing for the children, men, and women in the market in order to attain a competitive advantage over its competitors (Craft, 2018). Besides this, it deals in other products such as home appliances, shoes, accessories, etc. in order to be diversified and to attain a larger market share.
Porter Five Force model is said to be an approach used to define how a market is competitive, and thus how profitable it can be for a company. There are five forces within the framework i.e. the buyer’s bargaining power, supplier’s bargaining power, competitive rivalry, substitute threat, and new entry threat (Schwarzinger, 2012).
Buyer’s bargaining power – Buyers are the essential stakeholders of the company who possess an interest in the business and its activities. The buyers in the retailing industry are price sensitive because they look for enhanced quality at affordable prices. As the market possesses many competitors, it makes it very important for Next Plc. to add value, style, quality, or label to the product such that buyers can be attracted. In the absence of these elements, there are huge chances that customers switch to another competitive brand. Hence, the buyers bargaining power is high (Fern Fort University, 2018).
Supplier’s bargaining power – Suppliers are the company’s internal stakeholders who provide raw material to the company. In the United Kingdom market, there are different suppliers but their effect is very limited over Next Plc. Because of the huge obtainability of the suppliers, another supplier in case of an undesired condition can switch them (Fern Fort University, 2018).
New Entrant Threat – The businesses in the United Kingdom’s market possess high threat from the new entrants. Next Plc. has attained a justifiable position in the retailing market, but there are new entrants who can be a big threat to the company (Fern Fort University, 2018).
The threat of Substitute Product – The Company possesses low threat from the substitute products because it offers branded products, hence it could be said that the threat of substitute product is not a key issue in the market of cloth retailing for Next Plc.
Competitive Rivalry – There are different retailers of clothing in the market of the United Kingdom who signifies the rivalry between Next Plc. and other retailers. ASDA and Marks & Spencer are the biggest rivals of Next Plc. These businesses are dealing with competition because of service, price, and quality (Fern Fort University, 2018). Considering this, Next Plc. is experiencing a moderate level of competition in terms of service and quality, which is not a big problem for the company.
Strategic Drift
Strategic Drift is said to be the notion of strategic management that talks about the response of companies while moving towards an altering environment. Diverse circumstances and unanticipated challenges are common aspects that can take place anytime when dealing with the strategic change in the business. Strategic drift is the circumstance when a company fails to result in the probable strategic consequence (Sivalingam, 2018). It has been considered as the reason for which administration of the company loses concentration from the strategic plan and involves in a different activity that is less important.
Next Plc. has faced a strategic drift within the business, in the year 2016. The retailer zoomed up the manner it places together its fashion range in order to compete appropriately with the competitors like H&M and Primary, and Zara, which take only some weeks in place of months to carry clothes from the stage of designing to the stores. However, the chief executive of Next Plc. i.e. Lord Wolfson, self-confessed the push, which in few situations saw judgments provided in three days in place of three months, directed to faults that resulted in a tough situation that was faced by the company in 2016. It had also resulted in declining of the profit margin of the business (The Guardians, 2017).
Next Plc. has its stores and online business across UK, Europe, and Asia, which has offered it a key advantage in terms of making sales and earning revenue. However, this aspect is a challenge in consideration of strategic planning. It is essential to understand that will the help of strategic planning it is very easy to execute the strategies and objective in a proper way (Bloomberg, 2018). However, due to international business operations of the company, it is hard to create a market plan. The effect of globalization and passion can be simply readdressed to the company’s strategic planning. It stops them to run their operations in a proper manner. Barriers are common issues in the business. Because of high corporate level, it becomes very tough to maintain an eye on every part and it raises a challenge in the distribution and management of the resources for Next Plc.
Any business that neglects the issues of resource wastage needs to deal with huge problems within the industry it operates. It can influence the effectiveness of the company and a kind of change can be observed on the earning ration of the business. Next Plc. has to deal with problems of strategic planning but except this, all the aspects are under the control of the company. An extra alteration in the opinion and demand of the consumer is considered as a factor that can affect the strategic planning. The vision and mission of the company reflect its values and determination that affects the buying decision of the company. The vision of Next Plc. is to become the top retailer in clothing by ensuring the quality of its products, which reflects that the company gives priority to its customers (Next Plc., 2018). This enhances the image of the company in the eyes of the customers and therefore increases the overall demand of the products. Next Plc. is properly assessing the demand in the market to develop its mission and vision. The efforts of the management are supporting the business in meeting their strategic plan of having a worldwide presence. Executives of the company are taking profitable decisions such that they can fulfill their promises. They are recognizing and satisfying the customer’s needs by providing high quality products at a reasonable price. This reflects that there is an alignment between the company’s mission, vision, and market demand. This helps the company to be the second largest retailer in the retail industry of the United Kingdom.
The Next Plc. is capable enough in offering a variety of products to its consumers. It has been observed that business take various initiatives for creating innovative products. A huge portion of the earning of the business goes for the work of R&D that allows it to bring new and innovative products in the market (Next Plc., 2017). The business organization is capable of cash generation as compared to the competitors and this cash is utilized for the renovation of the existing stores and the opening of new stores. The Next Plc. has been observed as capable of increasing the sales of online business through Next Directory. From the perspective of strategic aspect, the company is proficient of regulating costs and budgeting conventionally to endure growth. It allows maintaining the low cost and offering branded products at reasonable prices to the customers. The company’s earnings per share ratio have been increased in last some years that reflects shareholders are been provided with the enhanced dividend (Next Plc., 2016). Besides this, measurement of the profitability of the company and shareholder return reflects that business is making regular profits. There are different projects of expansion in the queue that shows the company’s future growth.
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Key Partners ü Business suppliers at international and domestic level ü Associations ü Local Joint Ventures |
Key Activities ü Analyzing the customer’s demand in the market ü Maintenance of Warehouses and Logistics ü Customer Service ü Lucrative distribution system ü Merchandising of goods |
Value Proposition ü Convenient shopping ü Visiting desired stores ü Tailored shopping ü Range of products ü Home delivery ü Safe online shopping |
Customer Relationship ü Maintaining long-lasting association with the customers ü Inviting more consumers ü Priority to the feedbacks and suggestion of the customer ü Retaining loyal consumers |
Customer Segments Mass Market Segmentation: ü Men ü Women ü Children |
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Key Resources ü Stores ü Website ü Warehouses and Logistics ü Infrastructure of stores |
Channels ü Stores ü Website of Next Plc ü Social Media like Facebook, Twitter |
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Cost Structure ü Staff ü Capital Expenditure ü Warehouse and Logistics |
Revenue Streams ü Sales of products |
McKinney 7-s Model is a management model established by one of the well-known business consultants i.e. Tom Peters and Robert H. Waterman in 1980. The 7S of the model are a strategy, skills, shared values, structure, systems, staff, and style. This model is mostly utilized, as a tool for organizational analysis to monitor and evaluate alterations in the internal organization situation. The model is dependent on the theory that, if a business wants to perform properly then there must be alignment among these seven elements (Management Study Guide, 2018). It is used for enhancing the business performance and scans the effects of future variations. Subsequent points signify seven elements that are connected together for attaining success in the future for Next Plc. Company
Strategy – Strategies are the very important aspect of the business practices that are always in line with the mission, vision, and corporate objectives. The Next Plc. has to frame effective strategies for creating products and doing regular innovations (Next Plc., 2018).
System – Next Plc. embraces an effective system along with a useful approach for conveying the work to the personnel. The company possesses a department of Human Resource who takes complete accountability for upholding good relations between the personnel and management. The organization is certain of if the personnel are pleased then they will make the consumers satisfied. The department of finance is accountable for organizing funds and investing them in cost-effective projects.
Shared Values – The Next Plc. is the following value system of treating the customer with respect and offering the best service.
Staff – The Next Plc. employees are qualified and they contribute their efforts to the success of the organization. The administration concentrated towards offering training to the workers in the areas they lack knowledge. Additionally, the company motivated its people to offer quality services such that they can attain customer loyalty (Next Plc., 2018).
Structure – The Next Plc. has adopted a hierarchical organizational structure that has resulted in the creation of an exclusive viewpoint. The personnel in the business are respected and everyone is assigned to the responsibilities as per their skills. The organization believes that everyone is important and responsible for the successful attainment of business practices (Next Plc., 2018).
Skill – All the departments of Next Plc. are comprised of skilled and talented people. This is because of the effective process of recruitment and selection. Besides this, it concentrates on the training and development of the workers.
Style – The working style of the employees in the Next Plc. is very exclusive that appeals talented pool across the world. The business possesses standard strategies for implementing the work, however; the workers are permitted to work with their best possible manner in order to attract consumers.
Product – The Next Plc. is focused on offering the quality products to the customers in order to satisfy their needs. As per the statement of mission, the company is focused towards offering beautifully designed and high quality products to their consumers (Next Plc., 2018).
Price – The Next Plc. offer branded products in the market at reasonable prices. It has been one of the well-known retailers to offer discounts on different occasions, with around 70% discounts. It also offers special discounts for plus size and taller consumers. Existing as the retailer of mid-market to uphold its competitiveness it is essential for Next Plc. to provide special discounts structures and proposals during the festive seasons.
Place – The location of the stores is always considered as the key method for growth and increasing sales in the market. Next Plc. has placed itself as the high street store of retailing. It also possesses different types of stores for example factory outlets, flagship stores, etc. (Next Plc., 2018)
Promotion – It comprises different ways through which a company encourage its target audience to purchase the product for example magazines, television, radio, etc. Next Plc. majorly promotes its products through magazines for instance Vogue. Besides this, it also brings different discount deals online and on stores.
Analysis and evaluation of Resource Implication
As per the analysis conducted above in relation to the Next Plc., there are different things that have been evaluated. The report has performed an analysis and assessment of the resource implications of the study made so far. It can be recommended to consider the areas that are reinforced by the use of numerous models. There is a requirement for analyzing the impact as well. It has reflected the consequences regarding the decisions that have been made within the organization. It is essential to understand the adverse impact of the changes made in the operations and management of the organization. It is a structure-based analysis that offers an approach, which is followed by Next Plc. for the proposed variations. Business needs to take crucial decisions while carrying out the projects. It is recommended to make use of small desk exercise while working in the team. It a crux, it has been determined that there are few elements used to examine the fruitful use of the resources. Therefore, it is suggested to make effective use of resources like proper allocations of funds, effective used of physical resources in order to attain long-term and short-term objectives of the business.
Conclusion
Strategic management is considered one of the essential parts of any business. All the companies have to place a few objectives for bringing out effective performance. The above analysis has supported in assessing the strategic planning of one of the United Kingdom retail business i.e. Next Plc. Initially, knowledge of the external environment has been provided in order to understand the influence of different external factors. The strategic analysis supported in recognizing the competitive advantage of the United Kingdom’s retail industry. Besides this, it has identified the key strategic capabilities of the organization that has supported it in attaining top position in the industry. Moreover, different approaches are used to reflect the strategies used by the company and their consequences.
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