Strategic Management and Strategic Competitiveness Essay
The Home Depot is a favorite store of mine. I frequently visit the same location for tools, cleaning supplies, and just to see the latest products available. The Home Depot was incorporated in 1978 and the first two locations were opened up in Atlanta, Georgia. “The Home Depot is the world’s largest home improvement retailer based on net sales for the fiscal year ending January 29, 2012″ (Securities Exchange Commission, 2012). The Home Depot stores sell a wide assortment of building materials, home improvement and lawn and garden products and provide a number of services.” In the annual report to the Securities Exchange Commission (2012) The Home Depot explains that “stores are located within the U.S.A, but locations can also be found in Canada, China and Mexico. The Home Depot also maintains that they are always searching for ways to upgrade their technology for company and customer ease and accessibility.”
The Home Depot is committed to technology; they claim in 2011 they “focused in particular on enhancements to their online presence and other customer facing technology, leveraging multiple channels to expand product assortment and simultaneously simplifying the process of locating and ordering products” (Securities Exchange Commission, 2012). The Home Depot recently made major enhancements to their website to improve the customers experience. Most people now shop online and being that The Home Depot is always striving to have their website easy to navigate and understand underscores their commitment to staying ahead of technology. The Home Depot maintains a global sourcing program to access the high quality products straight from the manufactures around the world.
“There are sourcing offices located in the Chinese cities of Shanghai Shenzhen and Dalian, and offices in Gudgeon, India Rome, Italy, Monterrey, Mexico and Toronto, Canada” (Securities Exchange Commission, 2012). In Industrial organization model the major benefits are that it keeps the pool of competition small, creates entry barriers and helps a firm to assess the next step of its few competitors. The Home Depot has many competitors, the main one being Lowe’s Home Improvement. The prices that The Home Depot has set must be close to Lowes’s prices so they do not lose customers. They benefit by using this model because they have deals with suppliers that are exclusive. You can only buy Shark Bite connectors at The Home Depot, for this reason the price is higher than it would be if it was an non-exclusive item.
The resource-based model focuses on internal strengths. This model tries to identify what the company can exploit to have an competitive advantage. The Home Depot does not have many brands of tools, paint or plumbing supplies that they create in-house. They specialize in finding suppliers that will do business with just them. Also the resource base model may not always result in a company achieving a sustainable competitive advantage and above-average returns. The Home Depot can achieve above-average returns by counting to use the industrial organization model. The Home Depot (2011) explains how their mission statement is used to discuss their top eight commitments.
“Taking care of our people, giving back to our communities, doing the right thing, excellent customer service, creating shareholder value, building strong relationships, entrepreneurial spirit and respect for all people.” The fourth commitment, excellent customer service, is the main reason that I enjoy shopping at The Home Depot. I have always had positive shopping experiences. The employees take the time to listen to my needs, requests, and questions and offer great advice. The employees are very attentive in asking if I need any assistance. Associates, customers, communities, vendors and suppliers and finally shareholder are all stakeholders in The Home Depot.
In my opinion, associates are the first people customers see when entering The Home Depot. They are vital to the success of the company and are trained well to have great customer service. Vendors and suppliers are next on the list because they can offer exclusive items that will drive the consumers to The Home Depot. Shareholders hold power in this company because it is a public company with stocks traded daily. They also have voting power and without them The Home Depot will not be the world’s leading home improvement retailer without the fan base and support from its customers. The Home Depot tries to create loyalty by offering free classes, give always and outstanding customer service. They also build homes for people that cannot afford a roof over their heads.
HD-1.29.2012-10-K. (2012). U.S. securities and exchange commission.
Strategic Management and Strategic Competitiveness Essay
What started as a store geared towards the rugged outdoorsmen has grown into one of leading retailers for the upscale college student as well as the adventurous young adult with a fashion to go along with their adventure. Abercrombie & Fitch (A&F) sells a variety of casual sportswear apparel, including shirts, graphic t-shirts, jeans, shorts, and sweaters, as well as perfumes/cologne and personal care products, and accessories for both sexes and children. As of February 1, 2014, the company operated 843 stores in the United States and 163 stores outside of the U.S. (SEC, 2014). With a footprint this large in the outdoor apparel it only made since to look into the e-commerce market to continue to expand and grow their business.
Strategic management deals with decisions a company makes to stay afloat and have a competitive advantage. Over the past years, A&F has encountered a few financial setbacks brought forth by turbulent economic times and a controversial advertising campaign that not only affected sales, it drew negative publicity and sometimes not all publicity is good publicity. If, however, the leaders of the organization can make good tactful and strategic moves, this company might be able to turn around and be profitable. Globalization and Technology
A&F understood that in order to be competitive, they must venture overseas and do it wisely as well as strategically. Companies that take the chance on foreign opportunities are often met with challenges set forth by governments, including local sourcing requirements, tariffs and restrictions on foreign direct investment. Not only must the area be able to support the new business, A&F had to make sure any other requirements from local areas are met. This may be why competitors American Eagle Outfitters Inc. and J. Crew Group Inc. had not made the move. Despite the challenge, Abercrombie took their business overseas in 2007, starting in London (Eaton, 2013). At that time, Gap Inc. was the only major competitor overseas, with one hundred sixty eight stores internationally.
Having the information available that Gap Inc. has been successful, allowed for A&F to save on financial resources of placing stores in certain areas. Knowing that Gap Inc. stores were making profit then A&F stores should make a profit in the same area. The company capitalized on this opportunity, and it paid off. The company recorded revenues of $3,318.2 million during the fiscal year ended January 2007, an increase of 19.2% over 2006. The operating profit of the company was $658.1 million during fiscal year 2007, an increase of 21.3% over 2006. The net profit was $422.2 million in fiscal year 2007, an increase of 26.4% over 2006. The company has made over $7 million in the current year with direct to consumer sales (Abercrombie & Fitch, 2007). Bringing the product to the consumers’ fingertips allows for them the opportunity to shop from their couches, beds, or even workplace and have their items delivered to their homes.
The world of e-commerce has helped A&F solidify itself as a leading outdoor clothier. Dramatic changes in technology have occurred rapidly over the last ten years. As noted in the textbook, “personal computers, cellular phones, artificial intelligence, virtual reality, massive databases, and multiple social networking sites are only a few examples of how information is used differently as a result of technological developments” (Hint, 2012). With such advances over the past decade, there has been an increased focus on online sales in order to remain competitive. Multichannel shopping has enabled companies to expand margins and tap into new and emerging markets including China, the leader in use of Internet sales channels (PricewaterhouseCoopers, 2013). Abercrombie has a good online store, accessible to both domestic and international consumers which expand the number of customers dramatically compared to brick and mortar stores only.
Abercrombie plans to improve their direct-to-consumer operations by upgrading their website and offering, an assortment of web exclusive styles, by making the items web exclusive it brings those consumers that would not normally use e-commerce to their website and allows them to gather information about their consumers to continue to target the correct demographics. Abercrombie also plans on improving mobile capabilities, expanding international language and payment options. This will enable Abercrombie to be more marketable to the online environment and easily available by any consumer worldwide. Industrial Organization Model and Resource-Based Model
The industrial organization (I/O) model describes how above-average returns are earned when companies use the information gained from the external environment to target a specific area within the industry and apply a winning strategy. Recognizing that 2013 was not a good year financially, A&F created specific objectives to help improve investment capital. These objectives (recover productivity and profitably in US stores, improve international growth, increase direct to consumer sales and reduce expenses) will enable the organization to look within each area and focus on improving those areas and begin making a profit. A&F has a plan and upon proper implementation the company should begin to see a positive as well as above average return.
The textbook explains that the resource based model, “assumes that each organization is a collection of unique resources and capabilities. The uniqueness of its resources and capabilities is the basis of a firm’s strategy and its ability to earn above-average returns.” (Hint, 2012) At one point A&F tried to use their elite and upscale brand as an enticement, making clothing for those wear a size “large” or lower. Chief Executive Michael S. Jeffries—according to Business Insider—had a core marketing strategy that exclusive sells and that including everyone would make his business “boring.” (Business Insider, 2013).
The “no plus size” strategy proved not only unsuccessful, but disastrous. It is not uncommon for small boutique stores to attempt to cater only to a particular crowd, however for a major chain store like Abercrombie & Fitch making that decision alienated a good portion of the profit potential because of Chief Executive Michael S. Jeffries’ decision. A&F reported a quarterly drop in same-store sales for the seven quarters straight, and its stock price fell 10.4 percent (Business time, 2013). Vision Statement and Mission Statement of the Corporation
Abercrombie and Fitch focuses upon high-quality merchandise that compliments the casual classic American lifestyle. The organization uses this statement to not only help define how Abercrombie and Fitch do business, but what the company is trying to sell to the consumer. Many consumers around the world understand and accept they will not live in America but if that consumer can somehow have a piece of America in his/her closet through the classic American lifestyle being offered by Abercrombie and Fitch then the person will purchase what they want. The Abercrombie and Fitch brand is as much about the company and what is provided to the consumer as the actual shirt on the persons back. A person see the words Abercrombie and Fitch across a shirt it will make those around think about where the person made his/her purchase and does that person remind them of themselves and want that same brand.
How Stakeholders Impact The Overall Success Of This Corporation. There are many types of stakeholders and each one adds value to and can affect the outcome of an organization. For this paper, three types are focused on – capital market, product market and organizational. Capital market stakeholders are the shareholders. Shareholders have an invested financial interest in the firm’s standing. Shareholders always want the company to make a profit and continue to grow so that their financial interest continues to grow. Product market stakeholders are the customers – those who are interest in the product being sold. Customers not only want the latest and trendiest fashions they also love the brand that is associated with Abercrombie and Fitch. That brand loyalty will keep the shareholders happy and continue investing their profits into the company, which can in turn produce more for the consumer. Organizational stakeholders are the internal workers – employees and management.
Employees are the management, supervisors, and laborers who expect a positive work environment where they can grow and gain knowledge. With good working conditions, outstanding organization to work for, and strong benefits package. Abercrombie and Fitch is a strong organization headed in the right direction using advanced technology and expanding beyond the borders of the United States. By taking the brand international, allows for a stronger market share and more profit. Great strategy must always be used when expanding beyond an organization’s normal area of control. Government to include federal, state, local, and international will affect potential growth with possible tariffs or other unforeseen expenses.
Having the ability to use the unique brand and capabilities of Abercrombie and Fitch will allow them to move into the future with a strong business plan that will bring positive profits. Abercrombie and Fitch mission/vision statement is more than a way to shape the business it is a brand that consumers want. That want allows for Abercrombie and Fitch to remain relevant going forward. Stakeholders are the driving force in any business and shareholders want profits, consumers
want products, and employees want a comfortable lifestyle.
Abercrombie and Fitch. (2014). Form 10-K 2014. Retrieved from SEC EDGAR website http://www.sec.gov/edgar.shtml Abercrombie & Fitch Begs the Fat Kids for Another Chance. (2013) Business time. Retrieved from http://business.time.com/2013/11/06/abercrombie-fitch-begs-the-fat-kids-for-another-chance/ Abercrombie & Fitch Refuses To Make Clothes For Large Women. (2013) Business Insider. Retrieved from http://www.businessinsider.com/abercrombie-wants-thin-customers-2013-5#ixzz2z3gtRZA4 Company Overview 2007. Abercrombie & Fitch SWOT Analysis, p. 4, Business Source Complete, EBSCOhost Hitt, Michael A.; Ireland, R. Duane; Hoskisson, Robert E. (2012-01-01). Strategic Management: Concepts and Cases: Competitiveness and Globalization (Page 11). Cengage Textbook. Kindle Edition. SECTION D100 – Simon Fraser University. (n.d.). Retrieved from http://www.sfu.ca/~sheppard/478/syn/1137/G_E_1137.pdf United States Of America: Abercrombie & Fitch announces … (n.d.). Retrieved from http://www.fibre2fashion.com/news/apparel-news/newsdetails.aspx?news_id=160117