The aim of strategic and operational management is to help the organization for increasing the performance of business by improving its effectiveness and efficiency. The report is based on strategic and operation's management of Kwik Save Group PLC company (Belohlavek, 2011). The report gives the reflection on external and internal analysis of firm and on SWOT analysis for strategic recommendations as well.
TASK 1: External analysis
1.1 PESTLE analysis
For environmental analysis, the most utilized method is to analyze the organization's surroundings through the tool, that is, PESTLE because it helps the managers of company to find the current market position of their business (Dalkir, 2013). PESTLE analysis includes various factors which affects the business environment in positive or negative way. The factors are as follows.
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Political : It defines the political situation of country that affects the business. The political stability of UK government is not too much strong. It imposes most of the policies which are related to the retail industry (Kourdi, 2010). Government applies different types of regulations in the retail supermarkets. It implies the import and export duties on products which increases the final cost of goods. So, the cost of grocery of Kwik Save Group PLC has increased but company has tried to manage the cost of final goods so that it will not create the pressure on below average income group.
Economic : It determines the economy of country as well as business. In February 2015, the inflation rate drops to 0% and it has occured due to the contribution of slowdown of business of furnitures, foods, fixtures and other recreational goods. The price of household equipments and other things are raised by 1.4% in the period of January to February 2015 (Langenberg, 2007). Unemployment rate of UK in January 2015 is 5.7% which has remain unchanged from the last three months. The personal disposable income is decreased in the second quarter of 2014. GDP rate of UK has increased from the year 2014. So, these all shows the economic conditions of UK which affects the business of Kwik Save Group PLC (Plenert, 2002).
Socio-cultural: This factor shows the social and cultural changes in UK which affects the business of Kwik Save Group PLC. The population of UK in increasing which enhances the consumption of domestic products and it is a good sign for company as well (Van Mieghem, 2003). But the income distribution has not yet balanced so some people spend more money on luxury items. Another factor which influences the social and cultural environment is the change in life style of people. Nowadays, individuals are more aware about the ethical consumerism in which they only want to purchase those products that does not affect the environment as well as human.
Technological: To speed-up the distribution and manufacturing of products, several technologies are available. These all help Kwik Save Group PLC company to meet the demands of products continuously (Toni, 2012). Company has to invest more money on R&D sectors which boost up the identifying of customer's expectations. Firm has to use automatic packaging of the material and then directly send it to the near warehouse. The technologies should be new so that the rate of obsolescence becomes reduced.
Environmental: Government of UK made some policies regarding saving the environment from the impact of activities of business. In this direction, Kwik Save company start taking some important steps like proper disposal of waste material, use of re-cycling packing material and trying to use those equipments which consumes less energy etc (Kirchgeorg and et.al. 2011). Another important decision which is related to the environment is reducing the carbon content in business activities.
Legal: By knowing the law of UK government, Kwik Save company has established some health and safety equipments. It also reduces the working hours of employees and give them fair wages. For doing the business in different countries, it is required to take the license so, company is also keeping this in mind at the time of doing business (Stevenson and Hojati, 2007).
1.2 Porter's five forces
Porter's five force model is used to examine the effect of the actions of the business activities on shareholders and stakeholders. It is a most usable method of analysis of business operations of the competitor's of the Kwik Save company. The five forces are as follows (Jonasson and Lauring, 2012).
Threat of new entry: It is related to the new entry of competitors in retail sectors of grocery. The company is having high threats of new entry as it is having many barriers for ist business such as government restriction, laws and regulations (Smith, Bruyns and Evans, 2011) .
Threat of substitutes: In this factor, the company is having high threat of substitutes because local grocery stores are selling same products in market with the different material (Ireland and et.al., 2011).
Bargaining power of consumers: According to this factor, the company is supplying moderate price product and they are having less bargaining power of consumers (Bettley and et.al., 2005).
Bargaining power of suppliers: The company is having moderate bargaining power of suppliers. The suppliers of Kwik Save is already in a collaboration with the firm.
Extent of rivalry between competitors: The extent of rivalry is more for this supermarket. It is having strong competitors in market such as Sainsbury and Tesco (Davenport, 2013).
2.1 Resource based view
Strategic capabilities refers to the abilities of business which are required to implement the competitive strategies in order to survive in the market for a long duration. For this, there are different resources that are required such as financial, human and physical resources (Eigenhuis,and Dijk, 2007). With the help of resource based view, organization can easily explain its competitive advantages and superior performance of its business. For Kwik Save, components of the strategic capabilities are as follows.
Physical: It is an important resource which is required in any company to run the business. It includes machines, products, buildings, raw or finished goods material, furniture and fixtures, computer systems etc (Frohlich and Westbrook, 2001). These all are giving their contribution in achieving the performance objectives and goals of Kwik Save company. The effective utilization of physical resources help in optimum utilization of the plant, increasing the production efficiency and proper marketing of products etc.
Financial: This resource is used to find the liabilities and working capital of Kiwk company. The financial resources include balance sheets, cash flow and funds of suppliers etc. To raise the funds of business, firm can sell out its bond, non-productive assets, shares and other related. To increase the working capital (Foss and Knudsen, 2013), Kiwk company can purchase the material on credit so that the extra money can be invested in other productive work.
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Human resource: In Kiwk company, it has several hierarchy levels which contains managers, employees, business partners, suppliers, customers, workers etc. These human resources can be used very effectively and giving the roles and responsibilities according to their knowledge and experiences ( Strategies to improve profit. 2013). It is essential to maintain the good relationship with suppliers ass well as customers. Company has to bring the new innovation with the time by using the capabilities of the employees.
2.2 Threshold vs distinctive capabilities
Threshold capabilities are those capabilities which are required for an organisation to meet its essential requirements in competition market and comes in the category qualifiers. These capabilities are only help the company to survive in the market but not giving the competitive advantages (Prahalad and Krishnan, 2002). The competitors are more strong in terms of the strategies formulation and influence the customer’s. Threshold resource for Kiwk Save Group PLC includes machines, buildings, employees, suppliers etc. Threshold competencies are basic knowledge of the employees, skills, motivations etc.
Distinctive capabilities are those capabilities which are used in taking the competitive advantages. These are originated from those attributes which are not having in the other firms. These are sustainable and appropriate in nature (Adeyoyin, 2005). When these capabilities are used and function with the time than it becomes sustainable. These capabilities defines the major characteristics of Kiwk Save company such as organisation structures, image of the company, reputation of the firm in the market as well as in customers mind etc.
It also helps in building the relationship between the organisation and stakeholders. The distinctive resources of Kiwk Save company are variety of the products, data base of the customer’s, adequate working capital, control on cash flow, skilled employees, new technologies, target customers, trusted suppliers, good business partners etc (Anh and Matsui, 2011). Distinctive competences are core competences of Kiwk company like strong distribution network, delivering the customer’s value etc.
2.3 Value chain analysis by using the VRIN framework
Value chain analysis is used to understand the various activities of the firm which are used to develop the competitive advantage as well as creating the value for shareholders. For getting the competitive advantages, Michael porters evolved value chain analysis which supports primary and supportive activities of the company (Bellgran and Safsten, 2009). The primary value chain activities are inbound and outbound logistic, operations, marketing and sales, services. The supportive activities are firm infrastructure, HR management, technology development and procurement process. Value chain analysis is done through VRIN framework.
VRIN framework describes the value, rarity, inimitability and non-substitutability. This framework is related to strategic capabilities. Value of strategic capabilities is define the delivering the value of the products and services to the customer’s (Feuerhahn and Eichenlaub, 2010). In the context of Kiwk Save PLC , company is giving the discounts on grocery products and the products are good in quality. This thing the gives the value to the customers of their money. Rarity of strategic capabilities refers to those unique capabilities which make the company different from its competitors (Belohlavek, 2011). Kiwk company has many strong competitors such as Tesco, Sainsbury etc and they are the powerful brands with large diversify product range.
Another strategic capabilities non-imitability which is also know as robustness. These are the core competences of the firm which are linked to the different activities of the business. To achieve such of competitive, the resource are required in large amount (Davenport, 2013). The core competences of Kwik Save company are skilled labour, specific products with best quality etc. These capabilities are enough to stand alone the company in front of the competitors. The last capability is non-substitutability which is used to avoid the risk of substitution. This capability has reduce the risk level of Kwik Save company in the competition market (Langenberg, 2007).
3.1 SOWT matrix
SOWT matrix analysis helps in analyse the internal factors of the business with respect to the external factors that affect the organisation activities and its strategic developments. SOWT matrix can be used in preparing the strategic plans with the help of TOWS matrix (Eigenhuis,and Dijk, 2007). The strengths, weakness, opportunities and threats of Kwik Save PLC are as follows.
- Increase ratio of unemployment.
- Rising the tax on grocery.
- Threats of entrance of new substitutes and new companies.
- Take the step in online shopping in UK.
- Joint venchers, mergers and acquisition with the local companies of UK.
- Expand the business at global level.
- Highly dependency on UK and European market.
- Lower working capital.
- Improper cash flow
- Showing the market presences.
- More competences and capabilities.
- Strong brand name.
So it is required to develop the strategic plan for Kwik Save Group PLC company. To get the advantages of the external opportunities it is essential to develop the internal strengths and overcome the weakness (Dalkir, 2013). To develop the strategic plan, first of all company has to define the mission and objectives of the business and than doing the situation analysis. In the situation analysis, firm covers the different situations like increase the working capital. Now nest step in this direction is strategy formulation in which company plan how to raise the working capital like issuing more shares, selling the non-productive assets, bonds etc. The final step is implementation and controlling the strategy (Anh and Matsui, 2011).
3.2 Recommendation on strategic plan
Kwik Save company should purchase the goods on credit so that it can easily maintain the cycle of the working capital (Kourdi, 2010).
Company should adopt the JIT system because large inventory level hold the large working capital.
Firm has to increase the face value of shares and try convene more and more investors for investing the money in company project (Toni, 2012).
It can also make the good relationship with the some vendors and suppliers and use their warehouse because this idea helps the company to save more money without investing in purchasing of warehouse (Jonasson and Lauring, 2012).
Kwik company can make some small joint venchers or take over the small grocery retail company and use their assets. It also saves the money of the company (Plenert, 2002).
3.3 Donaldson and Preston view of stakeholders:
Shareholders are those who purchase the shares of a company for their personal advantages. Kwik Save company has many shareholders who purchase the shares of the company fro getting the better return on their investments (Ireland and et.al., 2011). It gives the benefits on several aspects like higher rate of return, reduced the risk, encourage the entrepreneurship and more investments and make the management independent (Bettley and et.al., 2005).
There are different shareholders of the company such as government, customer’s, company employees, business partners, community etc. These people are investing their money for taking the good return at the time of profits (Foss and Knudsen, 2013 ). When the company is distribute the profits as a dividend than it has distributed according to the percentage of the shareholding.
At the time of distribution of profits, shareholders expect that company has not done any unethical activity with them and follow the transparency system. So it is required for the firm to map the expectations of the shareholders and fulfill them in effective manner (Feuerhahn and Eichenlaub, 2010).
3.4 SAF criteria
SAF is used for strategic evaluation in which the company evaluate the strategic plan to know the impact of the strategy on business and customers and image of the firm in the market. Suitability define the effectiveness of the proposed strategy by considering the opportunities and constraints of Kwik Save Group PLC company (Frohlich and Westbrook, 2001. ). It defines those problems which are facing by the organisation at the time of doing the business. This can be understand by the example of prici8ng strategy. At the time of deciding the pricing, company has the many options such as market penetration, retrenchment, product or market development, diversification etc. So suitability of strategy is depends upon the environment and capabilities (Prahalad and Krishnan, 2002).
second factor is acceptability of the strategies in which the company has find the whether the expected set performance objectives of the strategies fulfill the expectations of shareholders. In this process, there are three R is consider risk, return and reactions (Van Mieghem, 2003). In the last factor, company has consider the feasibility of the strategies means whether it gives the better result to the organisation or not.
From the above report it has been concluded that strategies and operational management play an important role in Kwik Save Group PLC company to formulate the strategies. With the help of the porters five forces and PESTEL analysis it is easy to find the different factors which affect the business operations.
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