Marketing Analysis of BQ | SWOT

Marketing Analysis of BQ | SWOT Introduction A strategy is developed by a consideration of the resources of the organisation in relation to its environment, the prime purpose being to add value Dobson (2004). According to Stredwick (2008), Strategic analysis is concerned with the strategic position of the organisation. It consists of the organisations values, culture, resources and its environment. It tackles the following questions: what are the key characteristics of the organisation, what changes are going on in the environment, and how will these affect the organisation and its activities. In addition, a detailed internal and external environmental analysis including an assessment of culture enables the organisation to make a strategic choice and also help in the strategic implementation. Therefore, the report will use different tools such as SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis in relation to Michael Porter five forces analysis to highlight where BQ (UK) is, and the environment it operates in, is strategically and where it could be in the future and the nature of competition. It looks at internal factors, the strengths and weaknesses of BQ, and external factors, the opportunities and threats facing the business. Besides, PESTLE (Political, Economic, Socio-cultural, Technological, Legal and Environmental) analysis is another tool to be used to analyse the macro external environment. Johnson (1992) Cultural web will also be used for the assessment of BQ culture. BQ Profile BQ was the first national DIY retailer and has been in the DIY business for more than 30 years. Richard Block and David Quayle (BQ) wanted to bring value, longer opening hours and a broader product range to everyone. In the 1980s it bought the Scottish DIY chain Dodge City and eventually became part of the Kingfisher Group. Today, BQ is the UKs leading DIY and garden centre retailer and its stores offer approximately 40,000 inspirational home improvement and garden products for the homemaker, occasional to serious DIY and trade professionals. Swot Analysis of BQ UK Strengths, Weaknesses, Opportunities Threats (SWOT) analysis is a tool of environmental scanning aimed at analysing both the internal (strengths and weaknesses) and external environment (i.e. opportunities and threats) to see whether the organisation can seize new opportunities given its strengths and face new threats despite its weaknesses. Thus, a SWOT analysis is a well-rounded analysis which goes well beyond the internal environment. Strengths Leading brand and good reputation BQ is the number one leading brand in the UK and is twice the size of its competitor. It has a market size of  £31bn as regard to the size of repair, maintenance and improvement market. Being the number one position in the UK market, BQ has a major strength as they are ahead of their rivals. Furthermore, BQs reputation is strong and popular which means people view it with respect and believe in it, for example, BQ is supporting Prince Charles in his Preserve the Rainforest. Increased market share BQ has a market share of 14% where it employs 22,602 employees and has 321 stores in the UK (http://www.kingfisher.co.uk/index.asp?pageid=33 accessed [19/10/10]. Thus, BQ will continue to grow in the home improvement and garden sector. Their increased market share is a key to their success as it boosts reputation, profit and the value of the organisation. Constantly creating new, differentiated, Innovative and wide range of Products BQ offer around 40,000 products in stores. BQ also has its strong own-label such as BQ car boot protector, BQ Foot pump and so on. BQ has innovative, well displayed products and they are also continuing with their renewal programme which includes updating product ranges such as launching their first fair-trade products and designing more eco-products. Thus, BQs innovation keeps it a front-runner in the home improvement and garden centre as it is regularly re-launching and designing new products. Hence, having a product differentiation strategy makes BQ at a better competitive advantage. Sites BQ has some good positions and new opening opportunities. BQ has 321 stores in the UK. They also encourage more eco stores such as their eco flagship store is located in New Malden and boasts innovative developments such as 108 underground bore holes, 100 metres deep which heat and cool the store with energy from the earth. Moreover, for the first year 2010/11 half progress, three large and 1 medium stores revamp (kingfisher strategy progress, March 2010). Thus, this is a strength which shows the overall performance of the BQ. Adding value to the organisation Adopting Michael Porter (1985) value chain concept through all its primary and supporting activities, BQ Delivering Value programme of self-help initiatives is working well, meaning now it generates significantly higher profits and cash flow from its operations and a much better return on capital for its shareholders [www.kingfisher.com]. Technological strengths BQ have embraced technological advancement in their business. For example, it has their own website where customers can shop on line namely, www.diy.com, thus facilitating e-commerce. In addition, BQ intranet facility also helps in improving its internal communication system where policy and procedures of the company can be accessed to all employees. Furthermore, on the 4th august 2010, BQ has launched its first iDIY APPS which makes it easier for customers to get the job done by having BQ experts available for them whenever needed. It is new at apple store and free to download for I phone and I pad users. Moreover, a range of green technologies have incorporated into new stores at BQ. Good customer relationship management More than three million customers come at BQ (UK) doors every week. Thus, BQ has an extensive customer base, which is a major strength regarding sales and profit. Besides, BQ retain their customers by giving them the opportunity to create, design their own product according to their taste. BQ offer different types of discount for regular shoppers which also help in customer retention such as the diamond card which offer 10 % discount off to the over 60s every Wednesday off selected purchases or products, Trade Discount Card which also offers discounts for trade customers and Corporate Gift Cards which receive discounts for bulk spending. Effective Human Resource Practices BQ has been awarded again for the fourth year running the Gallup best workplace award. Besides, on the 22nd June 2010, BQ UK also scoops the top award at institute of internal communications [www.kingfisher.com]. BQ UK is also recognised for its constant emphasis on employee training in order to improve customer satisfaction. For example, 15 500 employees of BQ UK have completed a Retail Skills Level 2 NVQ or Home Improvement Knowledge Qualification awarded by City Guilds. BQ has a very experienced workforce which drives the organisation with knowledge and expertise. In general, we can therefore comment that BQ UK concentrate on the soft side of human resource management. They invest in people through good communications, teaming and training. A participative management style BQ has an organic or flatter organisational structure which reflects its culture. Employees are empowered and have freedom of expressing new ideas. Thus, BQ unlocks the potential of its employees. At BQ, they have been busy laying the foundations for future growth. For example, they recently launched a Dragons Den-style panel to help them filter new innovative and creative ideas from staff which is called the Innovation Den. This, therefore, encourages a culture of entrepreneurship and empowerment. Financial resources BQ has improved their financial performance; this can be proved by the key performance indicators such as the operating margin which has increased from 2.8% in 08/09 to 4.9% in 09/10. Thus, the rigorous focus on generating improved cash flow from operations, reducing the investment in working capital, whilst tightening controls over capital expenditure, has yielded a significant reduction in financial net debt [www.kingfisher.com ] Effective waste and recycling management Reducing waste help to improve efficiency of organisation, thus, so far BQ has 48 % less carbon emitted from waste. They have tried to manage their production in a systematic way through the use of technology. They encourage customers to return old products and packaging for recycling. Low threat of new entrance (one element of Porters five forces analysis) Being the market leader, having a market size of  £31bn, concentrating on product differentiation; economies of scale; having cost advantages; having high capital requirements and being part of kingfisher, the third largest home improvement retailer in the world, BQ, has low threat of new competitors. Bargaining power of suppliers: one element of Porters five forces analysis BQ maintain strong relationship with their suppliers, for instance, ensuring that their suppliers provide them with eco-friendly products. Thus, the bargaining power of their suppliers is low, which makes BQ having a competitive advantage. Weaknesses As per kingfisher business review, august 2010, BQ like to like sales has increased on seasonal products such as garden products; however, one weakness will be that sales of garden product will be reduced due to winter weather which will discourage customers to invest in their gardens. BQ website, diy.com, has a poor e-commerce ratings as they were ranked bottom overall, with customer scans of 50%. In addition, the site got only two star ratings for price and product out of five stars. Furthermore, they also have delivery issues; from over packaging and delays to time slots which shows how BQ is wasting both its time and resources and also reveals their inability to adapt quickly to change. Opportunities BQ is to expand its offer in to the trade market, with the triumphant trial of Trade Point stores in nine of its large UK branches. As customer tastes keep changing, for example many people prefer to use eco-friendly products, thus an opportunity will be to broaden BQs customer by offering several trials of new or expanded product categories. Thus, this will expand the product/service lines by BQ which could help them to raise sales and increase their product portfolio. In addition, products which are cash generators and are at the maturity stage on the product life cycle can finance the rising star at the growth stage and even the question mark that are at the introduction phase. To open more eco-stores, thus, meeting the companys aim of being a sustainable business. Integrate advanced ICT (information communication technology) in business process to improve efficiency and effectiveness such as having an ERP (Enterprise Resource Planning) system. Reinforce its web design to facilitate effectiveness e-commerce. Redesigned and reduced the size of packaging on a number of lighting products, removing significant amounts of plastic and polystyrene. This will help in handling waste appropriately. Further international growth. BQ has several stores in the UK and Ireland. It also operates in china. BQ has a number of highly skilled staff, which is an opportunity for them to explore as expertise of their staff can help B Q to bring the business forward. Threats Industry Rivalry (one element of Porter five forces analysis) Focus (DIY) Limited; Wickes and Homebase Limited are the top UK industry rivalry. Homebase limited is the second market leader in home improvement and garden centre retailer in the UK. Homebase with its sister company Argos (750 stores) booming rapidly, shows a recorded sales figure of  £1.57 billion 2009/10 and profit margin was  £41.2 million 2009/10 (www.homebase.co.uk). Although, BQ are going to open some Trade points, Homebase has already a robust supply chain partnership with Argos. Being the first one to introduce loyalty cards, Homebase have an advantage in retaining customers. Homebase allow customers to collect and redeem nectar points. Even BQ has a system of processing nectar points, but this is available only on their website, even though, points are spent, not collected. In addition, Homebase is also recognised for choice, style and customer service across the wider home enhancement market. In addition, according to the Observer (31st October 2010, by Zoo Wood), analysts verdict stated that Homebase is planning to buy Focus (DIY) limited, if the acquisition is confirmed, BQ would be facing big competitive challenges, and may even lose its number one market position in the UK. Thus, the nature of competition where BQ operates is fierce. Tax increases can place additional financial burdens on BQ Changes in the way consumers shop and spend and other changing consumer patterns could be a threat to BQs performance For example, during the recession, many customers buying behaviour pattern changes, most likely, they will not spend money in home improvement or garden products. In addition, wallpapers colour paint can also be changed according to the colour fashion trend. BQ could be threatened by the high bargaining power of customers that they can influence BQ pricing strategies. BQ is susceptible to slowing UK housing market. For example, in the UK, sales declined by 2.6% to  £4.3bn in March 2009, as the recession hit consumers upgrading their homes. In addition, Kingfisher state that UK home improvement market has fallen down which will not only affect the sales, but will also affect the companys profitability and performance. http://news.bbc.co.uk/1/hi/business/7965018.stm accessed [19/10/10]. Ultimately, when strengths, weaknesses, opportunities and threats are identified, BQ implement the three strategies which can be formulated: a) matching strategies: match strengths with opportunities; b) conversion strategies: converting threats into opportunities and/or weaknesses into strengths; c) creative strategies: they can also be creative and try to identify hidden strengths. PESTLE Analysis of BQ PESTLE (Political, Economic, Social, Technological, legal issues and Environmental) analysis is used as a tool to analyse the external macro environment. It deals with those six factors that affect the organisation. Although the items in a PESTLE analysis rely on past events and experience, the analysis can be used as a forecast of the future. Besides, Kotler (1998) claims that PESTLE analysis is a useful strategic tool for understanding market development or decline, business position, prospective and direction for operations Political Factors Employment legislation According to Balchin (1994), For employment legislations, the government supports retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs. BQ has a flexible workforce of 60%; BQ does provide work for a diverse of people, such as students; people aged 45 plus; and under 25. In addition, increasing the retirement age up to 66 year old by 2020 will make BQ to review its HR policies to formulate new strategies. Besides, due to the increase of tax (VAT 20%), BQ price strategies need to be reviewed. However, BQ has requested to the government and European Commission to reduce the VAT to 5% on energy saving products to make it affordable to all www.diy.com . BQ is working in partnership with the government to promote sustainable growth For example, BQ is helping the Government Launch of the Green Loan Pilot Scheme where BQ is partnering the London Borough of Sutton in an experiment of the governments new (PAYS) Pay as You Save Scheme www.crp-news.com . Besides, BQ is helping the government to provide security equipment at reasonable prices and as affordable as possible to secure 45,000 homes. Government also offers BQ with vouchers to help in preventing burglary (National Security). Thus, having a good relationship with the government may help BQ in the future, such as having tax breaks, good public relations and strengthen their reputation. Economic Factors Economic factors are of concern to BQ, as they are likely to influence demand, costs, prices and profits. One of the most significant factors of the economy is high unemployment levels which have mainly increased due to the recession. The recession causing an increase in unemployment has decreased the effective demand for many goods, adversely affecting the demand required to produce such goods. For example, in 2008 the UK home improvement market declined by around 4% as the economic environment worsened, impacting consumer spending. BQ was badly affected by the weak housing market, that have made them concentrate on different marketing strategies of how to attract; retain or acquire the customers. BQ GDP (Gross Domestic Product) estimates for 2010 is 1.5 % This really shows the contribution BQ has made to boost the economy by producing its product within the countrys border. A positive GDP also indicates an avenue for economic growth which leads to higher living standards and greater prosperity for individuals. It also supports businesses to be profitable, which creates employment and income. Increase interest rates by 4% in 2011 and an increase in inflation rates will affect both BQ and the consumers. Therefore, the economy is likely to experience falls in consumption and investment. Social Factors Shifts in values, culture and lifestyle Norms, values and paradigms form the socio-cultural environment. They have impact on corporate strategies. For example, there has been a shift of lifestyle where nowadays people are more concerned of the environment issues occurring, such as the Green House Effect, the widening gap of the ozone layer, and so on, thus, they are more prone to consume eco-friendly products which help in maintaining a sustainable environment. Thus, to adapt with this socio-cultural shift, has pushed BQ towards the being responsible to the environment and support ethical behaviour. For example, they have designed new eco products and open new eco stores by using green technologies, such as QUEST environmental management system. In addition, BQ social responsibility which can reflect upon its culture, are divided into four section: Their diversity strategy (value of respect for people), Environmental impact (life cycle and make up of products); Ethical (how and where to buy our products) and Community (their better neighbourhood approach). Demographic changes Demographic changes such as the ageing population and an increase in female workers have made BQ to review its employment policy, for example, this made them concentrate on benefits offered to older workforce. In addition, having an ageing population has also influenced BQ in developing different marketing strategies to retain older customers such as the diamond discount card which offer 10 % discount off to the over 60s. Source: Hogarth, T. and Michael C. Barth (1991) Moreover, families are nowadays having fewer children, and having an ageing population, will result in a shortage of skilled labours in the market. Thus, this had led to the recent introduction of legislations such as the entrepreneurs visa, point-based systems and working visa. Therefore, BQ should acknowledged these changes and review its employment policy accordingly. Education In order to promote children skills, BQ has launched its nationwide job done initiative by teaching children DIY skills as a curriculum for the future. In addition, to educate both women and men about the use of DIY tools, BQ has introduced its IDIY apps. Technological Factors Technology is a major micro environmental factor which has influenced the development of BQ products and services. The new technologies benefit both customers and the company: customer satisfaction increases as products are readily available, services can become more personalised and shopping more convenient (Data monitor Report, 2003). BQ utilises the following technologies: New tracking technology: BQ is using TaqMan operation campaign technology Decorating card technology Variety use of low carbon technologies including solar panels and ground source heat pumps for New Malden eco store. And, in the future, solar system can be used in most homes as a replacement for gas and electric heating. BQ joined SEDEX- a web-based system that provides a membership based data exchange where it provides them with greater visibility at all levels of their supply chain. Legal Factors Many government legislations and policies have a direct influence on the performance of BQ. For instance, Kingfisher retail board ensures that BQ adopt the code of practice to guarantee ethical business practices among its employees, suppliers, contractors and investors. For example, BQ has an anti-bribery and corruption policies and procedures in the light of the new UK Bribery Act 2010. The existence of powerful competitors with reputable brands generates a threat of intense price wars and robust requirements for product differentiation. The governments policies for monopoly controls and reduction of buyers power can limit entry to this sector with such controls as license requirements and limits on access to raw materials (Mintel Report, 2004; Myers, 2004). Thus to device politically correct pricing policies, BQ set reasonable prices for its products. Environmental Factors In 2003, there has been greater pressure on many companies and managers to recognise their responsibility to society, and act in a way which benefits society overall (Lindgreen and Hingley, 2003). Thus, in 2008, BQ signed a three year partnership with BioRegional to move towards becoming a One Planet Living business in order to reduce its impact on the worlds resources. BQ is awarded chain-of-custody certification for both Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification schemes (PEFC). In addition, Graiser and Scott (2004) state that in 2003 the government has planned to introduce a new strategy for sustainable consumption and production to minimise waste reduce consumption of resources and minimise environmental damage. Thus, this has pushed BQ in developing strategies such as making use of a new supplier measurement system call QUality-Ethics-SafeTy (QUEST) to ensure that the green policy is respected in accordance to the sustainability standards. However, BQ commitment is that they will force all timber products to be source certified, and also developed enforcing principles to engage its environmental campaign on suppliers. In this circumstance, question can be asked about power relations between BQ and suppliers: could other companies do what BQ is doing? Do BQ have that much power which it holds over its supply base? According to New (2003), he states that BQ does not have that power to change the way the supplier operates as green purchasing policies would vary between firms context. Assessment of BQ Culture According to CWL Hill G R Jones (2001), an organisational culture is the specific collection of values and norms that are shared by people and groups in an organisation and that control the way they interact with each other and with stakeholders outside the organisation. Cultural Onion What is right and proper? What the organisation should seek to achieve? The basic assumptions of the group The way we do things around hereCulture can be compared to an onion with three layers. Figure : Cultural Onion; source: Trompenaars Hampden-Turner (1997) Cultural Web One of the most commonly used ways of making sense of an organisations culture is to use the cultural web (Johnson, 1992). It is a schematic representation of the elements of an organisations culture in such a way that we can see how each element influences the paradigm. The cultural web theory is also a useful analysis for management as it represents the fundamental assumptions related to political, symbolic and structural aspect of the organisation. Figure : cultural web. Source: Johnson (1992) Cultural web theory application is an effective tool in assessing the cultural environment for BQ. As mention before, the cultural onion contains layers of norms, values, and paradigm and also the ways of doing business within and outside the company. Hence, the concept of cultural web is the demonstration of these actions taken for granted for understanding how they associate and influence the strategy (Veliyath and Fitzgerald, 2000; Johnson and Scholes, 2003). It is also used to bridge the gap between actual and desired culture through adaption of future strategies. Culture can be examined through the interpretations of how the organisation behaves, including, rituals, stories, structures, routines and systems. This shows the clues about the taken-for-granted assumptions (Paradigm). BQ has a very friendly, welcoming and supporting approach in the routine ways that shows how staffs behave towards each other, and towards those outside the company that can make up the way people do things. The control systems and measurements are continually under the management review to display the competence of the staff and bosses decisions. For instance, control systems on its quality of service, its strong environmental supply chain system, and the behavioural control of its staffs by having a good HR policy. The rituals of the organisations life are, corporate gatherings, the special events which BQ stresses what is mostly important and reinforce the way things are done. Symbols represent different basics such as Titles, Logos, uniforms or the type of language and expressions commonly used which becomes a shorthand image of the nature of the organization. BQ has already a recognised eye catching Orange colour as its logo as well as its uniforms. The brand and the logo signify a lot to people inside and outside the organisation. Nevertheless, BQ is recognised for using similar orange colour logo and store layout from the American giant DIY retailer, Home Depot, thus, the question is how innovative and unique is BQ as regard to its logo and brand positioning? What will happen to BQ if Home Depot comes into UK market? Power Structures are the core assumptions that contribute to the paradigm and are likely to be made by the most powerful management groupings in the organisation. And, as for BQ, its power relies in the environmental and ethics department, how to make people more committed to the environment and as well as to develop their core values. Continuous meetings and communication at every level of the organisations hierarchy signify a strong internal environment and a flat (organic) organisational structure. Conclusion The report entails a detailed environmental analysis of BQ including an assessment of culture. BQ had adopted influential identities by making their DIY model into a virus and outlaying it out into the culture via a range of channels: cultural sponsorship, consumer experience, political controversy, and brand extensions. The report has used mainly SWOT and PESTLE to conduct the environmental analysis. Although they are powerful tool for analysis, they do have some limitations. For example, they are only good for the person who makes it. For instance, in SWOT analysis strength can be seen as a weakness by another person. Thus, it lacks of validity and reliability. However, conducting an environmental analysis will help to formulate generic strategies for the company to have a competitive advantage. Furthermore, the industry life cycle can also be viewed as an extension of PESTLE analysis as it is a way of showing how certain PESTLE factors influence the development of an industry over time. For example, it was the changes of PESTLE factors that caused BQ to move from growth to maturity and back again. Besides, due to a dynamic environment, strategy formulation should be viewed as a route to continuous learning. The excellence of a formulated strategy and the speed of its implementation will hence depend on the quality of BQs intellectual and behavioural learning processes.