Group Assignment

The Warehouse Group

Submitted By:

S. No Name Student Id No.

1. Prem Chand 1000021885

2. Prathamesh Edirisinghe 1000016435

3. Sheng He 1000003683

4. Mingya Hu 1000014087

5. Pengyue Ding 1000001813

Submitted To:

Ms. Lydia Harrell

Lecturer in Strategic Management

Submission date: 02nd March 2015

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EXCECUTIVE SUMMARY

The Warehouse group is a largest retailer in New Zealand. It has different stores in under

different brand names all over New Zealand. In this report we have done an extensive

research on The Warehouse, we have given a brief description of the Warehouse along with

the vision, missions and goals and objectives. This report contains macro environment

analysis which includes PESTEL analysis, Porter’s five forces along with the SWOT analysis

of The Warehouse. Report also contains internal analysis of The Warehouse in which we

have written VRIO and VRIN. The Aim of this report to analyse all the factors of an

organization and recommend business level strategies and its implementation.

Business-level strategy is about the way a company use to allocate its resource such as

finance, supply chain management and human resource in order to adopt the strategy that

cannot be imitated by its rivals (Besanko, Dranove, Shanley, & Schaefer, 2013). It aims to

integrates the company’s resource into core competencies that contribute to its competitive

advantages (Hill et al., 2007). It is about to improve a company’s functional operations in

manufacturing, logistics, human resource and so on. The Warehouse is one of the largest

retailers in New Zealand. Its strategies determine its market position and competitive

advantages. The objective of this report is to discuss the business strategies of the Warehouse

Group.

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TABLE OF CONTENTS

S.No. Content Page Number

1. Executive Summary 02

2. Introduction 04

3. Vision, Mission, Goals and Objectives 04-05

4. Macro Environment 05-07

5. Porter’s Five Force 08-09

6. Internal Analysis 09-13

7. SWOT 14- 16

8. Strategy 1 17

9. Implementation of Strategy 1 18

10. Strategy 2 18

11. Implementation of Strategy 2 19

12. References 20

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1. Introduction

As a New Zealand owned and operated large scale retailer, the Warehouse sells a variety of

goods to customers ranging from apparel, sporting, gardening, groceries, and entertainments

to electronic goods. It was established in 1982, and has grown to have 92 warehouse stores

across the country, 77 Noel Leeming stores specialising in electronics and appliances, 64

Warehouse Stationery stores and several online businesses (The Warehouse, 2015). The

group has been publicly traded on the New Zealand Stock Exchange. With the steady growth

and development, the Warehouse has become the biggest general merchandise and apparel

retailer in New Zealand. Besides its own operations, the Warehouse also owns a variety of its

own brands that are located within the stores such as the brand ‘Just’ for the gardening.

The major rivals of the Warehouse in New Zealand are Kmart (discount department stores),

Farmers (groceries), the Briscoe’s (discounted Apparel and home ware stores), and Super

Cheap Auto (automotive products). However, the variety of products sold in these department

stores is significantly lower than those of the Warehouse. The Warehouse is usually able to

offer more choices with lower prices because it has established an extended supply chain with

manufactures in Asian countries and maintained close relationship with these suppliers.

However, although the Warehouse offers lower prices and various choices to customers, it

has been criticised for the poor quality of goods it sold and has recalled some items it

exclusively sells.

2. Vision, Mission, Goals and Objectives

Vision – In 1982, Sir Stephen Tindall founded The Warehouse with a vision of

revolutionising retail industry in New Zealand. The Warehouse group vision is to remain true

to Sir Stephen Tindall’s vision and build a hundred year business which help KIWI’s to

flourish.

Mission Statement

The Company’s mission statement is “Where People Come First and Quality is Affordable”

and it is through this management style of putting people first that The Warehouse has

managed to grow at such a rapid rate. (The Warehouse, 2013)

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Through this mission statement warehouse group mainly concentrates on the customers and

their expectations. To fulfil the customers’ expectations and to amuse them by lucrative deals

this attracts more customers. Quality plays an important role in the retail industry. Warehouse

has a reputed name when it comes to

customer service and quality of the products. Fresh quality products are put for sale in

warehouse. The Warehouse employees work as a team and have a very friendly and good

environment to work in. It all represents the mission statement laid by the founder of The

Warehouse.

Goals & Objectives

Goals - The Warehouse group has an ambitious goal to drive its newly expanded outlets to

rival with the competitors. The NZX-listed retailer has made numerous acquisitions in recent

years, including Noel Leeming, Warehouse stationery. To compete with its rival’s better

customer service and lucrative deals are the main criteria to compete. For better customer

service proper training to the staff and motivational program are carried out by the

management team of warehouse. Motivational program such as increment, incentives

program will motivate the employees. All these factors help to expand the business of

warehouse. The main strategy of warehouse was to dominate sales through sales online as

well as in stores.

OBJECTIVES: The main objectives of Warehouse are to fulfil the customers’ expectations

and also to keep its employees motivated. To compete with its competitors and to rise in the

retail market customer’s expectations has to be fulfilled. To top the retail sector online

shopping also has to be more convenient to use.

3. Macro Environment Analysis

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Macro environment also referred as the external environment are the components used for the

strategic planning for an organisation. The macro environment consists of PESTEL i.e.

Political, Economic, Social, Technological, Environmental and legal.

PESTEL analysis which is also referred as PEST analysis is a concept in marketing values,

it’s a concept used by an organisation to track the environment they are operating or planning

to launch a new venture. (Weberience LLC, 2015)

Political - This factor determine the government stability and its influence in the economy of

a certain organisation. For e.g. The Indian government has passed its new budget in which the

price of Cigarettes, tobacco products, liquor , plastic bags etc. have increased due to which

the entire revenue generating structure of the referred industry might change. (Hindustan

Times, 2015) The New Zealand government has a direct impact on the retail industry in

regards to the trading hours, fair trading and competition. Because of the support from the

government the retail industry in New Zealand is booming and generating a huge amount of

revenue. When it comes to taxation NZ, imports into NZ are tax-free if the duty payable is

less than $60. NZ operates minimum duty on the products which is been import in NZ itself.

(Scholar, 2012) The NZ government has implemented a scheme for the retail market that the

employees can have benefits from the workplace, Warehouse also have benefits for its

employees which help them to save their income as most products are at a very cheaper price

for the staffs. Childcare benefits, medical aid when needed to the employees and its family

will be provided by warehouse.

Economic - This factor determine the economic performance of an organization which

directly impacts and boom for the long term effects. Economic factors include business

cycles, GNP trends, interest rates, exchange rates. The NZ economy showed a strong sign of

recovery following the global financial crisis and the 2010 & 2011 earthquake. Minimum

wages of an employee has been increased by the government which has a positive effects on

the retain New Zealand.

Socio Cultural - Socio cultural is a major factor influencing consumer’s choice. In New

Zealand changing societal concerns, attitude, and lifestyles have resulted in dramatic changes

in the retail industry in New Zealand. In modern world customers are more concerns about

health, obesity etc. due to that health food and eco-friendly organizations are in high demand

in New Zealand. Immigration policy of New Zealand has attracted a ton of migrants from all

around the world and due to that different regional cuisine foods are in high demand.

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Technology & Environment - In modern times due to expansion in internet and electronics

customers prefer online shopping in comparison to traditional shopping. In New Zealand

online shopping behaviour of consumers has forced all the retailers to provide online

shopping facilities to their customers. Retailers are providing new and in-innovating self-

check-in counters in their stores for their customers. Technological advancement has allowed

organizations to reduce carbon emissions, Energy management, reduce waste and recycling.

Porter’s Five Forces:

Threat of New Entrants - New Zealand positive and strong economy and changing

shopping behaviour of customers are attracting new entrants in New Zealand retail industry

big retail giants like wall mart are planning to start their operation in New Zealand. The

Warehouse Group has several years of experience in retail business and existing retail giants

(i.e. Kmart and PacknSave etc.) puts a strong barrier for a new entrant.

Bargaining power of buyers - The bargaining power of customers determines how much

customers can impose pressure on margins and volumes. In New Zealand retail industry

numbers of customers are large but they do not buy in bulk which indicates that bargaining

power of consumers in weak state. In New Zealand it is more economical to buy from one

retailer rather than from a host of retailers.

Supplier Bargaining Power - Supplier bargaining power is likely to be high when the

market is dominated by a few large suppliers. In New Zealand retail industry switching from

one supplier to another is not costly for a retail giant like The Warehouse. The Warehouse

group market share and dominance allow them to dictate the price they are willing to pay the

supplier.

Industry Competitors - Concentration, fixed or variable costs, differentiation, capacity,

pricing, behaviour and market and company growth are some of the factors considered in this

force. The Warehouse's chief competitors in the national retail scene include Farmers (low

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scale department stores), Kmart (discount department stores) the Briscoe’s (discounted sports

and home ware store chains) and Super Cheap Auto (automotive products). In New Zealand

retail industry The Warehouse rivalry is very intense as their rivals use price cuts to boost

their unit sales.

Substitution - In retailing industry there are large number of competitors. In retail industries

switching from one chain to another create low cost for the consumers. The Warehouse

competitors are focusing on price reduction and better customer service.

Internal Analysis:

Internal Analysis is a process through which strengths and weaknesses of an organization can

be identified by analyzing their competencies. In business differentiation in products and

services can be attained through competences which are its resources and capabilities. In

business tangible and intangible asset both are valuable because it reduce cost and add value

to firm’s outputs. Customer gives preferences those products over those of their competitors.

Value Chain Analysis

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Firm Infrastructure – The Warehouse group is a large retailer in New Zealand. It has 92

Warehouse stores, 77 Neol Leeming stores and 64 Warehouse stationary along with several

online businesses. This high number of stores located all over the New Zealand allows The

Warehouse to serve more than 10,000 customers in a day. The Warehouse group follow

“REDUCE, REUSE & RECYCLE” motto in all the stores which give them a competitive

advantage as their operating cost reduces and they earn a good carbon rating which is

appreciated by the government along with customers.

Human Resource Management – Human resource is a key component of The Warehouse

group as they value their employees the most. The Ware house group follows an open door

policy for their employees in which employees can communicate with managers easily. The

Warehouse encourages their employees to communicate openly to share new ideas, take

risks, and have fun. The Warehouse employ 90% of its workforce on hourly wages which are

competitive along with the wages all the employees get comprehensive benefits which

include medical coverage, holiday pay, leave of absence etc. All the benefits are available for

both part time and full time employees.

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Technology Development – The Warehouse group incorporate new technologies into their

daily operations. They have computer base warehouse technology like bar code, self-

checkout counters, and inventory management systems. The Warehouse group has adopted

Wayne’s award winning software programme in their stores. This software allows them to

regulate electricity, air conditioner water supplier etc. on their optimum utilization.

Operations of The Warehouse – The Warehouse group operates on a very large scale in

New Zealand, they have stores all around the New Zealand. The Warehouse group aims to

provide a safe shopping experience for customers and safe work place for all their employees.

The Warehouse group operation give a high priority to environment they give a high priority

to re-cycling.

Primary Activities

1- Inbound logistics - The Warehouse adopts Just-In-Time (JIT) to manage its supply

chain and logistics to maintain its supplying and inventory levels.

2- Operations - There are 92 Warehouse stores, 77 Noel Leeming stores, 64 Warehouse

Stationery stores in New Zealand.

3- Marketing and Sales – The majority of sales in the stores for nationally advertised

merchandise. Ware house stores are open for 13 hours throughout the week. All stores

maintain uniform prices to meet local competition.

4- Services – The warehouse has made after sales standards in their organization.

VRIO Analysis

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FACTORS Valuable Rare Inimitable Organization

Support

Good Price

Positioning

YES YES YES YES

Supply Chain

Integration

YES YES YES YES

Market

Proximity

YES YES YES YES

Customer Service YES YES NO NO

Diversification YES YES NO NO

HR Management YES YES YES YES

According to the VRIO framework of Ware house, there are six types of factors need to

discuss. Firstly, the value of warehouse business, such as their product, thousands of products

have been shown on the warehouse stock, it is a good price positioning that in strategic

management, because of the cost of product is very profitable price, compare with other shop,

warehouse dose have definitely advantage about their price strategy. The completive

advantage is very important for a firm, warehouse own a vary of product which include the

most of using facility in our life , it rely on their good supply chain integration in strategic of

business ,one of advantage is that ;the customer purchase the product is almost cheap than

any other company ,because of the resource of product is come from many factory ,they can

combine those opinions to determine the best value product for customer and take the

advantage to against others . It is a most simple question that warehouse has been deal with it,

which is their customer service can cover all of city, if the product has the quality problem or

some other issue, the customer could contact the customer service to exchange it or other

affording issue, they have many of shop in every area of Auckland such as city central or

western field. Because of the product might be same or even better than warehouse if a

customer to buy something in other shop, however for the area of service covering,

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warehouse does have advantage, that will not coping from other easily. As of January 2015,

The Warehouse employed over 12,000 people in New Zealand. The Warehouse's corporate

headquarters are located in North Shore, New Zealand. Apart from its 242 retail locations, it

operates 2 distribution centres located in Wiri, New Zealand and in Rolleston, New

Zealand as well as 12 online stores. A Warehouse Manager earns an average salary of

NZ$55,580 per year. People in this job generally don't have more than 20 years' experience.

Pay for this job does not change much by experience, with the most experienced earning only

a bit more than the least. It shows us that HR management system is very strong and it is a

competitive advantage.

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4. SWOT Analysis

SWOT analysis is a fast way to examine organization by looking at its inner strengths and

weakness along with the external opportunities and threats.

Strengths - Warehouse is the largest retail chain in New Zealand, which created more than 30

years and still going strong. The strength of Warehouse involves wide knowledge of retail

industry, cost leadership strategy, financial investment backing, existing customer base, and

strong IT returns through internet shopping. First of all, Warehouse exceeds a lot of

competitors because it has more than 30 years retail industry experiences, so Warehouse may

get enough wide knowledge of retail industry. Secondly, the cost leadership strategy is the

one of main strategy of Warehouse, it provides very low price for its products, and so many

consumer would like shopping in Warehouse, which is because Warehouse provide the

pricing strategy such as $1.99 for a product, the price is a different between $1.99 and $2

when customers see the price. Then, the existing customer base of Warehouse may make lots

of profits and benefits as there are many fixed customers in Warehouse and use to shopping

in Warehouse. Also Warehouse has strong financial investment backing. For example,

Warehouse purchased Noel Leeming Group in 2013, and also there are many Noel Leeming

chain stores in New Zealand, which show Warehouse has strong financial investment

backing. Strong IT returns through internet shopping, customers may require returns when

they are not happy with the product or the product has problem in online. For instance, one

customer purchased a product of Warehouse online, and the customer find the product has

some problem and require to return the product, so customer service department may accept

the requirement of the customer and solve this problem after finish checking product.

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Weaknesses - However, the weakness of Warehouse includes high labour cost and work

inefficiencies, high labour cost, negative publicity and little differentiation. For example,

there is a problem which is staff have to communicate with manager before consumers

require refund, it wastes so much time when many consumers require refund. Therefore, it is

better to provide some automatic refund machines, which may save a lot of time between

consumers and staffs. And then, high labour cost may reduce the benefits and profits of

Warehouse. For instance, there are 8 employees work in Warehouse, but Warehouse does not

need 8 employees because 6 employees may enough to support Warehouse, so other 2

redundant employees may increase the labour cost. Then, negative publicity may lose

customers, as we know women like shopping, when one women is not happy with products,

the women may tell her friends, so the reputation of Warehouse will reduce, some customers

will be affected. The products of Warehouse are very similar with other competitors, so there

is no much different between products, therefore, Warehouse may provide some new products

which from different countries, it may attract lots of customers.

Opportunities - There are 3 opportunities in Warehouse such as expansion of target market,

healthy market environment and increasing detraction of small retail businesses in New

Zealand. Warehouse may expand target market, first of all, if Warehouse’s new target market

is younger customers, focus on how the product or service of Warehouse may help them in

the long run, also take into consideration which advertising medium Warehouse want to use,

and some customers may spend most of their time on social media while others watch

television (Warner, 2013). Secondly, Warehouse may provide a healthy market environment.

For example, there is a family who usually shopping in Warehouse, parents often busy for

shopping and ignore their children, so Warehouse may provide some recreation equipment’s

for children so that parents may pick up their children after shopping, which is very

convenient. And then, increasing detraction of small retail businesses in New Zealand would

be an opportunity because it may help businesses to exceed competitors, nowadays, more

customers would like to see and choose cheaper products, so Warehouse usually provide the

lowest price to customers so that more customers shopping in Warehouse, also provide some

discounts and rewards so that attract customer to come back and shopping again.

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Threats - The threats of Warehouse involve intensified competition, government regulations

and rising commodity prices. First of all, intensified competition could be 1 main threat for

Warehouse, as we know, there are some markets usually provide low price for products to

customers such as Parking Save, K mark and Countdown, so many customers may compare

the price of products between these stores, therefore, not all customers may shopping in

Warehouse, which cause Warehouse may lose lots of profits and benefits. Secondly,

government regulations may influence Warehouse. For instance, Warehouse usually import

some clothes from different counties, when government regulations change some clothes are

limited for import, so Warehouse may not import these clothes. Consequently, Warehouse

may lose many benefits and profits. Thirdly, commodity prices may also influence the

benefits of Warehouse, if one product of Warehouse is higher than competitors, customers

may not choose the product. For instance, a customer may consider purchasing a fan, the

Warehouse of the fan price is $59, and the Kmart of the fan price is $55, so the customer may

choose Kmart.

1- Strategic Options –

1- Diversification & Cost Leadership Globalization

2- Globalization

Diversification & Cost Leadership

Previous literatures have identified three basic business-level strategy, which are cost

leadership, differentiation, and focus strategies (Hill, Jones, Galvin, & Haidar, 2007). The

Warehouse adopts the cost leadership strategy with the aim of offering the lowest prices and

various types of goods with low level of product differentiation to customers. The objective

of the cost leadership strategy is to reduce costs and increase efficiency in the production and

delivery process (Kumar, Jones, Venkatesan, & Leone, 2011). By using this strategy, the

Warehouse can establish an extended international supply chain to ensure efficient

manufacturing and cost effective logistic management. Almost all of the products sold in the

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Warehouse are manufactured and supplied by foreign companies. This approach makes full

use of the comparative advantages in the international businesses as the Warehouse could

enhance profits by sourcing these goods from countries where has low-cost labour and raw

materials. The high standardisation of the goods also aims to wholesale large amount of end-

products to reduce the costs and enhance the profits. The Warehouse can target different

target markets in New Zealand like construction business. After the earthquakes construction

business in New Zealand is flourishing at a very high price. This increase has created a large

demand for construction goods like construction material, tools etc. The Warehouse has a

large capital asset and stores located all around New Zealand. The Warehouse due to its

operating size can negotiate a better price with the suppliers of the construction materials and

can sell it in its store. The Warehouse group can penetrate this market easily and can attain

above average returns easily as construction material has been neglected by its main

competitors.

Globalization

Integration of world’s governments, firms and people are defined as globalization.

International trade also known as bilateral trade agreements are defined as globalization in

modern world. Global trade agreements increases cross country investments; this increment

has benefited information technology and communication sectors in past two decades.

Globalization expands markets for the organizations; it allows firms to sell their products in

different countries along with selling it in their domestic markets. The Warehouse group can

adopt this strategy to open their business in different country and continents. The Warehouse

group should enter in the Asian markets like India, China etc. Asia contains almost half of the

world’s population which is clear indicator that The warehouse group with its large capital

asset, new technology and experience can easily enter this market by strategic alliance, joint

venture etc. Asia’s large population will ensure that maintained cost leadership and

diversification policy will still offer them above average returns and which will be more than

the domestic market of New Zealand.

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Implementation

The Warehouse can adopt Just-In-Time (JIT) to manage its supply chain and logistics to

maintain its supplying and inventory levels. Efficient logistic management requires a

company maintaining the proper level of inventories in order to ensure stable supply and low

level of inventory storage costs (Flynn, Huo, & Zhao, 2010). In relation to the Warehouse, it

has its warehouse close to the main port. JIT in the electronic version will ensure on-time

order and appropriate level of inventories. By using this strategy, it not only helps the

Warehouse to reduce logistic costs, but also enhance its elasticity and adaptability to the

changing customer demands and market trend (Gimenez, van der Vaart, & van Donk, 2012).

For the supply chain management, the Warehouse has both internal and external suppliers in

the upstream of the supply chain in order to ensure the stable supply of different products. It

also has both in-house sales and independent sales channels in the downstream of the supply

chain, which enables the group has a diverse sales channels through its different brands to

enhance its sales flexibility and vulnerabilities to the market fluctuations and other risks

(Besanko et al., 2013). The Warehouse group can open new stores in South Island as due to

earthquake construction and rehabilitation is on a boom and it is been sponsored by New

Zealand government, govt. is offering subsidies to people and organization to open business

in south island. The Warehouse group can capitalize on this situation as they can open more

and more stores over there on a subsidize price as these stores will create new jobs for the

locals as well.

The Warehouse can do a strategic alliance with Big Bazar and reliance fresh who are big

retailer in Indian market. This alliance will help them to gain experience and knowledge of

the Indian market, values, culture and consumer behaviour. Their expertise in cost leadership

and supply management will be a key point for them to become a market leader in the new

Indian market. In India and China labour is cheap and agriculture sector is the main sector

which indicates that The Warehouse group can attain employees as well as products on a

cheaper price. They can make alliance with the farmers to sell their goods to them only which

help them to eliminate middle men for their imports from India and China.

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References:

http://www.thewarehouse.co.nz/red/content/homepage/about-us/stephen-

tindall

http://www.mindtools.com/pages/article/newSTR_66.htm

Barney, Jay B and Hesterly, William S. Strategic Management and Competitive

Advantage: Concepts. 2005 Pearson Education, Inc., Upper Saddle River, New

Jersey, 07458.

Strategic Management Journal, 5, pp. 171–180. Barney, J.B. (1991). “Firm resources

and sustained completive advantage “Janel management.

Barney, J. B., & Hesterly, W. S. (2010).’VRIO Framework. In Strategic Management

and Competitive Advantage (pp. 68–86). New Jersey: Pearson.

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.pdf

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http://www.retail.org.nz/retailresearchstatistics.html

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Strategy. Hoboken, NJ: Wiley

Flynn, B. B., Huo, B., & Zhao, X. (2010). The impact of supply chain integration on

performance: A contingency and configuration approach. Journal of Operations

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Gimenez, C., van der Vaart, T., & van Donk, D. T. (2012). Supply chain integration

and performance: the moderating effect of supply complexity. International Journal

of Operations & Production Management, 32(5), 583 - 610.

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Hill, C. W. L., Jones, G. R., Galvin, P., & Haidar, A. (2007). Strategic management:

An integrated approach (2nd Australasian edition). Sydney: John Wiley & Sons

Australia, Ltd.

Kumar, V., Jones, E., Venkatesan, R., & Leone, R. P. (2011). Is Market Orientation a

Source of Sustainable Competitive Advantage or Simply the Cost of Competing?

Journal of Marketing, 75(1), 16-30. doi: 10.1509/jmkg.75.1.16

The Warehouse. (2015). About the company Retrieved 10th Feburary, 2015, from

http://www.thewarehouse.co.nz/red/

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