Strategic Management essay on: Porter’s analysis
- Executive Summary……………………………………………………………………3
- External Analysis……………………………………………………………………….4
3.1 PESTEL Analysis…………………………………………………………………..4
3.2 Porter’s five forces analysis…………………………………………………………6
- Internal analysis…………………………………………………………………………8
4.1 Resources, tangible & intangible assets…………………………………………….8
4.2 SWOT Analysis…………………………………………………………………….8
4.3 Value chain analysis………………………………………………………………..9
- Current strategies………………………………………………………………………10
- Recommended strategies………………………………………………………………11
The purpose of the report is to analyze the case of Pumpkin patch organization and its business. Therefore report has been continued in several parts. First part describes the external environment of the said organization involving the nature of industry, PESTEL analysis, industry environment, and the competitive environment of the industry. Further part of the report throws the light on internal analysis which comprises of Pumpkin Patch’s key resources, tangible & intangible assets, capabilities acknowledgement, weaknesses and strengths of the organization. To define the internal and external analysis best, SWOT analysis has been drawn for Pumpkin Patch organization. Afterward, report talks about the current corporate level strategy of the firm and major issues related to that. An analysis has been made to assess the strategic fit into organizational objectives, internal & external environment of the organization. In next segment, appropriate strategy has been introduced and recommended for the firm on the basis of alternative strategies’ evaluation. Conclusion is the final part of the report which draws some decisive points related to the overall discussion.
Before analyzing the firm’s internal and external environment, it is obvious to give a brief introduction of the related organization Pumpkin Patch. The company is into business of children and infants’ wear. The company also operates and sells its products through mail orders, catalogues and internet in Australia and New Zealand, United kingdom & United States. Pumpkin Patch had entered in Australian retail market in 1996.Initially they used to sell their products only through mail orders but soon they opened their first retail store in Auckland. Maurice In 2002, Pumpkin patch started its business international wholesales. With this store they found better revenue on ground of people were able to feel and touch the products before making a purchasing decision.
The two key persons had got added to the company in 1993; one was Chrissy Conyngham as a design director and Maurice Prendergast as a CEO of Pumpkin Patch company. They worked in the area of innovative design, marketing & sales of the produces offered by company in a number of developed countries. Furthermore, according to the analysis of the company, it has been noticed that over the years company has progressed in Australian, US and UK market through retail stores and mail-orders as well. Moreover, this firm employs more than 3000 employees with over 200 stores in various countries and continues its wholesale operations in almost 14 countries. In last ten years of its business, Pumpkin patch has become one of the largest children wear retailer in Australasia which includes countries across Asia, Middle East, US & UK as well. In this overall context, internal and external analysis of company’s environment has been discussed and summarized in the next segments of the report (Ruth, 2006).
To conduct the external analysis of Pumpkin patch, it is better to make a PESTEL analysis of the external environment.
Political factors: There are some possible political factors such as government policies and other regulatory framework that affect the business of Pumpkin Patch. The increased goods and services tax in New Zealand, Australia and in other countries, political unrest affected the manufacturing process of the children’s wear in Pumpkin Patch in Australasia.
Economic factors: Such factors include interest rates change, exchange rates, taxation changes, inflation, etc which drop a great impact on the successful continuous performance of any business towards aiming the achievement of strategic goals. In case of Pumpkin Patch, high level of unemployment rates in its main markets, enhanced cists of living such as food, petrol, etc, increased borrowing costs & exchange rates in New Zealand which adversely affect the company’s overall business in every country it operates its business (Pumpkin Patch limited, 2011).
(Source: What makes a good leader, n.d)
Socio-cultural factors: These factors include increment in population rate, age distribution and safety status of the related country. One of the major social factors affected the company’s revenue that was starting the new clothing system for women but that did not get succeeded because it needed money and alternatively Pumpkin Patch needed money. Here, in this case company lost a good amount and decided not to turn back to it. On the other hand, targeting the kids market led them to get back to their position in the market and they got success and proved themselves as the largest company in Children’s wear retail sector (Oxford University Press, 2007).
Technological factors: Some of the technological factors came in light and turned into an issue for the manufacturing issues for the factories involved. Safety practices related to the technology imposed outside led the company think about the process and equipments used. Moreover, designing and sourcing process related technologies also affected Pumpkin Patch’s business as they usually operate through mail-orders and online catalogues.
Environmental factors: Environmental factors are associated with the industry’s environment affecting the business or its process. There can be climate change, other environmental scenario changes, temperature changes, etc. In Pumpkin Patch’s case, natural disaster Japanese Tsunami which was the first Christchurch earthquake occurred in 2010 made a conflict in the market and made a harmful effect on the business.
Legal factors: There are some legal changes that affect an organization’s behavior and way of functioning. The quotas system by UK, Europe and some other countries as a measure of safeguard on account of export it to other countries from Auckland. Legal factors involve no changes to the tax system in Australia, New Zealand and in UK along with no changes in company’s tax rate of 30%, 33% and 30% respectively.
Porter’s five forces analysis:
Afterward, Porter’s five forces model is also taken for support to analyze the external environment of Pumpkin Patch better. This model talks about the bargaining power of buyer & supplier, threat of substitutes and new entrants and the rivalry among competitors (Porter, 2008).
Threat of new entrants: When an organization yields the high returns and generates high revenue, it will definitely attract the new organizations. That automatically lessens the productivity for already existing organizations in the Industry. In case of Pumpkin Patch, when they had their business operation through mail-orders and catalogue share, they had not risk of any new organization’s entrance but after getting into retail sector they have invited a number of organizations as their competitors.
Threat of substitutes: When similar products exist in the market, it increases the customer’s propensity to switch to the alternatives according to their satisfaction level. It can depend upon the buyer’s costs of switching to the alternatives and their perception level of product discrimination. Pumpkin Patch claims to manufacture and provide the best quality kids wear, footwear and other home makers it operates into. Their main area of focus regarding product service is branding of specific products. On the basis of Pumpkin Patch’s case, it has been noticed out that it faced some threats of substitutes in New Zealand when other retailers copied the creative clothing and innovative designs of Pumpkin Patch and created their own fashion market for kids. Therefore it created a threat to Pumpkin Patch after introducing their copied products in the market (Harvard Business Review, 2008).
Bargaining power of customers: The customers’ bargaining power has the capability to put an organization under pressure to change its prices as they can switch to other firms for the similar products being offered. At the time of orders fulfillment through mail-orders, the customers had other options to switch to the organizations operating through retail sectors where they could touch and feel the passion attached with the clothes. But after entering into retail sector, bargaining power of supplier led down because then customers could get fresh and innovative dresses at Pumpkin Patch retail stores (Udanga, 2011).
Bargaining power of suppliers: Suppliers’ bargaining power can be described on the basis of market of efforts or inputs. It also depends on the extent of inputs’ discrimination and the supplier’s costs of switching linked to switching costs of the organization. Here in context of Pumpkin Patch, it was noticed that the bargaining power of suppliers were valuable and opportunistic. In 2004, Pumpkin patch had a valuable deal with HBK girl clothing that was basically from Hallenstein Glasson. This deal made a value for the money offered to HBK. Moreover, Pumpkin Patch also has good wholesaling relationship with the big international retails including Nordstrom of United States, David Jones of Australia and Roches from Ireland (Ruth, 2006).
Intensity of competitive rivalry: The Company Pumpkin Patch creates innovative design and fabrics for its clothing business. Analysis based on overview of the company represents that some of the innovative designs were prepared for Pumpkin Patch but was purchased by some other competitive organizations. This framed an intensity of competitive rivalry in Pumpkin Patch’s business mind. Further the competitive strategy of opening retail stores in a number of developing countries of the said company invited the competitive firms to make an advantage of it. Competitors such as Marks Spencer, Wal-Mart, got alert with this competency of Pumpkin Patch regarding their children’s section of clothing (Gregor, 2010).
This overall analysis summarizes the condition of Pumpkin Patch amongst its competitors, customers & suppliers’ relationship with it. Furthermore, a SWOT analysis, value chain analysis, core competencies analysis can also be drawn to analyze company’s internal analysis. On the other hand an internal analysis also reveals the company’s resources, key tangible and intangible assets.
Resources, tangible & intangible assets:
First, resources and company’s key assets can be defined on the basis of company’s reports. Pumpkin Patch believes in providing family facilities to its people within the premises. Company’s policies such as family-friend, encouraging flexibility, compliance and sense of balance, intangible rewards like promotions to the employees, are amounted to the key intangible assets. It usually employs nearly 2800 people for its premises. Moreover, 66% of its employees work from home and work for part time. Moreover, company’s core philosophy is integrity, platform of trust, loyalty and dedication which keeps its employees, customers and suppliers attached and engaged with the business operations and well functioning (Pumpkin Patch, 2012).
SWOT analysis method is approached to best define the organization’s strategies, strengths, weaknesses, potential opportunities and threats on the other hand (Pumpkin Patch limited, 2011).
Value chain analysis:
Value chain concept has also been proposed by Michael Porter. It describes the chain of operations or functions of an organization in a particular industry. The activities it includes start from inbound logistic, leading to manufacture, then outbound logistics, following marketing & sales and finally the service of the manufactured products. In case of Pumpkin Patch, first of all innovative and design of fabrics are prepared and set according to the latest trend and fashion. This stage includes conceptual artwork, framing of style, and product sourcing. However, the stage of design process is a consistent cycle throughout the year, therefore new and fresh ranges are added to the cycle all over the season. Afterward, products are manufactured according to the design set and pre-production and post production quality control system is implemented to check the line of fabric used in production (Sachs, 2008).
(Source: Kbr consulting, 2003)
In addition, after manufacturing process, garments are received, picked, packed and distributed at single distribution centre of Pumpkin Patch Auckland. It distributes nearly 70000 garments daily. After comes marketing & sales of the garments manufactured which are distributed through various modes. There are a number of project managers and architectures who take care of the proper designing and overall fit-outs of the organization and play a role of remarkable marketer. To attract the good number of customers to their brand, they have established play areas for children so that children could use their spare time while their parents shop from the place. Moreover, in addition to their sales and marketing activities, they have created separate areas for both boys’ and girls’ clothing and a mini section for Urban Angel brand (Pumpkin Patch limited, 2011).
Pumpkin Patch mainly concentrates on selling and bringing leading edge kids’ fashion in the market. Therefore they have adopted a strategy that is based on selling through a variety of different channels which includes their own retail stores, chosen departmental stores, distribution through wholesaling displays, through mail-orders, via internet and online catalogues. Next, its competitive strategy is to manage its balance sheet and cash-flow in order to expand its business and brand in multiple markets even facing some major challenges (Pumpkin Patch limited, 2011). The issues may include:
- Disorder and mismanagement in political system in Middle East
- Higher exchange rates in New Zealand
- Costs involved in opening of new retail stores
Apart from this they have a strategy aimed at growth and earning through:
- Through opening of new retail stores consistent development in New Zealand and in Australia
- Expansion of the market for pre and early teens brand in multiple cities across the countries
- Expansion of the already existing operations in Europe and Middle East in concurrence with their third party retailers (Radiolive.co.nz, 2012).
These strategies cover all the issues related to economic, political, environmental, opening and closure of the retail stores in Australia, New Zealand, UK & US.
Pumpkin patch has already created a good image amongst all the retailers established in Australia, New Zealand, US & UK. Recommended strategies can be put across to grow their business in various countries to get higher returns. There are following strategies recommended for Pumpkin Patch’s children wear industry to win the market.
Advertising strategy: First and foremost strategy suggested to the said company is advertising strategy. As the company has current strategy focused mainly on operating the business through its retail stores, online catalogues and mail-orders, it needs to advertise its new opening retail stores at particular locations. For that, first they should create a target customer profile before developing the strategies. It will help in finding out the customers’ basic requirements with respect to their choice and criteria to pick the children wear. In that case content defining customer should be precise and full of material to the subject (Cong, 2008).
Next, some of the retail sectors have perspective that they can win the market without advertising their product. But somehow it gets risky when people generally do not get aware of the brand. Following this, Pumpkin Patch should concentrate on advertising its new stores and building awareness among the customers about it. For this, it can approach the best suitable media within the least and accepted range of the company. The type of media is to be selected should be capable enough to capture the market quickly and effectively reaching the target market (High beam Business, 2012).
Product development: Next suggested strategy is with reference to product development or extension of product line. Company is already working with various clothing wholesalers, other garment manufacturers; on the other hand also have good team of experts and designers. It can move ahead and enter into new product line by offering more fashionable clothes for teens and new born babies (Gordon al, 2012).
Internet strategy: Internet has a good grip over the retail merchandising in developed countries like Australia, New Zealand, US & UK. It is a vital part of retail sector through Pumpkin Patch has made its business successful. Therefore, the company can adopt new internet strategies by opening profit-sharing, customer’s feedbacks and reviews, and other relevant sites. This strategy can best fit the internal analysis made for the company as it is going to close many stores in US and will continue making profits through mail-orders and catalogues sharing there.
Marketing strategy: The retail chain of infants’ and children’s wear is very long and strong in the market. Therefore, to remain stable and grow in the market in such conditions, company needs to focus on their marketing strategies. Above analysis states that company has been the largest retailer in the market but plans to open a few new stores. For that, company should have a better sales & marketing strategy. Likewise, analysis presented that company has only one distribution plant in Auckland, where the garments are received, packed and distributed to multiple cities and countries. So, Pumpkin patch should work in this area and should plan to open other distribution channels so that they could generate more revenue by making a great number of orders. All of these strategies have been recommended and discussed about on the basis of children’s wear industry’s snapshot (Gourville al, 2012)
On the basis of overall conclusion, it can be made a point to be noticed out that Pumpkin Patch has its main focus on business through mail-orders and online catalogues. Afterward, it opened its new retail sector where people could feel the passion and fabric of the clothes before they decide to purchase them. External analysis of Pumpkin Patch on the basis of PESTEL analysis and other competitive environment analysis dictated that company has faced various economical changes such as increased exchange and interest rates and downturn in European market. It has various competitors like Marks Spencer, Wal-Mart & JK with their creative and fashionable designs in the market. Furthermore, internal environment of the said company via SWOT analysis has been overviewed. It depicted the week indicators of profitability and volatile marketing conditions as the weak aspect of the company. But on the other hand company has the capability to offer various range of designer children’s wear and has proved itself as the largest retailer amongst all with higher returns.
Next, it talked about the current strategy of Pumpkin Patch focused on its business through opening more new retail stores, taking additional mail-orders and their fulfillment. Current strategy of company covers all the problems which it is facing related to the political & environmental factors, closure of its stores and competitors entry into the market. Therefore, in support a few strategies such as advertising strategy, product development, marketing strategies and internet strategies have been identified for their retail store and online business through mail-orders.
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