Corporate Strategy of Topps Tiles Power Line Communication - Case Study Example

?Corporate Strategy Table of Contents TOPPS TILES PLC 3 Company Overview 3 Products 3 Geographical Scopes 4 Business Model 4 STRATEGIC ANALYSIS 4 PESTLE Analysis 5 Porter’s Five Force Analysis 8 SWOT Analysis 10 Strategic Group Mapping 11 Stakeholder’s Analysis 12 Risk Analysis 13 Conclusion 13 References 14 TOPPS TILES PLC Company Overview Topps Tiles PLC is into the wholesale and retail sales and distribution of wooden floorings, ceramic tiles, and other flooring items. It is a UK based company and also listed in London Stock Exchange. The first store of Topps Tiles PLC was launched in Manchester in the year 1963. The owners of this store were Alan Brindle and Ted Derbyshire. Now Topps Tiles PLC has over 320 stores in the country. It launched its slogan in the year 2010; “Tiles for Everyone.” Topps Tiles PLC have 25 percent share in the ceramic tile industry (Topps Tiles, 2012, p. 3). The annual report of the company revealed that in 2010, Topps Tiles PLC has gained 2 percent more marker share that the last year. This company has three segments: a) Topps Tiles PLC retail operations in UK, b) Tile Clearing House (TCH), and c) Topps Tiles floor store business in Holland. So Topps Tiles PLC has 37 TCH and 275 outlets now. Topps Tiles Holdings is a subsidiary of Topps Tiles PLC, UK, which deals in ceramic tiles and wooden floorings. The company has about 1660 employees. Topps Tiles PLC claims to be the number one ceramic tile supplier or retailer. The mission of the company is to offer value and excellent quality products to its customers. The revenue generated in 2011 was ?175.5 million (MarketLine, 2012b, p. 3-4; The Financial Times Ltd, 2012). Products Topps Tiles PLC offers a wide range of flooring options to its customers. Apart from flooring, products for outdoor paving, tools and accessories for setting the tiles or other flooring options are also sold. They also offer online advice services for assisting customers in a better way. Tiles such as ceramic, porcelain, prestige stone, mosaic, etc are sold for not only floors but also for walls, especially in the bathrooms and kitchens. Specific range of kitchen tiles are there to give an energetic feel to the kitchen, so that cooking no more remains a boring job. Apart from the polished tiles, natural stones are also available for flooring to give an old and rustic look to the house. Special styling products like splash backs are also available. Services like designing, styling, and advice for cleaning and maintaining these floorings are also given by special advisors. Geographical Scopes Topps Tiles stores are located mainly in London and the other cities of UK. Though the company is listed and is counted among the top tile brands, but geography wise Topps Tiles PLC is confined to UK and its neighbouring areas only. Business Model Topps Tiles PLC follows a hybrid business model as it follows both business to business and business to customer form of dealing. Flooring tiles and stones are sold to real estate and construction companies and also to end users or customers who buy for their homes. It is also sold to very small retail companies who conduct business on a small scale basis. Topps Tiles PLC is a company which follows the sole objective of offering the best quality flooring tiles whether the customer is a business house or an individual, who is purchasing small quantity of products. The motto is to offer value for money. STRATEGIC ANALYSIS The functional analytical tools that are utilized to make strategic judgment in order to estimate the attractiveness of the market are: a) PESTLE Analysis, b) Porter’s Five Force Model, c) SWOT Analysis, d) Strategic Group Mapping, d) Stakeholders Analysis, and e) Risk Analysis. Each of these strategic tools or theories has been discussed and their implications with respect to Topps Tiles Plc are explained below: PESTLE Analysis PESTLE ANALYSIS Factors Analysis Political UK being one of the most powerful and flourishing country in the world has a significant role to play in the international business environment. It is one of the major five members of the United Nation Security Council. UK is also the founding associate of the North Atlantic Treaty Organisation, an associate of G8, and European Union. David Cameron, the Prime Minister of UK has taken initiative and lots of measures to diminish the fiscal deficit of the country. Economic UK had to face a declining growth rate of 0.8 percent, which also affected the employment rate of the country adversely. The unemployment rate increased to 8.1 percent in the year 2011, and it has been expected that the rate of unemployment would increase to 8.3 by 2012. So this signifies that nearly 2.5 million citizens in UK are unemployed, and this is the highest figure of unemployment in past 16 years in UK (Marketline, 2012a, p. 4). Social The government of the country has to face many challenges for maintaining the stages of public services on recommendation. Since the budget deficits, slowing economic condition and other economic issues, so the authorities were not in a condition to maintain the level of expenditure on the projects associated with social welfare. The policy of the government to handle migration is also crucial as this would also compensate the consequence of the ageing population in the country and the economy. (Marketline, 2012a, p. 4). Technological UK claims to have the largest aerospace station after US. It is also among the top manufacturing sectors in the world, which supports about 276,000 jobs in the country. The government of UK has also stated that the level of knowledge in science and innovation has increased in the country by 1.9 percent in the year 2004, and it is expected to rise to 2.5 percent by 2014 (Marketline, 2012a, p. 4). Legal UK was ranked seventh in the World Bank’s indicator called Doing Business in the year 2012. It is also the 14th freest economy in the world. The country also has comprehensive planned labour laws and the government has compromised several labour policies when it joined the European Union (Marketline, 2012a, p. 4). Environmental UK also with the European Union has committed their individual targets under the Kyoto Protocol. These commitments include the reduction of the green house gas discharge by approximately 8 percent by 2012. UK has already cut down the emission rates by 12.5 percent, and is moving forward with the target of 22.0 percent reduction of greenhouse gas emission (Marketline, 2012a, p. 4). Effect of PESTLE Factors on Topps Tiles Plc The political factors directly do not affect the companies, but the policies and regulation framework which the government sets affect the industry in which the company is in. Topps Tiles Plc would not be directly affected, but the ceramic and flooring industry would be affected by the political environment (Kirca, Jayachandran, and Bearden, 2005, p. 24-27). Economic factors would affect directly because after the subprime crisis and housing bubble the economic condition of the real estate sector was in turmoil. This has also affected the flooring and tiles industry too. Apart from this due to rising level of unemployment, renovation works in houses also reduced due to low purchasing power of people (Marketline, 2012a, p. 4). The society gets affected through economic condition, so due to economic slowdown or recession, the demand for expensive and semi-expensive floorings and other related products have gone down. It is not only an economic factor which represents demand, but through decreasing demand it can be also analysed that the people in the country have some issues due to which their purchasing power has reduced UK is a technologically advanced country, so this depicts that the company also utilise technologically advanced machinery in the factories and in the showrooms to cater to the customers better. The legal framework would be consisting of the regulations, accounting standards and policies which the companies in the industry have to follow. It would also include the tax policies too. Since countries and companies all round the world are taking initiative for reducing greenhouse gases, so Topps Tiles Plc should also have to reduce carbon footprint in their factories and showrooms by reducing waste and utilising eco-friendly resources, renewable energy and producing eco-friendly products. Porter’s Five Force Analysis Porter’s five force model is used by the strategic consultants for conducting a quantitative analysis of the industry in which the company is conducting business. This tool is helpful in determining the competitive intensity and the attractiveness of the market. (Rosenhauer, 2008, p. 6-8; McGuigan, Moyer, and Harris, 2010, p. 342-344). The elements of porter’s five forces are discussed below: Threat from substitutes In the UK tiles and flooring market, the threat of substitutes is low because the customer might switch from retailers and go directly to the manufacturers for substantial savings. However, these products are bought on the basis of its quality, so customers have loyalty towards particular brands or retails (MarketLine, 2012c, p. 17). Suppliers’ power The manufacturers in this industry in UK have small to medium size holdings or operations. They are maintaining focuses on one type of products such as tiles, wood or stone flooring, etc. The power of the supplier is strong in this industry because in this industry branding is not important. Customers generally do not buy flooring tiles by checking the brand name (MarketLine, 2012c, p. 15). Buyers’ power The purchasing power of the buyer is lower in UK now because the customers have less financial strength that before due to the present economic condition and employment rate. Buyers are more interested to look out for economic deals than high price and high quality. So the demand has reduced considerable. In this perspective the retailers has to reduce cost to continue sale and maintain revenue, so the buyer’s position gets strengthened here due to the negligible cost of switching. The power of the buyer can be considered as moderate (MarketLine, 2012c, p. 14; Smith, 1988, p. 3-5).). Threat from new entrants The brand strength is look, so it is easy for new entrant to enter the market. However, the companies have a strong customer base are exceptions because a customer who has bought flooring tiles from Topps Tiles will again visit the same shop or same store. The recent economic conditions of the market in UK discourage the entrance of new players, but overall the threat is high (MarketLine, 2012c, p. 16). Rivalry Rivalry can be determined through the presence of competitors in the market. The market of UK is saturated with many competitors and their different products. There are many small to medium retails of tiles and flooring products in the market, and the degree of product diversity is also high, though the core product is similar and in case of flooring tiles much alterations cannot be found in different retail stores. So the degree of rivalry is also high in such cases (MarketLine, 2012c, p. 18). SWOT Analysis SWOT Analysis describes the internal strengths and weaknesses of the company and the external threats and opportunities. Strengths The strengths of Topps Tiles PLC are its commitment and ability to deliver value for money products and services to its customers. The company is also among the major players in the flooring, ceramic tiles and other products. Apart from this the in-store customer experiences also gives an edge to Topps Tiles from its competitors. Topps Tiles has a well established online interface though which customers can view and order products too. Though customers generally prefer visiting stores to select flooring tiles, but this a good initiative from the company’s side (Pahl & Richter, 2009, p. 7). Weaknesses Topps Tiles PLC’s major drawback was the loss that the company has to incur in the year 2011. The revenue of the company in the year 2010 was 182,000, which reduced to 175,525 in 2011. This also depicts that the sales has decreased considerably. Opportunity Marketers are projecting that there are hopes of improvement in the real estate sector by 6.6 percent till 2016. So it can be depicted that the demand for flooring and tiles would also increase gradually. Moreover, a fixed percent of demand for such products and services would remain as people would renovate their house and repair from time to time. Threats Future is uncertain and many unforeseen hurdles in form of competitors, economic crisis and other natural calamity might come up. So a company has to always take an assumption of these issues and plan. The economic slowdown and increasing rate of unemployment in UK has reduced the buying power of the customers. Though the condition is improving but the slow economy and the condition of the real estate industry pose threat for the tiles and flooring industry. Strategic Group Mapping The strategic group mapping is a tactical tool which assists in analysing the major players in the industry and understanding their business penetration levels. The major competitors of Topps Tiles plc are Norcros plc, Craven Dunnill Jackfield Ltd, Travis Perkins plc, and British Ceramic Tile. The Strategic Group Matrix is prepared on two drivers or factors, namely, products and price. The product range and price range of the major competitors of Topps Tiles plc are analysed. Based on the matrix it is understood that Topps Tiles plc have a wide range of products and the prices of the products are not low but reasonable to high. This may be because of the product quality or the target market it caters to. It has been noticed that none of the companies have low priced products. This reveals that the top players offer the best products in the industry. Stakeholder’s Analysis The stakeholders are the persons or entities who are interested in the proper functioning of the company and also in the profits generated by the organisation through sales of products and services. The stakeholders of the company are the employees, shareholders, customers, and the society at large. Every stakeholder have significant role to play, and everyone are affected from the profits and losses of the company differently. Mendelow’s Matrix is commonly used strategic tools which assist in identification and analysis of the stakeholders. In Mendelow’s Matrix there are four quadrants, which segregate the stakeholders on the basis of the power exerted, interest and their intensity. The Quadrant A signifies high interest and low power, Quadrant B signifies low interest and high power, Quadrant C signifies low interest and low power, and Quadrant D signifies high interest and low power. This means that the stakeholders who are in Quadrant A have high interest in the profitability of the company and high power, similarly those stakeholders having low interest have low power to control decisions in the company. In this case the Stakeholders of Topps Tiles PLC is its shareholders, customers, employees, and the society. The shareholders would be in Quadrant A, in Quadrant B would be the customers and the suppliers, Quadrant C would involve the employees and their families and Quadrant D would be the competitors and others (Hill, and Jones, 1992, p. 131-132; Clarkson, 1995, p. 92- 95). Risk Analysis The risks that Topps Tiles Plc are facing or may face would be evaluated in the risk analysis. The economic challenge due to economic slowdown of UK and it is affecting the business too. It is becoming difficult to balance the long term investments of the company in an uncertain economic situation. It has to be also ensured that the capital structure of the group is appropriate for funding the future requirements. Topps Tiles Plc has also suffered from losses in the last year, this means that its revenue has considerably decreased. This is surely the result of economic slowdown, but improvement in economic scenario is not expected so quickly, so maintaining high product standard and price would affect the sales of the company too. Conclusion The study aims at conducting a strategic marketing analysis of Topps Tiles PLC. A comprehensive evaluation has been done using the strategic management tools to understand the external environment of UK and the internal environment of the company. Moreover, the stakeholders of the company have also been identified for assessing the market position of Topps Tiles PLC from all facets. Flooring tiles industry is closely related to the real estate industry too. Since the real estate segment and the economic environment of UK do not present a positive image due to recession, so the effect of such on the company has also been evaluated (Hunt, and Arnett, 2004, p. 7-10). References Clarkson, M. B. E., 1995. A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance. Academy of Management Review, 20(1), pp. 92-117. Hill, C. W. L., and Jones, T. M., 1992. Stakeholder-agency Theory. Journal of Management Studies, 29(2), pp. 131-154. Hunt, S. D., and Arnett, D. B., 2004. Market Segmentation Strategy, Competitive Advantage, and Public Policy: Grounding Segmentation Strategy in Resource-Advantage Theory. Australasian Marketing Journal, 12(1), pp. 7-25. Kirca, A. H., Jayachandran, S., and Bearden, W. O., 2005. Market Orientation: A Meta-Analytic Review and Assessment of Its Antecedents and Impact on Performance. Journal of Marketing, 69(April), pp. 24–41. MarketLine, 2012a. United Kingdom In-Depth PESTLE Insights. Company Profile Series, pp. 1-78. MarketLine, 2012b. Topps Tiles Plc. Company Profile Series, pp. 1-17. MarketLine, 2012c. Furniture & Floor Coverings in the United Kingdom. MarketLine Industry Profile, pp. 1-17. McGuigan, J. R. R., Moyer, C., and Harris, F. H. D., 2010. Managerial Economics. 12th ed. Connecticut: Cengage Learning. Pahl, N. & Richter, A., 2009. SWOT Analysis- Idea, Methodology and a Practical Approach. Munich: GRIN Verlag. Rosenhauer, Sven. 2008. Profit is a wonderful Word. Norderstedt: GRIN Verlag. Smith, J. B., 1988. Buyer-Seller Relationships: Similarity, Relationship Management, and Quality. Psychology and Marketing, 15(1), pp. 3-21. The Financial Times Ltd, 2012. Topps Tiles PLC. [Online] Available at: < http://markets.ft.com/Research/Markets/Tearsheets/Business-profile?s=TPT:LSE> [Accessed 8 November 2012]. Topps Tiles, 2012. Annual Report and Financial Statements 2011. [Online] Available at: < http://online.hemscottir.com/ir/tpt/download/pdf/annual_report_2011.pdf> [Accessed 8 November 2012]. Read More