Corporate Strategy Model of the Carphone Warehouse Group Plc - Assignment Example

Carphone Warehouse Group plc, Model – Corporate Strategy assignment Table of Contents Q1. Significant strategic developments in the growth of Carphone Warehouse 3 Q2. Elements of the corporate strategy – competition and innovation 5 Q3. Entrepreneurial skills for the business development 7 Q4. Carphone Warehouse – proposed corporate strategy for enhancement of performance 9 Q1. Significant strategic developments in the growth of Carphone Warehouse Carphone Warehouse was founded in 1989 in UK as a mobile phone retailer. As an effort to develop its activities the company expanded its area of interests and created in 1994 the Carphone Warehouse Insurance, a strategic movement that could provide to the firm’s customers the necessary protection to any damage related with their mobile phones. As a result of the above expansion of the Group to the Insurance area, a series of specific provisions of replacement phones could be offered to the firm’s customers. 1996 was the year that the company’s activities started to expand outside of UK through the establishment of brands in Paris and Dublin. The company’s performance in the internal market permitted such a strategic option and the entrance in foreign markets was considered as necessary in order for the company to gain a competitive advantage towards its local competitors. The above attempt presented soon positive results and the company decided next year (1997) to proceed to the entrance in the Spanish markets by establishing a brand in Madrid. The above decisions of entrance in foreign markets through the establishment of brands can be considered as the most important strategic initiatives of the firm’s management team. This assumption is justified by the following development of the company which was characterized by constant and intensive growth both in the local and the foreign markets. However, the entrance in the foreign markets was not limited to the establishment of brands. In 1998, the company acquires GEAB Teleshop, a Swedish mobile phone retailer, as well as Comprotoel Group, a Dutch competitor. The following year, 1999, the company expands its interests in France acquiring FNAC Telecom, a major France competitor. This strategic decision, offered to the company the control of the French market in which now Carphone Warehouse was the leading mobile phone retailer (through the stores of FNAC Telecom). A similar case involved in Portugal, when the company acquired Polirent, an important local mobile phone retailer. These efforts for expansion continued in the Spanish, the German and the Dutch markets through the acquisitions of major foreign competitors that were operating in the above markets. Moreover, the company ensured its presence in the British market acquiring Cellcom, a company operating in the mobile industry and specifically in the area of billing, customer call and messaging services. This acquisition was not only a reason for increase of the company’s share in its local market but also a point of expansion of the existed strategic planning by entering the area of Facilities Management. The years that followed, were characterized by efforts to expand even more the existed market share both in the local and the foreign markets. Most significant examples of this corporate strategy were the acquisition of CMC in France in 2001, of Hutchison Telecommunications GmbH (Germany) in 2003 and of Xtra and NTel (in Spain and Switzerland). Moreover, the efforts for expansion of the firm’s retail strategy continued intensively and the company proceeded in November 2002 to the acquisition of Opal Telecom PLC, an alternative network operator, an acquisition that followed by the expansion of the company’s operational activities and more specifically by its entrance in the fixed line telecoms service (the agreement with Sainsbury’s was relevant with this corporate decision). The entrance of the company in the area of fixed line telecoms services continued by the acquisition of Onetel and Tele2 (British companies), leading competitors in the relevant area. The primary business market, this of the mobile services, was subsequently developed as the company decided to launch Mobile world offering its customers the option to make cheap international calls from their mobiles. The above strategic decisions prove that the company has successfully faced the challenges set by the strong competition that characterizes its area of activities. Moreover, in accordance with the business initiatives presented above, the company’s main strategic developments were the entrance in the foreign markets (a strategic decision that proved a profitable business option) as well as the expansion of the existed retail strategy as was expressed through the entrance in the area of fixed line services. The acquisition of competitors (both locally and internationally) has been proved as the major tool for the achievement of the above targets. With the above strategic decisions, the company managed not only to gain the control of its local market but also to increase its international presence to significant levels obtaining the share of its competitors to a series of markets of major importance (like the French and the German one). Q2. Elements of the corporate strategy – competition and innovation The company’s strategy is based on a series of specific principles among which are the priority of the customer’s interests and support, the engagement in the promises set by the firm’s campaigns and the maintenance of a high level of cooperation between the staff and the clients. Furthermore, the company has set a few targets that have to be pursued in all the corporation’s activities, as the increase of its presence in the market, the maximization of the customer lifetime value and the increase in the business-to-business fixed line operations. The main tools for the achievement of these aims – as included in the company’s relevant statement, [1] - are the investment in new store openings, the development of additional sales channels and the increase to the level of services provided to the customers. In the above context, the statement of company’s Chief Executive on 5th of December of 2005 that ‘one of the most important things, particularly in retail or a customer-facing business, is to respect the competition and to be paranoid’ has to be explained on the basis of the company’s efforts and targets both in a short term but mostly in a long term basis. The most usual tool for the strategic analysis of a company’s performance, the SWOT analysis, can be used here in order to complete the above task. The issues that are to be examined are the position of the company towards its competitors and its general behaviour in the market (according to the above mentioned statement). Regarding the above issues and using the SWOT analysis, the strengths of the business can be mainly located in its financial performance and mainly in its extended presence both in the local and in the European markets. As of its weaknesses, these cannot be precisely identified and it could be analogically stated that the company faces the high financial and competitive pressures that every firm in the current commercial conditions is facing. On the other hand, the company has the opportunity to increase its control in the local market through the extension of its retail strategy to the area of the fixed line services (as the level of development of its share in the local mobile services market is really impressive). One the other hand, the company should take into account the fact that although under the current conditions its position in the relevant market can be considered as secure, the threat of new entrants is present in every market area and the efforts for improvement of the customer support and the general services provided to the clients should not pause even given the current rate of the firm’s growth. The use of Porter’s model which refers to the existence of a series of forces that can influence a company’s performance can also be used in the above context in order to analyze the position and the role of the company’s competitors. However, as already stated, the firm has been positioned ahead of its competitors and the main target of the corporate strategy should be the retention of the current position (at least) in the market. The statement of the company’s Chief Executive should be therefore explicated in the above terms and be connected with all the company’s efforts to retain a competitive advantage towards its competitors and to proceed to any initiative that may be necessary for the retention of the current position in the market. Figure 1 - Porter’s Five Forces of Industry Competition (Porter et al., 1985) Threat of New Entrants Bargaining Power of Suppliers The Industry: Jockeying for position among Rivals Bargaining Power of Customers Threat of Substitute Products or Services Q3. Entrepreneurial skills for the business development Carphone Warehouse is a firm operating in the services industry. This has as a result the continuous contact with the customer and the handling a series of issues related with his support on a daily basis. In this context, the particular entrepreneurial skills that can be considered as necessary from a first view are the high level of communication and negotiating abilities. More specifically, the entrepreneur who is interested to invest to a business of similar type should be able to understand the customers’ needs regarding the specific services area, to analyze these needs from a logical and continuous manner and to arrive to effective solutions regarding their satisfaction (Gosman et al., 2002, Burke et al., 1998). On the other hand, the above entrepreneur has to be sensitive towards the demands of the clients examining in any case carefully any request and try to adapt it to the services offered by the company in order both the customer and the firm to be equally protected as of their interests (Claycomb et al., 2001). It has to be noticed here that the skills required by an entrepreneur in the current market area are not limited to the human related problems. Moreover, the most significant skills that are considered as necessary regarding the specific market area (as of every commercial sector) are connected with the ability to identify the trends of the market and to locate the chances for growth but also the risks involved in potential business decisions. In this context, every necessary corporate initiative has to be analyzed as of its relevance as well as of its possible level of success regarding a specific issue. In fact, because the entrepreneur is the person who holds the responsibility (to a final point) for every action taking place in the business area, he is usually put under significant pressure when having to interpret the signs of a specific market area and to proceed on decisions regarding an investment plan or a radical change to the organizational structure/ operation. For this reason, his ability to predict the possible unexpected situations or the negative effects that will result from a business initiative can also be considered as skills of significant importance. On the other hand, the entrepreneur has to be proactive and determined to proceed to changes when these are considered as necessary and he should not be opposed by possible negative outcomes of his actions particularly when it is obvious that the positive effects of a specific strategy will be at higher level from the negative ones (Meulenberg et al., 2004). It should be noticed however, that in practice such an entrepreneurial behaviour could be risky for the business, when the entrepreneur tends to be influenced easily from the changes taking place in the commercial environment and proceed to important business decisions without a thorough consideration of the situation (Vreneburg et al., 1999). In order for an entrepreneur to successfully use all the above skills he should also be able to control the business environment not only physically but mainly at an operational level meaning that he should have a thorough knowledge of all issues involved in the firm’s operation even in a general context (Sommer, 1992, Stoner, 1987). When this control does not exist, or it is limited then the entrepreneur does not have a complete view of the business activities and therefore of its potentials to proceed to specific changes or investment opportunities. Under these terms, every decision made will be destined to a failure. It should also be noticed that the application of any possible entrepreneurial skill cannot be completed without the existence of an appropriate communication level between the entrepreneur and the people involved in the firm’s operation (Wiklund, 1999). The high level of internal communication and cooperation is considered as a necessary prerequisite of any successful business plan. Q4. Carphone Warehouse – proposed corporate strategy for enhancement of performance The changes that currently occur in the British market regarding the services provided in the mobile phones industry impose a series of changes to the firm’s strategy in order to retain its position in the market and to be prepared for any possible threat from its competitors (Menezes-Filho, 2005). In this context, current corporate strategy should be thoroughly reexamined in order for any possible weaknesses to be identified (Bartov et al., 2002)and for the relevant measures to be taken in order to prevent a potential decrease in the firm’s financial performance. At a first level, the evaluation of the current strategy, should begin with the estimation of its financial performance as this task can be completed through the application of a series of tests and the calculation of certain financial ratios (in the financial analysis field) (Biasiotto et al., 2001, Bergman et al., 2004). This task will produce numerical data that will show any possible weakness of the firm’s strategy. However, because the results involve only in figures the location of the problem cannot be achieved fully without applying also other methods (Julien et al., 1994, Orser et al., 2000) related with the evaluation of the business performance (strategic analysis field). For this reason the application of specific models that are used as frameworks of strategic analysis (Deshields et al., 2005, Hall et al., 2000), is necessary in order to produce complete results regarding the specific issue. The Porter’s five forces model as presented above as well as the SWOT analysis could be possible models applying in the specific occasion. However, because the results produced with the above models also present a rather general view, the use of other models could be helpful in order to locate the challenges that the specific firm has to face in its industry environment (or the ones it will face in the near future, to the most reliable level that such an assumption can be predicted in advance). Figure 2 – Performance Reference Model [2] In order for the company to formulate a strategy that should be used under the current pressures of the financial market, the performance reference model (based on the Balanced Scorecard, tool of strategic analysis). In the context of the above model, the process ‘begins with strategic analysis to determine what must be done, and with what priority; business activities are identified, based on strategic goals and business drivers from the vision and mission of each organization; a business case is written to document the AS-IS assessment and justify improvements and then the transformation to the TO-BE architecture is launched, which results in measurable business outcomes including client/customer satisfaction data’ [2]. Finally, ‘performance measurements are reviewed and this provides feedback into the subsequent strategic plans’ [2]. The application of the above model can lead to specific results regarding the potential challenges of the specific industrial environment. In order however for such a ‘theoretical model’ to be applied the data and the facts involved should be available and ready to be used. For this reason a detailed evaluation of the firm’s financial and non-financial situation (as can be achieved using the above mentioned tools of financial and strategic analysis) is considered as necessary. Furthermore, the estimation of the industry’s trends through the application of specific econometric models could help to the produce of a more complete report regarding the firm’s current internal and external operational conditions and in this context a credible future strategy should be formulated and proposed. References Bartov, E., Fairfield, P. M., Hirst, D. E., Iannaconi, T. E., Maines, L. A., Mallett, R., Schrand, C. M., Skinner, D. J., Vincent, L. (2002). Recommendations on Disclosure of Nonfinancial Performance Measures. Accounting Horizons, 16(4): 353-342 Biasiotto, M., Hernardez, T. (2001). Retail Location Decision-Making and Store Portfolio Management. Canadian Journal of Regional Science, 24(3): 399-414 Bergman, T. J., De Meuse, K. P., Roraff, C. E., Vanderheiden, P. 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Journal of Small Business Management, 25: 33-37 Vredenburg, H., Westley, F. (1999). Sustainable Development Leadership in Three Conexts: Managing for Global Competitiveness. Journal of Business Administration and Policy Analysis: 239-252 Wiklund, J. (1999). The Sustainability of the Entrepreneurial Orientation-Performance Relationship. Entrepreneurship: Theory and Practice, 24(1): 37-47 http://www.cpwplc.com/ [1] http://www.balancedscorecard.org/bscit/prm.html [2] Read More