argos going global start 222

BLUE DIAMONDBLUE DIAMOND

ARGOSARGOSCOMPETITIVE ACTION PLANCOMPETITIVE ACTION PLAN

TEAMWORK

BLUE DIAMOND

JAMES

FUNSAM AKIN

PRESENTED BY

MAX

JAMESMANGLESH


Mission Objectives

ExternalAnalysis

InternalAnalysis

StrategicChoice

StrategyImplementation

CompetitiveAdvantage

The Strategic Management Process

Corporate LevelStrategy

Which Businessesto Enter?

• Vertical Integration• Diversification

• Strategic Alliances

Mode of Entry?


OUTLINEOUTLINE

PROPOSALPROPOSAL3.3. STRATEGIC CHOICESTRATEGIC CHOICE4.4. MARKETING VISIONMARKETING VISION RESEARCH AND ANALYSISRESEARCH AND ANALYSIS6.6. DEMOGRAPHICSDEMOGRAPHICS7.7. CULTURE AND CSR CULTURE AND CSR 8.8. FINACIAL ANALYSISFINACIAL ANALYSIS9.9. STAKEHOLDER ANALYSISSTAKEHOLDER ANALYSIS10.10. COST BENEFIT ANALYSISCOST BENEFIT ANALYSIS

PLANNINGPLANNING MODE OF ENTRY MODE OF ENTRY HRM AND TRAININGHRM AND TRAINING COST AND TIME SCALECOST AND TIME SCALE RECOMMENDATIONSRECOMMENDATIONS


PROPOSALPROPOSAL

Taking Argos to ChinaTaking Argos to China

Porter’s Single Diamond FrameworkPorter’s Single Diamond Framework


Gov’t

Chance

Rugman and Hodgetts, International Business 2003

Strategic FitStrategic FitThe Competitive Advantage MatrixThe Competitive Advantage Matrix


Strong

weak

weakFirm-specificadvantages strong

Countr

y-sp

ecific

adva

nta

ges

Souces: Adapted from Rugman and Hodgetts, International Business 2003

Cost Leadership Strategy – strong in CSAs but week in FSAs

Differentiation (uniqueness) – Any Strategy

Focus Strategy Focus Differentiation – Strong FSAs in marketing/customization

1

2

3

4

ARGOS

The Competitive Advantage MatrixThe Competitive Advantage Matrix

Firm-specific advantage (FSAs) :– Firm-specific advantage (FSAs) :– Strengths or benefits specific to a firm by Strengths or benefits specific to a firm by using personnel and technologyusing personnel and technology

Country-specific advantage (CSAs) :- Country-specific advantage (CSAs) :- Strengths or benefits specific to a country Strengths or benefits specific to a country that result from its competitive that result from its competitive environment, labor, gov’t policies, location environment, labor, gov’t policies, location and industry and industry



STRATEGYSTRATEGY

Short termShort term Medium termMedium term Long termLong term

Going Global.Going Global.Joint Venture in the global Joint Venture in the global environment – China with a 50 – environment – China with a 50 – 50 partnership plan.50 partnership plan.Delivering end-to-end solutions Delivering end-to-end solutions that give our customers that give our customers convenient ways to order, pay for convenient ways to order, pay for and obtain the goods we sell.and obtain the goods we sell.Aim to act responsibly and Aim to act responsibly and ethically towards all of the ethically towards all of the stakeholders, including the stakeholders, including the customers, colleagues, suppliers customers, colleagues, suppliers and business partners and the and business partners and the communities around the communities around the business.business.

Deliver sustainable returns for all its Deliver sustainable returns for all its stakeholders.stakeholders.Deliver growth in total shareholder Deliver growth in total shareholder return that at least matches the top return that at least matches the top quartile of comparable listed companies quartile of comparable listed companies over the medium to long-term.over the medium to long-term.Delivering sales and profit growth Delivering sales and profit growth throughout the group, supported by throughout the group, supported by investment programmes that give investment programmes that give returns in excess of the cost of capital.returns in excess of the cost of capital.Plan to grow dividends for shareholders Plan to grow dividends for shareholders broadly in line with earnings, subject to broadly in line with earnings, subject to the investment needs of the business the investment needs of the business and an acceptable level of dividend and an acceptable level of dividend cover.cover.Maintain an appropriate capital Maintain an appropriate capital structure, financing its operations structure, financing its operations through a combination of retained through a combination of retained profits, bank borrowings and property profits, bank borrowings and property leases.leases.

Sector-leading sales and profit Sector-leading sales and profit growth.growth.Leveraging our combined Leveraging our combined strengths to support our retail strengths to support our retail brands.brands.Developing world-class, low cost Developing world-class, low cost sourcing capabilities that enable sourcing capabilities that enable Argos to deliver even greater Argos to deliver even greater value to customers.value to customers.Consistent investment in Consistent investment in businesses with competitive businesses with competitive advantage will provide advantage will provide sustainable returns to sustainable returns to stakeholders.stakeholders.generate above normal profits generate above normal profits (expected and operational over (expected and operational over the long run)the long run)100% ownership 100% ownership

MarketPenetration

Product

Development Carlton’s Strategy

Market

Development Argos’ Strategy

Diversification

Product or Services:Increasing technical innovation

Present New

Market:Increasing

new buyers &

customers

Present

New

Market Product SelectionArgos’ Strategic Direction

[Source: Adapted from Exhibit 7.1: Strategy Development Directions (pg 341) Johnson, G, Scholes, K & Whittington, R (2007) Exploring Corporate Strategy. FT Prentice Hall]


Marketing VisionMarketing Vision

Leading retailing group that delivers long-Leading retailing group that delivers long-term, sector-leading sales and profit growth term, sector-leading sales and profit growth

Developing world-class, low cost sourcing Developing world-class, low cost sourcing capabilities that enable Argos to deliver even capabilities that enable Argos to deliver even greater value to customers.greater value to customers.

Delivering end-to-end solutions that give our Delivering end-to-end solutions that give our customers convenient ways to order pay for customers convenient ways to order pay for and obtain the goods we sell.and obtain the goods we sell.


RESEARCH - DEMOGRAPHICSRESEARCH - DEMOGRAPHICS

1,392,047 total £ 1,111,644,053

average £ 852.49 average $1,605.44

population (from page 4 of 4 chapter 4, 2005 figures) in BJ $2,200 Phase 1

Shanghai 13,363,000 assumed for all cities

Bei Jing 11,616,000 $2,000.00

Tianjin 9,208,000 factor 1.25

Qingdao 7,202,000

Total Phase 1 41,389,000

Phase 2 populations from wikipedia

Shanghai 13,363,000 1

Bei Jing 11,616,000 1

Tianjin 9,208,000 2

Qingdao 7,202,000 2

Harbin 9,563,000 3

Shijiazhuang 9,135,000 3

Shenyang 7,200,000 3

Nanjing 6,240,000 3 3000000

Kaifeng 4,800,000 ? £ 3,700.00

Suozou 6,073,000 3

Hangzou 6,400,000 3 £ 11,100,000,000

Fuzhou 6,600,000 3

Guangzhou 7,607,200 skip

Chengdu 11,000,000 skip

Chongqing 4,196,000 skip 5.3E+11 total retail turnover of china

Wuhan 9,700,000 ?

Total Phase 2 129,903,200 0.1%

£ 530,000,000

UK average disposable income per household £ 12,800.00 UK average household size 2.3 average disposable income per person £ 5,565.22 5%

67%of above £ 3,710.15

ARGOS PERFORMANCE IN UK PLUS IRELANDArgos turnover £ 5,548,000,000

population served 65,000,000 UK plus Ireland

turnover per head £ 85.35

profit £ 376,000,000

profit 6.8%

average disposable income per person £ 5,560

share average person spned of their disposable income 1.5%

number of shops 556

number of shop per head of population 116,906

turnover per shop £ 9,978,417

Argos in China

Phase 1

980,000 people

£ 3,700.00 disposable income each

£ 3,626,000,000

of available disposable income

1.5%percentage of disposable income the average UK

citizen spends in argos

Argos in ChinaPhase 2

3,000,000 people


£ 11,100,000,000 of available disposable income

1.5%percentage of disposable income the average UK citizen spends in

argos

Phase 2 (without phase 1)

2,020,000 people


£ 7,474,000,000 of available disposable income

1.5%percentage of disposable income the average UK citizen spends in

argos

6.8%incorporate rising profit into

years

start with 0%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

£- £1,000.00 £2,000.00 £3,000.00 £4,000.00 £5,000.00 £6,000.00 £7,000.00 £8,000.00 £9,000.00 £10,000.00

annual disposable income per person

Nu

mb

er

of

Pe

rso

ns

ex

ce

ed

ing

dis

po

sa

ble

in

co

me

(th

ou

sa

nd

s)

Cities, phase 1

Cities, phase 2

threshhold for disposable income

Phase 2:Number of people with disposable income of £3700 or higher: 3 million

Phase 1:Number of people with disposable income of £3700 or higher: 980

Argos Geert-Hofstede Dimensions


CULTURE CULTURE


CULTURE ANALYSISCULTURE ANALYSIS• Hofstede (See Below)Hofstede (See Below)• CountryCountry

Many different regions with own culture, beliefs and valuesMany different regions with own culture, beliefs and values Like a continent similar to the EULike a continent similar to the EU

• Language Language Speaking some Chinese builds trust Speaking some Chinese builds trust China _ MandarineChina _ Mandarine Hong Kong _ Cantonese Hong Kong _ Cantonese

• Values Values Do not like to loose faceDo not like to loose face Do not like western foodDo not like western food Family orientatedFamily orientated

• Norms Norms Median age 2005 = 34Median age 2005 = 34 Larger number of single males – how to caterLarger number of single males – how to cater Owning you own homeOwning you own home No culture of DIYNo culture of DIY Marriage rates increasingMarriage rates increasing Religion not discriminated againstReligion not discriminated against

• Chinese traditional religion 232.6mChinese traditional religion 232.6m• Buddhism 111mBuddhism 111m

• Beliefs Beliefs Cash deals plastic transactions are not trusted, bank fraudCash deals plastic transactions are not trusted, bank fraud Savings not credit culture – high returns for savings. Savings not credit culture – high returns for savings.

Corporate social ResponsibilityCorporate social Responsibility

Interests and impact of policies onInterests and impact of policies on SocietySociety CustomersCustomers, , EmployeesEmployees, , CommunitiesCommunities And other stakeholders,And other stakeholders,

Social responsibility is subjective and ambiguousSocial responsibility is subjective and ambiguousbecause it requires human judgementbecause it requires human judgement


http://en.wikipedia.org/wiki/Society

http://en.wikipedia.org/wiki/Customers

http://en.wikipedia.org/wiki/Employees

http://en.wikipedia.org/wiki/Community

Business Case For CSRBusiness Case For CSR

• Human resourcesHuman resources: recruitment retention, pay and : recruitment retention, pay and fundraisingfundraising

• Risk management Risk management : reputation that takes years to : reputation that takes years to buildbuild

• Brand differentiationBrand differentiation: unique selling proposition: unique selling proposition• License to operateLicense to operate: avoidance of regulation and : avoidance of regulation and

interference i.e. Health Safetyinterference i.e. Health Safety



4CR FRAMEWORK


STAKEHOLDER MANAGEMENT AND SOCIAL

CAPITAL REPUTATION

SHAREHOLDER VALUE

SOCIAL INNOVATION, P

ERFOMANCE STABILI

TY

ECO-EFFICIENCY – FA

IR GLOBALIZ

ATIONRISK MANAGEMENT

REGULATION AND COMPETITIVE POLICIES

SOCIAL ACCOUNTABILI

TY

ETHICS

INVESTOR DEMAND SRI

PHILANTHROPY CORPORATE CITIZENSHIP

VOLUNTARY REGULATION

COMPANY LAW AND

COMPULSORY REGULATION

SUSTAINABLE DEVELOPMENT

THE 4CR CORPORATE RESPONSIBILITIES MAP

CORPORATE RESPONSIBILITY DRIVING CORPORATE RESPONSIBILITY DRIVING FORCESFORCES


Investor Demand

GovernmentPressure

ConsumerDemand Public

Pressure


SAFESAFESustainability:Sustainability: Strong retail brands with large customer bases Strong retail brands with large customer bases

Purchasing, sourcing and supply chain scale Purchasing, sourcing and supply chain scale Choice and value-led product offering Choice and value-led product offering Shared infrastructure and logistics expertise Shared infrastructure and logistics expertise Remarkable stability in inflation and growth rate. sustained economic Remarkable stability in inflation and growth rate. sustained economic development over the last 25 yearsdevelopment over the last 25 years

Acceptability:Acceptability: Acceptable to all the stakeholders Ethical principles i.e. Equality,Acceptable to all the stakeholders Ethical principles i.e. Equality,Corporate Social Responsibility i.e. Investment in environmental community Corporate Social Responsibility i.e. Investment in environmental community projects projects Employment OpportunitiesEmployment OpportunitiesRaising standards of livingRaising standards of living

Feasibility:Feasibility: Population size i.e. target populationPopulation size i.e. target populationDisposable IncomeDisposable IncomeAvailable Infrastructure i.e. building, road network, other resources.Available Infrastructure i.e. building, road network, other resources.Governmental policies Governmental policies –– e.g. taxation etc. e.g. taxation etc.Rules and regulations Rules and regulations –– employment & company laws etc. employment & company laws etc.Customer profileCustomer profile

Expectations:Expectations: Business success - Profit & Growth Business success - Profit & Growth –– market potential market potential –– 6.8% 6.8% Profit return on investment Profit return on investment –– shareholders shareholders employment for local communities employment for local communities Government Government –– economic growth economic growth Good working conditions and employee Good working conditions and employee High quality products and services for customersHigh quality products and services for customers


Customer PerspectiveGoals Measures Value Value for money products

Increased customer segments Choice Wide range of new and proprietary products Quality Products defects and return Responsive supply On-time delivery

Argos - The Balanced Scorecard


Innovation and Learning Perspective

Goals Measures

Technology capability Operating system to support

performance management,

organisational learning and

knowledge management

HRM Human capital readiness

to support business growth

and strategy




Internal Business PerspectiveGoals Measures

Technology Capability Operations management for Marketing, logistic and Just in time management and sales Total Quality Management Customer satisfaction

Meeting response time targets Operating efficiency Products availability, forecasts and selection Profitable margins


Financial PerspectiveGoals Measures

Healthy Cash Flow Suceed Yearly sales growth and operating income

ProsperYear on year increased market

share and return on equity



StakeholdersStakeholders

Argos GroupArgos Group Chinese consumersChinese consumers Chinese GovernmentChinese Government SuppilersSuppilers Local Authority – PlanningLocal Authority – Planning Local Community/Groups – Social, Local Community/Groups – Social,

Cultural & Environmental considerationsCultural & Environmental considerations


STAKEHOLDER ANALYSIS


INTERNATIONAL HRMINTERNATIONAL HRM

• Local labour laws Local labour laws • UnionsUnions• Employee rights and insuranceEmployee rights and insurance• Multicultural trainingMulticultural training


HRM Functions Socio-economic Institutional Cultural

1) Recruitment and selection

•External & Internal Labour market •Availability of skilled workforce & competent managers

•Pressure to recruit locals

•Women’s position in society – managerial position

2) Recruitment agency

Availability & quality of services

Legal regulations – go through China government agencies

Unethical practice – to “steal” employees from other companies

3) HR Development Employee training

b) Management Development

Access to skilled people – numeric & literacy skills

Access to managerial competence

Local Education system – educational standards

Supply of relevant management programme Tax incentives or financial support.

•Values and status attached to training & development.•Attitudes to knowledge & learning•Style of learning – Structured vs. open ended learning situations and activities


HRM Functions Socio-economic Institutional Cultural

4) Compensation & Incentives

Individual Performance Appraisal

Wages

Performance related pay – sensitive to income inequalitiesLocal designs and levels of wages system

Strengths and attitudes of unions

Governing rules minimum and maximum wage levels in China

•Women’s position in society – managerial position

5) Work SystemOrganisation of labour & work systems

Labour market - local mix of skills on the use of teamwork – competencies & functional flexibility

Safety in workplace and regulations –working hours National norms - Performing tasks in groups

High degree of collectivism in China – easier to implement teamwork

6) Labour Relations Social status/class - Employee influence & participation

No labour regulations – employees as board member

Power distance in society - high in China- more difficult to introduce - union influence

ImplementationImplementationArgos - International Assignments Argos - International Assignments


Aims:to improve co-ordination of international business activities for managerial, commercial, technical and HRM functions.Project Team consist of• Project Leader• Human Resource - HR Training and Development Programmes • Finance - control and audit business accounts and finance • Marketing - supply chain management, marketing strategy and customer relationship management• ICT – technical and communication support and training• Competent managers • Managers who involved with Argos Project in Indial – expertise and management support.


•Short term International Assignments (1-2 years) to minimise •Fear of losing influence at corporate centre•Managers find reintegration difficult on return•Immigration/employment laws/ HC restrictions(adapted from Barham and Devine 1990)

BARHAM, K & HEIMER, C (1990) ABB – The dancing global giant: creating the globally connected corporation in (Ed) GOODERHAM, PN & NORDHAUNG, O (2003) International management cross boundary challenges. Blackwell Publishing, England.


•Comprehensive package includes •social cultural and logistic support, •cross cultural, diversity and language trainings, •attractive compensation and benefit package •preparing and helping employee and their family

to make healthy adjustment •success on cross cultural adaptation in new

environment. (adapted from Black & Gregersen, 1999) BLACK, J S & GREGERSEN, H B (1999) The right way to manage expats. Harvard

Business Review, 77(2): 52-60.


BLACK, J S & GREGERSEN, H B (1999) The right way to manage expats. Harvard Business Review, 77(2):

52-60.Comprehensive package includes •cross cultural, diversity and language trainings, •social cultural and logistic support, •attractive compensation and benefit package •preparing and helping employee and their family to make •healthy adjustment •success on cross cultural adaptation in new environment. (adapted from Black & Gregersen, 1999) BLACK, J S & GREGERSEN, H B (1999) The right way to manage expats. Harvard Business Review, 77(2): 52-60.


COST AND TIME SCALE COST AND TIME SCALE

Cost of Joint Venture – est. £30 Cost of Joint Venture – est. £30 millionmillion

Time scale: 2 to 6 monthsTime scale: 2 to 6 months Fully operational – 6 monthsFully operational – 6 months


RECOMMENDATIONRECOMMENDATION


ReferencesReferences

1.1. BEARDSHAW, J. et al. (2001) Economics: A student’s guide. BEARDSHAW, J. et al. (2001) Economics: A student’s guide. 55thth ed. Financial Times Prentice Hall. ed. Financial Times Prentice Hall.

2.2. JOHNSON, G. et al. (2005) Exploring corporate strategy. 7JOHNSON, G. et al. (2005) Exploring corporate strategy. 7thth ed. Financial Times Prentice Halled. Financial Times Prentice Hall

3.3. NEEDLE, D. (2004) Business in context, 4NEEDLE, D. (2004) Business in context, 4thth ed. Thompson. ed. Thompson.4.4. PORTER, M.E. (1980) Competitive strategy: techniques for PORTER, M.E. (1980) Competitive strategy: techniques for

analysing industries and competitors analysing industries and competitors InIn: JOHNSON, G., et al. : JOHNSON, G., et al. (2005) (2005) Exploring corporate strategyExploring corporate strategy. 7. 7thth ed. Financial Times ed. Financial Times Prentice Hall.Prentice Hall.

5.5. WORTHING, I. et al. (2003) The business environment. 4WORTHING, I. et al. (2003) The business environment. 4thth ed. Financial Times Prentice Hall.ed. Financial Times Prentice Hall.


THANK YOU FOR LISTENING THANK YOU FOR LISTENING

TEAMWORK

BLUE DIAMOND

JAMES FUNSAM AKIN

TO