Table of Contents
Introduction to the company.
Key issues of the company.
Clarification of Aims and Purpose.
Clarification of theoretical propositions.
Porter five forces model
The report highlights the trends in profits and sales of Debenhams within the United Kingdom these days. The report will include the essential factors that include the factors and aspects that cause harm to the company in expansion. The main objective of this report will be based on the explanation of issues faced by the concern in the market. Hence, for this report various business management models will be used for the critical analysis of the market trends that are affecting the sales and profits of the company. The report will highlight the insights using porter's five forces model to know the contribution of suppliers, buyers, competitors, substitutes and new entrants in the market. The conclusion reached that the company has to develop its value to reach the customer base and expand its market.
Debenhams is the British multinational retailing public limited company that serves its products through departmental stores of the United Kingdom, the Republic of Ireland and Denmark with its franchise in other countries at large scale. The company was founded in 1778 as Flint & Clark, operated this company. In 1998 Debenhams regained its independence when it was “demerged” from the Burton Group, which subsequently changed its name to Arcadia Group plc. The company was founded with a single store in London in the eighteenth century and has grown up to 178 locations across other countries. The company serves in a wide range of selling furniture, clothing, accessories, gifts, cosmetics, electricals, shoes and household items. The Group trades from department stores and small store formats. Brands include Designers and Debenhams, including third-party brands.
The revenue generated by the company is € 2277.0 million. The stores are 161 in number that is operated through various countries with approximately 11 million square feet of trading space and around 27,000 employees. The Debenhams brand has its portfolio in 56 stores operating under the license in 19 other countries. These include Kuwait, Libya, Malaysia, Bahrain, Gibraltar, Jordan, Indonesia, Iceland, Iran, Malta, and Malaysia. Debenhams is a company that is registered and trades its shares on the London Stock Exchange (LSE). The company's key people are the Chairman: John D. Lovering, CEO: Rob Templeman and Deputy CEO and Director: Michael Sharp. An organization structure of the company determines task allocation, reporting lines, and formal coordination mechanisms and interaction patterns. As a retail organization, Debenhams emphasizes its structure in response to market and environmental forces by identifying and developing new talents to suit what's happening in the market and the retail and business environment in general.
After the expansion of markets at a larger scale, the company has faced many issues. These issues have arisen because of rising trends, too many stores, and too many sales, debts, and costs. The first issue that they faced was lagging fashion trends. Fashion is cyclical, but the new trend was beginning that turned out to be a game-changer. In the year 2006, Laith Kalif said that with the launching of the iPhone, the sales of Debenhams got floated. This was the key element in the transformation of the way people shop for goods, helping the rush to online shopping with the extra ease and functionality of the application. This is the only brand which is seen failing to see the future. Also, almost a third of the departmental stores in Wales and England have disappeared. They have stopped converting for other types of use, split into smaller units or even demolished as the sector adapts to this fundamental structural change. With the shift to online grew and became firmly established to change. Although not only the retail chain failed to predict but the lack of response to the unfolding trends eventually affected Debenhams.
Moreover, the management failed to maintain the historic brand itself. Ultimately they failed to establish a clear brand proposition for its customers. Debenhams stucked faster to its expansion plans that they were unaware of. They got unsuccessful in managing the customers through eye-catching promotions. The third issue that they faced was with debt and costs. The physical expansion bought with them the soaring costs that they had to incur during expansion. All the costs are rising while footfall through the shops and profit margins were falling. Debenhams is a tale of woe from start to finish. The financial reports of Debenhams interrogate, investigates and disentangle the individual. In the reports, it has been clarified that in the face of poor wage growth and seismic shifts in the way people shop, Debenhams was unable to invest and adapt as it needed to (Axford and Axford, 2014). The short-term thinking, a huge amount of borrowing and lack of investment allowed the financers to make bumper profits. This was particularly ill-equipped for the company to tackle a situation like this. In this way, the large fixed costs were seriously hurt and the ability of the company to fight with Amazon and online competitors was threatened. Lack of investment in its stores over several years has left its oversized estate looking tired, while its range of clothes is seen as functional rather than fashionable.
The report aims to critically evaluate the issues faced by Debenhams due to which the organization is not able to achieve the profits levels as it has experienced previously. Gradually the productivity of the organization started to decline as the demand for their product reduces due to a reduction in customer purchases. To meet our market demands the entity has to focus on the latest trends that the customers demand. Also, some of the stores should be shut by the company to manage the employees and sales. As the issues have been discussed above the company should focus on debts snd costs, recent trends and too many sales along with too many stores (Eder and Asset T., 2018).
The level of competition in the retail industry is very high. However, the competition has created the problem, more and more organizations are diversifying into the field and increasing the number of competitors in the market. The analyze the macro environment PESTEL tool is used to analyze the position of the company. The PESTEL analysis provides insights related to politics, economics, technological aspects, environmental compliances and rules, and regulations that Debenhams has faced in its environment. These factors put their direct impact on the sales and market of the brand. This can impact competitive advantage as well as Porter's five forces that shape the strategy and competition level. They can influence the profitability levels and the competition of firms over the consumer service industry.
The operating challenges are known by detailing PESTEL analysis that has a great impact on the prevalence of other competitive forces other than the prevailing macro environment. As an example, a company has been earning high profits with strong growth but won't be suitable for other companies in any terms from PESTLE analysis.
Political factors play an important role in defining the factors that can impact Debenhams in long term success in a particular country or marketplace. Debenhams is working in Retail in many countries and depicts itself to diverse kinds of the political atmosphere and party-political structure dangers (Giannoulis, Petit and Zdravkovic, 2017). To attain achievement in such an active Retail industry across numerous countries is to spread the methodical dangers of the political environment. Debenhams Plc can carefully examine the subsequent influences before incoming or capitalizing in a certain marketplace :
There are some factors related to the economic environment like foreign exchange systems, savings rate, an inflation rate that determine the overall percentage of demand and investment in the economy. While there are other factors such as competitive advantage to the firm that impacts its growth and expansion. Debenhams can use the country's economic factors such as growth rate, inflation & industry's economic indicators that affect forecasting about the organization (Shetty, Renukappa, Suresh and Algahtani, 2019).
Type of economic system in countries of operation what type of economic system there is and how stable it is. The interference of the government system in the free market and customer-related services. The exchange rates and stability of the host country in terms of economic systems in the country. The efficiency of the markets in financial terms helps the company to make decisions either to expand or concise in the local markets. It also involves the quality of infrastructure to maintain the performance standards. The advantages in com[arison with the host as well as the consumer service sector are to be known by the company for its expansion. The economy is also different in terms of the workforce in the retail sector. Education level in the economy. The educational status concerning productivity and labor cost has a greater influence on economic systems. The interest rate, economic growth rate, inflation rate, and discretionary income and unemployment rate also affects the economy (Jameel and Hayee 2017).
The impacts and culture of the various countries in which they have opened their delivery points affect the growth and business of the company. Here, in the social factors attitudes and beliefs play an important role in designing how the market will be understood by the customers.The social factors like demographics of respective countries, the skill level of the population, class structure, power and hierarchy in the society. Gender and conventions have greater influence that the company has to consider while entering and expanding their valuable products. Also, leisure interests and attitudes are the determinants that decide the company's success or failure.
Technology is the factor that is helping various countries to grow and expand at a faster pace. Over the years, it has transformed so farand never given the chance to someone to cope with the changes. The technological factors that will contribute to the company's growth are:
Environmental factors that impact the company are:
This was the lagging point od Debenhams that they did not analyze the environment. This should be the first point which the company has to consider before entering the market. Environmental factors like weather, recycling of the products, environmental regulations, attitudes towards ecological products in the country, waste management and pollution regulations for retail markets.
As the company has spread over in many countries, the legal frameworks protect the property rights of an organization. The firm should thus keep the competitive edge in mind before expanding in different countries. The legal factor is like Copyrights, patents, data protection, employment law, anti-trust law, discrimination law, consumer protection, and e-commerce.
The competition of industry is analyzed through porter's five forces model.
The threat of new entrants: the United Kingdom is the country where sales are disrupted continuously with the emergence of technology and innovations. However, the major competitors like Marks and Spencer, John Lewis are the new market players that had made it difficult for Debenhams to expand their market. Technological advancements are there because the customers seek products that suit their lifestyle and puts pressure on value propositions, pricing strategies and lowering costs. Debenhams can use innovative products and services to get its dynamic place in the market. This will help the company in sustaining the position with changing trends (Levine, 2014).
The threat of substitutes: There is always a threat to the company when the customer finds the same product at the minimum range and improved quality in the market. Moreover, the rapid changes in online services and eCommerce have made competition high in the market. It has stripped off retailers and marked the presence of online service providers.
The threat of rivalry: It is the fact that price competition does not have long term benefits for the organization. Debenham can grow their market by building sustainable differentiation with unique services.
The threat of buyers: In these types of markets, buyers' demand is low in such markets. Also, the customers are influenced by the services they are offered. Hence, the bargaining power of buyers concerning Debenhams is higher and their ability to seek demands in also high.
The threat of supplier: Debenham can improve customer loyalty by earning name and fame in the market. Moreover, now there is a trend of vertical diversification by retailers (Luo, Huang, and Lu, 2016).
Product innovation: The company has been recognized in maintaining a successful track of records in developing new products.
Excellent performance in new markets: The brand has built its expertise in having market success and entering into new markets. This has helped in earning more profits and diversifying economic risks in the market that they operate in.
Good profit-making on the investments: As the brand is serving in diversified fields they are successful in earning good sums of profit on capital investment.
Strong distribution channels: Debenhams has built a network in major potential markets.
High level of customer satisfaction: As the company has diversified into various markets, it has gained a high level of customer satisfaction among the customers. This has also helped the company in building rapport and loyalty among customers (Onuferova, Čabinová, and Vargová, 2020).
Reliable suppliers: The company has a strong base with reliable suppliers that provide raw material by importing and exporting to various places to overcome the bottlenecks.
Adoption of market strategies: The company is working for a long time and knows about the different marketing strategies that they adopt to expand their business. This has allowed them to get success.
Marketing of products: The company lagged in promoting and advertising their product. Even though they got success but then also they must have adopted strategies to position and sell their product in the appropriate segment.
Financial planning: Financial planning was not done properly. This was the point that the company must have focused on knowing the expenditure and spending.
Demand forecasting: The company did not use demand forecasting techniques and missed the opportunities to compare with the customers.
Faced challenging to compete with the customers: It was the niche segment in which Debenhams was serving. But, with the entry of new entrants the company was not able to tackle the market share.
Investment in Research and Development: The company was having very good earnings, but did not spend in the Research and Development sector. This did not let the company know about the leading players in the industry regarding innovation (Moradi and Rasi, 2017).
The emergence of new trends: Debenhams has a great opportunity to get emerge in new trends to build revenue and diversify into new products.
Stable cash flow: The company can invest in new markets and new products if it maintains a stable cash flow.
The emergence of new technology: The emergence of new technology provides an opportunity to practice new trends in the market. This part enables the company to build loyal customers with a wide range of services.
Low inflation rate: The stability in the market occurs because of low inflation in the market. Also, it enables credit at a lower interest rate to the customers.
Market development: Market development is how the company could provide its services with competitor advantage.
Government support: Debenhams serve on a large scale so the government supports the company to sell its products in the state as well as federal levels (Odor, 2018).
Threats lie in the external environment. The threats to Debenhams are:
The company should create its value by keeping in view the role of their stakeholders. They should recruit and train staff that can support the company in design management, creative, marketing, administrative and financial functions. They should serve their products and services in proper markets with appropriate distribution channels. The company should also focus on financial growth to provide appropriate resources, working capital, capital spending to its stakeholders. The development and management of a brand should be there by creating inspiring places to shop for the customers and leveraging relationships. Hence, all these points will help the company to earn its value in terms of employment, return on capital, transaction value and sales growth.
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