Introduction
What is the DIY idea when people doing the fitment in UK? The probable answer is the B&Q which includes the leading notion of Do It Yourself in UK's do-it-yourself retailers. However, during various rapid changes such as monetary fluctuation, new customer demand and new government regulations, B& Q is facing a downtrend after reached its peak in 2004 that earn £400 millions. This paper will go through the analysis of the B&Q strategy management to go over this matter, proposal to solve this issue and the suggest solution of the situation made by the proposal.
Overall view
B&Q is the most significant DIY DO-IT-YOURSELF retailer in European and it is the key subsidiary retail of Kingfisher, which was the third largest Home Improvement retailer on the planet. It was founded in 1969 and became the primary player in the DIY Home Improvement retailer market in the UK. Its business strategy focuses more on low priced, self-service and strong organizational culture.
Basic strategic logic
Environment
The analysis of external and internal environment of DIY market is now very vital due to the rapid differ from 1980 to now. B&Q has grown fast through various benefits of external environment of the DIY market from 1980. Firstly, the stable financial and government encourage rules supported visitors to own their home, producing a high boom of home price. Therefore, increasing expenditure on maintenance and fitment of house is now a primary investment as its quality value of capital assets. Secondly, the image of the house presents people's lifestyle, social status and achievement that accelerate customer to invest money to reach the self-esteem recognition. As the support of government policy, the low interest rate is a significant factor to help people has more capacity to refurbish and revamp homes. B&Q reacted to this positive environment by changing quickly and nicely in a right time leads its high success. Refer to technology analysis, B&Q through adoption of ERP system SAP to help expand supply chain and through phone and online order to improve the sale.
However, the marketplace is declining from the late 2004 and the client demand has changed such as concentrating on the high quality rather than low priced. In order to deal with those demand change, B&Q adopted several strategies such as the high innovation of new product, increasing ranges, entering into RMI market, increasing store size, open new mini house, increasing the Warehouse division and improved professional service.
In conclusion, there is a fit between this strategy and the house Improvement market in the earlier time which may be illustrated by the B&Q's high profit (see Appendix 3). However, it needs to improve more to match well with this market later owing to the rapid change from 2005.
IO-style
Five force framework
Competitive rivalry
There is a strong competition between your existing players in this market and B&Q come across a high competition with few but larger competition under the low differentiation market. However, in the first 1990s, each player strongly target on different market. For example, the two major rivals emphasize on different target that Homebase target more on the "softer female friendly image" while Wicks target the "Serious DIY" and Tradesman customer.
The threat of entry
Owing to the positive and attractive external environment of DIY market, various competition entered into the forex market rather than few and larger rivals earlier specially some private equity company such as Argos and Floors-2-Go, B&Q faces more stressful environment because they provide some more advantageous conditions. For example, Tesco supply reliable range of DIY product and cheap than B&Q which threaten the B&Q lower price strategy; Ikea strengthen its dominant product in Kitchens, Lighting and Storage which reduce customer's loyalty on B&Q product in this area; Wilkinson's strong online competition declared B&Q's weakness on IT. Moreover, new specialist opponents instead of the original rival investment in these sectors show their strength on increasing amount of stores, product expertise, greater service and promotion than B&Q.
The risk of substitutes
The main threat from the substitutes of B&Q will be the accessory of home instead of the furniture. Another risk is the fact during the lifestyle or economic crisis some people reduce use the formal furniture in the house. Otherwise there exists low risk of substitutes in DO-IT-YOURSELF market.
Buyer power
The switch cost is very low when there's a limited differentiation. The truth demonstrates B&Q has insufficient differentiation using its competitors. In cases like this, customer can `easily switch to some other company in this do-it-yourself industry market. Therefore, the buyer power is very high in B&Q.
Supplier power
The role of supplier in B&Q's case is not so strong as the buy power, because there is less strong position of seller. Consequently, B&Q apply two ways of cooperate with them. Firstly, reward will get when there's a great innovation. Secondly, a greater share of business will be given the favored suppliers and the suppliers were rated by their better negation, history of price reduction and performance.
In conclusion, the analysis of five competitive forces illustrates that B&Q stay static in the working environment that has less risk of substitutes and supplier power with high risk of competitor, new entry and high buyer power.
3 generic strategies
B&Q put itself in the low cost position and through application of overall cost leadership strategy to achieve the competitive advantage. In this area, B&Q has a particular Cost Price Reduction Programme which is achieved by long term better cooperation with suppliers, increasing own brand products such as Performance Power and Colours, reducing Warehouse price, increasing the local Distribution Centres in Doncaster and Scunthorpe and decrease in the price on particular product comparing with the one before.
However, from late 2004, the home improvement market dropped down because of the increasing interest, taxation and pension contributions, B&Q is against cost stress from various aspects including the increased staff cost due to the increase in the federal government policy of minimum salary, rapid increasing store rents. Alternatively, due to the new market trends from the first 2000, customer emphasis more on the product quality than the purchase price.
In conclusion, B&Q's generic strategy that overall cost leadership is well match its industry organisation strategy earlier, but it requires to improve in order to handle the demand change.
M-style
According to the Appendix 7 from the truth, it could be seen that B&Q concentrate on the mass customers that offer the wide range across all categories, strong price strategy, small format for convenience, big stores and mixture of brand and own brand. Among its two majors that happen to be Wickes and Homebase, the main customer target of B&Q are the serious DIY'er and Basic DIY'er and few DIFM supporters. Wickes also involve the segment of Serious DIY'er and Homebase set foot in the segment of DIFM Projects which need high professional advice.
The highlight on low price reflection on B&Q would be placed in the position 2 which refers to low price strategy in the strategy clock. However, with the change of customer demand like the customer getting more and more attracted by the high quality, individuation and specialist which here identifies some individuals prefer more professional service that DIFM to DIY, the B&Q's online marketing strategy can not fit well with the customer needs in the Home Improvement market.
RBV-style
The threshold resource in B&Q is the basic and wide range of product to meet up with the consumer's minimum requirement. There is a strong support of financial resource by Kingfisher to sell the freehold assets to release the cash to aid the expansion of B&Q. B&Q employ some retired tradesmen to offer the professional knowledge, experience and service. This sort of employees enable B&Q has a distinctive resource that it is the first company to hire the staff that are over 50 years-old staff for their stores. Furthermore, this unique resource also ends in the lowest absenteeism rates which increase the high work efficiency.
The strong financial resource can cope with the dynamic capability for future years success through high support on each business activities of B&Q. However, the initial resource that over 50 years-old staff would not be considered a unique or positive resource in the future when the staffs become older causing the high turnover rate and high turnover cost. This kind of rules will certainly reduce the efficiency of work. Due to some inconvenient characters of old people and there will be low efficiency work than teenagers.
In addition, after merger with France's leading retail in the same market, B&Q try to highlight on the international resources to accomplish high returns on finance. This international resource has positive influence on reducing cost to accomplish good deal strategy.
ST-style
According to Mitchell et al (1997), stakeholders be analysed from three attributes that are power, legitimacy and urgent. Government regulations is seen a definitive stakeholder due to its power on changing environment through changing interest, taxation and so forth. This case illustrates that the increasing interest rate and taxation directly and quickly influence the B&Q's profit. Customer is the dormant stakeholder which includes high power and in B&Q. Staff and supplier regard to the dependent stakeholders which has less power but much interest that the B&Q should try to do their effort to bring them participates in the business activities. For instance, B&Q pressure on the team culture which provide opportunity for employee promotion and good cooperation with suppliers. Management, shareholder who has high power and legitimacy can affect overall strategy management in B&Q. Competitors can be treated as dangerous stakeholder in B&Q case which includes power and urgency with little legitimacy. The truth pointed that the rivals open more out-of-town stores than B&Q during the market slowdown period, as the CEO Ian Cheshire ignore this competition change that commenting that they can't find the forex market change.
In general, B&Q should manage each stakeholder and keep close watch on their activities to meet their demand to handle the rapid demand change. From the case description, it can be seen that B&Q put customer to begin with of stakeholder priority which more focuses on the client and market trend to take initiative to fulfill the customer in the rapid change. However, when they realized the increasing role of women, young women and single-person in the market, they did not take some action to attract this specific target. In addition, during they recognize the growth space of DIYM, they didn't take any specific technique to cope with change.
Application of the suggestion strategy
It sometimes appears obviously that B&Q strategic management may not be steady with rapidly changing environment. As most business will face the problem or decline in their life cycle, B&Q has profit deduction when facing the market slowdown. The Home Improvement industry is directly and heavily influenced by the fluctuation of house property industry, so that it is can be acceptable in a few extents if B&Q is falling down when you can find house market slowdown. However, it still needs to find some turnaround strategy to handle the rapid change.
Firstly, predicated on the analysis of B&Q IO-style strategy, it is well known that B&Q apply the price leadership strategy as the major strategy in this industry organisation and its own product is lack of differentiation. However, this mere strategy loses its advantage when there is another big competitor also by using low cost strategy. It is better that the business must have some uniqueness which other competitors difficult to imitate. So it suggests adopting the hybrid strategy which combines with the reduced cost and differentiation. This differentiation strategy may be accomplished through seeking unique product, service, and distribution. For example, B&Q little by little launch its brand such as "clours" paint. Aside from launching own brand, B&Q can try hiring some specialist employee who may offer professional service and distinctive advice for the client even B&Q already removed some jobs to reduce the cost after market slowdown. This professional service can be specific related to the DIMF which has more growth room in the new demand environment or related to the after-sale service about people using DIY.
However, this strategy is not easy to implement due to difficult balance between your low costs with differentiation. As the differentiation needs high investment on technology, research development, and advanced staff etc. In this condition, firm need to find a way to lessen the cost while make an effort to meet up with the differentiation demand. In recruitment of talented people, company can try training staffs in the organisation instead of employing outside the company to lessen the cost. On the other hand, B&Q can try outsourcing through low labor cost, good resource, experts to reduce the costs. Purchasing cheap product from oversea also maybe a treatment for the decreasing the price in this example. Moreover, adopting the third party logistic distribution can also help the cost.
Secondly, B&Q already realized that the girl, young woman and single-person were playing an increasing crucial role in decision making in the forex market. Such as the Low's research illustrated that around 80 percents of all home improvement product purchase is set by women (Hoover, 2008). However, they did not make a strategy focus on this particular market target. To satisfy the women target, B&Q can try some soft categories and pleasurable environment for the kids as its rival Homebase do. To gratify young women and single-person, B&Q can seek to introduce some high fashion, nice design and unique product to meet their high lifestyle requirement. Normally, this kind of customer focuses more on the high quality and design rather than low price. Alternatively, in the modern city, there exists increasing numbers of people renting a house rather than purchasing a house. So B&Q can try introducing some nice product which has short lifecycle with low price such as some one-off product or some policy that provide renting the merchandise. As consequence, renter will consider to buy those products without worrying about the waste when renter is moving out the home.
However, this suggestion has limitation on the difficulty of exploiting new product especially for the short lifecycle product and renting product. On the other hand, there is a risky of the introduction of the short term product or rent strategy and concentrate on specific target. So that it advise company to do the product development fund on the plenty customer research.
Thirdly, from facing the strong online competition from its competitor, it shows that B&Q strengthens its IT. While using development of Internet, increasing numbers of people prefer online shopping and check. Furthermore, the strong online sale implies decreasing the labor cost in the store and operate cost of the stores. As the B&Q spend much money on the increasing numbers of the Warehouse, size and format of the store, all of this cost can be largely reduced if customer chooses online shopping. Alternatively, it is very convenient and even curtailing some transport cost of shopping for customer doing all the process that product choosing, tracking, check-out and payment online. Moreover, B&Q can offer various sale, promotion and special service for online order to attract more customers purchasing online. For instance, Home Depot is launching a radio scanner service to help decreasing customer's time on the checkout lines (Hoovers, 2008).
However, the use of strong IT strategy needs much investment on the technology and finance. Therefore, it stresses the financial problem of how to collect the fund. To solve this problem, it is suggested to take long term mortgage, find some customer or company to get B&Q through some attractive participating items or obtain some advantage from the suppliers. The reason of advantage by suppliers here is that pay the amount of money once they sold the products. It helps the company release the fund to turnover.
Lastly, predicated on the information description from the truth and analysis of B&Q, it is seems can not find the B&Q do any B2B business. So it suggests that B&Q apply the B2B strategy which regards that company has alignment with other companies. In this example, it can cooperate with the real estate company or some group of customer. Through the monetary scale with the real estate company, it offers competitive advantage for B&Q not only on the increasing sale but also on the purchasing from it suppliers. On the other hand, the cooperation with real estate companies is can be seen as a free of charge advertisement.
However, this suggestion is also facing some issues with the true estate company in terms of the cooperation and the trustworthiness of that real estate company. Because if the true estate company that cooperate with B&Q have not good reputation, it will influence the client analysis on B&Q product. For example, if the client is unhappy start real estate company, later they could also not purchase the B&Q product which has relationship get back company because of their house. So in this case, B&Q should look for a reputed real estate company and offer the right project to attract them. For instance, offering low price for mass purchase is one such attractive rule.
Conclusion
From various analysis performed based on the B&Q case study, many factors which lead to the success and failure of B&Q could be studied. Four ideas receive in this paper through hybrid strategy, specific market, IT improvement and B2B strategy. Although this paper provides various recommendations to help B&Q manage the change, there are still amount of limitation on implementation of the proposals.
