kingfisher assignment

Module name: Sustainable Strategy - from Planning to Implementation

Title of the assignment: Strategic Analysis of Kingfisher PLC UK

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Executive Summary

Every company who engaged in business needs a strategy which drives the company to

success. Irrespective of the resource availability, if the company adopts a wrong strategy such

company will not be able to maximise its share holder’s value which is the ultimate goal of a

company. Therefore it is clear that strategy of a company is the power that drives the company.

In this assignment strategy of kingfisher was analysed carefully in terms of its positioning and

the direction using model such as PESTLE, SWOT analysis and five forces .The direction of the

strategy was analysed using BCG matrix. Further suitability, acceptability, feasibility and

sustainability of the strategy were described. Finally recommendations were given in the light of

potential of the company.

Contents

1. Introduction........................................................................................................................................4

2. Strategic position..................................................................................................................................5

External Environment...........................................................................................................................5

3. Strategic Directions............................................................................................................................11

4. Suitability, Acceptability, Feasibility and Sustainability..............................................................15

Suitability..............................................................................................................................................15

Acceptability.........................................................................................................................................15

Feasibility.............................................................................................................................................15

Sustainability.......................................................................................................................................15

5. Conclusion and recommendation.................................................................................................15

6. References.......................................................................................................................................16

1. Introduction

Kingfisher PLC is a multinational company engaged in home improvement business. The

company’s headquarter is located in London. Currently the company is speeded its stores in

more than 950 locations around 8 countries in Europe and Asia.

In 1982 the company was founded after a buyout of British Woolworth supermarket chain by

Paternoster stores Ltd. After the incorporation the company expanded its business by series of

mergers and acquisitions such as B&Q, Comet, Castorama and Superdrug.

Listed in London Stock exchange and FTSE 100 the company has recorded revenue of £ 10.4

billion in 2001 while the operating profit for the same year was £704 million. The company is

employed around 80,000 employees around its super market chain.

The company planned to acquire Asda in 1999 and failed due to the competition form Wal-mart,

the largest supermarket chain in the world. The sales from outside UK provide more than 50%

contribution for the total revenue of the company. Due to the high involvement of corporate

social responsibility activities, The Company was listed in two corporate social responsibility

indexes, Dow Jones Sustainability index and FTSE4Good. (http://www.kingfisher.com)

The company’s major brands are B&Q, Brico Depot, Castorama and Screwfix.

2. Strategic position

Jonson and Scholes describe that the strategic position of an organisation is refers to

identification and analysing of the impact of the external environment, resources available in the

organisations internal environment and different stake holder competencies. (Jonson & Scholes,

2005)

External Environment

Following techniques and models can be used to analyse Kingfisher’s external environment.

PESTEL Analysis

It is evidenced that there are several external factors which affect to kingfisher’s strategic

position. (Appendix 1)

It can be noted that the political situation of those countries where kingfisher has its

supermarkets affects its strategic position. More that 50% of the revenue is generated out of UK

market and thus it is very important that the political situation of those countries to the

operations of the kingfisher.

After considering economic factors it is evidence that the economic stability of the countries

where kingfisher operates have a significant impact to its operations. Among other economic

factors inflation, interest rates, exchange rates plays key role. Further, in the countries that’s

facing economic crisis such as Greece the company may also face to same problems.

Moreover the fiscal and monetary policy may also affect to kingfisher’s operations as those may

disturb the market activities of those countries.

High demand for new and stylish home products shows the impact from those goods to the

operations of kingfisher. Those are the new opportunities where company can execute to its

growth.

Cutting edge technology together with innovation may have impact on the operations of

kingfisher. Accordingly the customers may make their choice on the products which has

superior quality and technology.

Environment factors such as corporate social responsibility and sustainability development are

one of the major concerns of various stake holders of the company including customers and

suppliers. Activities which reduce carbon emission and promoting product which require

minimum level of energy are encouraged by various pressure groups. Those factors may affect

to the way the company carry out its operations.

Finally the legal factors relating to operation of supermarket chain in various countries may

different to each other and kingfisher needs to comply with those laws and regulations in

respective countries.

Michel Porter’s five forces

This gives an analysis of forces that affects to the operation of kingfisher in the retail industry in

UK.

(Source,www.hbr.org)

1. Threat of new entrants

Since kingfisher is offering wide range of products which are required for a house there is a high

threat of new entrants. Kingfisher can eliminate those threats by implementing entry barriers

such as ,

Increasing entry cost by investing in technology

Promoting eco friendly products

Offering new stylish products with high quality

Improving economies of scale through increasing efficiency and effectiveness.

2. Bargaining powers of Customers

Since kingfisher offer large range of products customer has the option to buy those

products from different shops around the country .Bargaining power of the customers

can be eliminated through following activities,

Increase brand loyalty among customers such as B&Q etc

Customer loyalty programs

Further new stylish products offered by the company reduce the bargaining powers of

customer as customers don’t have much choice in the market.

3. Bargaining powers of suppliers

Kingfisher purchases various range of products for household consumption thus suppliers

can make a great influence for its operations. Thus to eliminate or reduce such threat the

company entered in to long term supplier contract with suppliers and obtain best price from

customers. Further kingfisher buys products from several customers and therefore the

bargaining powers of each supplier is controlled.

4. Threat of substitutes

Since kingfisher operates in retail market the availability of substitutes are very low.

5. Competitive rivalry within the industry

Competition among the players in the market is very high and therefore the company has

taken server steps to reduce such competitiveness.

Build strong brands which competitors don’t have

Offer lowest price in the market

Offer new and stylish products and obtain early mover advantage.

SWOT Analysis

Strengths, weaknesses, opportunities and threats that the company has in its operations is

discussed in below,

Strengths Weaknesses

1. Loyal customers- the company have a

portfolio of loyal customers who never

leave the company

2. Strong brand value- Kingfisher is having

strong brands such as B&Q, Brico

Depot, screwfix and Koctas which

competitors does not have.

3. Pricing- kingfisher offers the best price

among the competitors which cannot be

matched.

4. New and stylish product range-

kingfisher offers new and stylish range

of products which are unique to

1. Low investment in Research and

developments - The Company pays

little attention in to research and

development activities.

2. Low market share in other

countries- other than UK an France

kingfisher has lower market share

in home improvement products.

3. Weaknesses in the management

team – the recent performance of

the company shows that the

management team of kingfisher is

kingfisher. weak.

Opportunities Threats

1. Acquisitions – There are lots of small

companies where company can acquire

and expand its operations.

2. Expansion in to foreign markets- the

company’s operations are limited to

Europe and Asia. Company has the

potential of expanding its operations in

to American and African region.

3. Innovation - Kingfisher can improve its

product range by undertaking research

and development activities and innovate

new products which can offer to

customers.

4. Diversification- without limiting to home

appliances and products sales kingfisher

can expand its operations in to other

suitable business sectors using its

knowledge and experience.

1. Global level competition in UK- with

the acquisition of Asda by wall mart

there is a severe competition

among companies to increase the

margins and volume. In this

scenario kingfisher needs to face to

the completion at global level.

2. The technology used by the market

is very cheap and thus it will threat

to kingfisher as they use latest

technology at high cost.

3. Economic recession

In a situation where economy faces

recession the company may exposed to

threat where the consumers may not

interested in home appliances thinking that

those are unnecessary costs.

Capabilities of Kingfisher

1. Ability introduce new and innovative products with eco friendly manner

2. Ability to expand operation in to foreign countries with a lower level of risk

VRIN Analysis

1. Identifying Kingfisher resources

Strong brand portfolio

Geographically dispersed supermarket chain

Highly skilled labour force

2. Valuable

Above mentioned resources are capable of helping the firm to create value creating

strategy.

3. Rare

The resources kingfisher has is rare compared to the competitors of the company

4. In- imitable

Those resources are hard to in-imitable as its involves high cost to imitate

5. Non substitutable

Those resources cannot be substitute by any other resources.

Value chain

The value chain of King fisher is as follows

(Soruce,WWW.hbr.org)

3. Strategic Directions

Kingfisher launched seven point “Delivering value ‘ plan in the year of 2008. Accordingly such

seven objectives are as follows,

1. Driving up B&Q UK and Ireland profits

2. Exploiting our UK opportunities

3. Expanding our total france business

4. Rolling out Eastern Europe

5. Turning around B&Q China

6. Growing group sourcing

7. Reducing working capital

(Source, www.kingfisher.com)

http://www.kingfisher/

.In order to monitor whether the objectives are achieved kingfisher has established following

Key Performance Indicators (KPI)

Operating margins

Total trade sales

Net profits

Direct shipments

Working capital balance

Results of staff engagement survey

Eco product sales value as a percentage of total sales.

(www.kingfisher.com)

When considered the strategic direction of kingfisher it can be analysed using Ansoff’s growth

matrix as follows,

Products/Services

Existing New

Markets

Existing MARKET PENETRATION

Increase the revenue in

UK and Europe

countries where the

company is already

having operations.

Expand retail shops in

the Asian region

PRODUCT DEVELOPMENT

Promote other retail

products such as food

items in the existing

retail markets

Develop new and

stylish products to the

existing market and

customers

New MARKET DEVELOPMENT

Start operations in new

foreign markets with

same products.

Expand operations in

UK and Europe region

DIVERSIFICATION

Expand operations

through diversifications

Start offering new

products in new foreign

markets.

http://www.kingfisher.com/

When carefully analysing kingfisher’s seven strategies it is understand that the company is

concentrating market penetration strategy. The company’s strategy is to grow its operations in

the existing market such as UK, France and Asian countries such as china. However it is clear

that kingfisher is having a lots of potential to consider other 3 strategies as its has all resources

to execute such strategies. (Peter, 1995)

Kingfisher and BCG Matrix

(source ,www.bcg.com)

Once we considered the BCG matrix it can be suggest that all the brand of kingfisher, “B& Q”,

“Castprama”, “Brico Depot”, “Screwfix”, “Koctas”, and “Hornbach” are in Star position as it has

launched its seven step strategy in 2008 and from that time onwards company was improving its

performance over the period. Accordingly over the four years from 2008 to 2011 the Key

Performance Indicators (KPIs) of the company shows positive improvements and therefore it is

concluded that kingfisher is in the star position.

4. Suitability, Acceptability, Feasibility and Sustainability

Suitability

The vision of the company is to “Be the world’s leading local home improvement retailer” and

this vision is evidenced by the seven step strategy formulated by the company. Accordingly the

strategy of the company was formulated to accomplish the vision of the company.

(www.kingfisher.com)

Acceptability

The strategy of the company can be accepted as such strategy has formulated with the intention

of increasing the cash returns of all parties. Accordingly it is clear that the objective of such

strategy was to increase the shareholders value.

Feasibility

The feasibility of the strategy of kingfisher is proved by achieving Key Performance Indicators

set by the company from the year of in which the strategy was initiated.

Sustainability

The strategy of kingfisher concentrates on the sustainability as well. This is evidenced by the

introduction of “Eco product sales as a percentage of total sales” as a Key Performance

Indicator to its strategy. (Johnson G, Scholes, 2005)

5. Conclusion and recommendation

It is evidenced through this analysis that kingfisher is a company where they can explore lots of

their potentials. Further it has lots of strengths and opportunities where company and

concentrate on. Having a loyal customer portfolio and strong brand portfolio i propose following

strategies to kingfisher.

Expand in to new markets both in UK Europe and other continents with strong brand

portfolio such as B&Q, Castorama, Brico Depot etc.

Realign its marketing strategies to grow UK and Europe operations so that it can remain

in the star position in the BCG matrix.

Divest in to new sectors such as food items, Gas stations ect using knowledge and

experience kingfisher has in the retail industry.


6. References

Porter, M.E. (2008) "The Five Competitive Forces That Shape Strategy", Harvard

Business Review, January 2008, pp. 79-93

Chisnall, Peter: Strategic Business Marketing, 1995

Johnson G, Scholes K, Whittington R. (2005): The Environment: Exploring Corporate

Strategy, Pearson Education

Kingfisher PLC,2012,United Kingdom, Available (online) www.kingfisher.com, [viewed on

18 March, 2012]

BCG Matrix, Available (online) http://www.bcg.com/about_bcg/history/history_1968.aspx

[viewed on: 15/3/2012]

Johnson G, Scholes K, Whittington R. (2005): The Environment: Exploring Corporate

Strategy, Pearson Education

http://www.bcg.com/about_bcg/history/history_1968.aspx


Appendix 1

PESTEL Analysis

1. Political Factors 1. Political situation in the countries where

kingfisher carrying out its business

operations.

2. Economic Factors 1. Specific economic situation of countries

where kingfisher operate.

2. Monetary and fiscal policies adopted by

the government of those countries.

2. Social/Cultural Factors 1. High demand of new and stylish home

products.

2. Demand in Europe market to home

products.

3. Technological Factors 1. Cutting edge technology used in retail

shops.

2. High demand and recognition of online

sales.

4. Environmental Factors 1. Corporate social responsibility

activities

2. High concentration for sustainability

development

5. Legal Factors 1. Laws and regulations relating to

sale of retail goods.