Challenges Faced by Discount Superstores Group Holdings
Discuss about the Intersection of Entrepreneurship and Strategic Research.
A business idea is generated by brainstorming several ideas and then leveraging it in accordance to skill set of its stakeholders (Kiel, 2014). An essential component of a business model affects its influence on the business and determines its critical success factor. The scope of this current analysis concerns Discount Superstores Group Holdings Australia Pty Ltd. The Company came into being post liquidation of Retail Adventure Company that owned several brands including Crazy Clark’s and Sam’s Warehouse. The Company is a privately held retail Company based across 143 total locations. The Company had been operating on sustainable profitability; hence the scope of analysis here develops factors that have led to its sustainable growth (Obschonka, Silbereisen & Schmitt-Rodermund, 2011). Moreover, evaluation of current challenges faced by its customers is analysed to arrive at reasons that the Company has accommodated innovation. An idea related to innovation is generated along with feasibility of that idea and its execution is entailed
Discount Superstore is an extremely profitable venture that caters to varied types of products for tis customers. The brand within a short period of time had been able to extend its profitability to become a well-renowned brand within the country (Demil et al., 2015). Brand loyalty of the Company is also considerably high but it faces problems in catering to its customers. Its Project Simplify is a long-term strategic plan that was inherited from Retail Adventures. In this current strategic plan, the Company aims to focus at Pareto Principle for retail business. Unlike other retail businesses where the focus is on sales per square meter or departmental performance, this retail business believes that 80% of their business will come from 20% of their merchandise range. This has made the business to focus on only on their core merchandise range and on their seasonal demanded products only. This has led to variance in the Company’s product stock around the country (Onetti et al, 2012). Each store has focused their products on its individual capability, stock display and strategic planning. Meaning that if a customer finds products available in one store and aims at purchasing similar product at a store near their home, it is highly probable that the customer will not find the product. This factor has led to high amount of customer dissatisfaction and decrease in overall sales of various products from the brand (Smith, Binns & Tushman, 2010). Customer dependability on the brand is significantly less compared to other retail brands that are present across the market.
Proposed Business Model
The Company needs to focus its business similar to other retail stores by having multiple products from varied brand names. It needs to expand its current branded products and keep varied types of products available. The business need to develop a strategic plan which will encompass brands from several companies and products from all available types (Hitt et al, 2011). The Company needs to establish a steady distribution chain across its stores. It needs to streamline its strategic value chain to get maximum benefits from various products. Then it can refocus new strategic drive to be departmental performance. By aligning of strategic value chain, it will be able to make products of various brands available and then gain significant cost advantage. Making tie-up with key-partners for getting a steady supply of various products will allow sustainable cost advantages that can further add to its profitability. Spreading its product range across various products will enhance its cost benefit approach and reduce downside risks associated with undertaking single basket of products (Kuratko & Audretsch, 2009). In case of earlier Pareto strategy, the Company had focused its business model on very few categorical products, thereby significantly increasing risks component. In case amongst these few products, one product’s demand ceases then the Company’s business might suffer losses. Therefore, spreading business risks across multiple products enhances chances of sustainability for the current business and its products as well.
A business model allows development of strategic management layout for a proposed business idea (Hong & Fauvel, 2013). Discount Superstores has to change its existing strategic plan to accommodate new strategic motive. In its past strategic layout its primary focus was on driving sales of particular products in particular stores. But in the current strategic proposal there is a focus on increasing products available across the market to make them available in all its stores. Therefore, its critical business canvas model has to be redesigned to accommodate more features and functionalities that can deliver value to the business. Components of the business model as Key Activities, Key Resources, Partner Networks, Value Propositions, Customers, Channels, Customer Relationships, Finances, and Revenue Streams need to be ascertained (Doganova & Eyquem-Renault, 2009). Attached in Appendix 1 is a depicted business canvas model for the newly proposed idea that has been suggested for the business.
Innovating and applying a business idea might not be as tedious as identification of its critical success factor. The Company will be performing on a greater sustainability and profitability mode if it is able to change its strategic planning methods altogether (Hitt & Duane Ireland, 2017). Moreover, changing a strategic operational method might not be an easy task as it incorporates changing of the entire business model that has been operational. There have been several risks factors identified in the current developed business model, one of which is inventory management. Expanding product ranges across to include a number of products might pose a challenge in maintenance of an appropriate inventory. While Discount Superstore has its own inventory but it does not have large capacity to include varied type of products. Moreover, the supply chain management of the Company is efficient in handling of limited number of products and showcasing them in the store. While accommodating versatile range of products, there is bound to be challenge faced in placing them across multiple store locations as well. Meaning the entire supply chain with inventory and stacking facility of the store needs to be refurbished. The critical success factor here is to determine appropriate amounts of stock that need to be maintained at stores and then placing an order before they run out. The Company need to adopt Just-in-time (JIT) ordering technique to deal with its current situation faced. Maintaining an appropriate level of stock will be the key success factor for this Company. Therefore, the Company posts application of the strategy need to devise a plan such that it is able to handle risks of running out of certain products in an efficient manner. This will allow the company to become profitable in the market.
Feasibility of the Proposed Business Model
Evaluating feasibility of any idea prior to applying them is critical for understanding their viability and success. In the current scope of strategic plan development and business model evaluation, it has been understood that maintaining of stock possesses the gravest of challenge (Teece, 2010). In order to enhance feasibility of the currently proposed business model a stock handling procedure need to be determined. A stock handling technique of Just in time will allow ordering quantities of items that have been finished and not maintaining large quantities in the inventory. This will significantly help reducing inventory costs for the company. The Company does not need to maintain high amounts of inventory for any of its product; rather it needs to have a dynamic value chain that is responsive in nature. This attribute will help increase feasibility of the proposed business model and allow applicability for the same. Once the proposed business model has been established there will be significantly economies of scale and cost advantages generated from keeping large number and variety of stocks for every product. The Company can in this way re-invest its profitability into making of private label branded products as well. Private label branded products of Discount Superstores will help retain profitability for the stores entirely further increasing idea viability and business sustainability.
Conclusion
Discount Superstores in Australia has been functioning as a profitable venture. It has several brands available across its retail stores that attract sizable amounts of customers. However, due to its problem identification of Pareto analysis, there has been customer dissatisfaction across its stores. Emerging number of retail companies and presence of a large number of multinationals have led to shrinking business of the Company. Therefore, the Company needs to expand its product availability and provide more benefits to its customers to attain high levels in customer satisfaction rates. Accommodating in a varied number of brands and products will help attract more local consumers and allow the company to maintain its competing advantages.
References Lists
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Doganova, L., & Eyquem-Renault, M. (2009). What do business models do?: Innovation devices in technology entrepreneurship. Research Policy, 38(10), 1559-1570.
Hitt, M., & Duane Ireland, R. (2017). The intersection of entrepreneurship and strategic management research. The Blackwell handbook of entrepreneurship, 45-63.
Hitt, M. A., Ireland, R. D., Sirmon, D. G., & Trahms, C. A. (2011). Strategic entrepreneurship: creating value for individuals, organizations, and society. The Academy of Management Perspectives, 25(2), 57-75.
Hong, Y. C., & Fauvel, C. (2013). Criticisms, variations and experiences with business model canvas.
Kiel, I. H. (2014). Entrepreneurial marketing.
Kuratko, D. F., & Audretsch, D. B. (2009). Strategic entrepreneurship: exploring different perspectives of an emerging concept. Entrepreneurship Theory and Practice, 33(1), 1-17.
Obschonka, M., Silbereisen, R. K., & Schmitt-Rodermund, E. (2011). Successful entrepreneurship as developmental outcome: A path model from a lifespan perspective of human development. European Psychologist, 16(3), 174.
Onetti, A., Zucchella, A., Jones, M. V., & McDougall-Covin, P. P. (2012). Internationalization, innovation and entrepreneurship: business models for new technology-based firms. Journal of Management & Governance, 16(3), 337-368.
Smith, W. K., Binns, A., & Tushman, M. L. (2010). Complex business models: Managing strategic paradoxes simultaneously. Long range planning, 43(2-3), 448-461.
Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2-3), 172-194.
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