PESTEL and SWOT Analysis of Homebase

PESTEL and SWOT Analysis of Homebase Homebase is the UKs second largest home improvement retailer and is recognised for choice, style and customer service across the wider home enhancement market. It has more than 300 large, out-of-town stores throughout the UK and Republic of Ireland, and is planning to add to its store chain with around 15 new stores a year. It sells over 30,000 products across DIY and decorating, home and garden ranges, and has a growing internet offering. Homebase serves over 70 million customers per year through its stores and offers customers the convenience of home delivery for bulky, high-value items. Its Ideas magazine is the number one home interest magazine in the UK, with a circulation of almost half a million. In 2006 Homebase won Britains Best Superstore Manager of the Year at Britains Best Retailer Awards and in 2005 it was awarded DIY Retailer of the Year in the National Home Awards. Homebase was the first UK DIY retailer to achieve Forest Stewardship Council Chain of Custody certificati on. More information on Homebase can be found on Situation analysis With sales of nearly  £6bn in the past financial year, Home Retail Group is the leading home and general merchandise retailer in the UK. Although company is already the number one in many of its product categories, there is still potential to increase its market share. Our combined position accounts for just 10% of a market valued at  £60bn. As many of these markets are fragmented and its market share has built quickly, there are further opportunities for growth. Homebase proves theres No Place Like Home for charities In August 2006 Homebase launched its first two year partnership with Marie Curie Cancer Care (www.mariecurie.org.uk) and the Irish Cancer Society in the Republic of Ireland (www.cancer.ie), under the banner of Theres no place like home ; The charities were chosen in a company-wide staff ballot where 39% of Homebase staff voted to support them ; The aim of the two year partnership was to raise  £500,000 to pay for 25,000 hours of home nursing. Homebase staff and customers have exceeded all expectations in the first year of the partnership, smashing the original target and raising an astonishing  £78 5,000 already ; Over the past 12 months, the campaign has seen everything from head shaves and dress down days to staff abseiling down buildings for the charities. The money raised in the first year will help to provide a fantastic 39,250 hours of nursing. External Analysis-Macro Environment Political Employment rate in UK is increased to 74.7% since the last year and it is suppose to increase as well at the end of the current year which could be beneficial for the company because the purchasing power of the customers has increased and at the same time it will increase the cost of the company by increasing the pay rate of their own employees. Terrorism is also affecting the customer little bit but it increases the online sale. If the company go in the developing countries for manufacturing, it may reduce the cost because the low pay rate in the developing countries at the same time it may affect the reputation of the company. Economical Consumer price inflation rose up to 2.2% in January 2008 influenced by the oil and food prices which can influence the price strategy of the organization as well as the promotion and distribution and also can effect the purchasing power of the consumer. Oil prices are increasing rapidly in these days and the prices has been reached to its record which increases the cost and in return the high prices. The value of dollar against Euro is decreasing which can affect the profit margin. Social The rate of population in UK is increasing dramatically which is a big cause of unemployment. Increasing number of visitors especially on London Olympics 2012 can be a opportunity to sponsor time or individual and increase globally the companys image and recognition. Technological Due to the increasing internet awareness among the customer the online sale is increasing day by day. It saves the time and cost as well. 52% of business suffered a malicious premeditated e-security breach during 2005 which can affect the customer data, as well as the customer trust to by online. It can affect the reputation of the brand. After the introduction of the new security system PayPalà ¯Ã†â€™Ã‚ ¢ the online payment from credit card has become more secure which increase the customer confidence on the brand which increase the reputation of the brand. Legal The World Trade Organization members countries have the right to impose the safeguard measures and it has a legal processing to imports. When the company goes to importing it should be aware and follow the changes in the regulations. Environmental By following the government waste strategy the company should increase the amount of recycling which strengthen the reputation of the company. The public of UK is environment conscious and may be a burning issue of the world in near future so the company should improve its recycling policies. External Analysis-Micro Environment The micro environment also known as task environment are the internal forces that have a direct affect in the companys strategies. These factors include buyers, suppliers, all type of competitors, new entrants and substitutes employees and marketing intermediaries (media). Industry analysis The following analysis is based on Michael Porters 5 Forces Model (1996) and it helps understand the competitive environment for HomeBase Threats of New Entrants Factors Level of threat implication Product differentiation High Home products are very common products so the marketing of the company sells. Capital requirement Medium A lot of capital require to introduce a new product to compete the existing products Brand identity Low Home base has a strong brand name in whole US and UK Distributional channel Low Franchisee will be consider the brand identity in the first step Economies of scale medium New entrant have to entrant in a large scale to compete in the market Threats of substitute products Factor Level of threat Implication Few substitute products Low In household products there are very few products which can be replaced Bargaining power of customer Factors Level of threat implication Product quality High Some of the competitors claim to provide similar quality products to the customer Type of customer high As the management of the store is responsible for a good sale so there is a strong customer bargaining Brand identity Low Marketing strategy is strong thats why the brand is recognized all over the US and UK Bargaining power of supplier Factors Level of threats implication Cost of supplier High This company is in developed countries thats why the labour cost quite high Supplier concentration Low The company support community traders Competitive rivalry Factors Level of threats Implication Brand identity high The brand value of each company as well as the target market makes the differentiation to the customer Industry grown High Due to the recent growth in the household items the competition is very high Cost of structure High Competitors follow the same scheme of economies of scale with relatively low cost and high profit Diversity of competitors High Now a days there are some companies who are introducing the efficient products Conclusion: after analysing the Porters 5 forces in this company it is noticed that the retail market is attractive for Homebase. Though Homebase is a leader in the market the company has to develop more technological and attractive products to compete the other companies as well as company has to improve its growth strategies to keep the customers and to fulfil their needs. Market segmentation Consumer market The Homebase has become the leader in its market because it covers almost every household item like from gardening to decorating. Now a days due to development in technology the customer is becoming more and more aware of the quality so they demand for high quality products because they have choice. Products Homebase concentrate on household products and the is still trying to cover everything regarding home. Company deals with the following types of products. Kitchen items Bathroom products Furniture and homewares Lighting Flooring and tiling Decorating Home electrical Heating and cooling Tools Building and hardware Gardening Outdoor living Main competitors following are some principal competitors for the Homebase, Home Depot, Inc.; Eagle Hardware and Garden Inc.; Hechinger Stores Co.; Builders Square Inc.; Payless Cashways Inc.; Orchard Supply Hardware Corp.; Lumbermens Building Centers. Though Homebase has quite strong competitors but still it is leading the market and providing the quality products as well as quality service to its customer and also it is successful to keep its customers till now. The company has to continuo the performance to maintain the standard. Brand Since last few years Homebase has worked focused on customer favour by providing products in low rates with a shopping experience that combines excellent service with a comprehensive range of household items. Homebase proves theres No Place Like Home for charities In August 2006 Homebase launched its first two year partnership with Marie Curie Cancer and the Irish Cancer Society in the Republic of Ireland, under the banner of Theres no place like home ; The charities were chosen in a company-wide staff ballot where 39% of Homebase staff voted to support them ; The aim of the two year partnership was to raise  £500,000 to pay for 25,000 hours of home nursing. Homebase staff and customers have exceeded all expectations in the first year of the partnership, smashing the original target and raising an astonishing  £785,000 already ; Over the past 12 months, the campaign has seen everything from head shaves and dress down days to staff abseiling down buildings for the charities. The money raised in the first year will help to provide a fantastic 39,250 hours of nursing. After doing this Homebase has become a strong brand in all over the UK and Irish republic. Internal analysis Resources Physical resources Number of stores: 310 Countries operating: UK IRISH REPUBLIC 2. Human resources More than 8400 employees including stores and offices are working in Homebase 3. Financial resources Pro forma of 52 weeks to 3 march 2007 4 march 2006 Sales  £1,594.2m 1559.0 benchmark Operating profit  £53.4m  £51.4m Benchmark operating margine 3.4% 3.3% Like-for-like change in sales 1.4% 3.1% New space contribution to sales change 3.6 3.1% Total sales change 2.2% 0.0% Benchmark operating profit change 4% n/a Number of stores at period end 310 297 Of which contain a mezzanine floor 165 144 Competences and capabilities Using the 5Ms is possible to analyse the competences and capabilities of the company. Market The Homebase is the leader in the retail market and it is providing quality products in cheaper rates and due to this Homebase is being recognized all over the uk as well as Irish republic. Materials The company is investing a lot of capital to introduce new stores so that the customers can buy quality products from their locality. The key element to the new store design is part of the business strategy to make-up merchandising fixture. Men More than 8400 employees including stores and offices are working on Homebase. Money Financial resources Pro forma of 52 weeks to 3 march 2007 4 march 2006 Sales  £1,594.2m 1559.0 benchmark Operating profit  £53.4m  £51.4m Benchmark operating margine 3.4% 3.3% Like-for-like change in sales 1.4% 3.1% New space contribution to sales change 3.6 3.1% Total sales change 2.2% 0.0% Benchmark operating profit change 4% n/a Number of stores at period end 310 297 Of which contain a mezzanine floor 165 144 Machines Number of stores à ¯Ã¢â€š ¬Ã‚ ½Ãƒ ¯Ã¢â€š ¬Ã‚ ¾ 310 Countries operating à ¯Ã¢â€š ¬Ã‚ ½Ãƒ ¯Ã¢â€š ¬Ã‚ ¾ UK IRISH REPUBLIC S.W.O.T Analysis Strengths Leverage purchasing scale High loyalty Strong brand name Increase share in large product markets Expand homebase store network Extend and exploit multi-channel leadership Weaknesses More capital require for new stores High supply cost High operation cost Opportunities Further to go on importing Opportunity to explore other overseas sourcing locations Additional benefits to come from supply chain Other cost reduction processes Threats Strong competition in retail market Customers are becoming more and more aware of quality due to improvement in technology and want high quality products on cheap prices Increase in the sales of competitors Though there is competition in the market the Homebase has a strong brand name and the company is improving their performance as well as it is investing in the product quality and opening new stores. There are still lot of opportunities for the company. Market plan On the basis of the previous audit marketing and the company strengths the objectives and the targets of the company are as follows; Objectives and targets Reduce plastic bag consumption by 25% by the end of 2008 Attain ISO 14001 status for 5 Distribution Centres Attain recycling rates of 50% across the Group Energy Achieve energy accreditation for the Group from the Carbon Trust Reduce energy consumption by 2% KwH/sq ft Purchase at least 30% green power Products Review current policy guidelines for product selection Attain accreditation for sustainable paper sourcing Maintain existing recycled paper content of catalogue at 13% Community Raise at least  £1.6m for charity partnerships Achieve gold status for payroll giving ( at least 10% of workforce) Establish arrangements for community investment Establish a volunteering policy for the Group Workplace and HR Improve employee engagement scores. Improve take up of share save schemes Reduce average absence per employee Reduce RIDDORS by 10% Customers Increase levels of customer satisfaction (reduce no of orders which  generate one complaint) Group growth strategies Growth through leveraging purchasing scale Growth through increasing market share in targeted large product market Growth through extending and exploiting multi- channel leadership Growth through expanding the store network (10 homebase stores in a year) Marketing mix To implement the above strategies the following points can be applied: Product / branding Homebase is working efficiently in these days by following their strategies and because of this it is leading the market in all over the UK and Irish republic. Well I believe that regarding to the objectives of increase the brand image is recommended that the company is to associate the environmentally friendly image such as reducing the use of plastic bags. And further more the company should go on importing as well as explore the other overseas resources locations so that the brand can win the global recognition. Though the company has started its own recycling program in which some products are totally recyclable and some are partly, but in future environment will be a burning issue so organization should do some more for this which protect as well as beneficial for the brand in future. Price The differentiation strategy allows the company to implement a value-based pricing approach. Place Develop a multi-channel distribution has been successfully implemented in the company. On the other hand company should increase its online sale. Promotion target People concerning about environmental issues House wives Communication To promote the product benefits To make the product known To increase online buyers The massage It is suggested to use the objectives that concern with the knowledge or awareness in the mind of the customer. Media selection Advertisement on the magazines which are usually being sent to the houses monthly or weekly Attracting customers by making sales on special occasions Online advertisement Using the logo in other web sites to link with the companys web site Series of the press releases to be sent to magazines and access online TV campaign to roll out nationality on terrestrial TV Posters People To monitoring services online as well as make available news tools to the customer shopping online To incorporate orders online, to store products and others To help increase the sells and to ensure the customer service quality Process Products purchase online delivery with in a week Credit card to be charged at time on the shipment of the order and confirmed by e-mail Use the latest security methods such as PayPalà ¯Ã†â€™Ã‚ ¢ Return policy should be with in the existing 30 days after the purchase Physical evidence Receipts and inventory bills Software to develop the e-commerce Budget breakdown To achieve the above marketing planning objectives it is set an overall cost of  £8.5 million. And this overall cost is divided into the following categories; Product 16% of the total cost is for the market research and for the development of the product, RD. The estimate cost in  £1360015.7 Place 8% of the cost is to be spend on the continuous refurbishment and maintenance of the stores, distribution and transportation, and the estimate cost is  £680,000. Promotion 60% of the total cost is to be used for the promotion of the product which includes the media advertisement such as advertisement in TV programs, magazines, posters in public transport, etc. The estimated cost is  £5100,000. People 10% of the cost is to be spent on HR, training, recruitment and IT outsourcing. The estimate cost is  £850,000. Process 4% of the total cost will be spent on the development of the operation processes and for this the estimate cost is  £394400.63 Physical evidence 2% of total cost is to be spent on the reservation for the physical evidence and process to maintain the e-commerce. And the estimated cost for this is  £170000 Total cost The total cost for the whole process of the above marketing planning to achieve the mentioned objectives is estimated as  £8500000.