APPLE AND THE RETAIL INDUSTRY FOR SPECIALIST CONSUMER ELECTRONICS IN THE UNITED KINGDOM
STRATEGIC MANAGEMENT MACAM
OVERVIEW v Drivers of Change v Competitive Strength Assessment v Five Forces Model v Strategic Group Map v Generic Strategies v Recommendations
DRIVERS OF CHANGE Economic recession diminishes consumers buying power and sales: v 2008 crisis considered by many economists as one of the worst since 1930s v £21.5 billion spent in 2011 = 4% less in than 2010 v The electronic retail sales were static before 2008 v In result of that the competition was more problematic and high between retailers v Customer became price led and their buying choice and behaviour was price related
DRIVERS OF CHANGE
Technological convergence: v One main driver of change in the retail electronics industry v Constant technological developments to stay innovative to follow the market needs and trends. v Cameras sales went down due to the new technological trend of including digital cameras in other products such as mobile phones, tablets, personal computers etc…
DRIVERS OF CHANGE New Online Retailing Platforms: v Internet revolution has pushed UK electronic retailers to adopt new ways of selling their products v Online retailing platforms are equivalent to virtual shops or vitrines.
v DSGI: Dixon and Pixamania v Comet: Improved navigation, Product reviews, delivery tracking system. v Amazon: cutting edge prices and fast delivery.
CUSTOMER SERVICE v DSGI: improved customer support, In-store/home technical advice, New loyalty Club v Comet: Home delivery Service, installation options, Customer credit and 24 hours helpline. v Apple: Customer service as differentiation strategy, Repairs, expert advice, Apple ambassadors and The Genius Bar.
RIVALS
COMPETITIVE STRENGTH ASSESSMENT
COMPETITIVE STRENGTH ASSESSMENT v Importance of price attractiveness v If a company’s brand or products are not so strong, it can still be competitive with lower pricing v Amazon and Supermarkets - highest competitive edge in relative cost position; Apple Retail and Independents - lowest competitive edge
COMPETITIVE STRENGTH ASSESSMENT v Apple Retail - competitive net advantage over EURONICS, Comet and Independents; competitive net disadvantage against Amazon, Supermarkets, DSGi v Highest rating in 7 out of 9 KSFs, perfect rating in 6 v Tops most KSFs but does not get highest overall weighted strength rating as these are less important
COMPETITIVE STRENGTH ASSESSMENT v KSFs with less than 10 rating - dealer/ network distribution and customer service capability, relative cost position v If it wants to have above industry (premium) pricing, it will need to strengthen weaker KSFs
FIVE FORCES MODEL
RIVALS The electronic retail UK market is Highly Competitive.
BARGAINING POWER OF BUYERS v Electronic goods are not considered as a daily need = Buying frequency is Low. v Due to the crisis sales slowed down. v Competition is high and customer are price led. v Bargaining power of buyers is Low to Moderate.
THREATS OF NEW ENTRY Electronic Retail’s market entry and exit barriers is significantly Low. v No big investment to enter the market. v Best Buy entered the market in April 2010, In 7 months they had 11 shops spread around the UK, and existed again due to their big losses and bad differentiation strategy.
BARGAINING POWER OF SUPPLIERS v Demand for electronics is high v limited number of suppliers v most retailers cannot integrate backwards à Bargaining power of suppliers in the consumer electronics retail industry is High v Apple is an exception
THREAT OF SUBSTITUTE PRODUCTS v Online retailing as a substitute to physical stores v Analogue products as substitutes for electronics v Switching costs low à Threat of online stores, if a retailer has not integrated it already, is High. à Threat of substitute products for electronic products is generally Low.
STRATEGIC GROUP MAP v Three strategic groups v High price and high quality v Average price and good quality v Lower price and good quality
v One standalone player v Lower or average price and good quality
STRATEGIC GROUP MAP v Average price and good quality v v v v
DSGi (40 %) Comet (12 %) EURONICS group (8 %) Best Buy
STRATEGIC GROUP MAP v Lower or average price and good quality v Amazon
v Lower price and good quality v Asda v Tesco
STRATEGIC GROUP MAP v High price and high quality v Specialized independent retailers v Apple (6 %)
GENERIC STRATEGIES Generic Strategy as a Business Strategy Option 1. 2. 3. 4.
The Corporate Strategy The Generic Strategy Timing of entry on market Strategies for international expansion
Analysing the external environment
Analysing the internal environment
Development of the business strategy
GENERIC STRATEGIES The Five Generic Strategies a) Low-cost provider (cost leadership) b) Broad differentiation (differentiation) c) Best-cost provider (hybrid strategy) d) Focused low-cost (focused strategy on niche market) e) Focused differentiation (focused strategy on niche market)
GENERIC STRATEGIES Market Share of UK retailers
34%
40%
6% 8%
DSGi
Comet
12%
Euronics
Apple
Others
GENERIC STRATEGIES The Generic Strategies in the UK brown goods market Euronics 8% 34%
Others
Other retailer s
52%
DSGi Comet Comet
6%
Apple Retail Apple retail Best-Cost Providers
Broad Differentiation
Low-Cost Providers
Focused Differentiation
GENERIC STRATEGIES Strategies pursued by Apple Retail v Broad differentiation v Broad product line = broad customer base v High-end quality and stylish products v Smaller market share = higher gross margin of 40%
v Selling Apple products from own stores = strong competitive advantage! v Premium price! v 3rd party retailers v High consumer satisfaction (70-80 %) v Loss leader! v Online sale, flagship stores, smaller stores in malls
GENERIC STRATEGIES Apple retailers’ main competition in the UK market
DSGi (40% share) Best-cost provider • Superior quality and value brands • Different segments/ stores • Megastores/small retailers • Industry standard prices
Comet (12% share) Best-cost provider • Value-for-money • Consumers can’t tell them apart from DSGi‘s stores
Others (34% share) Low-cost providers • Amazon, Tesco, Asda, and Best Buy • Internet- or supermarket based • High price competition
Euronics (8% share) Focused differentiation • Joined buying group • Small independent retailers • Niche market/ specialized • Fewer quality product offerings
RECOMMENDATIONS
Apple Retail is able to compete with its rivals in terms of quality and pricing for Apple products, and almost eliminates competition in branding and customer service. Apple Retail should keep their broad differentiation strategy = Stability
RECOMMENDATIONS v To increase competitiveness = strengthen customer support and product distribution activities v To improve product quality = focus more on R&D to avoid recalls v Invest in companies offering complementary products, i.e. wearable electronics, home audio, cameras, etc.
THANK YOU! Reported by Nikolai Kleist Burkal Malaya del Rosario Barbara Palier Hady Saleh