Dick Smith Foods Essay Example

  • Category:
    Management
  • Document type:
    Case Study
  • Level:
    Undergraduate
  • Page:
    2
  • Words:
    1414

Introduction

Some years back, many companies especially those in manufacturing enjoyed market monopoly. These companies exploited consumers because they held government-sanctioned authority to produce certain products exclusively, and therefore could set exorbitant prices without a care in the world. Those days are long gone. Modern economies encourage healthy competition amongst manufacturers, wholesale suppliers and retailers.

This has served two important purposes. First, it has encouraged very many players to venture into investment into many areas of the economy. Two, it has allowed market forces to regulate consumer prices because only the organization that offers the best services and the best quality products at competitive prices attracts clientele. New investors are no longer intimidated and exploitation of consumers effectively dismembered. This does not only promote healthy competition but it also engineers cutthroat competition for clientele. That means only the companies with the best image, the best service, the best quality products or services, and the most competitive pricing will survive in the market. An organization must therefore cut a niche for itself in the market by embracing strategic management in order to earn competitive advantage over its competition, thus making itself relevant in the market on the long-term.

Strategic management and strategic competitiveness

The SBAMN Center of the University of Central Arkansas (2013, p.1) describes Strategic Management as the three-pronged process of analysis, decision making, and the actions that an organization’s management takes so that it can create competitive advantage and sustain it in the market place. According to Ehmke (2103), competitive advantage is an edge that a company gains over its competitors by offering greater value to clients either by lowered pricing, or via additional benefits and service to clients at the same prices or justifiably higher prices, or both. Porter (2012) describes it as “Competing to be the best – competing to be Unique”.

When an organization establishes a mechanism of strategic management and realizes its strategic goals, more specifically competitive advantage, through a persistent implementation of its strategic plan, then it has achieved strategic competitiveness. As Baloch et al (2103, p.88) explains, strategic competitiveness is a sustained and proactive intellectual and analytical process intended to earn the organization long-term competitive advantage over its competitors. Strategic competitiveness results from a unique culture of strategic attitudes and systematic planning achieved through;

  1. Setting of long-term goals

  2. Thoughtful study of a fluid environment

  3. Identification of emerging problems

  4. Solving emerging problems

  5. Identification and speedy exploitation of opportunities

The competitive landscape of the 21st century portends great challenges for modern businesses. According to Baloch et al (2103, p.88), the competitive environment is now global, extending beyond boundaries and regions. Organizations may have won competitive advantage in their country or region but if they expand beyond borders, they face new competitors and different social, financial and political operational environment, which erodes their competitive advantage completely. They will have to design new strategies for oversees markets. Again, Baloch et al (2103, p.89) explains that organizations face rampant and accelerated rate of change and new opportunity, and rapid flow of information through fast communication technologies (90). Therefore, firms must expand their strategic competitiveness to cover this expanded scope.

Dick Smith Foods (DSF) initially managed to achieve competitive advantage over other supermarkets by appealing to the patriotic psyche of the Australian people that indeed his was a nationalistic company promoting Australian producers and products. DSF gained further appeal and a better image by the fact that DSF was not a manufacturer but a new job-creator promoting local industry. After Dick Smith left DSF in 2002, the company began to experience a gradual decline, especially after changing ownership. The initial strategic competitiveness entrenched by Dick Smith was lost on the new management, probably as they introduced new objectives and strategies. Notably, multi-nationals bought off most manufacturing companies that supplied DSF. That could have made DSF begin to loose its nationalistic image effectively loosing its competitive advantage, so the customers lost their enthusiasm to buy DSF products and the decline in sales ensued.

External Environment

According to Jain et al (2010, p.7) the external environment are factors or entities outside the business that affect the functionality of the business directly or indirectly. The external environment comprises of Micro and Macro factors. Microenvironment includes customers, suppliers, market intermediaries, competitors and the public. Macro environment comprises of socio-cultural, economic, political, demographic, natural, technological and international factors. They definitely affect the performance of a business.

Customers provide the cash flow and form the primary source of income. Without them, the business is dead. Customers provided the $80 Million sales to DSF. Their loss of enthusiasm on DSF products saw sales plummet to $8 Million. The worst blow was when supermarkets, DSF’s main customers, began to churn their products, which thus became less available to a skeptical public. Suppliers and market intermediaries ensure that the organization has a constant supply of products, and assist the sale process. When Dick Smith was at the helm of DSF, he maintained a good supplier chain from local manufactures, and this way he kept the supermarket well stocked with his products. The sale of his sources of supplies meant DSF lost some products or their supply became affected.

Competitors pose a threat to the organization’s existence and therefore play an important role in keeping the organization’s management on it toes. Jain et al (2010, p.7) states that a study into the competitor’s weaknesses strengthens the organization. They also ensure that the organization does not enjoy monopoly and forces it to offer good quality and service to the clients. DSF had managed to edge some of its competitors out of business, an unfortunate occurrence. When competing multinationals entered the market, DSF faced still competition alone, and the multi-nationals began to edge him out too. The public provides the clientele.

At the same time, the public may benefit from corporate social-responsibility projects the organization may initiate such as education support and healthcare. DSF gave millions of dollars to charity to enhance its corporate image.

Internal Environment

Jain et al (2010) describes the internal environment as internal factors that the business can control which include management policies, business objectives, organizational structure, departments, corporate brands and image, physical resources, vision and mission, working conditions, employee relations, and so on. Two main internal factors affecting DSF include capital and the management structure. DSF’s management changed severally thus distorting its corporate strategy. Dick Smith also says the company had overspent its money on charity, failing to plough back. The company did not have enough capital to fund its operations fully.

Business level Strategies (BLS)

According to Azriel (1999), BLS are strategic actions taken by an organization to provide value to its clients in an attempt to gain competitive advantage by “exploiting core competencies in individual products and specific market”. They include cost leadership, differentiation, focused low cost, focused differentiation, and integrated low-cost /differentiation.

DSF’s strategy was differentiation where rather than lower prices; it employed the uniqueness in its Australian brand, and sustainability as unique Australian products. DSF also exploited rivalry and barriers to new entrants, effectively edging out much of the competition. DSF also used focused differentiation by providing products for the up market, or the affluent clientele.

Recommendations and Conclusion

As discussed previously, DSF had several changes to its management. It would be wise to re-install Dick Smith as its chief executive officer in order to rebuild and redirect the initial competitive strategy that he had envisioned. He should also find ways of working with multi-nationals instead of demonizing them as anti-Australian, and other local suppliers, because modern business etiquette demands fair competition. The existence of competition is good for DSF so that they may become more effective in their strategy. Dick Smith should also realize the market is much different from the original market, so he should employ new strategies as he revamps the Australian image of his company.

References

Baloch, Q., Inam, M. (2103). Strategic Competitiveness: Creating Firm’s Future. Journal of
Managerial Sciences, Vol.3, No.1
. Retrieved 6 September, 2013, from

http://www.qurtuba.edu.pk/jms/default_files/JMS/3_1/06_qadar.pdf

Ehmke, C. University of Wyoming. (2013). Strategies for Competitive Advantage. Retrieved 5
september, 2103, from http://ag.arizona.edu/arec/wemc/nichemarkets

/05competitiveadvantage.pdf

Jain, T.R., Trehan, M., Trehan, R. (2010). Business Environment. V.K. (India) Enterprises,
Patiala. pp.6 – 8.

Jay, A. (1999). Business Level Strategy. Strategic Management. Retrieved 12 September, 2013,

from http://www.albany.edu/faculty/ja0754/bmgt481/lecture4.html

Porter, M.E. (2012). Competitive Advantage: Enduring Ideas and New Opportunities. Retrieved

10 September 2013, from http://www.isc.hbs.edu/pdf/2012-0622—
Rotman_Strategy_Presentation.pdf

Small Business Advancement National Centre (SBAMNC) University of Central Arkansas.
(2013). Defining Strategic Management. Retrieved 5 September, 2013, from

http://www.sbaer.uca.edu/publications/strategic_management/pdf/01.pdf