Dick Smith Case Study
Strategic management and strategy is a key factor when trying to compete and the external and internal environment needs to be analysed to do it effectively. By using business level strategy Dick Smith can compete with its competitors and achieve its goal of being one of the main brands that Australians prefer to buy. Strategic management is defined as dealing with the major intended and emergent initiatives aken by general managers on behalf of owners involving utilization of resources to enhance the performance of firms in their external environment (Harrington and Ottenbacher, 2010).
By using strategic management firms can gain a competitive advantage over other firms and compete with them. Blumentritt (2006) explains that strategic management is a process of beginning with a mission and vision. After its goals are set analysis and planning begins followed by implementation. An evaluation takes place at the conclusion. The nature of competition in many world industries is changing; there is a new landscape in the 21st entury. There is hyper competition like never before, technological advancements are at a high and investments are becoming enormous.
Technology is constantly changing so businesses must adapt to stay up to date and use their resources wisely. Fleck (2008) talks about disruptive technologies and how they caused problems. He explained that disruptive technologies bring a new value proposition to the market and offer different features. The rate of technological improvements tends to be faster than the improvement demanded by customers. Ngamkroeckjoti and Johri (2003) describe hyper competition as rapidly scalating competition arising from strategic decisions made by global and innovative competitors. Dick Smith foods is in a difficult position as it is not selling its product as cheaply as international competitors, hoping that its Australian made product will appeal to Australians for them not to buy from overseas.
With technology being so advanced to produce so much so cheaply, Dick Smith will struggle to appeal to a market who simply wants the cheapest product. Kefalas (2007) states that there are six sectors in the general business external environment hich must be considered when implementing strategy. He talked about the demographic, economic, socio-cultural, legal, technological and global sectors. As Dick Smith is concerned about products being bought from overseas instead of within the country, he is focusing on the socio-cultural aspect of the general environment. Another segment he would be researching would be global markets as he has to compete with all the cheaper alternatives. Mason (2007) talks about the five sources model of competition which includes threat of new ntrants, power of suppliers, power of buyers, threat of product substitutes and intensity of rivalry among competitors.
Mason talks about products needing to be differentiated; products must be at competitive prices and must be unique in order to attract customer loyalty. Smith appeals to customers with its unique Australian branding but prices are not as competitive as cheaper alternatives from overseas. Customer loyalty would be crucial for Smith to stay competitive as this is why he created the brand, to appeal to Australians. He must also be ware of the rivalry among competitors, it is a popular industry but with his iconic brand name he can be unique from the rest.
The external environment is very important to all businesses as they must know what they are up against, especially one that must compete with the world. Not only does the external environment need to be analysed but also the internal environment which relates to processes inside the business. Chen and Mohamed (2007) talks about the internal environment, how it involves resources, core capabilities and core competencies.
Resources are described by Martin and Zaghloul (2011) as inputs into a firm’s production process. Capabilities are used to deploy resources and are based on developing the organisation through human capital. They also talk about core competencies and how they provide a framework that articulates professional skills and set benchmarks from which success can be demonstrated. Dick Smith uses its resources to outsource its products from other Australian businesses and then the Dick Smith label is presented on the product.
This has caused controversy and critics state that all Dick Smith is oing is pushing out other Australian owned businesses. Willcocks (2011) states the obvious in that outsourcing is beneficial due to cost savings and greater value of the product overall. As Dick Smith products are already at a higher cost due to not coming from cheaper labour overseas, outsourcing is a crucial part to their production process. Corporate level strategy relates to product and market choices of a firm and business level strategy defines how well it deploys its resources in a given market when facing their competitors says Nandakumar, Ghobadian and O’Regan (2010).
They also go on to explain about the different strategies such as differentiation, focus and cost leadership. Baack and Boggs (2007) describes these strategies as being vital as they are a result of environmental features but are rooted in the firm’s decision to pursue a broad or narrow target market and a uniqueness or cost competency. Dick Smith specifically focuses on the differentiated and focus strategies due to their appeal and focus on the Australian market. He makes his product different by purely being Australian and making it clear that it is not made cheaply verseas, keeping a lot of Australia’s labour force out of employment. This would also mean having a large focus on Australians and the target market of those who do not want to be replaced by international competitors.
These strategies will appeal in the future as more products are moving overseas, it is a smart strategy that appeals to true Australians. Dick Smith is an Australian brand that needs to use strategic management as it needs to compete with much cheaper international alternatives. As the 21st century has become focused on technology and is hypercompetitive, Dick Smith must compete in an ever rowing world. He must be wary of the five sources, being aware of product substitutes and intensity of competitors.
As well as being aware of these external factors he must focus on using resources wisely and continue outsourcing to reduce costs. Dick Smith is still staying competitive even though his profit has reduced considerably over the years. He uses smart business level strategies such as differentiation and focus to appeal to Australians as a group to keep jobs here. Overall Dick Smith has been competitive over the years even though competitiveness has been lacking recently.