STRATEGIC ANALYSIS
STRATEGIC ANALYSIS
TABLE OF CONTENTS
1. INTRODUCTION
2. INTERNAL ANALYSIS
2.1 Ashridge Mission Model
2.3 Value Chain Analysis
2.4 Financial Analysis
3. EXTERNAL ANALYSIS
3.1 Porter’s Five Forces Analysis
3.2 Ansoff Matrix
3.3 PEST Analysis
3.4 SWOT Analysis
4. CORPORATE APPRAISAL
4.1 SPACE Analysis
4.2 TOWS
4.3 Strategic Choices
4.4 SAF Analysis
5. IMPLEMENTATION
5.1 Balanced Scorecard
5.2 Strategy Mapping
5.3 Monitoring
2. INTERNAL ANALYSIS
2.1 ASHRIDGE MISSION MODEL
Mission:
Holland and Barrett is a natural food supplement company. Its aim is to provide
quality products with affordable pricing.
Values:
Holland and Barrett places a huge confidence on their products because of high
research and development and quality of their product. The company is very
careful in choosing its raw material and takes special care of health and safety
standards. The company does not believe in the intermediary. When a customer
buys from H&B, the money charged according to the manufactures rate. The
company believes in testing the manufactures drug for any potency and purity.
This is done to provide the highest quality of product to the consumer.
Standards and behaviours:
The company retails health products and nutrient supplements with a wide
variety. With having more than fifty more products in the same industry, H&B
makes sure that all the products sold by them would have top quality material
used for their products.
H&B is a market leader in the UK. Being the market leader the company excels
in the Health and nutrition market. The uniqueness about the company is that
the company has never diverged from this industry since its introduction to the
UK. One cannot consider H&B low cost product producing company but it would
have one of the most competitive prices in against its competition, which
would be Julian Graves, which is a large independent specialist natural food
and ingredients retailer. Being a market leader the company has strict policies
in relation to environment and has popular initiatives such as “PLANT IT
GREEN”. The company invests into this policy every year, which makes this
company a responsible company.
Strategy:
The company is a headliner in the nutrition and special food supplements
industry. With over five hundred stores across UK and having a store on every
major high street in the country, the company plans to portray itself as a day-to-
day product for every household. The company has various tie-ups with local
vendors, which makes it a unique company as it tries to support its industry and
the local UK market in totality.
With its Plant-it-green, initiative the company has invested heavily into waste-
management. This makes the company a Green company, which is the need of
the hour in today’s day and age. The company also in the year 2001 committed
itself to no plastic bags policy. This initiative had put the whole industry into a
change, as they had to reinvent the way packaging was finished for their
products. As H&B had used 90% of the recycled material, which was, made in
their own plant, this saved them the cost of buying new packaging material and
made them a Green company, which had a minimal carbon footprint.
Using all the merits, the company has to its name and with various awards
under its belt. The company has expansion plans to other parts of Europe. The
company has the capability both ethically and financially to move on to other
EU and non-EU zones. Using current topics such as ban of genetically modified
organisms, the company would gain a lot of attention from the countries, which
has Farming as their Primary business. Having a huge chain of suppliers in UK
makes it a reliable retail company, which can guarantee good quality products
at any given point of time. The companies return policy, which is very flexible,
makes it an attractive business model, and is an attractive business strategy.
Key Points from Ashridge Mission Model:
The company has a huge diversified strategy, which makes it difficult for
themselves to follow their goals.
In spite of being the leader company in its sector, the company has difficulties
growing into the sector.
Using good resources and testing it makes this company unique.
The various Green initiatives is a marketable point and strategically it would
help the company go into zones and countries which are green conscious for
example ICELAND where the government has strict emission and recycle laws.
2.3 VALUE CHAIN ANALYSIS
From the value chain analysis it clear that H&B tries to focus a lot on its quality of
products both at the time of sourcing to selling. The company also focuses to be an
environment friendly company. The company in spite being a market leader tries to
keep its product pricing competitive to the market. The various green initiatives taken
by the company such as “plant a green” and “save a mug scheme” gives a positive
image to the consumer.
Inbound Logistics
Operations Management
Outbound logistics
Marketing/Sales
Service
Ensuring right raw materials
Quality controlled packaging.
Fuel consumption in transportation
Medium-too high range products
Home delivery
Strong belief in ethical purchasing of raw material
Various environment friendly initiatives
Shared delivery mechanisms with various shippers and other firms
Few advertising campaigns.
Assured money back service in case of faulty product.
Monitoring environmental impact of the suppliers.
Use of recycled products within the company.
Less stock of any range of products retailed by the company.
Market leader and a very strong presence in the industry
Quality assurance.
Source organic equivalent
Reducing carbon footprint.
Using internet as a mode of making sales.
In store advisors.
Keynotes from Value chain analysis:
The companies Inbound and Outbound logistics are of key importance as the
company is essentially a retailing business with additional measures such as quality
check, it becomes very important to the company to take certain measures such as
checking and monitoring the goods they choose to put on their shelves. The other
notable factor would be the company’s 90% effort to use recycled material as much
as possible. This step makes the company an ECO-FRIENDLY Company that is the
need of the hour and is a positive marketing technique. Company’s Weak attempt
on selling its products on the internet should be looked into as the company’s
reports claims that there are some products, which are not available on their
website. Companies website can also be upgraded to the Industry or competition
standard as this would help company to generate and attract more sales. The
procurement by the company is streamed line. However, looking at the company’s
value chain and the service quadrant the companies on-site help is not a major
attraction point as it was in the past.
2.4 FINANCIAL ANALYSIS (Internal & External)
Income Statement, Balance Sheet and ratio Analysis:
31.57Profit Margin 17.32 16.49 18.95 23.61 24.30
1,02,543 57,453
58,150
Shareholders Funds 92,042 93,985 76,140 68,429
Net Tangible Assets (Liab.) 91,867 93,531 76,239 69,199 1,02,907
Profit (Loss) before Taxation 47,716 41,161 46,284 61,972 64,204 81,286
Turnover 2,75,571 2,49,645 2,44,303 2,62,455 2,64,204 2,57,498
UK GAAP
Unqualified Unqualified
Unqualified Unqualified Unqualified
Uncons. Uncons. Uncons. Uncons. Uncons. Uncons.
12 months 12 months 12 months12 months 12 months 12 months
th GBP th GBP th GBP th GBP th GBP th GBP
30/09/200530/09/2008 30/09/2007
Unqualified
30/09/200630/09/2010 30/09/2009
The two main factors for growth and sustainability have been affected in the following
fashion:
The company has witnessed a sharp fall in revenues by 6.9% for the FY – 2008
as a comparison to YOY performance with FY 2007. This under further
investigation has not only been attributed to the economic downturn caused by
the recession but also due to the fall in demand of particular health supplement
products.
The profits to the company have been a concern area since FY’ 07 which have
been on a decline mode owing to the increase in operational costs which can be
attributed to operational inefficiency.
Balance Sheet:
UK GAAP
Unqualified Unqualified
Unqualified Unqualified Unqualified
Uncons. Uncons. Uncons. Uncons. Uncons. Uncons.
12 months 12 months 12 months12 months 12 months 12 months
th GBP th GBP th GBP th GBP th GBP th GBP
30/09/200530/09/2008 30/09/2007
Unqualified
30/09/200630/09/2010 30/09/2009
30,313Fixed Assets 52,378 37,386 38,374 36,761 29,336
1,80,649Current Assets 4,45,315 3,99,859 3,59,446 3,28,516 2,23,946
-1,52,435Current Liabilities -4,05,316 -3,43,170 -3,21,177 -2,95,649 -1,49,921
58,527Total Assets less Cur. Liab. 92,377 94,075 76,643 69,628 1,03,361
2,53,282 2,10,962
28,214
Total Assets 4,97,693 4,37,245 3,97,820 3,65,277
Working Capital 39,999 56,689 38,269 32,867 74,025
Examining the current assets of the company indicate a steady growth pattern which is evident from the expansion of the firm in the form of multiple stores across UK. This displays that the firm has chosen an aggressive growth strategy to capture potential market share that the firm has lost out to supermarkets and chemists.
Ratio Analysis:
GBP GBP GBP GBP GBP GBP
Current RatioLiquidity RatioShareholders Liquidity RatioSolvency Ratio (%)Asset CoverGearing Ratio (%)Return on Shareholders Funds (%)Return on Capital Employed (%)Shareholders Funds per EmployeeWorking Capital per EmployeeTotal Assets per Employee
30-09-2010 30-09-2009 30-09-2008 30-09-2007 30-09-2006
1,38,788 1,31,069 1,16,220 1,03,507 71,227 60,069
11,154 16,993 11,180 9,313 20,817 8,034
25,667 28,173 22,244 19,390 28,837 16,359
51.65 43.75 60.39 89.00 62.12 138.89
51.84 43.80 60.79 90.56 62.61 141.48
330.31 378.74 385.86 117.38 207.24
53.49
21.49 19.14 18.73 40.49 27.23
1.19
1.04 1.02 0.99 1.28 0.96
Structure Ratios
Profitability Ratios
Per Employee Ratios
1.10
0.98
274.75
18.49
379.63
n.s. 151.37 57.07 125.36
1.17 1.12 1.11 1.49
30-09-2005
The current ratio, though positive, indicates a fluctuating behaviour of the firm
that puts the liquidity at risk which could result in instability of the firm.
The significant increase in gearing ratio beginning with FY’07 demonstrates that
the firm has been on a growth strategy since FY’07.
3. EXTERNAL ANALYSIS
3.1 PORTER’S FIVE FORCES ANALYSIS
Bargaining power ofbuyers Notes
Buyer leverage – information
Medium: The company can improve its marketing by giving more information about their product.
Importance of quality in final product
High: The intense commitment to quality goods at exceptional values is one of the prime objectives of the company.
Brand identityHigh: A market leader in the industry, is known for the quality products.
Easily copied
Medium: There are companies which are producing similar products but Holland & Barrett is well known by its quality products and the other products may not be of the same standards.
2) Bargaining power of suppliers Notes
Presence of substitute
Medium: Substitutes are present in the same industry, but due to the firms history the firm is not challenged in respect to its product quality.
Impact of IT – better access to information
High: A detailed information about all the companies product would help them generate more sales.
Impact of IT – closer supplier relationships
Medium: advertise the suppliers name or any associations with any supplier.
3) Threat of substitutes NotesRelative price performance of substitutes
Low: H&B tries to keep the prices of its product as competitive to the market.
4) Entry of new competitors Notes
Brand identity / customer loyalty
High: Company has long history and strong brand identity but their customer base is getting cut because of new incomers to the market.
Capital requirements
Low: H&B is owned by corporate giants such as NBTY & Carlyle Group. So capital generation is not a big threat to the firm.
Distribution channels
High: Company has already good distribution channels but due to consolidated market the entry barriers are high for the competition.
Product knowledge
High: The company is known for the specialist products, this gives them an edge over the competition with the years of expertise.
5) Rivalry among existing competitors Notes
Industry growth
High: Due to the subtle industry growth the companies growth is matched evenly to the market.
Product differencesMedium: Some product are similar but most of the products they are producing in their
Brand strength High: Company has 80 years of experience in
the health supplement industry.
Diversity and concentration of competitors
High: With the competition in the industry from Superdrug or boots who are not the exact competition to H&B.
3.2 ANSOFF MATRIX
The Ansoff Growth Matrix can help to evaluate product and market growth strategy, in
fact from the table n. x it is clear that H&B has pursued a market penetration strategy.
This thanks to online pricing strategies and new more attractive packaging,
nevertheless it is possible a market development are still possible in this sector, by
promoting their products during Olympics and by extending the variety of sport
integrators.
Existing products New Products
Existing Markets
Online price reductions
New packaging for evening primrose and cod oils
Increase food variety offer
Extend of Whey Protein substitutes
Improve in-store qualified advice
Develop anti-age and baby products
Premium indulgence yogurt
New Markets
Natural beauty products
Promote the benefits of healthy food during Olympics
International export, especially in EU
Diversify product lines of food (i.e. gluten free)
Targeting new customer segment
Opt for a diversified conglomerate
3.3 PEST ANALYSIS
PoliticalProbability Impact Total
EU's Food Supplement Directive (FSD) (the company was burdened with this directive)
4 -5 -20
Company still had products, which were still under government investigation.
3 -4 -12
Industry growth rate (2%) (source-Mintel) 5 -2 -10
Social
Older generations have various health conditions such as heart, joint related problems etc. such problems can be controlled with the help of VMC’s.
5 4 20
Specialised VMC’s is the need of the hour. 5 3 15
Many people are Opting a healthier lifestyle due to various health related problems.
4 3 12
There are questions in relation to the scientific reliability of some of these VMC’s.
2 3 6
Economical
Rising taxes have always been an issue for the company, but due to the slowdown, it has become more evident in the companies function.
3 -4 -12
Market sensitivity, the nature of the market is very fragile, due to which it becomes very news driven market.
3 -5 -15
The company has a very small target market, cause of which demand of the products are highly consumer-oriented.
4 -2 -8
Technological
The companies store can revamp their stores to match competition like Superdrug or boots
3 2 6
Company’s website can provide all the range available with them as this would help in increasing sales and would help in developing the market.
2 3 6
Company’s stores could use in-store advisors who can help the customer to choose the right product for them.
2 1 2
Key points from Pest analysis:
Holland and Barrett is a VMC specialist, the company has been one of the pioneer
companies in this market. Doing an in-depth research on this company revealed that
company has many external factors, which could be the reason for the little growth it
had seen. The industry, which was already “overburdened” by various laws and
regulations lead to the series of meetings with various European commissions in order
to find a practical solution to such problems. (http://www.whitehouseconsulting.co.uk/case_studies.html).
According to the company’s website, there are various products, which are not
approved by the FDA. This could be a worrying factor for the company as these are
the most commonly used indigents used in all H&B products.
(http://www.hollandandbarrett.com/pages/healthnotes.asp?Resource=%2Fassets%2Ffeature%2Fare-herbal-supplements-safe_13011_4%2F~default) . The
company also challenges an issue of health supplements being considered a safe
haven for its consumers as there is no confirm scientific explanation or result which
proves it to be 100% safe. (http://www.hollandandbarrett.com/pages/healthnotes.asp?Resource=%2Fassets%2Ffeature%2Fare-herbal-
supplements-safe_13011_4%2F~default).
The company has been in a market, which has not seen too much growth in the last
few years. According to Mintel, the industry grew by 2%, which makes any industry
very unattractive, due the economic slowdown in the year 2008 the company faced a
further crisis of selling the product as its product was considered a luxury product.
Looking at the current market scenario the company faces a hoard of external factors
which are affecting the business. Some of these factors are bound to get solved,
whereas some would have no immediate solution but, would have a temporary one.
PEST helps in pointing out such problems or so called “grey-areas” which a company
would use to chart out their future plans.
3.4 SWOT ANALYSIS
Holland & Barrett has decades of brand loyalty and awareness from its customers, but
in order to keep its competitiveness it must not surrender to its Financial limitation
due to the franchising formula. H&B has many opportunities such as Olympic Games
could bring greater focus on sports and fitness and this could help the market of Whey
protein.
However the Company has to deal with new EU regulation of self medication products and the rise of
similar but competitive shops in the food supplement sector.
SWOT AnalysisSTRENGHTS Brand awareness
Brand Loyalty Broad offer of healthy foods and sport supplements High coverage of UK territory
WEAKNESSES Holland & Barrett should turnaround declining sales Financial position limitation due to franchising formula H&B is not presented as a contemporary, lively retailer
OPPORTUNITIES Sports nutrition supplements, as Whey Protein Online shop development, which offers detailed products
info Olympics could bring greater focus on sports and fitness Introduction of natural beauty, baby products
THREATS European Law regulation of self-medication products Adverse publicity and boycotts, due to the use
of workfare participants Low controls on franchising shops Fitness product shops that sells similar items with
competitive prices
4. CORPORATE APPRAISAL
4.1 SPACE MATRIX: A snapshot of firm’s posture
Further to the analysis from the Internal and external audit, key interpolative factors influencing the
performance of the firm have been subjected to be plotted on a Cartesian graph. This helps in determining
the current posture of the firm and therefore hints the firm of the future strategy to incorporate.
Business Strengths (BS) Score Brand Image 4Market Share 5Vertical Integration 3Product Quality 4Technological Know-how 2 Average -2.4
Environmental Stability (ES) Score Inflation 3Technology 5Competition Intensity 6Price of competing Products 5Elasticity of Demand 4Average -1.4
The plotted graph above indicates that the firm is in an aggressive posture owing to
the financial leverage the firm has in addition to the leading position they have
attained for years. A strong financial support by Carlyle group and an enjoyable
market share also indicate that the firm has substantial competitive advantage in their
line of business. However, with the outcomes from the Ansoff growth matrix and the
industry dynamics, it is suggested that the firm chooses a market development
strategy in order to consolidate the market leadership position in order to avoid losing
out to the non-specialists such as supermarkets and chemists who compete indirectly
with H&B in this scattered market.
Financial Strengths (FS) ScoreFinancial Leverage 4Liquidity 3Return on Assets 1Financial Risk 2Cash Flows 2Average 2.4
Industry Attractiveness (IA) ScoreGrowth Potential 2Entry barriers 5Consolidation 5Access to Financing 4Financial Stability 3Average 3.8
Space Graph:
Aggressive
4.3 TOWS
EXTERNAL
OPPORTUNITIES(O)
1. New Sports nutrition supplements i.e. Protein Powder
2. Online shop 3. Olympics ads invite to an
healthier lifestyle
EXTERNAL THREATS
(T)
1. European Law regulation
2. Adverse publicity 3. Franchising
disadvantages4. Competitive
substitute sellers
INTERNAL STRENGHTS
(S)
1. Good brand awareness
2. Brand Loyalty3. Broad offer of
healthy foods and sport supplements
4. High coverage of UK territory
1. Improving Online shop experience by offering more detailed product info (S1,02)
2. Increasing variety of sport supplements (S3,01)
3. Creating a mktg campaign in line with Olympics games(S1,S3,S4,03)
1. Increasing online ads to promote their fair-trade (S1,S4,T1)
2. Creating specific promotion after the segmentation of potential clients (S1,S4,T4)
INTERNAL WEAKNESSES
(W)
1. Possible turnaround of declining sales
2. Financial limitation due to franchising formula
3. Old fashioned style retailer
1. Training franchisees on the newest products (W2, O1)
2. Launching online new sport supplements i.e. L-Carnitine drinks (W1,W3,O1,O2)
1. Reducing threat of competitive seller by re-innovating company style (W3,T2,T4)
2. Creating a new marketing campaign eco-friendly (W1,W3,T2)
Strategic Priorities
1. Reducing threat of competitive seller by re-innovating company style (W3,T2,T4)
2. Creating specific promotion after the segmentation of potential clients (S1,S4,T4)
3. Improving Online shop experience by offering more detailed product info (S1,02)
4. Training franchisee on the newest products (W2, O1)
4.4 STRATEGIC CHOICES
TOWS strategies have been prioritised in 4 levels which have conducted to a choice
evaluation (Ansoff):
1. Improve market development initiatives by facilitating experiential
marketing strategies and increase the awareness of health supplement
products which can stimulate increased perception towards consumer’s
behaviour and market growth both on line and in stores.
2. To enhance vertical Integration and develop premium products or
create bundle offer for segmented groups. For instance, developing
specialist products for special needs could help create a niche area which could
demand a premium pricing, thus resulting in greater profit margins.
3. To consolidate the market leadership position with an approach
towards horizontal integration by allowing the available store presence to
offer extended and complimentary health advisory services to premium
customers which translates into customer loyalty and return on space. This can
further be supported by enhancing the existing online experience by providing
the consumers with information related to all products and latest developments
in the market.
4.5 SAF Analysis
SAF: A multi - dimensional screening
The emerged strategic choices from above are subjected to SAF framework for the
purpose of assessing their Suitability, Acceptability and Feasibility of the options
before contributing to the firm’s strategy.
Suitability Matrix: Firstly, the evolved strategic choices are graded against the
objectives of the firm in order to gauge the weighted average of each choice. A
stronger average yields a better fit against the firm’s objectives. Below are the options
weighted along with the objectives of H&B.
OPTION
OBJECTIVE 1
Sustaining Market leadership
OBJECTIVE 2
Increasing customer base
OBJECTIVE 3
Lower operating costs
Weighted
TOTAL
RELEVANCE
PROBABILITY
Weighted
SCORE
RELEVANCE
PROBABILITY
Weighted
SCORE
RELEVANCE
PROBABILITY
Weighted
SCORE
1 2 0.35 0.70 3 0.35 1.05 1 0.30 0.30
2.05
2 4 1.40 4 1.40 2 0.60
3.4
3 3 1.05 5 1.75 1 0.30
3.1
Acceptability Analysis: To check the acceptability of the options by the various
stakeholders involved in the firm.
Stakeholders Option 1 Option 2 Option 3
Franchisee NO (Involves high upfront costs to revamp stores)
YES NO (Increases operational costs)
Investors YES (compliments and justifies the previous investments)
YES NO (is an extra cost and time taking to achieve ROA)
Customers YES (provides a pleasant shopping experience)
YES & NO
(While the selection of products might get easier, they come with additional costs)
YES (educates the consumers better and offers additional services. This is a key differentiator from non-specialists.)
Staff YES YES YES (opens up new areas for learning and offerings & NO (could affect in store sales)
Suppliers YES ( Promotes sales)
YES (results in Increased market)
NO (Increased awareness might result in rejection of lower quality products.)
Overall Acceptability Grade
Overall Acceptability Outcome
YES Strong YES YES (With a strong support from customers despite 3 NO’s from other stakeholders).
Feasibility of options:
Option Finance Time Resource
s
Technolo
gy
Personn
el
Feasible
1 NO YES Partial
YES
NO YES
(partial
training
required
)
Partial
YES
2 YES YES YES YES YES STRON
G YES
3 NO NO NO
(Addition
al
staffing
required)
YES NO
(Intensiv
e
training
required
)
NO
Summary:
Investigation into Suitability, Acceptability and Feasibility of the strategic choices have
led to the consensus that the option 2 of vertical integration leading to the
development of segmented products might be the appropriate course of action to
formulate a market development strategy to HnB. However, the only anticipated
obligation arising from this option could be the extra premium price that the
consumers might to bear with. This could be justified by also considering a partial
horizontal integration strategy which allows at least a few selected stores of the firm
to offer additional services such as health consulting, dieticians and an initiative to
build increased awareness of the need for health supplements to the target
consumers. Though Options 1 and 3 could not be completely ignored, it is advised to
educate the potential consumers with the benefits of products where the firm holds a
market leadership in order to consolidate the position before the firm chooses to
deploy a horizontal integration in the future.