This is an informal report addressed to the City Analyst outlining the analysis and evaluation of HMV Group plc’s environmental and strategic position, giving suggested new organisational strategies and plans.
Environmental and Organisational Audit
Environmental and organisational audits are used to discover a company’s position in their market and environment, and the company’s physical position. Two possible environmental audit techniques that can be done on a company like HMV Group plc are Porter’s 5 Forces and PESTEL analysis.
Porter’s 5 Forces
(Source: Franteractive Inc, 2008-2009)
Porter's Five Forces model is made up by identification of 5 fundamental competitive forces:
Rivalry among the existing players
HMV Group plc is one of the world’s leading retailers of music and DVD and the leading retailer of books in the UK and Ireland in terms of total sales; with HMV operating through 692 stores in 7 countries and online, and Waterstone’s operating through 313 stores in the 4 countries and online (HMV Group plc, 2009a). Even though HMV Group plc is a huge successful company, they still have to keep a close eye on their competition, because it is always possible for one of the competitors to develop in a way that will increase their market share overtaking HMV. Such competitors include, Amazon, Play.com, supermarkets, iTunes, eBay, WH Smiths, Borders and although illegal, piracy.
Threat of new entrants
Threats of new entrants should always be of worry to any business no matter how big and established they are. It is unlikely that a new entrant will pose an immediate effect on HMV Group plc, because is an extremely difficult task to get high market share as soon as one enters a market; but it will mean more pressure on HMV Group. However if a well establish company moves into HMV Group’s market it is likely that they get high market share quickly, and if HMV Group don’t have a contingency plan for a situation like that it can be fatal for the business. In the current economic climate it is unlikely that there will be many threats of new companies, but it might mean that other companies in other markets may be looking to deviate to try and promote more income.
Threat of substitutes
Substitutes may be a possible problem for HMV Group, because there are many out there and with the constant improvement in technology it becomes an increasingly present threat. Substitutes for HMV Group products can be, hiring of products from places such as Blockbusters, downloading legally and illegally, second hand products through the means of services such as eBay and technology changes such as digital books.
Bargaining power of buyers
The Barging power of HMV Group’s buyers is quite high, because it is relatively easy for them to switch to a new supplier, i.e. one of HMV Group’s competitors. HMV Group can overcome this problem by offering discounts and by possibly offering a unique selling point to their products. By understanding the bargaining power of your buyers, helps establish the importance of keeping them happy, which is effective the number one priority, because this is where the revenue comes from.
Bargaining power of suppliers
The barging power of suppliers for HMV Group may be low, because HMV Group is a large well establish company with a possible high buying power. HMV Group’s suppliers will have to keep HMV Group happy or they will just find a new supplier. This means HMV Group is able to almost bully their suppliers into doing what they want, because of the threat of HMV Group leaving that supplier. This is a great attribute to have, because it means HMV Group may enjoy discounts that other company’s don’t and the payment terms will suit them( Johnson and Scholes 2002, page 117). If however the supplier had a unique selling point, such as a patent on one of their products, this would substantially increase the bargaining power meaning HMV Group would have to...
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