History of the Company
Harvey Norman has been in operations for 31 years since its formation in 1982 as a partnership between Gerry Harvey and Ian Norman. The retail venture started off as a single store before eventually registering significant success that led to a great expansion (Grant, 2003). The immense success of the pair resulted in the firm going public in 1987 in the Australian Stock Exchange.
The Harvey Norman’s mission statement is four-pronged in its objective, which includes getting recognition as the world’s leader in the retail service delivery within the fast moving consumer goods’ region. Additionally, it targets to generate superior returns to benefit its shareholders to create a workplace that is inspiring, as well as get welcomed within the communities that it operates.
Over the years, several changes and transformations have been witnessed in Harvey Norman. Its business portfolio was expanded for the first time in 1991 to include a computer superstore operation under its structure.
The first international expansion occurred in 1997 when Harvey Norman opened its doors in New Zealand, followed by another significant move in 1998 that saw the firm acquire The Joyce Mayne enterprise and Archie Martin Vox stores (Grant, 2003). Joyce Mayne mainly operated a furniture and appliance business chain.
In 1999, the retailer expanded its international growth further by entering the Singaporean market through a joint venture prior to acquiring the Electric City business chain in the country in 2001. The same year also saw Harvey Norman garner the majority control of the Rebel Sports, another retail chain in Australia.
Continued expansion led Harvey Norman to enter the Slovenian market in 2002 and both the Malaysian and Ireland domestic markets in 2003 (Grant, 2003). Presently, the firm operates in numerous business areas using its principal subsidiaries that include Achiever Computers Pty Ltd, Calardu Pty Ltd, P & E Sale Pty Ltd, and Space Furniture Ltd, among many other subsidiaries.
The Harvey Norman official logo. Source: Harvey Norman (2011)
Target Market
Demography and Psychographics
Harvey Norman deals with a large business portfolio that includes numerous products for the market. This has, in turn, widened its designated target market with a great deal to include male and female buyers.
The computer and tablet portfolio mainly targets youthful individual buyers from the early teenage years of 16 to 55 years old. This portfolio also targets corporate consumers, both middle-and large-scale, acquiring computers for their corporate use.
The individual consumers are seeking to keep pace with the fast growing technology and innovation in the information communication technology. A significant number of these consumers comprise of students intending to use the computers for their studies, gain fast and accurate information, as well as interact through the social media platform.
They have a higher demand for entertainment, such as listening to music, watching movies, and playing highly interactive online games. These buyers are innovators in their own right, constantly seeking to learn about any latest technology advancements and acquiring them to remain most modern. The power of interaction over the internet keeps them informed and inspires their urge to look for more information.
Corporate consumers are interested in enhancing operational efficiency through the use of computers. They intend to measure their activities and actions to obtain accurate results. Companies also target to network their premises to achieve fast and reliable communication amongst their workforce. They are mainly interested in latest advanced computer models that are an improvement of the previous models obtained.
Market Positioning
Their main focus entails delivering the latest high quality and high functional computers to their buyers. Harvey Norman’s business-to-business market segment seeks to ensure that its corporate clients, just like the individual buyers, enjoy a high quality performance of their computers and tablets. The company is among the leading computer retailers in Australia. It is expanding into the global arena to establish itself among the major international market players.
Competitors/Competitive Sustainable Advantage
The Australian superstore market that was pioneered by Harvey Norman has since expanded over the years to attract numerous players. Other retailer firms competing with Harvey Norman include Westel Group Ltd., Woolworths Ltd., Coles Supermarkets, Myer Holdings Ltd., James Richardson Corporation, as well as David Jones Ltd., and Strathfield Group Ltd., among many other players.
Woolworths, for instance, is Australia’s biggest supermarket chain that accounts for the country’s largest market share. The retailer has managed to build a strong customer loyalty that it relies upon to leverage its market competition.
David Jones, on its part, has sustained a great market differentiation focus by exclusively maintaining distribution agreements, agencies, and licenses. This has afforded David Jones a strong brand name.
Competitive advantage
Harvey Norman’s success borders on the resultant economies of scale involving the firm’s purchasing, as well as marketing activities. The distinct store approaches of franchising that the firm pursues equally enhance its competitive advantage in the market.
In this mode of practice, a given Harvey Norman store may house a furniture franchisee, computer products franchisee, as well as an electrical goods franchisee. Such an arrangement gives room for appropriate specialization for the sales staffs, giving the common motivation benefits that result from entrepreneurial franchisees.
SWOT Analysis
Strengths
Harvey Norman has established itself as Australia’s largest electrical, as well as the entertainments goods retailer. This strong establishment influences its market performance through the elaborate branch network and overall market presence.
Harvey has also expanded into the international market where it has set operations in Malaysia, Singapore, Slovenia, New Zealand, and Ireland. This is crucial for its business performance because it has provided an additional market opportunity that, in turn, increases revenues and profits.
The huge business magnitude enjoyed by the retailer enables it to afford attractive promotional offers without putting its operations into jeopardy.
The attractive promotions pull more customers and potential buyers into the company’s numerous stores. This helps in acquiring a wider customer base. Harvey Norman also boasts of a large workforce exceeding 10,000 employees. This enables the company to serve its large number of customers effectively.
Weaknesses
The global retail market is challenging for Harvey Norman because of the characteristically stiff competition. This has seen the firm fail to register a significant growth in terms of the market share. The retailer has also previously faced damaging controversies following allegations that it engaged in illegal business practices. Such negative publicity discourages customers and business partners from associating with the company.
Opportunity
The company’s huge business magnitude put it in a better position to sustain low prices while maintaining high product quality. The retailer can still achieve further expansion, particularly into the lifestyle product segment where it can leverage on its brand name.
Threats
Prices of the electric products have been falling gradually over the years. This tends to reduce the revenue potential of the company, which could as well affect its profit stance.
Mounting pressure from the market, especially within the consumer durable segment about brand name and quality, continues to pose a challenge to Harvey Norman. Equally, maintaining the number one position in the consumer durable segment is highly challenging owing to the stiff competition in the industry.
Current Climate
Harvey Norman has considerably failed in its local market rankings in 2013, which is a trend that began in 2012 (Reilly, 2013). Australian retailers are ranked by considering factors like financial prowess, as well as the how strong the brand name is. This determines the customers’ choice to buy.
The latest rankings place Harvey Norman in the fourth position behind industry rivals Woolworths that has maintained the lead for the second year running (Reilly, 2013). Others include Coles and Burning in positions two and three respectively. This implies that the firm is performing poorly, especially in terms of revenues and profits. This translates into a diminishing customer base.
The waning strength of the Harvey Norman brand name could be because of a weak differentiation strategy pursued by the firm. This could have failed, in turn, to convince buyers that they stand to benefit from a unique shopping experience when they purchase their products from a Harvey Norman store.
On the global market scene, Harvey Norman has equally failed to register convincing growth results. Apart from the New Zealand, Singapore, and Malaysian markets, the retailer’s performance in the Slovenian and Ireland markets has been less convincing over the years.
Overly, the global market suffered a slow growth rate following the global financial crisis that hit the entire global economy between 2008 and 2010. However, the aftershocks of the economic meltdown are still being felt in some parts of the world.
This could be the reason for the slow growth rate recorded by the retailer. Like in the domestic retail market, the global arena is also highly competitive as firms compete to gain market hold. The poor growth results could be as a result of Harvey Norman’s poor understanding of some of the foreign markets, which makes the retailer to commit strategic blunders in its approach.
The Retail Sector Overview
Environmental Factors
Harvey Norman has faced several criticisms over failure on its part to manage the environment. Its extensive business operations create a significant environmental damage, particularly from dumping of waste material (Markets for Change, n.d.).
However, the firm has a significant five-year action plan that highlights its resolutions on how it intends to tackle environmental management and related issues. On the environmental challenge caused by its packaging, Harvey Norman’s specific action plan entails prioritizing “Reduce, Reuse, Recycle” policy.
The firm focuses on availing recycling facilities and maintaining contracts with waste consultants to sustain the policy (Harvey Norman Holdings Ltd, 2012).
Harvey Norman goes a step further to equip its cashiers with knowledge on how to query customer on whether they would need their goods to be packaged in plastic bags. The manufacture of these plastic bags constitutes up to 50% of recycled material and it is degradable as well (Harvey Norman Holdings Ltd, 2012). The franchised retailers preferred packaging their goods in cotton bags.
This would promote the ease of re-use. The company is also involved in collecting polystyrene waste for recycling by outsourcing another firm to do the job. The resultant recycled material is either used in the manufacture of diesel fuel or as a poly resin used in picture frames (Harvey Norman Holdings Ltd, 2012).
Environmental degradation by Harvey Norman. Source: Markets for Change (n.d.)
Economic Factors
The franchise model has enhanced a unique shopping experience at Harvey Norman, enabling the retailer to achieve a significant value addition. The wide variety of products available at any of the retailer’s stores makes it easy to attract many consumers at the same time.
Shoppers are willing to purchase products from Harvey Norman at whatever cost because of the uniqueness and quality that is afforded to them by the numerous franchises housed in the same room. The large economies of scale advantages enjoyed by Harvey Norman make it easy for the firm to introduce and sustain product promotions that attracts price sensitive consumers.
However, the high competition in the industry forces Harvey Norman to maintain its prices as low as possible to outwit its industry rivals. Superstores manage to set their prices at lower rates. This helps the firm to achieve return-buy mainly due to the consistent promotional offers.
The presence of many other retail chains in the market, which also stock the same range of products, makes it challenging to own particular buyers. The low switching costs, which in some instances are non-existent, makes it easy for buyers to visit other retail brands and make their purchases from there.
The Competitive Pressures
The Australian retail market comprises of close to 140,000 retail enterprises (Productivity Commission Inquiry Report, 2011). In the recent past, the industry has faced new international entrants who have further intensified the scope of competition. As a way of containing the competitive pressures, most players in the industry have turned into online retailing to enhance shoppers’ convenience.
Price is the most critical aspect upon which competition in the retail industry is maintained. Players offer numerous price promotions as a way of attracting new customers while hoping to maintain their already existing buyers (Productivity Commission Inquiry Report, 2011).
There are minimal barriers to entry in the industry. This eases the process of joining the market for any willing new firm. For instance, the rate of entry into the retail industry in the country was marked at 13.4% between 2008 and 2009. This highlights the highly dynamic nature of the related competition (Productivity Commission Inquiry Report, 2011).
In a bid to combat the ever-rising market competitive pressures, established retailer brands, such as Woolworths and Coles have resorted to aggressive market acquisitions (Apotolou, 2011). This strategy seeks to increase market share for the specific retail brands. Woolworths, for instance, has acquired Macro Foods and Cellarmasters and pursued branded expansion to increase its market presence (Apotolou, 2011).
The competitive pressures appear to have focused more on achieving close interaction with buyers because virtually all the retailers in Australia are operating or planning to initiate online retailing initiative.
The retail stores are seeking to make the shopping experience a more interactive and convenient exercise to win over and maintain the clientele. Further expansion within Australia seems to be a less strategic move as the market appears saturated. The established players are considering expansion into the international market as the new platform to sustain their competitive wars.
Changing Demographics and Buying Preferences
The Australian population is described as ageing given the progressive rate at which the population is growing older. According to government statistics, the current percentage rate of Australian aged at least 65 stands at 13%, with the figure set to reach the 25% mark by 2050 (Australian Bureau of Statistics, 2012).
This means that the Echo Boomers or the Internet Generation presently constitutes a significant portion of Australian shoppers. As a result, Australia’s general buying preferences is set to border mainly on fashion, as well as popular cultural trends (Daniels, 2007).
The new emerging shoppers are more optimistic and realistic compared to the baby boomers generation. They are well educated and widely travelled. This affects their purchase decisions a great deal (Daniels, 2007). Their independent, sophisticated, and non-traditional nature eliminates the significance and power of word of mouth in persuading or convincing them.
Instead, the greater online communities that they are part of influence their buy decisions largely. The new generation is more inclined to do their shopping while accompanied by friends. They also spend a considerable amount of time browsing through various stores. This makes their shopping no longer an instant act of making purchases (Daniels, 2007).
These trends are likely to become more pronounced as the older generation gradually exits their active shopping era, while the younger generation enters into this phase properly. In essence, Harvey Norman will need to transform its marketing strategies and adopt new approaches that will accommodate the younger generation effectively.
Online retailing remains as one of the best strategies to accommodate this new pressure, but the retailer will need to explore other significant ways to ensure that it positions itself strategically to serve these demanding shoppers.
Young generation shoppers in one of Harvey Norman’s stores. Source: Porter (2012)
Consumer Behaviour Issues
Most consumers are affected by the global economic uncertainty that has affected their buying decisions. The rising interest rates, as well as the high fuel prices have resulted in higher costs of living. This, in turn, reduces the consumers’ buying power.
The highly unpredictable economic situation has affected the sale of non-basic commodities, such as entertainment appliances and computers, as consumers grow wary of their spending behaviour.
Consumers have also grown more inquisitive and cynical as they seek to achieve value for their money. Quality remains as one of the leading priorities for the buyers and any retailer appearing to forfeit this crucial aspect risks losing the market. These consumer behaviour issues, in general, indicate the growing importance for consumer information and knowledge.
Buyers want to understand more before they can eventually make the purchase decisions. Therefore, it is up to Harvey Norman to ensure that such knowledge is availed to buyers readily to help them make informed choices fast.
E-commerce and Technology Influence
E-commerce has been critical in helping firms to increase their overall sales, while improving on their value addition. More consumers can now purchase products from the stores without necessarily appearing physically in the stores. This has increased convenience in the shopping experience as a whole.
It has also increased the level of interaction between customers and retailers because buyers can easily make direct contacts and make special requests. The improved overall customer experience has also enhanced customer loyalty and trust as buyers feel they are being served in a special and customised way.
On the other hand, technology as a whole has helped in increasing the level of efficiency in service delivery by the firms. Communication takes place at a fast rate and more efficiently. This makes it possible for the retailers to maintain low operating costs. The retail industry no longer holds inventory within the store premises because interconnection between suppliers and the stores enables the delivery of stock to happen in real time.
Retail Market Strategy
Retail Format
Harvey Norman runs its business using the department store format. This strategy enables the firm to stock a wide variety of products in its stores and attract a huge customer base. Harvey Norman allocates sales space, sales personnel, and a manager to each of the department stores under its roofs.
This makes it easy for the firm to cater for the special market needs of each of the distinct departments. As a result, each of the departmental stores is performing excellently well as they focus their attention on the specific customer needs.
Location Strategy in the Market Place
Harvey Norman stores are specifically located in the cities and major urban centres in Australia. The company chose these locations mainly as a strategy to tap the high spending urban dwellers who demand for stylish and high quality shopping experience. The cities and urban towns are mostly inhabited by middle class residents. Most of these residents are also relatively youthful in age.
The store locations are easily accessible for the targeted customer base because the stores are mostly situated in popular hot spots within towns and their immediate neighbourhoods. Revellers find such places more appealing because of the convenience involved. Most offices are situated in or around the town areas, thus visiting the stores after the duty is easier.
Retail Mix
Harvey Norman stocks a wide variety of products that include computers, tablets, TV’s, home theatres, iPods, cameras, and mobile phones. The electronics and computer equipment vary in many aspects, including size, colour, brands, and models.
The retailer allows the electronic and computer manufacturers to deliver their latest models whenever they are announced to further present the consumers with a wider product selection. The retailer strictly stocks high quality products manufactured both by national and private companies.
The pricing strategy involves both premium and low prices. The retailer stocks high quality high premium products that mainly target high spending consumers. It also stocks high quality, but low priced products.
The high competition in the retail industry has seen the retailer focus more on the low pricing strategy to attract more consumers. This pricing strategy is more justified given that the firm has to make considerable efforts to attract and maintain a wider market, especially for the price-sensitive customers.
Quality/Level of Customer Service
Harvey Norman offers a comprehensive customer service that includes the manufacturer’s warranty, installation, delivery, TV recycling, refund, return and repair policy, as well as consumer guarantees, among many others (Harvey Norman, 2011).
The extensive customer service ensures that almost all customer care needs are catered for effectively. The retailer should expand the levels of the customer service even further to achieve a greater competitive edge. This would enhance the overall quality.
CRM/Customer Loyalty Program
Harvey Norman has a customer relationship management (CRM) program in place. It uses the program to maintain good relations and interactivity with its customers (Harvey Norman, 2011). This is a strategic business tool that the firm must continue to support to help it build the necessary customer loyalty and trust. The customers use CRM mainly to influence the performance of the retailer to match with their expectations.
However, with its wide customer base and market reach, CRM may prove to be expensive to the overall operations of the firm. Implementing all the demands raised by customers may not be an easy thing to achieve. On the other hand, customers whose demands fail to be fulfilled may feel neglected by the firm and consider the firm less responsive to its market.
Communication Mix
Harvey Norman uses advertising, sales promotion, and public relations for its communications in its marketplace and the market space. These elements are consistent because they all work towards creating market awareness and attracting more buyers to the firm.
Store/Website Layout, Design and Visual Merchandising
Harvey Norman stores are planned according to departments where products with the same characteristics are grouped together. The website layout also groups common merchandise together, making it easy for buyers to navigate with little challenge. There is consistency in both channels because the retailer uses high technology that captures details in real time, thus displaying accurate information at all times.
Recommendations
The international market remains to be the most significant for players as the retail industry continues to experience high innovation and competition. The Australian market is saturated, thus the profit margins will remain poor for a long period. Harvey Norman must, therefore, consider increasing its operations in the international market if it seeks to achieve substantial growth.
However, the international market is potentially tricky and the retailer must approach it with caution. The best strategy would involve forming partnerships and associations with already existing local players to provide the firm with ample opportunity to learn the market.
The emerging economies of China, India, and Brazil are lucrative markets and the firm should consider venturing into them ahead of other international retailers. The middle class in these economies is growing at a high rate, implying that the demand for retail shopping is high.
References
Apotolou, N. (2011). Australia’s retail revolution. Charter Magazine. Web.
Australian Bureau of Statistics (2012). Reflecting a nation: Stories from the 2011 Census, 2012–2013. Web.
Daniels, S. (2007). Retail therapy: Gen Y considerations for the retail industry. Victoria, Australia: The Australian Centre for Retail Studies.
Grant, T. (2003). International directory of company histories, volume 55. Farmington Hills, MI: St. James Press.
Harvey Norman (2011). Harvey Norman online. Web.
Harvey Norman Holdings Ltd (2012). Action Plan July 2010 to June 2015. Web.
Markets for Change. Biomassacre: Logging forests for Bioenergy Report. Web.
Porter, C. (2012). Hypocrite Harvey goes stormin’ into cyberspace. Web.
Productivity Commission Inquiry Report (2011 November 4). Economic structure and performance of the Australian Retail industry, No. 56. Australian Government. Melbourne.
Reilly, C. (2013). Retail brand rankings show a steep drop at Harvey Norman. Web.