Home Hardware Survives In A Tough Retail Landscape - External Environmental Essay.

Brief Overview of the Company

Discuss about the Home Hardware Survives In a Tough Retail Landscape.

Strategic  management is considered to be an essential aspect of the organization and it is the duty of the firm to ensure that it makes effective strategies which will assist the firm in gaining a successful competitive edge (Davis, 2018). For this, the firm is required to continuously assess its external environment to understand the factors which may have an impact on it in the long run. The objective of the report is to understand the external environment of the chosen company, Home Hardware and understand whether the company is moving in the right direction or not. The tools which will be used to analyze the external environment are PESTLE Analysis and Michael Porter`s Five Forces Analysis.

The Home Hardware Stores Limited is a privately held organization based in Canada which deals in home improvement, construction materials and furniture retailing. It was found by Walter Hachbron in the year 1964 and has its headquarters in Ontario, specifically in St. Jacobs. The chain is a cooperative and owned by 1100 independently owned stores. The company has been performing considerably well despite the competition it faced from the Home Depot in the year 1994. The chain store is a popular option for the growing numbers of the do it yourself programs (Davis, 2018). The member owned cooperative has its collective strength and the company has successfully competed against various giants like the RONA and other big box operators.

The different stores under the same banner like Home Building Centre, Home Hardware Building Centre and the Home Furniture banners tend to perform well.

The different capabilities of the company include the following:

• Ability to provide quality products
• Ability to adhere to competition

The competitive advantage of the store is as follows:

• It has been in the market since a long period of time.
• The company has large number of stores (Davis, 2018).
• It’s a cooperative business which makes it powerful.

The external environment analysis is a crucial step when the strategies are required to be made. Hence, in order to conduct an external environmental analysis of Home Hardware, two tools will be used. The first tool is the PESTLE Analysis and the next tool used will be the Porter`s Five Forces Analysis.

The PESTLE Analysis comprises of the Political, Economic, Social, Technological, Legal and Environmental factors which are present in the external environment of the firm and tend to have a strong impact on the functioning of the company (Hill, Jones & Schilling, 2014).

The different customers of the Home Hardware in Canada comprise of governmental contractors and hence, if any relevant changes are made then the company may get affected directly. The company is highly susceptible to the political stability of the organization. The company is a cooperative and hence, in this scenario, there often exists various internal politics that exist within the organization and tend to pose a threat or have a major impact on the organization.

Capabilities and Competitive Advantage

The economic downturn and other crucial economic factors which existed in the American environment had a huge impact on the business organizations and many of the businesses were unable to survive in the given scenario, but this was not the case for Home Hardware and it was able to survive through the turbulent times (Hill, Jones & Schilling, 2014).

This can be related to the rise in the Do it yourself era and the need that houses require repairs and renovations. For this reason, houses often demand products, home repairs and

goods services. However, an increasing problem for the company may is the rise in the millennials who are not purchasing houses currently and this may lead to issues with regard to the business for Home Hardware as they may not have the ability to purchase the furniture’s from these stores (Wheelen et al., 2017). However, for those families who have a high income, the company is performing well.

The social factors generally refer to the demographic factors related to the external environment of a company. In case of Home Hardware, these factors comprise of different factors like the income of the purchasing audience, the choice of the different consumers and their needs. The increasing population of the millennials will not be able to purchase the product but in other cases, the middle class families serve as a good group of customers to the Home Hardware (Hoovers.com, 2018). Certain stores under the brand name provide high quality products as well which assist the needs of the higher income group customers.

The technological factors which tend to have an impact on the business are the advancement of technology with respect to the manufacturing of the products. There have been various technological advances with regard to the tools used for manufacturing and the furniture industry in America has changed (Wheelen et al., 2017). This has had an impact on the supply chain as well as the distribution network which would assist the different companies to make a smooth transition. The social modes of technology with respect to the use of e-commerce can also be used in order to reach out to a wider consumer base.

The company Home Hardware needs to abide by the different legislative regulations, employee disputes, debt disputes, claims and compensations as well as the product liability.

The legislative requirements of the different workers in regard to the Health and safety regulations must be abided by.

PESTLE Analysis

The Home Hardware Company also needs to abide by the different initiatives which are taken in order to improve the environment. The company needs to reduce the use of energy made by it and this shall contribute towards ensuring that the environment and the resources are conserved (Hoovers.com, 2018).   The use of wood in the furniture’s needs to be reduced and replacement by other eco-friendly goods which will go a long way in make the environment a better place.

The porter’s five forces analysis is an effective tool which is then used to analyze the macro environmental factors with respect to the industry in which the company functions in. The five industrial factors which are present in the industry of Home Hardware are as follows:

• Competitive Rivalry
• Bargaining Power of Customers
• Bargaining Power of Suppliers
• Threat of New Entrants or New Entry
• Threat of Substitutes or Substitution

The competitive rivalry can be described as the effect of the competition on the business. With respect to the industry of Home Hardware, the number of competitors are very high. There are companies like Home Depot who recently made an entry in Canada which tends to contribute losing out of customers. The switching cost of the customers are low which makes the competition even fiercer.

The Home Hardware Company faces a strong force from the buyers as well. This aspect of the analysis concentrates on the impact of the different consumers on the business and as the switching cost of the customers are comparatively quite low, the power of the consumers tends to increase (How Home Hardware survives in a tough retail landscape., 2018). Furthermore, the high availability of substitutes tends to make their bargaining power even higher.

The given factor is used to understand the manner in which the different suppliers tend to impose their demands on the company. In the case of Home Hardware, the conditions which make the buyer of the suppliers very weak are the large population of suppliers. Home Hardware can easily switch from one user to another. There exists no exclusivity with the retailers which tends to further weaken the power of the suppliers.

The given case of substitutes tends to pose a considerable threat on the Home Hardware Company. This factor tends to reflect the power of substitutes to have an impact on the business outputs (Hoovers.com, 2018). There are various factors which contribute to this high threat of substitution like its high availability, low switching cost and high performance ratio of the different substitutes which make the threat a strong force.

Porter's Five Forces Analysis

The threat of new entrants in the industry also tends to have a huge impact on the business. This is because this factor acts as a representation of the impact of new firms on the business. As the switching cost is low with the cost of business being moderate in nature, the threat of new entrants is considerably high.

The business strategy which is followed by the Home Hardware was not up to the competitive standards which was demanded by the business environment. However, in the past year, the company has bought about a huge change in its business strategy and wants to compete with the various companies as present in the business environment. Hence, the three given strategic areas will be concentrated on by the chosen organization:

E-commerce- The Company is planning to engage itself into the e-commerce domain. Like its competitors Home Depot and LOWE, Home Hardware plans to make its debut on the e-commerce domain and through this, it plans to ensure that it will be able to increase its market share and be able to increase its revenue (How Home Hardware is renovating its business strategy., 2018).

Marketing and branding- The company wants to improve its brand image and revamp the marketing strategy as well (Home Hardware debuts new brand positioning, 2018). It believes that as competition has increased considerably and the customers have a wide option base to choose from, it will be better for the company to portray their quality products so as to ensure that their popularity increases.

Conclusion

Therefore, from the given analysis it can be stated that the external environment of Home Hardware is highly competitive as there exists a presence of various players in the market. Furthermore, there are various legal and environmental legislatives as well which tend to have an impact on the business. For this reason, the  management has prepared various strategic plans which need to be implemented successfully in order to ensure Home Hardware achieves long term success.

References

Davis, B. (2018). Home Hardware “aggressively going after growth”. Retrieved from https://www.therecord.com/news-story/6866654-home-hardware-aggressively-going-after-growth-/

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Home Hardware debuts new brand positioning. (2018). Retrieved from https://strategyonline.ca/2017/04/12/home-hardware-debuts-new-brand-positioning/

Hoovers.com (2018). Retrieved from https://www.hoovers.com/company-information/cs/company-profile.home_hardware_stores_limited.c619e28df95b1343.html

How Home Hardware is renovating its business strategy. (2018). Retrieved from https://www.theglobeandmail.com/report-on-business/how-home-hardware-is-renovating-its-business-strategy/article33627798/

How Home Hardware survives in a tough retail landscape. (2018). Retrieved from https://marketingmag.ca/brands/how-home-hardware-survives-in-a-tough-retail-landscape-184351/

Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. Pearson.