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Kathmandu Holdings Strategy

In this report, there is a discussion about the business and competitive strategy of Kathmandu Holdings and how its business performance is evaluated in the context of the strategies embraced by the company. Meanwhile, the is balanced scorecard also added with outlining the four important perspectives named as internal, financial, customer, learning and growth perspectives. In last, various recommendations also have been proposed in relation to the significant areas where the company has an opportunity to improve the performance of the business in the future.

In relation to the company, Kathmandu Holdings is the leading seller for outdoor gear and clothing for travel and adventure established in 1987. The company is having a key presence in Australia, the United Kingdom, the United States and Germany. Moreover, it has nearly 270 stores in New Zealand and Australia as of 2020, a significant rise from the previous year (Hughes, 2020). Meanwhile, the company have employed nearly 400 employees in order to drive its international multi-channel business. Meanwhile, the company is building the best sustainably made outdoor gear – to get individuals to experience nature’s benefits more frequently.

A company strategy ascends from the mission statement signifies different actions and practices the company embraces to attain its short and long term business objectives. A company organisation strategy can be perceived both at the corporate and business level to which the different activities are divided by the management at the functional level so that to synchronize different departments’ activities towards common objectives. Kathmandu Holdings strategy is intended to develop international brands emphasized on active outdoor activities, capitalising in digital channels to deliver customers with a essentially world class integrated commerce knowledge, facilitating the operational distinction of its brands, and leadership in sustainable practices (annualreports.com, 2021). In order to deliver an integrated commerce knowledge, the company is executing introductory common platforms for online and Omni-channel, loyalty management, data comprehensions, and analysis and customization. Meanwhile, leveraging operational distinction is undertaken by Kathmandu Holdings through optimising its supply chain, efficiently managing the fixed cost base, and capitalising to improve core structures to reveal growth prospective crossways loyalty plans and online. The company further propose to boost cross-brand revenue progress prospects. In relation to sustainability, the company aims to underpin everything they do as considering the impact of environmental and social factors. Moreover, Kathmandu Holdings is explicitly betrothed with its individuals and communities and its ESG starts with the interests of employees in the value chain (Grimmer, 2021). In terms of generic strategies, Kathmandu Holdings embrace over differentiation strategy and therefore, strengthening a differentiated place in the outdoors group internationally while getting local customers to reassess and fall back in love with its brand lies at the core of new brand positioning and vision work embark on by Kathmandu (Cameron, 2021).

Kathmandu Holdings Approach to Competition Strategy

Kathmandu Holdings is a leading outdoor brand in Australia, New Zealand and the United States and achieves a competitive advantage through offering a diverse and sustainable product range. It helps the company to attain a competitive edge over the key competitors comprising Mountain Warehouse, Cotswold Outdoor, Yeomans Outdoors and so forth. In order to determine Kathmandu Holdings competitive industry in a more all-inclusive way, it is significant to recognise its strength and position with company internal resources and assess where the business has leveraged a competitive edge in relation to its strategic resources and capabilities. It can be positively assessed through the help of the VRIO model, which has been described as underneath -

Capability and Resources

Valuable

Rare

Imitable or non-substitutable

Organized

Competitive Advantage

Extensive international existence

Yes

Yes

Yes

No

Temporary competitive advantage

Extensive product portfolio

Yes

Yes

Yes

Yes

Sustained competitive advantage

Integrated Supply Chain

Yes

Yes

Yes

Yes

Sustained competitive advantage

Innovation

Yes

Yes

Yes

Yes

Sustained competitive advantage

Strong financial capacity

Yes

Yes

Yes

Yes

Temporary competitive advantage

Competitive Advantage

In relation to the table, it can be said that Kathmandu Holding has strong resources and core capabilities that aid the organisation to reinforce its differentiation strategy in the Australia retail industry. Kathmandu Holding competitive approach is clear as the company have an extensive product and brand portfolio range. More specifically, the company specializes in quality clothing and equipment for travel and adventure whereas Oboz and Rip Curl are important brands making significant differences that underpin the brand success as a source for high-quality outdoor products. Kathmandu holdings further leverage its integrated and 4 tier supply chain to strengthen its competitive advantage where tier 1 is its primary supplier who holds a straight contractual sourcing association for the supply of Kathmandu branded products (kathmanduholdings.com, 2021). In terms of innovation, Kathmandu Holdings is further driving innovative practices to achieve higher sustainability and fits its products to better meet the terms of a circular economy where the company is working towards closing the loop. Meanwhile, the main tenet of Rip Curl and all its brands is their technical innovation and excellence, which enables the company to deliver the greatest possible products for its consumers. However, Kathmandu Holdings have a temporary advantage in terms of having a strong international presence and robust financial capacity. More specifically, the company products are mainly available to the markets of the United States, Australia and New Zealand and this shows that Kathmandu Holdings lack an international presence mainly in the Asia-pacific countries and developing nations.

Kathmandu Holdings performance can be evaluated with its financial year, which was in alignment with the guidance and industry prospects. In relation to Kathmandu Holdings current ratio for the year 2021, it was 1.86 and that shows that the company is in a strong position as its assets will be able to cover its debts that are due at the end of the year (morningstar.com, 2022). Similarly, the quick ratio of Kathmandu Holdings was 0.90 and therefore, the company has no liquid assets to pay its current liabilities and that should be considered with caution. The debt equity ratio of Kathmandu Holdings was 0.47 for the same year (morningstar.com, 2022) and this signifies, the company is not fully utilizing the cheaper source of finance (debt). The return on equity ratio for Kathmandu Holdings was identified as 7.93%. The current Altman Z score for the company also identifies as 2.2 (macroaxis.com, 2021) and it represents the grey area specifying that the company may go bankrupt in the following two years.

The following balanced scorecard represents management with four different outlooks and it further also balances the traditional financial pointers. In relation to Kathmandu Holdings, the balanced scorecard has been stated as below –

Strategic Perspectives

Strategic Objectives

KPIs

Targets

Responsibility/Actions

Financial

Increase profitability and lessen operational costs

Net profit and operating cost

5% rise in the net profit and 4% lessening of operating cost

Senior management and financial division

Customer

Improve customer fulfilment and enhance brand awareness

Proportion of customer satisfaction index

+85% in the year 2024

Marketing division and CRM department

Internal Processes

Advance information system and bring flexibility in service delivery

Cost efficacy index as well as brand awareness score

>70% each focus session

and brand awareness up by 10% annually

All functional departments

Learning and Growth

Strengthen transformational leadership and create a strong performance based culture

Strategies for the personnel growth and company culture practices

25% rise in the performance of personnel’s

HR Management and Department

With the strong leadership, Kathmandu Holdings is continuously developing international brands emphasized on active outdoor activities, capitalizing in digital platforms to offer customers with an essential integrated commerce experience. As stated above, the company strategic position is mainly based on a differentiation approach despite of their market is not much widen, however, the company is successfully managing its core customer segment with having an initial priority to place a management structure for building out Group capabilities. Though, there is a certain gap that needs to be identified and filled so that to attain long term sustainable advantage. New market development and having a global presence is much important for Kathmandu Holdings as the company in the current time have a limited presence whereas it has been also identified that the company is not able to strengthen its core competencies by leveraging its resources in an effective way. Hence, there is a need for transformational leadership in place so that to enable the company to increase its footprints in a number of countries (both developed and Asia pacific regions) as it will help Kathmandu Holdings to achieve a greater economy of scale (Eggers et al, 2017) and support in out-competing the local rivals in the industry.

Financial Performance

In addition, Kathmandu Holdings needs to further invest in the R&D department to bring more new technologies that help the company to make big innovations in materials while also keeping momentum on sustainable resources. This should be in line with the company circular based business models that demands designs for circularity through the value chain, targeting of zero waste supply chain, raising the use of circular materials and improving transparency on the targets (Urbinati, Chiaroni and Chiesa, 2017). Hence, the recommendations included exploring incentives to catalyse a circular textiles economy as well as a prohibition on all textiles from landfills. At next, the number of businesses joining the group continues to grow where Kathmandu Holdings already have included three key brands including Kathmandu, Rip Curl and Oboz that share a focus on expertly designed, technical and sustainable products. Therefore, the company need to further take advantage of collaboration while addressing the social and environmental challenge at a big level. The collaboration will also help brands come together to openly discuss a range of issues associated to ethical sourcing and sustainable business practices, comprising worker voice, stakeholder engagement and transparency in the supply chain (kathmandu.com, 2022). It makes clear that mindfulness can empower the company to approach challenges with a more open mind, higher self-awareness, consideration and creativity.

Conclusion

Ultimately, Kathmandu Holdings is the leading seller for outdoor gear and clothing for travel and adventure while upholding a competitive edge in the industry. With the strong financial position, the company has an opportunity to invest in more areas comprising e-gadgets and more number of outdoor equipment so at to attain a higher economy of scale. Moreover, the company requires to further increase its footprints to more developed and developing nations (such as France, India, Vietnam, Indonesia and Russia) via joint venture and collaboration with the local businesses. Kathmandu Holdings further have an opportunity to embrace all 3 iconic brands i.e. Kathmandu, Rip Curl and Oboz to share an emphasis on proficiently designed, technological and sustainable products. Though, to continue its leadership in the market, it is important for the company to widen its product and service portfolio as well as increase its presence in more regions of the world.

References 

annualreports.com. (2021) Annual Report 2021 [ONLINE] Available from: https://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_KMD_2021.pdf/ [Accessed 21/01/2022].

Cameron, N. (2021) Why Kathmandu is going out there with its new brand platform and purpose [ONLINE] Available from: https://www.cmo.com.au/article/688362/why-kathmandu-going-there-its-new-brand-platform-purpose/ [Accessed 21/01/2022].

Eggers, F., Hatak, I., Kraus, S. and Niemand, T. (2017) Technologies that support marketing and market development in SMEs—Evidence from social networks. Journal of Small Business Management, 55(2), pp.270-302.

Grimmer, L. (2021) Surf’s up: how Rip Curl offset the impact of store closures, travel bans: interview with Heather McIlvaine.

Hughes, C. (2020) Kathmandu holdings limited number of stores in New Zealand from 2018 to 2020 [ONLINE] Available from: https://www.statista.com/statistics/1031055/new-zealand-store-count-kathmandu-holdings-limited/ [Accessed 21/01/2022].

kathmandu.com. (2022) Our Suppliers [ONLINE] Available from: https://www.kathmandu.com.au/our-suppliers/ [Accessed 21/01/2022].

kathmanduholdings.com. (2021) Sustainability Report 2021 [ONLINE] Available from: https://www.kathmanduholdings.com/wp-content/uploads/2021/10/Kathmandu_Sustainability_Report_2021_HR.pdf [Accessed 21/01/2022].

macroaxis.com. (2021) Kathmandu Z Score [ONLINE] Available from: https://www.macroaxis.com/invest/ratio/KMD.NZ/Z-Score [Accessed 21/01/2022].

morningstar.com. (2022) Kathmandu Holdings Ltd [ONLINE] Available from: https://www.morningstar.com/stocks/xnze/kmd/trailing-returns [Accessed 21/01/2022].

Urbinati, A., Chiaroni, D. and Chiesa, V. (2017) Towards a new taxonomy of circular economy business models. Journal of Cleaner Production, 168(1), pp.487-498.

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