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Strategic Operation Management (Case Study of Iceland))

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  • 2012Strategic and Operation Management Mominul Plabon 9/11/2012
  • 2|Page Executive SummaryThe following strategic and operation plan forms the basis for the strategic analysis ofIceland Food. A number of techniques have been used to identify the market position ofIceland and the outcome of the analysis enabled the researcher to identify the issues thatneed to be taken into account when Iceland devise their future business strategies. From theanalysis it is found that Iceland has a sizable market in the United Kingdom while they aresuccessfully competing on price and quality. Furthermore, the growth strategy of Iceland isvery progressive unless they consider some issues such as targeting only lower incomelevel buyer, specialising only on frozen food and some other issues. A detailed report can befound in the following sections.Key Words: Strategy, Stakeholder, Product
  • 3|Page Table of Contents1.1 Company Profile..................................................................................................1.2 Expectations of Stakeholders ............................................................................ 51.3 External Environment analysis ......................................................................... 61.4 Competitive Analysis ......................................................................................... 71.5 Strengths and Weaknesses ............................................................................... 92.1 Strategic Choice .............................................................................................. 102.1.1 Market penetration through existing product in UK market ......................... 112.1.2 Introducing new product into UK market ..................................................... 112.1.3 Considering EU/ Overseas Market ............................................................... 112.1.4 Diversification into other businesses............................................................ 122.2 Stakeholder Acceptability................................................................................ 122.3 The viability of Product Development Strategy ................................................ 132.4 Methods for Achieving Strategic Option .......................................................... 133.1 Strategy Implementation ................................................................................. 153.2 Strategic Direction .......................................................................................... 153.3 Implementation challenges ............................................................................. 163.4 Managing Challenges ...................................................................................... 174. Concluding Remarks ........................................................................................ 175. References ........................................................................................................ 18
  • 4|PageCompany profileI celand Food is one of the biggest food retailers in the United Kingdom which is mostly renowned for delivering consumer products at affordable prices and its good quality frozen food. Dating back to the past, Iceland was founded by its present ChiefExecutive Officer Malkom Walker CBO in 1970 (Iceland, 2012). The company CEO startedthe business with 60 capital and initially hired a small place to start up. According to thecompany history, Iceland have managed to prove that they were strongly capable ofmanaging a company that could end up being closed down if the business and operationsstrategies were not as strong as effective whereas, they have many strong competitors likeSainsbury, Tesco, Morrison, Wilkinsons.By 1984 Iceland was one of the emerging food retailers in UK whereas, the business startedto take off rapidly and by 1996 Iceland had opened its 752nd stores in England with theoperating profit of 50m+ (Iceland, 2012). Currently Icelands business growth is at very fastpace as they announced net profit before tax up 22.5% to 184.3 million with also the openingof 18 net new stores in 2011 in UK (Iceland, 2012). The company currently has a steady aimto capture the whole UK frozen market through continuous product and service innovation.Figure 1- The current market position of Iceland, sourced from: (Iceland, 2012 and bbc,2012)However, success is never constant such as, it may rise up or fall down dramatically if thestrategies taken by the Management level are not constantly reviewed and developed (Kewand Stredwick, 2005). In a modern business context, organisations need to continuously
  • 5|Pagescan the internal and external environment of the business and devise strategies to eithercope up with the demand or sustain more competitive advantage so that they can be aheadof their competitors.1.2 Expectations of StakeholdersIcelands Stakeholders include its customers, employees, shareholders, government,suppliers, community, trade unions, and the overall management bodies. These groups ofpeople have few expectations and requirements from the business, which must be fulfilled inorder to gain support (Kew and Stredwick, 2005)Figure 2- The expectations and requirements of Icelands Stakeholders, source: (Kew andStredwick, 2005)
  • 6|Page1.3 External Environment analysisFor a big company like Iceland, the stability and safety of the political environment is crucialto success as political unrest, violence, terrorism can endanger the countrys tradingcondition (Thompson and Marting, 2010). In this term, Iceland combines a high level of risksfrom the political aspects of the country.From the economical point of view, Iceland combines many risks and opportunities. Forinstance, the exchange rate plays an important role for Iceland such as the company buys itsmost of the raw products or elements from outside UK (Iceland, 2012). Iceland reported itsmore than 15% raw materials come from different parts of Europe and further 10% comefrom different parts of the world i.e. Thailand, South Africa, and China. In this term, if theexchange rate fluctuates constantly, then the company might suffer from a short term profitdecline and also revenue will fall down as a result. On the other hand, taxation, inflation ratealso play vital role in developing or threatening the business prospect of Iceland (Bowhill,2008).Social environment is a great source of threat and opportunity for Iceland, which includes thedemographic structure of the country, lifestyle of the consumers, cultural aspects and thecurrent trends of the market.According to Office for National Statistics (ONS), from 2001 to 2009 period, the populationrate of UK increased by 2.7 million whereas, they notified that ageing population is one ofthe major concerns at the current time (ONS, 2012). The both issues outline many majorfactors from where food retailers like Iceland combines risk and opportunity. For example, itcan be assumed that from 2.7 million people a percentage of the people are immigrants whosettle here in UK. In this term, different national culture, religion, race aspects bring issuessuch as want for own countrys product, product customisation, and diverse workforce and
  • 7|Pageso on (Ahlstrom and Bruton, 2009). Furthermore, ageing population also concerns thehuman resource management of the company such as rise of cost against the elderworkforce (pension, benefit), increasing training and recruitment cost for the new employeesand so on. However, the culture, belief and lifestyle of the consumers have a significantimpact on Iceland such as the changes in consumer buying behaviour might require thecompany to change its product or service strategy at a rapid or slow pace (Ahlstrom andBruton, 2009).Technology is the vehicle of modern world. The rapid change of technology world has asignificant impact on Iceland food. For instance, few years before customers used to walk inthe store and buy products but the current invention of technology facilitates the consumersto buy products from their home (online ordering). In this term, consumer goods providersare greatly engaged in developing their business strategies to cope with the current demand.On the other hand, the increasing use of internet introduced many opportunities and threatsfor business organisations such as, online marketing, worldwide rapid data transfer, tele-working, advanced data management, fast pace media and so on (Kew and Stredwick,2005).1.4 Competitive AnalysisWhether the business environment is stable or turbulent, the organisations are alwaysrequired of scanning the forces within the industry that may have impact on their operations(Kew and Stredwick, 2005). In this term, identifying the factors which have influences on thebusiness is one of the major concerns of current corporate world. Furthermore, to analysethe variables within an industry, Michael Porter had outlined five factors which have asignificant impact on the organisations operating in a same industry (Porter, 1998).
  • 8|PageFigure 3 - Industrial Force, source: (Porter, 1998. p.145-147).According to Henry (2008), Buyers can be the ultimate product user or another businessorganisation who resell the products to another seller or consumer. Iceland develops itsproducts and services for the ultimate product user and they do not have any re-seller but asthe retail food indus

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