Strategic Analysis Assignment Evaluating Current Position of Victoria’s Secret

Question

Task: In this strategic analysis assignment, you will choose one existing incumbent that is being beaten by a challenger in business. In other words, identify and choose one incumbent that is struggling to survive in the market. Conduct a thorough analysis of the current conditions of this incumbent.

You will have to use at least 4 strategic analysis frameworks, identify and evaluate the current position of the incumbent and synthesise the findings. The first one (Porter’s Five Forces Model) is compulsory. In technology cycle and 3 phases of Innovation model, you will have to explain at which phase does the current position of the incumbent of your choice fall on. After assessing the incumbent’s current position, provide a detailed solution for this incumbent to re-emerge in the market. The solution has to be linked to innovation and new disruptive technologies. This will help you to explain about the firm’s strategic intent. This solution should help you to identify and explain resources and capabilities required by the incumbent that helps to close the gap between its current position and its strategic intent. As part of your assessment, you will have to create a mind map to show the possible solutions.

Answer

Introduction:
Nowadays, business process is very dynamic and competitive. The research on strategic analysis assignment identified that the struggle of gaining competitive advantage and adopting innovative business strategies are the common factors of almost all companies irrespective of their business size. Leading companies also fail to follow the changing market trend and do not emphasis on competitive analysis. As a result, challengers beat those existing incumbents in business and consequently theystruggle in the market to survive.

This report aims to conduct a thorough analysis of Victoria’s Secret, a popular retailer of women underwear and fashion, which planned to shut many stores in 2019. The strategic analysis of this company will be conducted by Porter’s Five Forces Model, SWOT, The McKinsey 7-S Model and Stakeholders analysis.

Porter’s Five Forces Model:
Degree of existing rivalry:
In recent years, the number of competitors of Victoria’s Secret is increasing continuously due to the availability of resources at comparatively low prices. Moreover, the changing preference of customers also influence many companies to enter into the industry for fulfilling those requirements (Baxter 2019). Hence, the maximum challenge of the company comes from its competitors like Lively and Adore Me, which are continuously expanding their businesses in the same market by attracting same customers of Victoria’s Secret.

Threats of potential entrants:
The economies of scale are difficult to obtain in the industry where Victoria’s Secret operates its business. Initially, However, at present, the company is facing challenges from new entrants like Lively and Adore Me, which are opening up new retails stores across the US and consequently is capturing the market share of Victoria’s Secret. Moreover, the company fails to upgrade its product quality as per the requirements of customers. Victoria’s sector focuses mainly on the product differentiation along with attractive advertisements and good customer services. On the contrary, other companies capture the market mainly by offering standard products that can be used for long time. In addition to this, Victoria’s Secret charges higher prices for its products from customers in order to meet the high business expenditures. On the other side, competitors charge comparatively lower prices as they get a ready-made market with a strong distribution networks. As a result, the pricing strategy of challengers also become a reason of closing down stores of Victoria’s Secret.

Bargaining power of suppliers:
In the industry, where Victoria’s Secret operates its business, has a large number of suppliers compared to the number of potential suppliers. This indicates that suppliers have comparatively less influence on pricing strategy of the company (Kutnohorská and Krišt?fková 2019). The company has exclusive supply chain as well as suppliers, who provide less differentiated, low costs materials to the company. As a result, the company faces difficulties in manufacturing a wide a range of standard products and to fulfil the changing preference of consumers across the world. Thus, suppliers create risks for the business of Victoria

Bargaining power buyers:
Buyers cannot influence the prices of Victoria’s products which means buyers have comparatively weak bargaining power like suppliers. The industry follows competitive monopoly structure where companies sell similar but differentiated products. Hence, it is difficult for customers to get completely substitute products of Victoria’s Secret. Instead of this, it becomes difficult for the company to gain competitive advantage by earning higher revenue due to some reasons. Firstly, most of the loyal customers of Victoria have comparatively low income and hence buyers prefer products with low prices. In addition to this, buyers also demand for standard and quality products and move to other companies when Victoria fails to provide it. Therefore, the company experiences significant threats from the buyers.

Threat of substitutes:
Within the industry, Victoria haslittle number of competitors, who manufacture same products for customers. However, the new brands are making standard but differentiated products to capture a large market share. Customers of different income group can afford the products of those competitors. Moreover, women are switching to size-inclusive band like Adore Me, Lively, and Third Love and others for getting more comfortable options. Thus, it becomes challenging and difficult for Victoria’s Secret to retain customers successfully like before.

SWOT Analysis:
Strength:
• Victoria’s Secret gets a major success in its business through conducting the annual Victoria’s Secret Faison Show, which every leading fashion channels and magazines showcase for promoting its latest collections.
• Victoria’s Secret has strong brand portfolio as the company has invested in this segment for expanding and launching products
• The company has formed a strong and reliable chain of product distribution for distributing products to potential markets easily and quickly (Phadermrod, Crowder and Wills 2019).
• The company has reliable suppliers that supply raw materials to the manufacturers of the company and this in turn helps the company to avoid any problem related to supply chain.
• The go to market strategies for the products have brought huge success to the company

Weakness:
• Limited success in case of product variation
• The company spends comparatively less in its Research and Development and hence it becomes difficult for the company to compete with other leading companies in the same industry
• The company is unable to face challenges created by new comers in the same business. Furthermore, it also losses the share of small markets in the niche categories.
• The company does not have any mechanism of taking internal feedback directly and this in turn affects the business procedure of the sales team for overcoming challenges
• Vitoria’s Secret is not successful at integrating firms having different work culture.

Opportunities:
• Through adopting a new level of technology and free trade agreement of the government, the company can successfully enter into to new markets with new product range

• By developing markets, the company can increase its competitive advantage in other field of fashion
• The new technology in the business process may provide Victoria’s Secret an opportunity to practice lower pricing strategy in a new market. It will help the company to attract and retain loyal customers
• From online channels, the company can collect new customers. It already has started to invest huge money into online platform, which consequently opens new channels for attracting customers.
• The changing government policies like new tax structure and supports to stimulate businesses may further help Victoria’s Secret to expand business successfully without facing any political or legal disturbances.

Threats:
• Limited workforce of Victoria’s Secret in the global market causes serious threats for the company from obtaining a steady growth
• As the company is operating in different countries, the currency fluctuation and political conditions in different markets create huge threat for the company (Zhu et al. 2019)

• The growing business of local companies by adopting effective strategies to attract local customers may further create challenge for the company
• The changing behaviour of consumers in online platforms may also create threats for physical retail stores of the company
• New technologies, adopted by the competitive firms can be a serious issue for the company in long-term future.

The McKinsey 7-S Model:
Hard elements:
Strategy:
Victoria’s Secret applies social media marketing for promoting brand value instead of applying traditional method of product promotion. The company builds its business on value, design and function for achieving business sustainability. The company arranges fashion show annually to promote its new products to customers with the support of fashion magazines and channels (Frishammar et al. 2019). The company also applies online marketing strategy for attracting new customers.

Structure:
The company uses divisional structure which means it divides employees into group for working on the same product at the same position for same customers. The main aim of the company is to avoid the risks of a functional structure that raises the possibility of lack of communication among employers and employees. However, Victoria’s Secret is an international company for which it faces complexities in determining the type of divisional structure.

Systems:
Victoria’s Secret offers a flexible working environment to employees for supporting their efficient works. The company provides offers a new item every time when it is launched at a discounted price. The smooth working environment and skilled workers as well as attractive wages influence the daily procedures and activities of staffs.

Soft Elements:
Skills:
The employees of the company should have the capability of helping women regarding their inner size. They also need to organise everything carefully even in the hectic sales and need to have the skills of dealing with strange customers.

Styles:
The company follows hierarchical leadership and corporate business structure. Moreover, the company has shareholders, which play significant role in the company’s decision-making process.

Staff:
The employees of the company are highly skilled and experienced. However, the requirement various based on the job profiles and job levels. The employees go through the process of hiring, coaching and training for any type of activities in the company.

Shared value:
It implies the core value of Victoria’s Secret. Here, the shared value of the company is designed in such a way that it can social issues successfully (Khiew et al. 2020). The company does this by controlling the resources and innovation techniques for creating a new solution for customers and the society where it operates. To protect environment, the company decides to make an eco-friendly catalogue.

Stakeholder’s analysis:
Strategic stakeholder Analysis:
This type of stakeholder analysis focuses on the stakeholder management issues, which have direct impact on the company’s financial performance. These stakeholders are unions, employees, customers, shareholders, vendors, owners, supply chain partners, regular agencies, community members and others. Each of these stakeholders is very crucial for the business and they have significant influence on the company’s performance (Street et al. 2019). In case of Victoria’s Secret, shareholders including companies, people and other institutions that own minimum one share of the company. For avoiding any negative consequence, the company always tries to make good communication with them. This is because if shareholders start to sell shares of the company, its value would fall immediately. The board of directors is appointed by shareholders for taking business decisions of their behalf. Board is responsible to run every day business and conduct a general meeting each year for reporting shareholders on the performance of the company. Regulatory agency or the government also has influence on the business as the company needs to follow the rules and regulations of them. The contribution of employees in the business is also important. Employees of the company are supermodels, photographers, fashion designers along with others who operate in the HR, marketing and Finance departments (Liu et al. 2017). Thus, the company does not spend too much power on them. Suppliers and vendors are also important stakeholders of the company, as they are responsible for supplying resources and distributing final products to end-customers. Customers are also essential for the company as their changing taste and preference as well as feedbacks determines the actual conditions of the business.

Normative Stakeholder Analysis:
It focuses on the requirements that are required to stakeholders’ moral and ethical implications.
In the company, the higher authority like managers emphasises on maintaining relationship with important stakeholders.
Solution to close the gap between company’s current position and strategic intent with a mind map:
Here, Victoria’s Secret needs to take the method of design thinking to understand the perception of consumers and to sustain in the market for long-term. It will help the company to gain competitive advantage by fulfilling the requirements of customers (Cui, Fan, Liu and Li 2017). The process will help will the company to consider creative process of solving problems through conducting research. As the main problem of the company is offer comparatively low standard of products with higher prices the value of the company declines in the market. Thus, the company needs to address the main problem of the company successfully to solve problems.

Figure 1: Mind Map of Victoria's Secret

Conclusion:
The report conducts strategic analysis of Victoria’s Secret, which experiences competition from its strong competitors Lively and Adore Me and so on. To analysis the present conditions of the company, the report considers Porter’s Five Forces Model, SWOT analysis, the McKinsey 7-s model and Stakeholder’s analysis. Through the analysis, it is observed that the company has brand value though it does not offer high quality products to customers at reasonable prices. Moreover, the company does not have strong measures to compete against new comers or challengers. In this context, the paper considers that design thinking can reduce the gap between the company’s present position and its strategic position.

References:
Baxter, G., 2019. A strategic analysis of Cargolux Airlines International position in the global air cargo supply chain using Porter’s Five Forces Model. Infrastructures, 4(1), p.6.
Cui, L., Fan, D., Liu, X. and Li, Y., 2017. Where to seek strategic assets for competitive catch-up? A configurational study of emerging multinational enterprises expanding into foreign strategic factor markets. Organization Studies, 38(8), pp.1059-1083.
Frishammar, J., Richtnér, A., Brattström, A., Magnusson, M. and Björk, J., 2019. Opportunities and challenges in the new innovation landscape: Implications for innovation auditing and innovation management. European Management Journal, 37(2), pp.151-164.
Khiew, K.F., Chen, M., Shia, B.C. and Pan, C.H., 2020. The Implementation of Adopted Balanced Scorecard with New Insight Strategy Framework for the Healthcare Industry: A Case Study. Open Journal of Business and Management, 8(2), pp.600-627.
Kutnohorská, O. and Krišt?fková, J., 2019. Application of Porter's five forces model to the Czech dairy industry after the abolition of milk quota. LITTERA SCRIPTA, p.89.
Liu, P., Zhou, Y., Zhou, D.K. and Xue, L., 2017. Energy Performance Contract models for the diffusion of green-manufacturing technologies in China: A stakeholder analysis from SMEs’ perspective. Energy Policy, 106, pp.59-67.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based SWOT analysis.Strategic analysis assignment International Journal of Information Management, 44, pp.194-203.

Street, L.A., MacGregor, C.J. and Cornelius-White, J.H., 2019. A stakeholder analysis of admission in a baccalaureate social work program. Journal of Social Work Education, 55(1), pp.34-49.
Zhu, Y., Zhong, N., Su, H., Ruan, X., Bao, J., Zhang, L., Du, J., Xu, D., Ding, R., Xiao, K. and Zhao, M., 2019. Strengths, weaknesses, opportunities and threats (SWOT) analysis of reinitiation into methamphetamine abusers: qualitative findings from an exploration of methamphetamine abusers in Shanghai, China. General psychiatry, 32(3).