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Hampleyss Business Performance
The purpose of this project is to analyse Hampleyss business performance. In particular, this paper is aimed to explore firms micro and macro environment by conducting 7 Ps, PESTLE, Porters 5 Forces, and SWOT analysis. Besides, it is important to detect the marketing strategies used to benefit from companys strengths/opportunities and eliminate its weaknesses and threats. Through relying on the obtained information, the present report provides a set of recommendations that can be utilized by Hamleys to improve its sustainability.
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Background of Hamleys
The Hamleys Group Ltd. is the oldest UK manufacturer and retailer of toys and games for children of various age groups. This company was founded in London in 1760 (Bloomberg L.P. 2016). Consequently, Hamleys has more than 250 years of experience in the media and entertainment sector (MBASkool 2016). Hence in the 21st century, Hamleys faced the change of ownership, when it was bought by French company Ludendo, which paid ?60m for the retailer in 2012 (Ruddick 2014). Ludendo was interested to turn the discussed toy manufacturer into a multinational corporation that would be easily recognized around the world. In these conditions, the attention towards increasing domestic market shares was not given a needed priority. Besides, in late 2015, mass media revealed the news that Hamleys is close to being sold to a Chinese womens footwear business (BBC 2015). Whereas, the plausible leadership of the company still remains unknown, it is clear that the frequent change of ownership may have an adverse impact on the brands image and financial sustainability of this corporation. In order to assist a company in anticipating the decline in sales, it would be appropriate to conduct a throughout analysis of its current micro/macro environment and marketing strategies with the aim to define the most efficient marketing approaches.
Importance of Marketing for Hamleys
Given a long and successful history of Hamleys, it is natural to suggest that this company implements differentiation advantageous strategy. In other words, it utilizes a well-developed brand image of the refined quality and strong intangible value, which is reflected in the companys slogan The finest toys in the world (MBASkool 2016). In these conditions, Hamleys targets mostly the UK upper class population by setting high prices (Fitzgerald 2008). The notion of luxury implies that Hamleys doesnt try to compete on price with other toy retailers (Fitzgerald 2008). To a degree, this strategy is successful and it is obviously viable since the corporation keeps remaining an important and well-recognized manufacturer and retailer in toys and entertainment industry.
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Hence, the revealed approach has certain drawbacks. Hamleys is a product-oriented company, which means that it focuses on producing the goods of an excellent quality. This strategy naturally leads to increased prices and reduced production orientation (less items are sold). Moreover, production orientation is positively related to sales orientation. Nonetheless, to extend a client base, it is necessary to consider the rapidly changing customer demands. For example, customers are expected to purchase high quality goods for moderate prices. Fortunately for Hamleys, a strong market orientation (Hamleys 2016) contributes to companys prosperity. Therefore, this corporation remains successful in domestic market, even though in order to increase profitability, it should consider the aforementioned omissions.
Detailed Marketing Mix of Hamleys (7 Ps for their UK Operation)
To discuss the marketing mix of Hamleys, it is important for one to define the objectives. The basic marketing mix includes production, price, place, and promotion (Appendix 1), which stem from the internal environment of a company. In addition, people, process, physical evidence are the elements of marketing mix that exist in external environment (Appendix 2). In terms of Hampleys, its product has impressive tangible and intangible value, which is stressed with high prices, and luxury place of distribution (the centre of London) (Hamleys 2016). Besides, the adherence towards good quality is combined with a profound differentiation; consider an example, London store stocks approximately 40,000 toys (Financial Times 2000). Undoubtedly, this mix of product, price, and place is appropriate for targeting the segment of upper-class buyers.
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Nevertheless, many potential clients are being discouraged from purchasing by companys uncompromised pricing. Specifically, it is known that Hamleys had acquired a reputation for being a rip off, particularly due to pricing scarce items at an exploitative level (Doole & Lowe 2005, p. 96). This ambivalent situation implies that the discussed retailer is supposed to meet the needs of customers who are ready to pay a lot, stressing their social position, as well as consider the demand of low/middle class clients.
Furthermore, promotion is done through advertising, proposing special offers, and setting strong physical evidence by creating the atmosphere of restfulness and joy in shops (Hamleys 2016). In this regard, a former customer and todays employee reveals that Hamleys is completely unique in providing the theatrical wow factor that traditional toy shops used to do (Fitzgerald 2008). The shop entertainment is the way to generate magic moments for customers, which simultaneously, is used as a freebie that attracts potential buyers and serves as a way to enhance the value of products. Given this rationale, it is possible to suggest that the discussed business implements the objective and task method of promotion(Creative Commons 2012, p. 404). The choice of the promotion strategy is correct because it successfully functions to align with the components of the marketing mix.
Apart from entertaining the visitors, Hamleys (2016) advances the process of purchase by elaborating a convenient system of terms and conditions. As a result, customers feel more secure about shopping, which is predefined by the proper companys approaches to eliminate the risks. In addition, Hamleys increases its cyber presence with the goal to improve its physical evidence and the process of shopping (Financial Times 2000). In a word, the above-described mix of promotion, physical evidence, and process of shopping is beneficial for Hamleys.
PESTLE Analysis of Hamleys (UK Market)
To understand the objectives of a companys macro environment, one should refer to Appendix 4.
Hamleys enjoys advantageous political environment. Firstly, friendly political environment is predefined by the states adherence to economic liberalization. Secondly, the evidence of a favorable political environment is successful entries in the domestic industry of toys and entertainment by the new companies (Mast Business Directory n.d.). Therefore, it is possible to conclude that political environment is advantageous.
The economic environment for Hamleys is beneficial. In particular, the UK is considered to be a well-developed state, which means that the firms approach to target the upper-class customers complies with domestic economic environment. In a word, the high purchasing power of dwellers and visitors of London creates good opportunities for financial prosperity.
Hamleys social environment is also advantageous. Firstly, embodying the notion of history and national identity of the British, this company may enjoy the favourable attitude of communities in which it operates. Secondly, providing entertainment and profound decorations, Hamleys increases the value of citys infrastructure that is supposed to be positively praised by society. Thus, one can rightfully deduce that social environment is favourable for Hamleys.
Without a doubt, Hamleys enjoys beneficial technological environment. Consider an example, the company implements its cyber presence for conducting an effective social media advertising. In these terms, Hamleys have plenty of channels: Facebook, YouTube and Twitter to name but a few (The Digital Marketing Bureau 2012). Besides, the use of e-technologies, for example, such as WhatsUp Gold, facilitates arranging and monitoring the process of the workflow (WhatsUp Gold 2013). Given these, and other technological components of business, it is natural to conclude that Hamleys greatly benefits from the advantageous technological environment.
The legal environment is moderately challenging for Hamleys, which is connected with states high demand towards the safety and quality of products. For instance, if the quality of toys (safety) is compromised offences may result in fines of up to ?5,000, or a maximum prison term of 6 months, or both (Department for Business, Innovation & Skills 2012). This regulation is imposed on the UK businesses by the European Toy Safety Directive 2009/48/EC (Department for Business, Innovation & Skills 2012). In these circumstances, companies are pressed to ensure the safety of manufacture and retailing, which may be more pricy, but definitely more ethical in terms of legal responsibility towards stakeholders.
Similarly to legal, environmental conditions possess a moderate challenge for Hamleys. Specifically, a company is supposed to perform in frames of environmental sustainability, which may require more costly technologies. Nevertheless, the use of eco-friendly materials greatly contributes to high value of its products.
Porters 5 Forces of Hamleys (UK Market)
The elements of the 5 Forces components that impact performance of every business can be observed in detail in Appendix 3.
The Threat of New Entrants
The threat of new entries is very high. Despite a long and impressive history of Hampleys, which contributed to its branding, spread of the positive word of mouth and experience in marketing, new rivals successfully enter the UK industry of toy and entertainment. Consider an example, Sambro International, Metro Toys UK, Ark Toys UK, Marbel Toys UK are the competitors of Hamleys that entered the market during the last decades (Mast Business Directory n.d.). These businesses maintain financial sustainability in spite of Hamleyss brand, which means that the threat of new entries stillremains very high.
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The Power of Rivals
The power of competitors is very strong. The companys reluctance to compete over prices intensifies the pressure of competitors because the young companies propose impressive diversity of toys and games and set competitive prices that are affordable for both upper and middle class buyers (Fitzgerald 2008). Therefore, it is natural to presume that Hamleys experiences high rivals pressure.
The Power of Customers
Hamleys experiences high customers pressure. For instance, a ripping off reputation implies that the word of mouth is utilized as a leverage to correct the companys approach in pricing (Doole & Lowe 2005). While being combined with the abundance of the alternative options proposed by rivals, the force of customers grows even further.
The Power of Suppliers
The power of suppliers is assumed to be moderate. On the one hand, being simultaneously a manufacturer and a retailer, Hamleys only requires the suppliers of materials. On the other hand, given the considerable amount of rivals and their power, this company has limited possibilities to control suppliers (Mast Business Directory n.d.). Consequently, the pressure of suppliers is average.
The Power of Substitutes
The force of substitutes is low. Hamleys (2016) proposes a diversity of goods in the sector of toys and entertainment. Moreover, it organizes different shows for visitors to entertain young clients and their parents. In these conditions, the possibility of substitutes is very insignificant.
SWOT Analysis of Hamleys (UK Market)
- Strong brand image that complies with the national identity of the British people.
- High tangible and intangible value of products.
- Successfully implanted marketing mix.
- Profound differentiation of products.
- Strong cyber presence and successful use of social media for advertising.
- Deteriorated reputation of a rip off company.
- Limited options in terms of cost of goods.
- Frequent change of ownership.
- Favourable political, economic, social, and technological environments of the UK market, which ensure the optimization of manufacturing and retailing.
- Moderate power of suppliers and low force of substitutes allow maintaining reasonably high prices.
- Promising prospects of toy and entertainment industry for 2015-2019 generates good chances to increase financial prosperity. In particular, the sector will grow by 3.2% per year over the next 5 years and will be worth ?66.6 billion by 2019 (Stokes 2016).
- Possibility to set the diverse price options (for example, implementing smart pricing or other initiatives).
- Good chances to increase cyber presence. Consider the rationale, it is expected that about 1/3 of all sales in the discussed industry will be conducted through the Internet. Experts believe that in 2015-19s, the shift from retailing to e-retailing will be accompanied with consumers spending ?14 billion on internet access and advertiser spending ?12 billion on internet advertising (Stokes 2016).
- High pressure of rivals, customers, and new entries.
- Plausible challenges in legal and environmental sectors.
- A risk to lose Hamleyss strong connection with the national identity of the British, which comprises a great share of brands value.
Segmentation, Targeting & Positioning of Hamleys (UK Market)
The market segmentation of Hamleys is the upper-class customers who either come to shop with children or buy products for their young ones alone. In this regard, the approximate portrait of a buyer is a well-educated individual with middle or high income, who belongs to the middle-aged or elderly group and possesses certain family and national cultural values. The identified segment is targeted with the appropriate marketing mix (high prices, geography (the centre of London), refined buying experiences, etc.). Moreover, to position a brand as a proper purchase for the detected market segment, Hamleys emphasises on the value of high quality brand that was developed within 250 years of history. This intangible asset along with high prices serves to satisfy customers endeavours to stress on their social status.
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Consumer Behaviour Analysis of Hamleys (UK Market)
The company struggles to adequately anticipate customer behaviour. The companys profile reveals that in 2015 pre-tax profit, as well as post-tax profit of Hamleys was negative; meanwhile, the turnover for the same year was increased (Due Dil 2015). This statistics suggests that customers do not assign much value to the companys goods as Hamleys expects them to. As a result, the process of customer acquisition, retention, and extension functions deficiently.
Importance of Market Research
Given the above-described micro and macro environment of Hamleys, it is appropriate to claim that the discussed business struggles to conduct a proper estimation of rivalry. Moreover, it does not put enough efforts in building relations with customers with the aim to earn their loyalty. Besides, Hamleyss positioning strategies should be revised, taking into account appropriate pricing techniques. The study of the aforementioned objectives is rather important for ensuring the future sustainability and extension.
Recommendations for Hamleys (Referring to Domestic Market)
Hamleys is advised to extend its market targets, in particular, by addressing the needs of the middle class customers. This approach requires the change of positioning, which can be done by shifting attention from the notion of luxury to the notion of similar national values shared by Hamleys and its British consumers. In addition, it is necessary to incorporate diverse pricing strategies to improve the differentiation of goods and attract more customers. Furthermore, considering that e-retailing is supposed to gain power in the nearest years, this company must continue working at advancing cyber presence, particularly, focusing on social media advertising and e-retailing. Undoubtedly, both traditional and e-retailing require improving relations with customers by setting competitive prices and providing excellent buying experience. Moreover, given strong rivalry, a company is recommended to study the strategies of competitors in order to be capable of implementing certain efficient techniques.
The current report reveals that Hamleys possesses great tangible and intangible assets that can be used to ensure companys sustainability in the future. Furthermore, the micro and macro environment of this business are mostly favourable. Hence, in order to regain and maintain financial prosperity Hamleys should explore the rivals strengths, implement effective price setting techniques, and consider the increase of market segments by targeting the middle class customers.
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