Getting to know the company Argos Home Retail Group, UK Essay Example

UK to align with its current business model.

In 2000, Argos, a leading retail brand in the UK and Ireland, established a fiscal services department to provide recognition and guarantee products to its customers. The company operates by utilizing economies of scale, as evidenced by the average transaction size of approximately ?30 and an average of 5 transactions per customer per year. Argos excels in distributing products through various channels, which sets it apart from its competitors and enhances the shopping experience for its customers. Approximately 40% of total sales are generated through multi-channel methods, such as online and phone orders for home delivery.

The online reservation for in-store collection has become the fastest growing channel. This feature is available at all Argos stores and offers a wide range of products. Argos has two main product lines - home improvement products and general merchandise. With sales totaling around ?60 billion, it holds a 10% market share in the UK. The home improvement line includes products for home improvement, housewares, and furniture, which accounts for approximately ?31.5 billion in sales.

The general ware merchandise line at Argos includes Jewellery, toys, athleticss and leisure equipment, consumer electronics, big domestic contraptions. This product line contributes about ?28 billion to the Argos Top lines. Argos conducts its business operations primarily through its extensive network of 700 shops located throughout the UK and Ireland. The shops are spread across various locations, including major centres and residential areas. The network of shops is vast and overwhelming. The shops are typically situated in commercial centres, which are surrounded by nice residential areas. The size and operations of the shops depend on factors such as demographics,

buying power of residents, consumer spending, and the scale of operations.

The number of shops in Yorkshire is roughly one for every seven towns, but in densely populated areas like London, there are ten shops. However, alternative channels play a significant role in the business. Customers can place orders online or by phone and have the option of home delivery or picking up items in-store. The official website, www.argos.co.uk, ranks as the UK's second most popular retail site. Online shopping represented 20% of the company's total business in the previous fiscal year.

Determining pricing is a crucial responsibility for top management at Argos. The majority of sales rely on the affordability of Argos' products and services. The pricing strategy is influenced by various factors and primarily follows Economy Pricing. The key to the business's success lies in utilizing economies of scale.

Despite having smaller borders in comparison to its competitors, Argos manages to generate immense volumes that far outweigh these low margins. Argos places significant importance on offering discounted prices for their products without any unnecessary features or hidden costs. They achieve this by effectively managing the manufacturing and selling expenses, keeping them as minimal as possible. Additionally, they offer a range of affordable in-house brands. Argos prioritizes cost management by focusing on their distribution channel management.

There are fewer intermediaries between the manufacturer and the end customer, resulting in lower prices and less profit dilution. Argos primarily uses an economy pricing strategy, but also employs other strategies for certain market segments, such as penetration and skimming. When the iPod was initially released in 2001, Argos had a preferred partner status with Apple and exclusive rights to sell

the iPod in the UK for a year. In order to promote the product, Argos implemented a penetration strategy.

The I Pods were initially discounted by approximately 25% to encourage impulse purchases. However, as demand increased dramatically, the prices were adjusted back to normal. In fact, the prices were gradually reduced until the exclusive rights to sell the product were lost in mid-2002. This pricing strategy is known as psychological pricing. Interestingly, about 75% of Argos merchandise is priced just below a whole number.

The rice cooker is priced at ?13.99, while the I Pod Nano costs ?108.99. Additionally, Argos offers various optional services for the main product purchases.

Argos, a full owned fiscal subordinate, offers a guarantee for their merchandise at a minimal additional cost. They have exclusivity with certain brands, such as the Argos air freshener cartridge. The cartridge is priced at around ?3, even though it only costs the company about 4 pounds.

The cartridge is specifically made for Argos fill ups, so the company offsets this by charging a higher price for refills. Promotional Pricing is mainly used to sell off remaining inventory and products that are near their expiration date. The BOGOF (Buy One get One Free) promotion is frequently employed towards the end of the Christmas season. No matter how excellent a product may be, it will not achieve success without a robust promotional campaign.

Argos is a well-respected and widely acknowledged retail brand in the UK. A considerable amount of its yearly sales are allocated to promotion, enabling the brand to establish a significant brand worth. As a component of its promotional strategy, Argos extensively employs electronic media for advertising. The company partners

with "Professional Creativity," a reputable European ad creator, to develop 30-second ads. Advertising endeavors are especially heightened during the Christmas and Easter seasons.

Its ticket line - ‘Do n't Buy It, Argos It ' is a true indicant of the company 's diverse and advanced concern theoretical account. The biggest exposure given to the company is its catalogue itself. Updated twice a twelvemonth, the Argos catalog is a 2000 page colourful book, having the full merchandise scope. A recent Argos study showed that about half of the UK families have the Argos catalogue with them. This gives an huge trade name exposure, while at the same clip lending to merchandise gross revenues.

Argos has a large teleselling sales team, employing professional business advisers to conduct sales presentations at various events such as communal gatherings and office spaces. Additionally, Argos hosts an annual trade show at UK state centers. Ample clients receive discount vouchers as complimentary tokens, and newly launched in-house brands offer free merchandise samples. Throughout the year, Argos organizes multiple competitions, with winners receiving store vouchers.

Argos sends a weekly newsletter to registered users, which provides updates on current events in the retail industry. They also publish a quarterly magazine that examines the retail sector. The company's catalog is their most influential resource, and they regularly study changing customer trends and preferences. While the company has not previously prioritized this approach, they have significant plans to participate in major events.

Discussions are underway with Formula One administrators for possible sponsorship of the Silverstone Grand Prix. Furthermore, Argos is also a strong candidate for association with the 2012 London Olympics. The current economic crisis is the most severe since

the Great Depression and has caused widespread economic discomfort due to consumer debt and leverage. Consequently, many established economies have had their fundamentals questioned and several have failed during this difficult period.

The UK's economy has suffered a 5.7% decline in the past eighteen months, causing turmoil. The country has seen six consecutive quarters of contraction while European countries are beginning to witness some slight growth rates. There are ongoing attempts to identify positive aspects as the job market and consumer spending have come to a near standstill. Consequently, several industries, including those providing essential goods and services, have been affected.

According to the Office of National Statistics, non-food retail stores have had consistent business over the past two years. In the first three quarters of 2009, there was a small increase of 1.1%, compared to only 0.2% in 2008. However, there was a decrease of 1% in the fourth quarter of 2008. The third quarter stayed steady, while the other periods had growth rates below 1%. When considering inflation and rising costs of capital extraction, these numbers become even more worrisome.

The industry experienced continuous growth following a successful public presentation in 2007, showcasing a 12% increase. The growth rate was 8% in 2006 and 7% in 2005, all of which contributed to the overall industry growth. This presentation played a significant role in driving economic growth and creating liquidity through increased consumer spending (Office of the National Statistics, 2009). Argos' performance over the past two years aligns with macroeconomic and industry trends. However, there was a decrease of 1% in total group sales compared to the previous year, resulting in ?5897 million.

The gross margin decreased by

100 points. The operating and distribution costs rose by 1%, not accounting for the 3% inflation during the same time period. Operating net income decreased to 300 million, a 19% decrease. Earnings per share decreased by 24% to 25.9 pence. The non-cash asset write downs (bad debts) amounted to ?402 million.

Finally, the group reported a decrease in net income before revenue enhancement of 394 million lbs, compared to a net income of 426 million lbs the previous year. Additionally, the group's Goodwill and Intellectual Property rights decreased from 1923 million lbs to 1541 million lbs. The total assets also declined from 4372 million lbs to 3802 million lbs. The exchequers dropped from 210 million to 174 million without any significant investments or refunds (Argos, 2009). Overall, the company has experienced a decline in performance.

Despite the general economic recession, Argos has been performing significantly worse than its competitors. While the overall industry has grown by 1%, Argos has experienced negative figures for the first time since its establishment in 1997. The current recession has caused confusion in the marketing and promotional strategies of many global corporations. Consumer spending has become almost non-existent as customers are increasingly reluctant to buy and focus more on saving. Sales and marketing teams are under immense pressure to meet their targets while the marketing budget appears more uncertain. Like many others, Argos is undergoing significant business restructuring to control costs, improve efficiency, and increase profitability.

We propose several strategies that the management should follow during the restructuring process, as well as highlighting the common mistakes to avoid.

Solution: Instead of reducing margins to cut costs, it is important to explore other methods.

History has shown that price reductions can be challenging to reverse. While lowering prices may temporarily attract customers, it can negatively impact the company's profitability in the long run. Argos should consider alternative ways to attract consumers, such as offering value-added services. This could include providing better credit terms (such as hire purchase or installment plans), offering complimentary goods, implementing priority delivery, among other options.

Solution: Instead of delaying, it is advisable to explore other alternatives first. The sales team operates under immense pressure to meet their targets. Often, companies make the mistake of dismissing underperforming employees without considering subjective factors. The human capital is a valuable asset for a company, and when an employee leaves, they take with them company knowledge, business model, expertise, experience, and loyalty, directly benefiting their competitors. The sales team's most significant contribution is the personal connection and network they have established with clients over time. Therefore, Argos should find ways to improve without adversely affecting its employees.

There are often top-performing artists who consistently surpass their targets. Selling is an innate art, a skill that not everyone possesses. Argos should identify these star performers and encourage them to share their insights on generating leads and closing deals. Brainstorming sessions are an excellent way to exchange these ideas. Solution: Money should not be the only motivator.

Consider alternative methods of recognizing employees in light of the changing job market. Companies are adjusting their compensation structures due to the tightening labor market and financial limitations. It is important to recognize that highly skilled and accomplished individuals would not struggle to secure better-paying positions, regardless of market conditions. If the company cannot provide a lucrative

compensation package to keep these individuals satisfied, it should explore alternative means of honoring them.

Argos should establish a short-term sales committee to reward its top performers until the market improves and everyone is aligned. However, there are drawbacks to this approach. These financial incentives can create a competitive and toxic environment within the sales department. Each sales team member will prioritize their individual sales targets rather than working together as a cohesive unit, resulting in the company becoming too focused on short-term goals. Instead, Argos could consider offering non-monetary rewards such as flexible working hours, surprise days off, or team outings. The financial incentives would then be provided at the end of the year based on the goals achieved.

Solution: The solution is to adopt the 20 - 80 scheme for dressed ore. Companies are no longer able to afford the high levels of inventory that they used to boast during prosperous times. In the case of Argos, having a diverse range of products and options is a key driver of business, and reducing the inventory could negatively impact brand loyalty. Therefore, Argos should focus on the 80 - 20 rule, which states that 20 percent of customers account for 80 percent of sales.

The primary focus is to identify the major consumers who contribute to 80% of the gross revenues. An analysis is necessary to understand the consumer behavior and purchasing habits of the remaining 20% consumers. Once this is done, adjustments can be made to the stock list, ensuring that these valuable customers have access to their preferred choices. While this may not completely solve the issue of brand dilution, we anticipate a significant reduction

in its impact, by three quarters. The recommended solution is to avoid it.

In the current market, businesses are not in a position to take risks with their strategic decisions. Due to sales not meeting expectations, many firms are choosing to expand either by adding new products to their line or by increasing the depth of their existing offerings. However, financing this expansion is becoming more expensive, which puts pressure on the sales team to generate higher revenues in order to cover these costs.

Therefore, we recommend refraining from making any expansions until the economic system improves. The solution is to focus on getting the fundamentals right. Regardless of the status, the basics of the markets remain unchanged. Numerous companies are aligning their marketing strategies with the recession.

This is known as 'retailing for the recession '. While this current fiscal crisis is not the first one we have seen, it is officially recognized as the 90th. There have been tougher times in the past and there will be even tougher ones in the future. The recessions are only temporary, with market protocols being restored very soon. It doesn't matter at all.

In order to adapt to the improving markets, adjustments will have to be made to the sales plans and marketing strategies. However, these changes come with costs and may disrupt the sales department, which is inherently susceptible to change. We recommend that the current recession should not lead to any alterations in Argos' strategic marketing decisions.