ARGOS and Future Development
ARGOSand Future Development
Argosand Future Development
Thefuture development of the organizations is one of the mostsignificant topics of discussion among the scholars and themanagement teams. This is because of the general expectation that thefuture of the organizations will be affected by multiple trends andchanges that are taking place in the business environment. Studyshows that the global economies has been concentrating wealth,becoming globalized, and enhancing environmental responsibility whilethe workforce is becoming more educated, diverse, and free orientedthan in any other time in the history of the world (Cole, 2007, p.11). Consequently, it is expected that organizations will face newchallenges and issues that will influence their future development asthey find their ways in an environment that is characterized by anincrease in knowledge based work and networking. This paper addressesthe future development of Argos, which will be accomplished suingthree major analytical tools, including PESTEL, Porters Five Forces,and SWORT analysis.
Theword management has been using different words in various scholarlyworks, but they all try to suggest the same thing in different ways.According to Koontz (1961, p. 178) management can be defined as anart that involves getting things done with and through people who areorganized in formal groups. In another definition given by HenriFoyol, management is the process of forecasting, planning,organizing, commanding, coordinating, and controlling (Akrani, 2011,p. 1). This definition is based on the key management functions. In asimilar study, Management Innovations (2008, p. 1) defined managementas a process that involves working towards the organizational goalsand objectives by working with and through people and other resourcesowned by the organization. Vives (2009, p. 1) suggested that thedefinition of the term management should encompass the four functionsof management, which include planning, organizing, leading, andcontrolling. Although these definitions are stated in differentwords, they all indicated that management is a process (not an event)that is accomplished with the help of human capital and otherresources of the organization.
Thecompeting values framework (CVF) is a model that is used to providean insight into various issues pertaining to cultural, drives, andgoals compatibility (Dileep, G., 2011, p. 51). The CVF is atwo-dimensional space that is used to reflect different orientationvalues. The first dimension also known as the flexibility-controlfocuses on the extent to which a given organization stresses onstability and change. The second dimension also known as theinternal-external axis focuses on the organization’s decision toeither address the activities that are occurring within it (internal)or those that are occurring outside the organization (external)(Dileep, G., 2011, p. 52). The framework is applied in many aspectsof organizational management, including the assessment of leadership,organizational culture, human resource practices, and communicationstrategies.
Therational goal model is a framework that focuses on the ability of theorganization to achieve its pre-determined goals (Octogram, 2005, p.1). Organization’s goals are set by the determination f generalgoal, establishment of means of accomplishing the goals, and thediscovery of a set of activities that for each goal. In this model,the producer is perceived to be work-focused and task oriented, whichhelps them to motivate other stakeholders to enhance theirproductivity and achieve organizational goals. The director, on theother hand, is expected to engage in setting organizational goals,planning, setting objectives, and clear expectations.
Ahuman relation is a model that deals with the study of organizationaldevelopment with a focus on the behavior of people who are organizedin groups in the workplace (Octogram, 2005, p. 1). The model is madeof five assumptions. First, the model assumed that quality andproductivity of employees depend on their satisfaction. Secondly,satisfaction is enhanced by an open and supportive communication.Third, addressing the personal needs of workers is one of the maingoals of the organizational management. Fourth, managers should payattention to good relations in the workplace. Lastly, the modelassumes that workers are motivated to do a good work only if theworkplace environment allows it.
Theinternal process model is based on the emphasis on documentation,measurement, information and hierarchy. These key variables of themodel enhance control and stability in the management oforganizations. In most cases, hierarchy is preferred when time is nota limiting factor and a given task is understood well. The model isalso based on the principle that states that control in anorganization can only be achieved if the system sums up therepresentations of a given process that one intends to control,either explicitly or implicitly (Octogram, 2005, p. 1). Althoughmismatch in the process model are common, the ideal model assumesthat the output of the model is always equal to its set point. Inthis model, the coordinator has the responsibility of maintainingschedules, structure, coordinating and organizing the staff efforts.
Theopen system model is based on the theory of open system, whichconsiders organizations as entities that interact freely with theexternal environment as opposed to independent and closed units.Different components of the model include inputs, outputs,organizational behavior process, technology, environment, culture,and system dynamics (Octogram, 2005, p. 1). The model has four majorfeatures that give it the identity. First, the model implies that theorganizational system is composed of many interdependent components.Secondly, a poor fit interdependent components result inineffectiveness of the organization. Third, the model implies thatthe effectiveness of any given organization is dependent on itsability to adjust to the environment, change that environment or findanother environment that is more favorable to operate. Fourth,internal and external development of the organization releasespressure for organizational change and produces substantial forcesthat enhance stability and inertia.
Part2: ARGOS and future development
ArgosLimited is one of the leading retail companies in the United Kingdomthat deals with household goods in multiple locations. Argos Limitedhas about 680 stores located in England, Wales, Scotland, and Ireland(Sheema, F., 2014, p. 1). Currently, the company distributed about35,000 products that include electronic appliances, consumerelectronics, toys, jewelry, furniture, and household goods. Thecompany has adapted to technological changes and it now sells goodsthrough the catalogue as well as online.
ArgosLimited is about to adopt a four point turn that is specificallyintended to help the company in restoring its sustainable growth,address competitive challenges, and exploit opportunities that areavailable in the marketplace (Argos Limited, 2013, p. 10). The firstpoint of turn will involve the repositioning of channels that willfacilitate the digital future of the company. The channels will focuson the management of customer transactions through the mobile oronline. Secondly, Argos will provide a wider range of productchoices, which will be availed to clients faster. Third, Argos seeksto develop and provide its customers with offers that are universallyappealing. Fourth, Argos will focus on a flexible and leaner costbase, which will enhance the process of shifting towardsdigital-based marketing. This implies that the future plan of Argosis nothing less than going digital and adopting the latest technologywith the objective of enhancing its efficiency and competitiveness.
Thepolitical environment of the United Kingdom has remained relativelystable for several years. The United Kingdom is one of thesubscribers of the OECD codes that require the liberalization ofcapital movements (U.S. Department of State, 2013, p. 1). This meansthat the government has created a traditional environment thatattracts both local and foreign investors to compete fairly, thusincreasing the competition for the local investors. In addition, bothforeign and local organizations are taxed alike. The government ofthe United Kingdom has also formulated a legal framework to guide thecountry in the process of digitizing the TV signal from analoguesignal. This favors Argos plan for the future digitization of all itsoperations and distribution of digital gadget.
TheInflation rate has a direct effect on the buying power of consumers.The UK’s rate of inflation has been reducing steadily in the year2014 compared to the year 2013 as shown in Figure 1. This means thatthe buying power of the UK citizens has increased and will continueincreasing with the decline in the rate of inflation.
Figure1: UK rate of inflation
Source:Trading economics (2014, p. 1)
Inaddition, studies have shown that the UK economy recorded the highestgrowth rates in 2012 and 2013 since the occurrence of the globalfinancial crisis as shown in Figure 2. The continuous growth in therate of GDP suggests that the buying power of the UK citizens willcontinually increase.
Figure2: The UK GDP growth rate
Source:Wearden (2014, p. 1)
Moreover,the rate of unemployment in the United Kingdom has been reducing withtime to its current position 7.2 % as shown in Figure 3. Nearly alleconomic parameters indicate that the buying power of consumers inthe United Kingdom is increasing and this suggests that Argos Limitedhas an opportunity to increase its sales in the future.
Figure3: Rate of unemployment in the UK
Source:Trading economics (2014, p. 1)
Socialonline shopping has improved consumers’ online shopping behaviorfollowing the increase in the internet accessibility andaffordability of smart devices. Research shows that the UK onlinesales increased to £ 10.1 billion in monthly record (Butler, 2013,p. 1). This means that the Argos’ strategy to digitize itsoperations is a move towards the right direction.
Nearlyall companies in the United Kingdom have embraced the practice ofonline shopping, which is intended to enhance efficiency indelivering goods and services to their customers in the best waypossible. Research shows that an average family in the United Kingdomhas at least 10 media devices with internet connectivity (Sheema,2014, p. 5). This indicates that the integration of technology inbusiness, both by trading companies and their customers provides anopportunity for companies that will go digital to increase theircompetitiveness in the market.
Environmentalpollution is currently an issue of concern all over the world. Thisimplies that all business should increase their sensitivity toforestry, carbon emission, supplier conduct, and communitydevelopment in order to attain business sustainability and success.Larger companies (such as Argos) are constantly monitored for theircontribution towards disposal of hazardous waste, supplier, andrecycling behavior. Both the local and the national government havethe primary responsibility of ensuring that businesses meet somespecified standards for environment protection.
Oneof the legal measures that organizations are likely to meet in thecourse of their business operations is consumer protection laws.Business are required to produce and sell products and services thatmeet the standards set by the government of the countries in whichthey operate. For example, the Sale of Goods Act that was enacted inthe UK requires that all products be sold without faults, in goodquality, able to serve the intended purpose, and meets thedescription of the purpose that they were manufactured to serve(Legislation.gove.uk, 2012, p. 1). In addition, businesses shouldcomply with other legislations, including the employee protectionlaws and legislations related to safety and health at work.
Thethreat of new entrants into the market
Entryof new competitors into the market is determined by the existingentry barriers that include from economies of scale of existingfirms, distribution channels, and the cost of entry among others.Currently, the progress in the technology sector has alreadyattracted new players (including Tesco and PC World) in the UK market(Sheema, 2014, p. 6). However, the high level of trust and brandloyalty that Argos has attracted over the years acts as an activebarrier for further entry of other retailers.
Theintensity of rivalry determines whether the value that has beencreated by a given firm will be dissipated by head-to-headcompetition. In the case of Argos, the company deals with a broadrange of products in the consumer market, which gives it a strongposition and capacity to withstand intense competitive rivalry(Stewarts, B., 2011, p. 1).
Threatof substitute services and products
Productsubstitution involves products-for-products of generic-for originalsubstitution. Currently, Argos deals with a wide variety of productsranging from kitchen to TVs (Stewarts, B., 2011, p. 1). This reducesthe exposure of the company to the threat of products-for-productsubstitution. However, there a risk of substitution of Argos originaland high quality products for generic products and this might affectsits profitability in the future.
Bargainingpower of suppliers
Argosbuys its products from different companies located in various partsof the world, but mostly in China where the cost of production is low(Stewarts, B., 2011, p. 1). The company buys goods in largequantities, which gives it an opportunity to demand for sizeablediscounts. In addition, the fact that electronic devices aremanufactured by a large number of companies reduces the bargainingpower of Argos’ suppliers.
Bargainingpower of Argos customers
Argosoffer competitive prices gift cards, discounts, and regular sales,which enhances its competitiveness in the market (Stewarts, B., 2011,p. 1). In addition, Argos offers unique products to its targetconsumers, convenient methods of purchasing (online and directly fromstores), and an opportunity to return items that don’t fit thepurpose for which the customer bought them. This has enhanced theloyalty of Argos’ consumers to its products.
Argoslimited sell high quality and a wide range of products to its targetcustomers. This has created a stronger image and the market share toabout 130 million (Datamonitor, 2009, p. 3). In addition, Argos hasestablished a wide network of retail stores (over 700) in the UnitedKingdom and other locations (such as Ireland), which gives it acompetitive advantage and a stronger market position over itscompetitors (Datamonitor, 2009, p. 3). Moreover, Argos has anestablished brand image that makes its products a competitive edgecompared to its competitors. According to Sheema (2014, p. 3) about 2about of three people in the UK have an Argos catalogue, which givesthem an idea of the products it offers.
AlthoughArgos has a large number of retail stores, it only depends on theUnited Kingdom’s market in selling its products (Sheema, 2014, p.5). This means that a slowdown in the UK’s economic growth affectsArgos financial performance directly. In addition, Argos’ widerange of products is concentrated within the technology sector, whichnarrows its market.
Argoshas managed to keep up with the current trend in e-marketing, whichis presently growing at a high rate. This is expected to skyrocketits sales by 26 % and enhance its position as a leading retailer inthe UK market (Datamonitor, 2009, 6). In addition, the governmentstrategy to digitize nearly all sectors of the national economy(including the shift from analogue to digital signals) provides Argosan opportunity for future growth given the fact that the demand fortechnology devices will increase (Sheema, 2014, p. 5).
Theentry of other players (including Tesco, ASDA, PC World, andSaisbury) in the UK retail industry subjects Argos to stiffcompetition, which might reduce its profitability in the future(Sheema, 2014, p. 6). Additionally, the steady increase in the costof labor in the UK labor market might reduce Argos competitivenessand profitability in the future compared to its foreign competitors.For example, the cost of labor per hour increased from 5.52 Euros in2007 to 5.73 Euros per hour in 2008 (Datamonitor, 2009, p. 6).
Argosutilize a directive approach of management orders flow from thechairman to the chief executive officer, then chief operatingofficer, then to the head of business development, and then to thehuman resource and the general administration (Argos Limited, 2014,p. 1). The flow of orders seems to follow a long chain of command,starting from the chairman to the general administrator beforereaching the junior staff. This reduces efficiency and the speed ofdecision making, which might reduce the competitiveness of Argos inthe market. This suggests that there is a need for a change in themanagement model in the future.
Argosfaces three major challenges that might affect the realization of itsfuture development strategy. First, overdependence on a single marketsegment (the London market) subject Argos to the risk of crash incase market slows down. For an instant, the occurrence of financialcrisis in the London market can lead to the fall of Argos because ittotally relies on the London market.
Secondly,the increase in the number of companies (including Tesco and ASDA)entering into the retail market subjects Argos’ to a stiffcompetition, which might reduce its profitability and capacity tofinance development in the future.
Third,Argos deals with a wide range of products, but within a narrowedmarket of technology based goods. Apart from subjecting Argos to therisk of crash in case the technology industry slows down,overreliance on a single industry shows that the company has failedto take advantage of its established brand image to exploit otheropportunities available in the market.
AlthoughArgos Limited has several weaknesses and it is subjected to a numberof threats, it still has sufficient strength to realize the availableopportunities and realize its development objective in the future.Argos is in a better position to take advantage of the stablepolitical environment in London, the growing GDP, and reducing rateof unemployment to increase its market share following the increasein consumers’ purchasing power. In addition, all components ofPorter’s five forces (including the threat of new entrants,intensity of rivalry, substitute services and products, bargainingpower of suppliers, and buyers) indicate that Argos has a strongposition for future growth and development. Moreover, the capacity ofArgos to overcome the major threats (such as the stiff competition)and weaknesses (including dependence on one product) will enhance itscompetitiveness in the market, capacity to exploit emergingopportunities, and profitability, thus increasing its capacity forfuture development.
Argosshould consider diversifying its market by entering into theinternational market. This can be achieved in many ways, includingthe opening up of new retail stores in other countries (such as Japanand India), partnering with retailers in other countries, or takingover established retailers in other countries. This will reduce themarket risk that arises from dependence on a single market.
Argosshould mount an extensive marketing campaign within the London marketin order to counter the rapidly increasing competition from otherretailers, including Tesco and ASDA. This will help the company inretaining or increasing its market share and profitability now and inthe future.
Argosshould invest other industries in addition to its currentspecialization in the technology industry. By doing this, Argos willbe taking advantage of its popular brand to introduce new productsinto the market and present its loyal customers with a wider range ofproducts. This has a wide range of benefits, include an increase inprofitability, reduced market risk, and increase in the market share.
Finally,Argos should change its management approach from the currentbureaucratic and directive approach to a participative style ofmanagement. This is the most appropriate style that will help Argosin managing its change and innovation as it shifts from analogue todigital. This is because participative style draws on employees’skills and knowledge and enhances their commitment to the resultingobjectives.
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