Group Assignment

The Warehouse Group

Submitted By:
S. No

Name

Student Id No.

1.

Prem Chand

1000021885

2.

Prathamesh Edirisinghe

1000016435

3.

Sheng He

1000003683

4.

Mingya Hu

1000014087

5.

Pengyue Ding

1000001813

Submitted To:
Ms. Lydia Harrell
Lecturer in Strategic Management
Submission date: 02nd March 2015

EXCECUTIVE SUMMARY
1

The Warehouse group is a largest retailer in New Zealand. It has different stores in under
different brand names all over New Zealand. In this report we have done an extensive
research on The Warehouse, we have given a brief description of the Warehouse along with
the vision, missions and goals and objectives. This report contains macro environment
analysis which includes PESTEL analysis, Porters five forces along with the SWOT analysis
of The Warehouse. Report also contains internal analysis of The Warehouse in which we have
written VRIO and VRIN. The Aim of this report to analyse all the factors of an organization
and recommend business level strategies and its implementation.

Business-level strategy is about the way a company use to allocate its resource such as
finance, supply chain management and human resource in order to adopt the strategy that
cannot be imitated by its rivals (Besanko, Dranove, Shanley, & Schaefer, 2013). It aims to
integrates the companys resource into core competencies that contribute to its competitive
advantages (Hill et al., 2007). It is about to improve a companys functional operations in
manufacturing, logistics, human resource and so on. The Warehouse is one of the largest
retailers in New Zealand. Its strategies determine its market position and competitive
advantages. The objective of this report is to discuss the business strategies of the Warehouse
Group.

TABLE OF CONTENTS

S.No.

Content

Page Number

1.

Executive Summary

02

2.

Introduction

04

3.

Vision, Mission, Goals and Objectives

04-05

4.

Macro Environment

05-07

5.

Porters Five Force

08-09

6.

Internal Analysis

09-13

7.

SWOT

14- 16

8.

Strategy 1

17

9.

Implementation of Strategy 1

18

10.

Strategy 2

18

11.

Implementation of Strategy 2

19

12.

References

20

1. Introduction

As a New Zealand owned and operated large scale retailer, the Warehouse sells a variety of
goods to customers ranging from apparel, sporting, gardening, groceries, and entertainments
to electronic goods. It was established in 1982, and has grown to have 92 warehouse stores
across the country, 77 Noel Leeming stores specialising in electronics and appliances, 64
Warehouse Stationery stores and several online businesses (The Warehouse, 2015). The group
has been publicly traded on the New Zealand Stock Exchange. With the steady growth and
development, the Warehouse has become the biggest general merchandise and apparel retailer
in New Zealand. Besides its own operations, the Warehouse also owns a variety of its own
brands that are located within the stores such as the brand Just for the gardening.

The major rivals of the Warehouse in New Zealand are Kmart (discount department stores),
Farmers (groceries), the Briscoes (discounted Apparel and home ware stores), and Super
Cheap Auto (automotive products). However, the variety of products sold in these department
stores is significantly lower than those of the Warehouse. The Warehouse is usually able to
offer more choices with lower prices because it has established an extended supply chain with
manufactures in Asian countries and maintained close relationship with these suppliers.
However, although the Warehouse offers lower prices and various choices to customers, it has
been criticised for the poor quality of goods it sold and has recalled some items it exclusively
sells.

2. Vision, Mission, Goals and Objectives

Vision In 1982, Sir Stephen Tindall founded The Warehouse with a vision of
revolutionising retail industry in New Zealand. The Warehouse group vision is to remain true
to Sir Stephen Tindalls vision and build a hundred year business which help KIWIs to
flourish.

Mission Statement
The Companys mission statement is Where People Come First and Quality is Affordable
and it is through this management style of putting people first that The Warehouse has
managed to grow at such a rapid rate. (The Warehouse, 2013)
Through this mission statement warehouse group mainly concentrates on the customers and
their expectations. To fulfil the customers expectations and to amuse them by lucrative deals
4

this attracts more customers. Quality plays an important role in the retail industry. Warehouse
has a reputed name when it comes to
customer service and quality of the products. Fresh quality products are put for sale in
warehouse. The Warehouse employees work as a team and have a very friendly and good
environment to work in. It all represents the mission statement laid by the founder of The
Warehouse.

Goals & Objectives

Goals - The Warehouse group has an ambitious goal to drive its newly expanded outlets to
rival with the competitors. The NZX-listed retailer has made numerous acquisitions in recent
years, including Noel Leeming, Warehouse stationery. To compete with its rivals better
customer service and lucrative deals are the main criteria to compete. For better customer
service proper training to the staff and motivational program are carried out by the
management team of warehouse. Motivational program such as increment, incentives
program will motivate the employees. All these factors help to expand the business of
warehouse. The main strategy of warehouse was to dominate sales through sales online as
well as in stores.

OBJECTIVES: The main objectives of Warehouse are to fulfil the customers expectations
and also to keep its employees motivated. To compete with its competitors and to rise in the
retail market customers expectations has to be fulfilled. To top the retail sector online
shopping also has to be more convenient to use.

3. Macro Environment Analysis

Macro environment also referred as the external environment are the components used for the
strategic planning for an organisation. The macro environment consists of PESTEL i.e.
Political, Economic, Social, Technological, Environmental and legal.

PESTEL analysis which is also referred as PEST analysis is a concept in marketing values,
its a concept used by an organisation to track the environment they are operating or planning
to launch a new venture. (Weberience LLC, 2015)
Political - This factor determine the government stability and its influence in the economy of
a certain organisation. For e.g. The Indian government has passed its new budget in which the
price of Cigarettes, tobacco products, liquor , plastic bags etc. have increased due to which
the entire revenue generating structure of the referred industry might change. (Hindustan
Times, 2015) The New Zealand government has a direct impact on the retail industry in
regards to the trading hours, fair trading and competition. Because of the support from the
government the retail industry in New Zealand is booming and generating a huge amount of
revenue. When it comes to taxation NZ, imports into NZ are tax-free if the duty payable is
less than $60. NZ operates minimum duty on the products which is been import in NZ itself.
(Scholar, 2012) The NZ government has implemented a scheme for the retail market that the
employees can have benefits from the workplace, Warehouse also have benefits for its
employees which help them to save their income as most products are at a very cheaper price
for the staffs. Childcare benefits, medical aid when needed to the employees and its family
will be provided by warehouse.
Economic - This factor determine the economic performance of an organization which
directly impacts and boom for the long term effects. Economic factors include business
cycles, GNP trends, interest rates, exchange rates. The NZ economy showed a strong sign of
recovery following the global financial crisis and the 2010 & 2011 earthquake. Minimum
wages of an employee has been increased by the government which has a positive effects on
the retain New Zealand.
Socio Cultural - Socio cultural is a major factor influencing consumers choice. In New
Zealand changing societal concerns, attitude, and lifestyles have resulted in dramatic changes
in the retail industry in New Zealand. In modern world customers are more concerns about
health, obesity etc. due to that health food and eco-friendly organizations are in high demand
in New Zealand. Immigration policy of New Zealand has attracted a ton of migrants from all
around the world and due to that different regional cuisine foods are in high demand.
Technology & Environment - In modern times due to expansion in internet and electronics
customers prefer online shopping in comparison to traditional shopping. In New Zealand
online shopping behaviour of consumers has forced all the retailers to provide online
6

shopping facilities to their customers. Retailers are providing new and in-innovating selfcheck-in counters in their stores for their customers. Technological advancement has allowed
organizations to reduce carbon emissions, Energy management, reduce waste and recycling.

Porters Five Forces:

Threat of New Entrants - New Zealand positive and strong economy and changing
shopping behaviour of customers are attracting new entrants in New Zealand retail industry
big retail giants like wall mart are planning to start their operation in New Zealand. The
Warehouse Group has several years of experience in retail business and existing retail giants
(i.e. Kmart and PacknSave etc.) puts a strong barrier for a new entrant.

Bargaining power of buyers - The bargaining power of customers determines how much
customers can impose pressure on margins and volumes. In New Zealand retail industry
numbers of customers are large but they do not buy in bulk which indicates that bargaining
power of consumers in weak state. In New Zealand it is more economical to buy from one
retailer rather than from a host of retailers.
Supplier Bargaining Power - Supplier bargaining power is likely to be high when the
market is dominated by a few large suppliers. In New Zealand retail industry switching from
one supplier to another is not costly for a retail giant like The Warehouse. The Warehouse
group market share and dominance allow them to dictate the price they are willing to pay the
supplier.
Industry Competitors - Concentration, fixed or variable costs, differentiation, capacity,
pricing, behaviour and market and company growth are some of the factors considered in this
force. The Warehouse's chief competitors in the national retail scene include Farmers (low
scale department stores), Kmart (discount department stores) the Briscoes (discounted sports
and home ware store chains) and Super Cheap Auto (automotive products). In New Zealand
retail industry The Warehouse rivalry is very intense as their rivals use price cuts to boost
their unit sales.

Substitution - In retailing industry there are large number of competitors. In retail industries
switching from one chain to another create low cost for the consumers. The Warehouse
competitors are focusing on price reduction and better customer service.

Internal Analysis:
Internal Analysis is a process through which strengths and weaknesses of an organization can
be identified by analyzing their competencies. In business differentiation in products and
services can be attained through competences which are its resources and capabilities. In
business tangible and intangible asset both are valuable because it reduce cost and add value
to firms outputs. Customer gives preferences those products over those of their competitors.

Value Chain Analysis

(mindtools, 2015)

Firm Infrastructure The Warehouse group is a large retailer in New Zealand. It has 92
Warehouse stores, 77 Neol Leeming stores and 64 Warehouse stationary along with several
online businesses. This high number of stores located all over the New Zealand allows The
Warehouse to serve more than 10,000 customers in a day. The Warehouse group follow
REDUCE, REUSE & RECYCLE motto in all the stores which give them a competitive
advantage as their operating cost reduces and they earn a good carbon rating which is
appreciated by the government along with customers.

Human Resource Management Human resource is a key component of The Warehouse

group as they value their employees the most. The Ware house group follows an open door
policy for their employees in which employees can communicate with managers easily. The
Warehouse encourages their employees to communicate openly to share new ideas, take risks,
and have fun. The Warehouse employ 90% of its workforce on hourly wages which are
competitive along with the wages all the employees get comprehensive benefits which
include medical coverage, holiday pay, leave of absence etc. All the benefits are available for
both part time and full time employees.
9

Technology Development The Warehouse group incorporate new technologies into their
daily operations. They have computer base warehouse technology like bar code, selfcheckout counters, and inventory management systems. The Warehouse group has adopted
Waynes award winning software programme in their stores. This software allows them to
regulate electricity, air conditioner water supplier etc. on their optimum utilization.
Operations of The Warehouse The Warehouse group operates on a very large scale in
New Zealand, they have stores all around the New Zealand. The Warehouse group aims to
provide a safe shopping experience for customers and safe work place for all their employees.
The Warehouse group operation give a high priority to environment they give a high priority
to re-cycling.

Primary Activities
1- Inbound logistics - The Warehouse adopts Just-In-Time (JIT) to manage its supply
chain and logistics to maintain its supplying and inventory levels.
2- Operations - There are 92 Warehouse stores, 77 Noel Leeming stores, 64 Warehouse
Stationery stores in New Zealand.
3- Marketing and Sales The majority of sales in the stores for nationally advertised
merchandise. Ware house stores are open for 13 hours throughout the week. All stores
maintain uniform prices to meet local competition.
4- Services The warehouse has made after sales standards in their organization.

VRIO Analysis

10

FACTORS

Valuable

Rare

Inimitable

Organization

Price YES

YES

YES

Support
YES

Positioning
Supply
Chain YES

YES

YES

YES

Integration
Market

YES

YES

YES

YES

Proximity
Customer

YES

YES

NO

NO

Service
Diversification
HR Management

YES
YES

YES
YES

NO
YES

NO
YES

Good

According to the VRIO framework of Ware house, there are six types of
factors need to discuss. Firstly, the value of warehouse business, such as
their product, thousands of products have been shown on the warehouse
stock, it is a good price positioning that in strategic management, because
of the cost of product is very profitable price, compare with other shop,
warehouse dose have definitely advantage about their price strategy. The
completive advantage is very important for a firm, warehouse own a vary
of product which include the most of using facility in our life , it rely on
their good supply chain integration in strategic of business ,one of
advantage is that ;the customer purchase the product is almost cheap
than any other company ,because of the resource of product is come from
many factory ,they can combine those opinions to determine the best
value product for customer and take the advantage to against others . It is
a most simple question that warehouse has been deal with it, which is
their customer service can cover all of city, if the product has the quality
problem or some other issue, the customer could contact the customer
service to exchange it or other affording issue, they have many of shop in
every area of Auckland such as city central or western field. Because of
the product might be same or even better than warehouse if a customer
to buy something in other shop, however for the area of service covering,

11

warehouse does have advantage, that will not coping from other easily. As
of January 2015, The Warehouse employed over 12,000 people in New
Zealand. The Warehouse's corporate headquarters are located in North
Shore, New Zealand. Apart from its 242 retail locations, it operates 2
distribution centres located in Wiri, New Zealand and in Rolleston, New
Zealand as well as 12 online stores. A Warehouse Manager earns an
average salary of NZ$55,580 per year. People in this job generally don't
have more than 20 years' experience. Pay for this job does not change
much by experience, with the most experienced earning only a bit more
than the least. It shows us that HR management system is very strong and
it is a competitive advantage.

12

4. SWOT Analysis
SWOT analysis is a fast way to examine organization by looking at its
inner strengths and weakness along with the external opportunities and
threats.
Strengths - Warehouse is the largest retail chain in New Zealand, which
created more than 30 years and still going strong. The strength of
Warehouse involves wide knowledge of retail industry, cost leadership
strategy, financial investment backing, existing customer base, and strong
IT returns through internet shopping. First of all, Warehouse exceeds a lot
of competitors because it has more than 30 years retail industry
experiences, so Warehouse may get enough wide knowledge of retail
industry. Secondly, the cost leadership strategy is the one of main
strategy of Warehouse, it provides very low price for its products, and so
many consumer would like shopping in Warehouse, which is because
Warehouse provide the pricing strategy such as $1.99 for a product, the
price is a different between $1.99 and $2 when customers see the price.
Then, the existing customer base of Warehouse may make lots of profits
and benefits as there are many fixed customers in Warehouse and use to
shopping in Warehouse. Also Warehouse has strong financial investment
backing. For example, Warehouse purchased Noel Leeming Group in 2013,
and also there are many Noel Leeming chain stores in New Zealand, which
show Warehouse has strong financial investment backing. Strong IT
returns through internet shopping, customers may require returns when
they are not happy with the product or the product has problem in online.
For instance, one customer purchased a product of Warehouse online, and
the customer find the product has some problem and require to return the
product, so customer service department may accept the requirement of
the customer and solve this problem after finish checking product.

13

Weaknesses - However, the weakness of Warehouse includes high labour

cost and work inefficiencies, high labour cost, negative publicity and little
differentiation. For example, there is a problem which is staff have to
communicate with manager before consumers require refund, it wastes so
much time when many consumers require refund. Therefore, it is better to
provide some automatic refund machines, which may save a lot of time
between consumers and staffs. And then, high labour cost may reduce the
benefits and profits of Warehouse. For instance, there are 8 employees
work in Warehouse, but Warehouse does not need 8 employees because 6
employees may enough to support Warehouse, so other 2 redundant
employees may increase the labour cost. Then, negative publicity may
lose customers, as we know women like shopping, when one women is not
happy with products, the women may tell her friends, so the reputation of
Warehouse will reduce, some customers will be affected. The products of
Warehouse are very similar with other competitors, so there is no much
different between products, therefore, Warehouse may provide some new
products which from different countries, it may attract lots of customers.

14

Opportunities - There are 3 opportunities in Warehouse such as

expansion of target market, healthy market environment and increasing
detraction of small retail businesses in New Zealand. Warehouse may
expand target market, first of all, if Warehouses new target market is
younger customers, focus on how the product or service of Warehouse
may help them in the long run, also take into consideration which
advertising medium Warehouse want to use, and some customers may
spend most of their time on social media while others watch television
(Warner, 2013). Secondly, Warehouse may provide a healthy market
environment. For example, there is a family who usually shopping in
Warehouse, parents often busy for shopping and ignore their children, so
Warehouse may provide some recreation equipments for children so that
parents may pick up their children after shopping, which is very
convenient. And then, increasing detraction of small retail businesses in
New Zealand would be an opportunity because it may help businesses to
exceed competitors, nowadays, more customers would like to see and
choose cheaper products, so Warehouse usually provide the lowest price
to customers so that more customers shopping in Warehouse, also provide
some discounts and rewards so that attract customer to come back and
shopping again.

15

Threats - The threats of Warehouse involve intensified competition,

government regulations and rising commodity prices. First of all,
intensified competition could be 1 main threat for Warehouse, as we
know, there are some markets usually provide low price for products to
customers such as Parking Save, K mark and Countdown, so many
customers may compare the price of products between these stores,
therefore, not all customers may shopping in Warehouse, which cause
Warehouse may lose lots of profits and benefits. Secondly, government
regulations may influence Warehouse. For instance, Warehouse usually
import

some

clothes

from

different

counties,

when

government

regulations change some clothes are limited for import, so Warehouse

may not import these clothes. Consequently, Warehouse may lose many
benefits and profits. Thirdly, commodity prices may also influence the
benefits of Warehouse, if one product of Warehouse is higher than
competitors, customers may not choose the product. For instance, a
customer may consider purchasing a fan, the Warehouse of the fan price
is $59, and the Kmart of the fan price is $55, so the customer may choose
Kmart.

1- Strategic Options

1- Diversification & Cost Leadership Globalization

2- Globalization

Diversification & Cost Leadership

Previous literatures have identified three basic business-level strategy,

which are cost leadership, differentiation, and focus strategies (Hill, Jones,
Galvin, & Haidar, 2007). The Warehouse adopts the cost leadership
strategy with the aim of offering the lowest prices and various types of
16

goods with low level of product differentiation to customers. The objective

of the cost leadership strategy is to reduce costs and increase efficiency in
the production and delivery process (Kumar, Jones, Venkatesan, & Leone,
2011). By using this strategy, the Warehouse can establish an extended
international supply chain to ensure efficient manufacturing and cost
effective logistic management. Almost all of the products sold in the
Warehouse are manufactured and supplied by foreign companies. This
approach makes

full

use

of

the

comparative

advantages

in

the

international businesses as the Warehouse could enhance profits by

sourcing these goods from countries where has low-cost labour and raw
materials. The high standardisation of the goods also aims to wholesale
large amount of end-products to reduce the costs and enhance the profits.
The Warehouse can target different target markets in New Zealand like
construction business. After the earthquakes construction business in New
Zealand is flourishing at a very high price. This increase has created a
large demand for construction goods like construction material, tools etc.
The Warehouse has a large capital asset and stores located all around
New Zealand. The Warehouse due to its operating size can negotiate a
better price with the suppliers of the construction materials and can sell it
in its store. The Warehouse group can penetrate this market easily and
can attain above average returns easily as construction material has been
neglected by its main competitors.

Globalization

Integration of worlds governments, firms and people are defined as globalization.

International trade also known as bilateral trade agreements are defined as globalization in
modern world. Global trade agreements increases cross country investments; this increment
has benefited information technology and communication sectors in past two decades.
Globalization expands markets for the organizations; it allows firms to sell their products in
different countries along with selling it in their domestic markets. The Warehouse group can
17

adopt this strategy to open their business in different country and continents. The Warehouse
group should enter in the Asian markets like India, China etc. Asia contains almost half of the
worlds population which is clear indicator that The warehouse group with its large capital
asset, new technology and experience can easily enter this market by strategic alliance, joint
venture etc. Asias large population will ensure that maintained cost leadership and
diversification policy will still offer them above average returns and which will be more than
the domestic market of New Zealand.

Implementation

The Warehouse can adopt Just-In-Time (JIT) to manage its supply chain and
logistics to maintain its supplying and inventory levels. Efficient logistic
management requires a company maintaining the proper level of
inventories in order to ensure stable supply and low level of inventory
storage costs (Flynn, Huo, & Zhao, 2010). In relation to the Warehouse, it
has its warehouse close to the main port. JIT in the electronic version will
ensure on-time order and appropriate level of inventories. By using this
strategy, it not only helps the Warehouse to reduce logistic costs, but also
enhance its elasticity and adaptability to the changing customer demands
and market trend (Gimenez, van der Vaart, & van Donk, 2012). For the
supply chain management, the Warehouse has both internal and external
suppliers in the upstream of the supply chain in order to ensure the stable
supply of different products. It also has both in-house sales and
independent sales channels in the downstream of the supply chain, which
enables the group has a diverse sales channels through its different
brands to enhance its sales flexibility and vulnerabilities to the market
fluctuations and other risks (Besanko et al., 2013). The Warehouse group
can open new stores in South Island as due to earthquake construction
18

and rehabilitation is on a boom and it is been sponsored by New Zealand

government, govt. is offering subsidies to people and organization to open
business in south island. The Warehouse group can capitalize on this
situation as they can open more and more stores over there on a
subsidize price as these stores will create new jobs for the locals as well.
The Warehouse can do a strategic alliance with Big Bazar and reliance fresh who are big
retailer in Indian market. This alliance will help them to gain experience and knowledge of
the Indian market, values, culture and consumer behaviour. Their expertise in cost leadership
and supply management will be a key point for them to become a market leader in the new
Indian market. In India and China labour is cheap and agriculture sector is the main sector
which indicates that The Warehouse group can attain employees as well as products on a
cheaper price. They can make alliance with the farmers to sell their goods to them only which
help them to eliminate middle men for their imports from India and China.

References:
19

http://www.thewarehouse.co.nz/red/content/homepage/about-us/stephentindall

http://www.mindtools.com/pages/article/newSTR_66.htm

Barney, Jay B and Hesterly, William S. Strategic Management and Competitive

Advantage: Concepts. 2005 Pearson Education, Inc., Upper Saddle River, New Jersey,
07458.

Strategic Management Journal, 5, pp. 171180. Barney, J.B. (1991). Firm resources
and sustained completive advantage Janel management.

Barney, J. B., & Hesterly, W. S. (2010).VRIO Framework. In Strategic Management

and Competitive Advantage (pp. 6886). New Jersey: Pearson.

nz

herald.

(2013,

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from

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Retail

NZ

Retail

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&

Statistics.

(2013).

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from

http://www.retail.org.nz/retailresearchstatistics.html

Besanko, D., Dranove, D., Shanley, M., & Schaefer, S. (2013). Economics of
Strategy. Hoboken, NJ: Wiley

Flynn, B. B., Huo, B., & Zhao, X. (2010). The impact of supply chain integration on
performance: A contingency and configuration approach. Journal of Operations
Management, 28(1), 58-71. doi: 10.1016/j.jom.2009.06.001

Gimenez, C., van der Vaart, T., & van Donk, D. T. (2012). Supply chain integration
and performance: the moderating effect of supply complexity. International Journal
of Operations & Production Management, 32(5), 583 - 610.

Hill, C. W. L., Jones, G. R., Galvin, P., & Haidar, A. (2007). Strategic management:
An integrated approach (2nd Australasian edition). Sydney: John Wiley & Sons
Australia, Ltd.

20

Kumar, V., Jones, E., Venkatesan, R., & Leone, R. P. (2011). Is Market Orientation a
Source of Sustainable Competitive Advantage or Simply the Cost of Competing?
Journal of Marketing, 75(1), 16-30. doi: 10.1509/jmkg.75.1.16

The Warehouse. (2015). About the company Retrieved 10th Feburary, 2015, from
http://www.thewarehouse.co.nz/red/

21