PESTEL and SWOT Analysis of Homebase

Homebase is the UK’s second largest home improvement retailer and is recognised for choice, style and customer service across the wider home enhancement market. It has more than 300 large, out-of-town stores throughout the UK and Republic of Ireland, and is planning to add to its store chain with around 15 new stores a year. It sells over 30,000 products across DIY and decorating, home and garden ranges, and has a growing internet offering. Homebase serves over 70 million customers per year through its stores and offers customers the convenience of home delivery for bulky, high-value items. Its Ideas magazine is the number one home interest magazine in the UK, with a circulation of almost half a million. In 2006 Homebase won ‘Britain’s Best Superstore Manager of the Year’ at Britain’s Best Retailer Awards and in 2005 it was awarded DIY Retailer of the Year in the National Home Awards. Homebase was the first UK DIY retailer to achieve Forest Stewardship Council Chain of Custody certification. More information on Homebase can be found on

Situation analysis

With sales of nearly £6bn in the past financial year, Home Retail Group is the leading home and general merchandise retailer in the UK.

Although company is already the number one in many of its product categories, there is still potential to increase its market share. Our combined position accounts for just 10% of a market valued at £60bn. As many of these markets are fragmented and its market share has built quickly, there are further opportunities for growth. Homebase proves there’s ‘No Place Like Home’ for charities In August 2006 Homebase launched its first two year partnership with Marie Curie Cancer Care (www.mariecurie.org.uk) and the Irish Cancer Society in the Republic of Ireland (www.cancer.ie), under the banner of ‘There’s no place like home’ ; The charities were chosen in a company-wide staff ballot where 39% of Homebase staff voted to support them ; The aim of the two year partnership was to raise £500,000 to pay for 25,000 hours of home nursing. Homebase staff and customers have exceeded all expectations in the first year of the partnership, smashing the original target and raising an astonishing £785,000 already ; Over the past 12 months, the campaign has seen everything from head shaves and dress down days to staff abseiling down buildings for the charities. The money raised in the first year will help to provide a fantastic 39,250 hours of nursing.

External Analysis-Macro Environment

Political

• Employment rate in UK is increased to 74.7% since the last year and it is suppose to increase as well at the end of the current year which could be beneficial for the company because the purchasing power of the customers has increased and at the same time it will increase the cost of the company by increasing the pay rate of their own employees.
• Terrorism is also affecting the customer little bit but it increases the online sale.
• If the company go in the developing countries for manufacturing, it may reduce the cost because the low pay rate in the developing countries at the same time it may affect the reputation of the company.

Economical

• Consumer price inflation rose up to 2.2% in January 2008 influenced by the oil and food prices which can influence the price strategy of the organization as well as the promotion and distribution and also can effect the purchasing power of the consumer.
• Oil prices are increasing rapidly in these days and the prices has been reached to its record which increases the cost and in return the high prices.
• The value of dollar against Euro is decreasing which can affect the profit margin.

Social

• The rate of population in UK is increasing dramatically which is a big cause of unemployment.
• Increasing number of visitors especially on London Olympics 2012 can be a opportunity to sponsor time or individual and increase globally the company’s image and recognition.

Technological

• Due to the increasing internet awareness among the customer the online sale is increasing day by day. It saves the time and cost as well.
• 52% of business suffered a malicious premeditated e-security breach during 2005 which can affect the customer data, as well as the customer trust to by online. It can affect the reputation of the brand.
• After the introduction of the new security system PayPal the online payment from credit card has become more secure which increase the customer confidence on the brand which increase the reputation of the brand.

Legal

• The World Trade Organization members countries have the right to impose the safeguard measures and it has a legal processing to imports. When the company goes to importing it should be aware and follow the changes in the regulations.

Environmental

• By following the government waste strategy the company should increase the amount of recycling which strengthen the reputation of the company.
• The public of UK is environment conscious and may be a burning issue of the world in near future so the company should improve its recycling policies.

External Analysis-Micro Environment

The micro environment also known as task environment are the internal forces that have a direct affect in the company’s strategies. These factors include buyers, suppliers, all type of competitors, new entrants and substitutes employees and marketing intermediaries (media).

Industry analysis

The following analysis is based on Michael Porter’s 5 Forces Model (1996) and it helps understand the competitive environment for HomeBase

Threats of New Entrants

Factors

Level of threat

implication

Product differentiation

High

Home products are very common products so the marketing of the company sells.

Capital requirement

Medium

A lot of capital require to introduce a new product to compete the existing products

Brand identity

Low

Home base has a strong brand name in whole US and UK

Distributional channel

Low

Franchisee will be consider the brand identity in the first step

Economies of scale

medium

New entrant have to entrant in a large scale to compete in the market

Threats of substitute products

Factor

Level of threat

Implication

• Few substitute products
• Low
• In household products there are very few products which can be replaced
• Bargaining power of customer

Factors

Level of threat

implication

Product quality

High

Some of the competitors claim to provide similar quality products to the customer

Type of customer

high

As the management of the store is responsible for a good sale so there is a strong customer bargaining

Brand identity

Low

Marketing strategy is strong that’s why the brand is recognized all over the US and UK

Bargaining power of supplier

Factors

Level of threats

implication

Cost of supplier

High

This company is in developed countries that’s why the labour cost quite high

Supplier concentration

Low

The company support community traders

Competitive rivalry

Factors

Level of threats

Implication

Brand identity

high

The brand value of each company as well as the target market makes the differentiation to the customer

Industry grown

High

Due to the recent growth in the household items the competition is very high

Cost of structure

High

Competitors follow the same scheme of economies of scale with relatively low cost and high profit

Diversity of competitors

High

Now a days there are some companies who are introducing the efficient products

Conclusion: after analysing the Porter’s 5 forces in this company it is noticed that the retail market is attractive for Homebase. Though Homebase is a leader in the market the company has to develop more technological and attractive products to compete the other companies as well as company has to improve its growth strategies to keep the customers and to fulfil their needs.

Market segmentation

Consumer market

The Homebase has become the leader in its market because it covers almost every household item like from gardening to decorating. Now a days due to development in technology the customer is becoming more and more aware of the quality so they demand for high quality products because they have choice.

Products

Homebase concentrate on household products and the is still trying to cover everything regarding home. Company deals with the following types of products.

• Kitchen items
• Bathroom products
• Furniture and homewares
• Lighting
• Flooring and tiling
• Decorating
• Home electrical
• Heating and cooling
• Tools
• Building and hardware
• Gardening
• Outdoor living

Main competitors

following are some principal competitors for the Homebase,

Home Depot, Inc.;

Eagle Hardware and Garden Inc.;

Hechinger Stores Co.;

Builders Square Inc.;

Payless Cashways Inc.;

Orchard Supply Hardware Corp.;

Lumbermen’s Building Centers.

Though Homebase has quite strong competitors but still it is leading the market and providing the quality products as well as quality service to its customer and also it is successful to keep its customers till now. The company has to continuo the performance to maintain the standard.

Brand

Since last few years Homebase has worked focused on customer favour by providing products in low rates with a shopping experience that combines excellent service with a comprehensive range of household items.

Homebase proves there’s ‘No Place Like Home’ for charities In August 2006 Homebase launched its first two year partnership with Marie Curie Cancer and the Irish Cancer Society in the Republic of Ireland, under the banner of ‘There’s no place like home’ ; The charities were chosen in a company-wide staff ballot where 39% of Homebase staff voted to support them ; The aim of the two year partnership was to raise £500,000 to pay for 25,000 hours of home nursing. Homebase staff and customers have exceeded all expectations in the first year of the partnership, smashing the original target and raising an astonishing £785,000 already ; Over the past 12 months, the campaign has seen everything from head shaves and dress down days to staff abseiling down buildings for the charities. The money raised in the first year will help to provide a fantastic 39,250 hours of nursing. After doing this Homebase has become a strong brand in all over the UK and Irish republic.

Internal analysis

Resources

Physical resources

Number of stores: 310

Countries operating: UK & IRISH REPUBLIC

2. Human resources

More than 8400 employees including stores and offices are working in Homebase

3. Financial resources

Pro forma of 52 weeks to

3 march 2007

4 march 2006

Sales

£1,594.2m

1559.0

benchmark Operating profit

£53.4m

£51.4m

Benchmark operating margine

3.4%

3.3%

Like-for-like change in sales

1.4%

3.1%

New space contribution to sales change

3.6&

3.1%

Total sales change

2.2%

0.0%

Benchmark operating profit change

4%

n/a

Number of stores at period end

310

297

Of which contain a mezzanine floor

165

144

Competences and capabilities

Using the 5M’s is possible to analyse the competences and capabilities of the company.

Market

The Homebase is the leader in the retail market and it is providing quality products in cheaper rates and due to this Homebase is being recognized all over the uk as well as Irish republic.

Materials

The company is investing a lot of capital to introduce new stores so that the customers can buy quality products from their locality. The key element to the new store design is part of the business strategy to make-up merchandising fixture.

Men

More than 8400 employees including stores and offices are working on Homebase.

Money

Financial resources

Pro forma of 52 weeks to

3 march 2007

4 march 2006

Sales

£1,594.2m

1559.0

benchmark Operating profit

£53.4m

£51.4m

Benchmark operating margine

3.4%

3.3%

Like-for-like change in sales

1.4%

3.1%

New space contribution to sales change

3.6&

3.1%

Total sales change

2.2%

0.0%

Benchmark operating profit change

4%

n/a

Number of stores at period end

310

297

Of which contain a mezzanine floor

165

144

Machines

Number of stores  310

Countries operating  UK & IRISH REPUBLIC

S.W.O.T Analysis

Strengths

• Leverage purchasing scale
• High loyalty
• Strong brand name
• Increase share in large product markets
• Expand homebase store network
• Extend and exploit multi-channel leadership

Weaknesses

• More capital require for new stores
• High supply cost
• High operation cost

Opportunities

• Further to go on importing
• Opportunity to explore other overseas sourcing locations
• Additional benefits to come from supply chain
• Other cost reduction processes

Threats

• Strong competition in retail market
• Customers are becoming more and more aware of quality due to improvement in technology and want high quality products on cheap prices
• Increase in the sales of competitors
• Though there is competition in the market the Homebase has a strong brand name and the company is improving their performance as well as it is investing in the product quality and opening new stores. There are still lot of opportunities for the company.

Market plan

On the basis of the previous audit marketing and the company strengths the objectives and the targets of the company are as follows;

Objectives and targets

• Reduce plastic bag consumption by 25% by the end of 2008
• Attain ISO 14001 status for 5 Distribution Centres
• Attain recycling rates of 50% across the Group

Energy

• Achieve energy accreditation for the Group from the Carbon Trust
• Reduce energy consumption by 2% KwH/sq ft
• Purchase at least 30% green power

Products

• Review current policy guidelines for product selection
• Attain accreditation for sustainable paper sourcing
• Maintain existing recycled paper content of catalogue at 13%

Community

• Raise at least £1.6m for charity partnerships
• Achieve ‘gold status’ for payroll giving ( at least 10% of workforce)
• Establish arrangements for community investment
• Establish a volunteering policy for the Group

Workplace and HR

• Improve ’employee engagement’ scores.
• Improve take up of share save schemes
• Reduce average absence per employee
• Reduce RIDDORS by 10%

Customers

• Increase levels of customer satisfaction (reduce no of orders which generate one complaint)

Group growth strategies

• Growth through leveraging purchasing scale
• Growth through increasing market share in targeted large product market
• Growth through extending and exploiting multi- channel leadership
• Growth through expanding the store network (10 homebase stores in a year)

Marketing mix

To implement the above strategies the following points can be applied:

Product / branding

Homebase is working efficiently in these days by following their strategies and because of this it is leading the market in all over the UK and Irish republic.

Well I believe that regarding to the objectives of increase the brand image is recommended that the company is to associate the environmentally friendly image such as reducing the use of plastic bags. And further more the company should go on importing as well as explore the other overseas resources locations so that the brand can win the global recognition. Though the company has started its own recycling program in which some products are totally recyclable and some are partly, but in future environment will be a burning issue so organization should do some more for this which protect as well as beneficial for the brand in future.

Price

The differentiation strategy allows the company to implement a value-based pricing approach.

Place

Develop a multi-channel distribution has been successfully implemented in the company. On the other hand company should increase its online sale.

Promotion target

People concerning about environmental issues

House wives

Communication

• To promote the product benefits
• To make the product known
• To increase online buyers

The massage

It is suggested to use the objectives that concern with the knowledge or awareness in the mind of the customer.

Media selection

• Advertisement on the magazines which are usually being sent to the houses monthly or weekly
• Attracting customers by making sales on special occasions
• Online advertisement
• Using the logo in other web sites to link with the company’s web site
• Series of the press releases to be sent to magazines and access online
• TV campaign to roll out nationality on terrestrial TV

Posters

People

• To monitoring services online as well as make available news tools to the customer shopping online
• To incorporate orders online, to store products and others
• To help increase the sells and to ensure the customer service quality

Process

Products purchase online delivery with in a week

Credit card to be charged at time on the shipment of the order and confirmed by e-mail

Use the latest security methods such as PayPal

Return policy should be with in the existing 30 days after the purchase

Physical evidence

• Receipts and inventory bills
• Software to develop the e-commerce

Budget breakdown

To achieve the above marketing planning objectives it is set an overall cost of £8.5 million. And this overall cost is divided into the following categories;

Product

16% of the total cost is for the market research and for the development of the product, R&D. The estimate cost in £1360015.7

Place

8% of the cost is to be spend on the continuous refurbishment and maintenance of the stores, distribution and transportation, and the estimate cost is £680,000.

Promotion

60% of the total cost is to be used for the promotion of the product which includes the media advertisement such as advertisement in TV programs, magazines, posters in public transport, etc. The estimated cost is £5100,000.

People

10% of the cost is to be spent on HR, training, recruitment and IT outsourcing. The estimate cost is £850,000.

Process

4% of the total cost will be spent on the development of the operation processes and for this the estimate cost is £394400.63

Physical evidence

2% of total cost is to be spent on the reservation for the physical evidence and process to maintain the e-commerce. And the estimated cost for this is £170000

Total cost

The total cost for the whole process of the above marketing planning to achieve the mentioned objectives is estimated as £8500000.