Kim Harris owns and operates a small retail store, selling the outdoor clothing
ID: 423374 • Letter: K
Question
Kim Harris owns and operates a small retail store, selling the outdoor clothing of an American manufacturer to a predominately college-student market. Lately, a large department store outside of town has started selling similar but lower-priced clothing manufactured in China, Thailand, and Bangladesh. Kim is starting to lose business to this store. Why would a SWOT analysis be helpful in addressing Kim's strategic management problem? How could Porter's competitive strategies model be helpful as well?
Explanation / Answer
a SWOT analysis is a “detailed examination of organizational strengths and weaknesses as well as environmental opportunities and threats. As Kim begins to evaluate her store’s strengths, it’s important for her to identify strengths are special to her organization – things that she does exceptionally well compared to other retailers. She could use these strengths as a way to gain a competitive edge on the big-box retailer that moved into town. An example of a special strength would be that her clothes are manufactured in the United States are more quality than the clothes manufactured overseas. Many consumers do not even realize they are buying something made outside of the United States until they are told. With our busy schedules, we don’t always have time to check every label of every item we’re buying to determine where it was made. American consumers seem to support American industries. If Kim advertises the difference in origin of her clothes versus her competitor’s clothes, she may gain a portion of her customers back.
It is also important that Kim carefully reviews her store’s weaknesses. She doesn’t have to look at these weaknesses as her store’s “black marks.” Instead, she should review them as areas that need improvement. If Kim ignores her store’s weaknesses and refuses to address areas that need improvement, it could give the big-box store a competitive edge over her. For example, the big-box store is selling lower-priced clothing. Kim could evaluate her store’s costs to determine if there is an issue with efficiency that, once fixed, could allow her to provide her clothing at a more competitive price.
Environmental conditions – opportunities and threats – are just as important as her store’s conditions. Kim may not be able to reasonably compete with the big-box store in the college-student market, so she needs to evaluate other possible target markets. Because she sells high-quality outdoor clothing, she could target mature adults that have a higher income level and enjoy participating in outdoor activities. This type of market would have more money to spend on clothing, versus the typical college student.
We already know the biggest threat in Kim’s situation – the big-box store. However, even though we know the what we need to evaluate the why. Kim needs to determine why the big-box store is a threat to her business. Is it just the low-cost clothes? Does it offer better customer service? More convenience? If Kim can determine all the factors that determine why the big-box store is a threat to her store, she may find new ways to remain competitive.
Another model that could be helpful for Kim is Porter’s competitive strategies model. According to our book, Porter believes that strong competitive strategies can be developed using differentiation, cost leadership, and focus. Kim needs all the help she can get in developing a strong competitive strategy to keep her competing with the big-box store.
The first strategy, differentiation, is used to develop ways for a business to compete through its uniqueness. Kim definitely has some uniqueness as a small, family-owned business selling only American-made clothing. This kind of small town store provides a different kind of feel and shopping experience than a big-box store. Kim could use this to her advantage.
The second strategy, cost leadership, is used to determine ways to operate at a lower cost than competitors. As stated earlier, there are likely areas of inefficiency within Kim’s store. Many small stores run very casually with little thought of efficiency. Kim may not have to make very many changes to increase her efficiency and lower her operating costs.
The last strategy, focus, builds on the differentiation and cost leadership strategies. It pushes a business to narrow its focus to a small/unique market where its unique product and low-cost operations will be beneficial. College students are probably not the best market for Kim. The typical college has minimal income and is more worried about passing classes than high-quality, unique clothing. Kim needs to find a market with an outdoor niche that has an appreciation for American-made high-quality clothing. As stated above, she should look at more mature adults with extra income to spend on luxuries.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.