Escolar Documentos
Profissional Documentos
Cultura Documentos
Lecturer: Shay Lynch Number of member 1 2 3 4 Student Names Marion LELANDAIS Marie LANDO Tatiana BLANC Agathe VIGNERAS Student Numbers 1626879 1626958 1626879 1626889 % of the total project 3% 2% 45% 50%
Table of Contents
Chapter 0 Challenge ............................................................................................................................. 6 Background consulting study .............................................................................................................. 6 HMV UKs Profile ................................................................................................................................. 6 Roland Berger & Partner UKs Profile .................................................................................................. 6 Process following................................................................................................................................. 6 Chapter 1 The entertainment environment ......................................................................................... 8 1. Financial Crisis ............................................................................................................................. 8 2. Entertainment Industry ............................................................................................................... 8 3. Downloading ............................................................................................................................... 8 4. Consumer Behaviour ................................................................................................................... 9 Chapter 2 HMVs Internal Audit ......................................................................................................... 10 1. Capabilities ................................................................................................................................ 10 2. Products, Distribution and Brand management ....................................................................... 10 3. Stakeholders .............................................................................................................................. 11 Chapter 3 Recommendations and Implementations ......................................................................... 13 1. To Develop a R&D program ....................................................................................................... 13 A need of R&D program is perceived ............................................................................................ 13 A need of finance to develop a R&D program .............................................................................. 13 2. To re-think the offer .................................................................................................................. 14 Need a reduction of prices ............................................................................................................ 14 Need to expand the service offer .................................................................................................. 14 Need a dematerialization of product: to foster online product rather than physical product on the decline ..................................................................................................................................... 14 Multichannel distributor confirmed .............................................................................................. 14 Conclusion ............................................................................................................................................. 16 References ............................................................................................................................................. 17 Appendix 1 PESTEL Analysis ............................................................................................................... 22 Political and Legal factors .................................................................................................................. 22 Economic and Environmental factors ............................................................................................... 22 Social-cultural factors ........................................................................................................................ 23 Technologic Factors ........................................................................................................................... 24 Appendix 2 Key Drivers in the entertainment industry ...................................................................... 26 Financial Crisis 2008 .......................................................................................................................... 26 Music Diversification ......................................................................................................................... 26 High technology and innovation ....................................................................................................... 26 Dematerialization of the entertainment industry ............................................................................. 26 Products are dematerialized ......................................................................................................... 26
Services around the entertainment are dematerialized. .............................................................. 26 Legal and illegal: piracy and free platform ........................................................................................ 26 Piracy ............................................................................................................................................. 26 Free Platform................................................................................................................................. 27 Appendix 3 Porters Five Forces ......................................................................................................... 28 Music: .................................................................................................................................................... 28 Competitive intensity: ....................................................................................................................... 28 Potential new entrants: ..................................................................................................................... 28 Bargaining power of suppliers........................................................................................................... 29 Bargaining power of buyers .............................................................................................................. 29 Threats of substitute products or services ........................................................................................ 29 Movie:.................................................................................................................................................... 29 Competitive intensity: ....................................................................................................................... 29 Potential new entrants: ..................................................................................................................... 29 Bargaining power of suppliers........................................................................................................... 29 Bargaining power of buyers .............................................................................................................. 29 Threats of substitute products or services ........................................................................................ 30 Video games .......................................................................................................................................... 30 Competitive intensity: ....................................................................................................................... 30 Potential new entrants: ..................................................................................................................... 30 Bargaining power of suppliers........................................................................................................... 30 Bargaining power of buyers .............................................................................................................. 30 Threats of substitute products or services ........................................................................................ 30 Appendix 4 Life Cycle Product Analysis .............................................................................................. 31 CD industry ........................................................................................................................................ 31 DVD industry ..................................................................................................................................... 31 Video Game Industry ......................................................................................................................... 31 Appendix 5 Strategic Groups .............................................................................................................. 32 Situation by SBU ................................................................................................................................ 32 Music ............................................................................................................................................. 32 Visual Industry ................................................................................................................................... 34 Games Industry ................................................................................................................................. 36 Appendix 6 Market Segmentation ..................................................................................................... 38 Appendix 7 - HMV UK & Irelands Value Network & drivers: CDs, DVDs, Games ................................. 41 Appendix 8 Value Chain of HMV UK ................................................................................................... 43 1. Infrastructure ............................................................................................................................ 43 General management (Hmvcarreers)................................................................................................ 43 Data network infrastructure ......................................................................................................... 43 Recent changes.............................................................................................................................. 44
2.
Human Resource Management................................................................................................. 44 Brand and employees .................................................................................................................... 44 Recruiting, hiring, training, developing and compensating all personnel..................................... 44 Stakeholders .................................................................................................................................. 44 3. Technology Development ......................................................................................................... 45 E-business technology development (Chouaib, 2009) ...................................................................... 45 In-store technology development (PRnewswire).............................................................................. 45 4. Procurement (Essaysforstudent.com, 2009) ............................................................................. 45 5. Inbound Logistics ....................................................................................................................... 46 Call-off to suppliers ....................................................................................................................... 46 Materials handling ......................................................................................................................... 46 Warehousing ................................................................................................................................. 46 Online sold products ..................................................................................................................... 46 Inventory control ........................................................................................................................... 46 6. Operations ................................................................................................................................. 47 Packaging ....................................................................................................................................... 47 7. Outbound Logistics .................................................................................................................... 47 From in stores................................................................................................................................ 47 From the Internet .......................................................................................................................... 47 8. Marketing Sales ......................................................................................................................... 48 Product, pricing, advertising and promotion, distribution ........................................................... 48 Customer value, cost to consumer, convenience, communication .............................................. 53 Sales force effectiveness ................................................................................................................... 54 9. Unique services ......................................................................................................................... 55 People ............................................................................................................................................ 55 HMVs Store Card Activities........................................................................................................... 55 The Social Space (Himelstein et al., 2009) ..................................................................................... 55 Appendix 9 Strategic Capabilities and Competitive Advantage ......................................................... 56 Threshold Capabilities (minimum needed to compete in a marketplace): ....................................... 56 Resources ...................................................................................................................................... 56 Competences ................................................................................................................................. 56 Capabilities for competitive advantage............................................................................................. 57 Resources ...................................................................................................................................... 57 Competences ................................................................................................................................. 57 Appendix 10 Sustainable Competitive Advantage ............................................................................. 58 Brand: ................................................................................................................................................ 58 Portfolio:............................................................................................................................................ 58 Appendix 11 - Ishikawa diagram for HMV UK & Ireland ....................................................................... 59 Appendix 12 Benchmarking................................................................................................................ 60 Area of Potential Improvement: Distribution ................................................................................... 60 UK & Ireland leading competitors in the area ............................................................................... 60
Goals .............................................................................................................................................. 60 Area of Potential Improvement: Website ......................................................................................... 60 UK & Ireland leading competitors in the area ............................................................................... 60 Goals .............................................................................................................................................. 60 Area of Potential Improvement: Price (value for money) ................................................................. 60 UK & Ireland leading competitors in the area ............................................................................... 60 Goal ............................................................................................................................................... 61 Appendix 13 ITC Innovation Drivers ................................................................................................... 62 1 .Innovation of product support ...................................................................................................... 62 2. Innovation of distribution via internet channel ........................................................................... 63 3. Diversification .............................................................................................................................. 63 4. New technologies: New product inside HMV even if already existing in the market ................. 63 Appendix 14 - Knowledge management ............................................................................................... 64 Appendix 15 TOWS and its analysis.................................................................................................... 65 Threats............................................................................................................................................... 65 Opportunities .................................................................................................................................... 65 Weaknesses ....................................................................................................................................... 66 Strengths ........................................................................................................................................... 66 Anaylsis .............................................................................................................................................. 67 Use HMV UK & Irelands internal strengths to take advantage of external opportunities........... 67 Improving internal weaknesses by advantage of external opportunities ..................................... 67 Using HMV UK & Irelands strengths to reduce the impact of external threats ........................... 68 Defensive tactics aimed at reducing internal weaknesses and avoiding environmental threats . 69 Appendix 16 Boston Consulting Group matrix ................................................................................... 70 1. CD & Music downloading .......................................................................................................... 71 2. DVD ............................................................................................................................................ 71 3. Video Games ............................................................................................................................. 71 4. Technologies.............................................................................................................................. 71 5. Fashion & Merchandising .......................................................................................................... 71 Appendix 17 Consideration of the 13 strategic options ..................................................................... 72 1. Integration Strategies ................................................................................................................ 72 a) Forward Integration .............................................................................................................. 72 b) Backward Integration ............................................................................................................ 72 c) Horizontal integration ........................................................................................................... 72 Intensive Strategies ........................................................................................................................... 72 a) Market Penetration ............................................................................................................... 72 b) Market Development ............................................................................................................ 72 c) Product Development ........................................................................................................... 73 Diversification Strategies................................................................................................................... 73 a) Concentric Diversification ..................................................................................................... 73
b) Conglomerate Diversification ................................................................................................ 73 c) Horizontal Diversification ...................................................................................................... 73 Defensive Strategies .......................................................................................................................... 74 a) Joint-Venture ......................................................................................................................... 74 b) Retrenchment........................................................................................................................ 74 c) Divestiture ............................................................................................................................. 74 d) Liquidation ............................................................................................................................. 74 Appendix 18 - Porters Generic Strategies ............................................................................................ 75
Chapter 0 Challenge
Background consulting study
In this information society, entertainment markets are experienced continual and rapid changes. So if a company is not prepared to undergo these changes, it can find itself in a difficult situation. HMV UK & Ireland is one of these. That is why it challenged our Strategy Consulting Firm to replace it in the market, by analyzing its strategy and provide recommendations for the future.
Process following
It exists a number of environmental factors or forces that can influence the market
place behaviours, affecting the consumers or the competition just as much as business. That is why it is necessary to conduct an environmental audit of the HMV UK & Ireland to evaluate what these factors and forces are. This audit will study environmental trends and events that can potentially affect the strategy. Then the internal audit will judge the capabilities of HMV UK & Ireland to meet the needs of its target market coping with the external environment. These analysis will not only result in the identification of HMV UK & Irelands core competencies, but also in the identification of appropriate resources that will be able to take advantage of opportunities which the company does not yet enjoy. The report will conclude by giving some recommendations about the generic strategic options that will fit with your situation.
The 2008 financial crisis has an impact on Europe and specifically in Ireland and the UK. Their purchasing power is still weak; consumers are reluctant to buy. However, the UK is recovering from the crisis with a positive growth rate this year (see appendix 1) as it is one of the strongest economies in Europe.
2. Entertainment Industry
According to the following tools:
Appendix 1 PESTEL Matrix Appendix 2 Key Drivers in the entertainment industry Appendix 3 Porters Five Forces Appendix 4 Life Cycle Product Analysis Appendix 5 Strategic Groups
The entertainment industry can be roughly divided into three SBUs: music, visual and gaming. The music and visual sector are slow-growing sectors since it has become at its decline lifecycle stage (see appendix 4). However some innovations and IT technologies perspectives are a great promise to re-start these sectors. Indeed, the visual market is strong thanks to its 3D movies. Music is also listened to in many different ways rather the typical CD support, in particular MP3, androids, etc. However the technology is evolving constantly and exponentially. To have a competitive advantage through innovation is a great challenge. HMVs competitors are making the difference by pricing. Indeed, Tesco has a price advantage in almost all the SBUs (see appendix 5) if free platforms and, so on, are not considered. This is an important strategy as the power of suppliers is very important and it restraints the power of retailers decisions. Video game sector is differentiating itself from the music and visual sector; it is at its maturity stage (see appendix 4) and seems to benefit from innovations, mainly wireless and mobile ones which can permit to start a new generation preparing the decline of the previous generation of consoles. In fact, the video game sector is strong and innovative. Moreover, the video games offer is not very differentiated so it might be an interesting gap to fill in.
3. Downloading
According to the following tools:
Appendix 1 PESTEL Matrix Appendix 2 Key Drivers in the entertainment industry Appendix 4 Life Cycle Product Analysis Appendix 5 Strategic Groups
Downloading has been a huge evolution in the entertainment industry. As there was a legal gap about the Internet regulation, the illegal downloading1 has grown a lot. This downloading is a huge threat which gives an important power to buyers. The British government decide to regulate this segment. The UK Parliament passed the Digital Economic Bill in 2010. The Irish government has also a strong will to fight against illegal downloading; it asked the parliament to regulate this problem but the bill is still putting up with some strong oppositions.
4. Consumer Behaviour
According to the following tools:
Appendix 1 PESTEL Matrix Appendix 2 Key Drivers in the entertainment industry Appendix 6 Market Segmentation
Consumer types are segmented in different groups. We can affirm that the rise of the Internet and its use has changed the consumer behaviour; more and more people are trusting the e-commerce and buying through this channel. Moreover, the development of IT devices creating mobility to technologies is a huge factor that has change persons life. Internet and new technologies has divided the world into two parts: the ones who are young and (want to) use and, the others who are older and dont know/want to use Internet and new technologies.
illegal downloading means acquiring a downloading file without paying any royalties to authors.
Despite a high 1.24 billion turnover, HMV UK & Ireland is in a difficult financial situation. Indeed, HMV UK & Ireland doubled its debt and its shares have really collapsed this year. It would have been enough to discourage employees but HR management is much advanced that managers succeed in maintaining employees mental. They have established an open management allowing a two-way communication concerning every subject, and in spite of the crisis, they keep rewarding their employees for good performances and nourishing the work environment. Thus, the vast amount of experience and expertise among employees has not suffered of damage so they keep staying close of customers expectations. The collective experience and the competent board of director have made a more efficient human knowledge that exists within the organisation. Unfortunately they have had a late reaction in its responding to the technological change, which has cost HMV its stable position and lead it towards the problems it suffers today (especially the important in-store sales diminishing). But thanks to the retailers well-established relationship (competent and innovative partners (e-solutions and companies) and confident supply chain), it is able to pursue its business and have a second chance to enhance its strategy. Furthermore, its new ability for innovation (product support, distribution, diversification...) has offered new perspectives for success. Finally, regarding the factors which drive to the decline of the firm and the benchmarks which well-manage the solution related to these factors, the only thing missing is a good strategic planning to move up the slope.
HMV UK & Ireland mix continue to evolve. Since 1921, HMV UK & Ireland sells CDs, DVDs, games. But following the decline of its market, HMV UK & Ireland decided first to implement an Internet strategy in 1997 (the website: hmv.com) and then to expand the product range in 2009 (technology, clothing and merchandising). Furthermore, it has seen
10
right by focusing on technology, where the opportunity for range expansion in high-growth product is the greatest. Without forgetting that, it has the largest range of products on the high street in entertainment industry. And as its stores cover a wide range of location across the UK & Ireland, it reaches the more physical customers in the market. This multi-channel distribution would be a stronger advantage than it already is if these same channels were well coordinated. Indeed, if the coordination were assured, there would be more customers on each channels knowing that online and offline traffic consumers is important but neither necessary the same nor in an exclusive way. Even if they have well perceived reputation for services, these have to be improved. For instance, the website is not optimized and excludes 50% of its visitors from the previewed products because of their Microsoft technologies utilization which require people to work with Internet Explorer. Moreover, HMV UK & Ireland bad referencing on Google and other search engine prevent the company to acquire potential consumers. Therefore HMV UK & Ireland high prices compared to competitor are not always explained and they are even a strong weakness for the company. The brand is the Sustainable Competitive Advantage, since 1921, HMV UK & Ireland have built a reputable brand assuring a long-term and profitable customer relationship. The brand shares the customers perception that buying an entertainment product is not shopping but a pleasurable experience itself. The brand is closely linked with the organisational culture. In addition, HMV UK & Irelands commitment to advertising, promotion and personal appearances has, during 90 years, forged the strong image of the brand. That is true that HMVs logo, representing Nipper the Dog, remains an integral part of HMVs advertising and promotion that plays an important role in publishing the brand. It is the experience and heritage associated with the brand. Accompanied by the slogan Top Dog, this, more than representing the positioning, brings the brand to life.
3. Stakeholders
According to the following tools: Appendix 7 - HMV UK & Irelands Value Network & drivers : CDs, DVDs, Games Appendix 8 Value Chain of HMV UK Appendix 10 - Sustainable competitive advantage Appendix 14 - Knowledge management
The important stakeholder groups for HMV UK & Ireland are (without order of importance) employees, customers and shareholders. They are a public limited company so they have to communicate to each of these groups Stakeholder mapping identifies the expectations and power of the stakeholders. The Power/Interest matrix of stakeholders is important to identify potential stakeholder areas which may be an issue in times of change (Midlane, 2008).
11
Interest Power Low Low Minimal Effort . Investors . Community . Charities . Artists .Environmental . Agencies High Keep Satisfied . Customers Key Blockers or Facilitators of Change . Managers . Lenders . Government
Table 0 - Power/Interest matrix of HMV UK & Irelands stakeholders
High Keep Informed . Shareholders . Employees . Fan clubs . Music awards . Suppliers
12
13
Implementations Innovative technologic product from the Brand itself Innovative support: e.g. we thought that HMV UK & Ireland could create USB keys with songs already on it. USB R&B, USB classic or USB that you can fulfill with music inside the social space. Collaboration with an innovative and technologic company
Need a dematerialization of product: to foster online product rather than physical product on the decline
HMV UK & Ireland should implement a targeted retrenchment on its range products. To develop online offers (CD bonus, DVD bonus) and progressively reduce the CD and DVD offer knowing that in a long term the only people who would buy these products would be the materialist passionate. Indeed, CD and DVD might be the next step of retrenchment as it is at its decline lifecycle and almost becoming dog products. Thus, sales performance would be improved and HMV UK & Ireland would be able to focus on its technological innovation which seems to be the more relevant strategy.
14
way the retailer would be able to leverage its UP2 ( Specialist HMV= Value + Range + Knowledge + Inspiration) across channels to avoid the only-pure-competition driver.
Recommendation: to re-think the offer Need a reduction of prices Implementation In-store distribution of less expensive online music Online music at competitive price (less expensive than now) Social events: game competition, karaoke They should innovate the service and interaction especially the rich experience of the physical store environment (sight, sound, human interactions) transferring this experience to the website through rich media (technology like chat to share the customers experiences or ask a salesman, online events, streaming concerts) Reduce progressively its CD and DVD offer
Need a dematerialization of product: to foster online product rather than physical product on the decline Multichannel distributor confirmed
Partnership with operator (such as Vodafone) for mobile channel distribution Website improvement: To provide more control for customers To deliver consistent information in the website To use the same name for the same product than in store (to coordinate channels) To make site product page easy to print To show inventories of all local stores
Unique Proposition
15
Conclusion
Despite of what we can hear on HMV's situation, it is not as bad as this. Indeed, they have strategic partnerships, and strong capabilities which are not negligible. Settling its financial situation is the short-term strategy (cuts the non necessary cost, and adapt the long-term strategies of market penetration, retrenchment, and even the establishment of a joint venture (can be some term of the contract (to help HMV UK & Ireland to reimburse its debt) to implement in order not to lose the trust given by the stakeholders. We have proposed some long-term strategy (product development and concentric diversification) and some ideas of implementation that can help the company to re-gain its place on the market, and even to be better.
16
References
Adobe, n.d., Game Adobe Flash Media Server, Adobe.com. *Online+, Google Access, Available at: http://www.adobe.com/fr/products/flashmediaserver/ [vieewed on 29th May 2011] Altech UK, n.d., Our Customers, *Online+, Google Access, Available at: http://www.altechuk.com/our-customers/ [viewed 18th May 2011] Analyse de lindustrie musicale , 2008, Oboulo.com. [Online], Oboulo.com Access, Available at: http://www.oboulo.com/summary?id=52247 [viewed on 27th May, 2011] BBC News Technology, Aprill 20th 2010, Digital Economy Act court challenge fails, BBC. [Online] Google Access, Available at: http://www.bbc.co.uk/news/technology-13141986 [viewed 28th May 2011] Cardrew, January 31st 2011, HMV starts store closure, Music Week, *Online+, Google Access, Available at: http://www.musicweek.com/story.asp?sectioncode=1&storycode=1044067 [viewed on 16th April 2011] Cbanque, n.d., Lintervention des Etats et des banques central et ses contreparties. [Online] Google Access, Available at: http://www.cbanque.com/pratique/finance/intervention-etatsbanques-centrales.php [viewed 28th May 2011] Charles V., Decembre 2009, Dossier Marketing Vivendi, Oboulo.com. *Online+, Oboulo.com Access, Available at: http://www.oboulo.com/summary?id=101776 [viewed on 29th May 2011] Chapter 15, Specialist retailer HMV, n.d. *Online+, .docstoc Access, Accessible at: http://www.docstoc.com/docs/34603969/Microsoft-PowerPoint---chap-15-specialist-retailer--HMV [viewed 18th May 2011] Chouaib, Decembre 17th 2009, The challenges facing HMVs e-Business activities in the future, *Online+ Google Access, Available at: http://www.sidahmed.net/HMV_SidAhmed_Chouaib.pdf [viewed on 27th May 2011] CIA, 2011, The World Fact Book Ireland. [Online] Google Access, Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ei.html [viewed 26th May 2011] CIA, 2011, The World Fact Book The United Kingdom. [Online] Google Access, Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html [viewed 26th May 2011] Commision Competition, n.d. The HMV Group: Initial Submission. *Online+ Available at: http://www.competitioncommission.org.uk/inquiries/completed/2006/storecard/pdf/initial_subs_retailers_hmv.pdf [viewed on 29th May 2011] Daily Mail Reporter, December 9th 2010, HMV feels the blues as the first-half losses widen, The Daily Mail. [Online] Google Access, Available at: http://www.dailymail.co.uk/money/article1337073/HMV-feels-blues-half-losses-widen.html [viewed on 29th May 2011] Design Council, n.d., Design to overcome a downturn: HMV group. *Online+, Google Access, Available at: http://www.designcouncil.org.uk/case-studies/designs-to-overcome-a-downturn/hmvgroup/ [viewed on May 17th May 2011] Dowell A. et al, December 27th 2010, The Rise of Apps, Ipad and Android, The Walt Street Journal online. [Online], Google Access, Available at: http://online.wsj.com/article_email/SB10001424052748704774604576035611315663944lMyQjAxMTAwMDIwODEyNDgyWj.html [viewed on 29th May 2011] Dupuis, P., January 26th 2009, Musique en ligne: la French Touch est trs dynamique
17
Webentertainer.fr. [Online], Google Access, Available at: http://www.webentertainer.fr/page/13 [viewed on 28th May 2011] Evadoc, September 13th 2009, Rapport dAnalyse Strategic FNAC, *Online], Google Access, Available at: http://www.evadoc.com/doc/1742/rapport-danalyse-strategique-fnac [viewed on 21st May 2011] Facts and Figures, n.d., HMV Group. *Online+, Google Access, Available at: http://www.hmvgroup.com/about-us/facts-and-figures.aspx [viewed on 25th May 2011] Ferguson, July 13th 2002, DVD Boom, Cash Imput From Flotation Set Up HMV Expansion in UK, Japan, BillBoard. *Online+, Google Access, Available at: http://books.google.fr/books?id=gsEAAAAMBAJ&pg=PA61&lpg=PA61&dq=market+leader+england+HMV&source=bl&ots=PXj9OObtM o&sig=Xr70BYqisqAxOEULj6pCvi64Gn4&hl=fr&ei=GzXdTavaHpOAhQeN8rzCDw&sa=X&oi=book_resul t&ct=result&resnum=6&ved=0CEQQ6AEwBQ#v=onepage&q=market%20leader%20england%20HMV &f=false [viewed on 28th May] Game group, n.d., Our Markets, *Online+, Google Access, Available at: http://www.gamegroup.plc.uk/gmg_plc/about/markets/ [viewed on 28th May] GFK, February 10th 2010, GFK dresse le bilan des marchs de lentertainment en 2009 , AFJV. [Online], Google Access, Available at: http://www.afjv.com/press1002/100217_etude_marche_entertainment_loisirs.php [viewed on 29th May 2011] Gillespie: Foundations of Economics Additional chapter on Business Strategy, 2007, Pestel Analysis of the Macro-environment, Oxford University Press. *Online+, Google Access, Available at:http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm [viewed on 21st May, 2011] Hall,J., March 2nd 2011, Marks and Spencers Robert Swannel Quits as chairman of HMV, The Telegraph. [Online], Google Access, Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8355673/Marks-andSpencers-Robert-Swannell-quits-as-chairman-of-HMV.html [viewed on 27th May 2011] Himelstein et al., May 26th 2009, Multi-channel retailing: assessing the strategy of a UK multi-channel retailer in the context of its pure-play competitor, *Online+, .docstoc Access, Available at: http://www.docstoc.com/docs/63335291/HMV-%E2%80%93-UK-Context [viewed on 25th May 2011] HMV Group plc., December 9th 2010, .Investis. [Online], Google Access, Available at: http://production.investis.com/hmv/rns/rnsitem?id=3892142 [viewed on 26th May 2011] HMV moves warehouse to Guernsey, June 24th 2005, Music Week. [Online] Google Access, Available at: http://www.musicweek.com/story.asp?storyCode=14277§ioncode=1 [viewed on 26th May 2011] HMV to trial instore Liquid Audio digital music distribution, n.d., PRnewswire. *Online], Google Access, Available at: http://www.prnewswire.co.uk/cgi/news/release?id=24043 [viewed on 18th May 2011] 'HMV trying to sell via Facebook is so not cool' 2011, New Media Age, p. 05, Business Source Complete, EBSCOhost, viewed 23 May 2011. HMV Careers, Join Us, [Online], Google Access, Available at: http://www.hmvcareers.co.uk/ [viewed on 29th May 2011] 'HMV Group Case Study: New strategy acknowledges decline of traditional retail model', 2010, HMV Group Case Study: New Strategy Acknowledges Decline of Traditional Retail Model, pp. 1-
18
23, Business Source Complete, EBSCOhost Access, [viewed 23 April 2011] HMV group, n.d., Retail strategy, HMV blog. *Online+, Google Access, Available at: http://hmvee.blogspot.com/2010/05/retail-strategy.html *viewed on 30th May 2011+ and Human Resources, HMV blog. *Online+, Google Access, Available at http://hmvee.blogspot.com/ [viewed on 25th May 2011] HMV group, 2009, Annual Report and Accounts 2009, *Online+, hmvgroup.com access, Available at: http://2009.hmvgroup.ry.com/pdfs/hmv_ara09.pdf [viewed 18th May 2011] HMV group, 2010, Board of Directors, *Online+, hmvgroup.com access, Available at: http://2010hmvgroup.ry.com/Board_of_Directors/Default.aspx [viewed 18th May 2011] HMV group, 2010, Our Market, *Online+, Google Access, Available at: http://www.hmvgroup.com/investors/our-markets.aspx [viewed on 28th May 2011] HMV group, 2010, Shaping our decisions, *Online+, Google Access, Available at: http://2010hmvgroup.ry.com/overview/Our_Markets.aspx [viewed on 28th May 2011] HMV group PLC, 2011, Bloomberg BusinessWeek, [Online], Google Access, Available at: http://investing.businessweek.com/businessweek/research/stocks/people/person.asp?personId=82 91300&ticker=HMV:LN [viewed 25th May 2011] Jennifer L., October 18th 2008, How Tech Has Changed Our Lives, PCMag.com. *Online+, Google Access, Available at: http://www.pcmag.com/article2/0,2817,2332342,00.asp [viewed 28th May 2011] Julien L., August 4th 2010, Au Royaume-Uni, le march de la musique continue de croitre , Numerama. [Online], Google Access, Available at: http://www.numerama.com/magazine/16406-auroyaume-uni-le-marche-de-la-musique-continue-de-croitre.html [viewed on 29th May 2011] Kennedy, J., Irish Govt pushing through illegal downloading changes to copyright law, Siliconrepublic. [Online], Google Access, Available at: http://www.siliconrepublic.com/comms/item/20561-irish-govt-pushing-through [viewed 28th May 2011] Kesha S., January 20th 2011, Troubles with HMVs suppliers leads to trouble for the company, TopNews.in. *Online+, Google Access, Available at: http://www.topnews.in/troubleshmvs-suppliers-leads-trouble-company-2305757 [viewed on 28th May] Laing, January 20th 2011, HMV woes affecting suppliers, The Journal. [Online], Nebusiness.co.uk Access, Available at: http://www.nebusiness.co.uk/business-news/latest-businessnews/2011/01/20/hmv-woes-affecting-suppliers-51140-28017629/ [viewed 18th May 2011] Laposte-export-solutions.co.uk, May 2011, Ireland, consumption behaviour . [online], Google Access, Available at: http://www.laposte-export-solutions.co.uk/uk/markets/countryprofiles/ireland/consumption-trends [viewed 28th May 2011] Laposte-export-solutions.co.uk, May 2011, United Kingdom, consumption behaviour . [online], Google Access, Available at: http://www.laposte-exportsolutions.co.uk/uk/markets/country-profiles/united-kingdom/consumption-trends [viewed 28th May 2011] Le Barillec, 2006, Master project : Economie et gestion master 1 : La crise de lindustrie musicale. [Online], Google Access, Available at: th http://s.le.barillec.free.fr/la_crise_de_l_industrie_musicale.pdf [viewed on 28 May 2011] Le e-commerce bondit de 22% en Europe , February 2nd 2010, Lefigaro.fr. [Online], Google Access, Available at: http://www.lefigaro.fr/conso/2010/02/01/05007-20100201ARTFIG00124-le-e-
19
commerce-bondit-de-22-en-europe-.php [viewed on 29th May, 2011] LJP Dublin, October 1st 2009, Irlande en Bref Sant, contrefaon, famille, consommation , lepetitjournal.com. [Online], Google Access, Available at: http://www.lepetitjournal.com/dublin/breves-dublin/47465-santontrefa-famille-consommation.html [viewed 28th May 2011] McCowley, I., December 7th 2000, the 50 top retail websites, Mad.co.uk. [Online], Marketing Week Source, Available at: http://www.mad.co.uk/Main/News/Sectors/Retail/Articles/5e56b0040abb4543890bc8a124567707/ The-50-top-UK-retail-websites.html [viewed on 29th 2011] Midlane, 2008, Manage Strategic Change at the HMV Group. [Online], Google Access, Available at: http://dmidlane.com/id12.html [viewed on 29th May 2011] Merchandising: Zara & HMV, December 21st 2009, Essaysforstudents.com. [Online], Essaysforstudents.com Access, Available at: http://essaysforstudent.com/essay/Merchandising-ZaraAmp-Hmv/29403.html [viewed on 18th May 2011] Merrionsquarre.ie, May 5th 2011, Minister Sherlock welcomes growth in business expenditure or R&D in Ireland, Irish Government News Service. *Online+, Google Access, Available at: http://www.merrionstreet.ie/index.php/2011/05/minister-sherlock-welcomes-growth-inbusiness-expenditure-on-rd-in-ireland/ [viewed on 26th May 2011] Nielsenwire, December 18th 2009. [Online], Google Access, Available at: http://blog.nielsen.com/nielsenwire/consumer/theres-no-business-like-show-businessentertainment-trends/ [viewed on 28th May 2011] Nouvelles Technologies et mutation dun march : quels leviers de croissance pour lindustrie du disque ? , 2006, Oboulo.com. [Online], Oboulo.com Access, Available at: http://www.docstoc.com/docs/6333521/HMV-%E2%80%93-UK-Context [viewed on 27th May, 2011] Office for National Statistics, Mach 18th 2011, UK gross domestic expenditure on research and development, Statistical Bulletin. *Online+, Google Access, Available at: http://www.statistics.gov.uk/pdfdir/gerd0311.pdf [viewed on 27th May 2011] Peltoniemi, 2008, Life Cycle of the games industry: the specificities of creative industries, [Online] ACM access, Available at: http://portal.acm.org/citation.cfm?id=1457211 [viewed on 28th May] Parliamentary Office of Science and Technology, January 2004, Environmental policy and Innovation, Postpone. [Online], Google Access, Available at: http://www.parliament.uk/documents/post/postpn212.pdf [viewed 23rd May 2011] PhD Beddington and PhD Finch, November 25th 2011, Digital Infrastructure, letter to government, British Council for Science and Technology. *online+ Google Access, Available at: http://www.bis.gov.uk/assets/bispartners/cst/docs/files/letters/10-1326-digital-infrastructureletter-to-government.pdf [viewed on 27th May 2011] Rimmer, A., August 31st 2010, Britains Fight Against Illegal Downloads, Suite101. *Online+, Google Access, Available at: http://www.suite101.com/content/britains-fight-against-illegaldownloads-a279579 [viewed on 28th May 2011] Roberts, P., November 15th 2010, The Irish Financial crisis of 2010 explained, IrishCentral. [Online], Google Access, Available at: http://www.irishcentral.com/news/The-Irish-financial-crisis-of2010-explained-108111559.html [viewed on 28th May 2011] Scribd, April 13th 2010, Product Life Cycle of Compact Disc. *Online+, Google Access,
20
Available at: http://www.scribd.com/doc/29859536/Product-Life-Cycle-of-Compact-Disk [viewed on 28th May] Sidigroup, March 14th 2008, Case study, HMV Guernsey, Channel Islands, *Online+, Google Access, Available at: http://poland.sdigroup.eu/downloads/case_studies/en/Case_Study_HMV_en.pdf [viewed 18th May 2011] Soldera, P., July 17th 2007, The Product life cycle of the Music Industry, Insightbydesign, Google Access, Available at: http://insightbydesign.blogspot.com/2007/07/product-life-cycle-ofmusic-industry.html [viewed on 28th May] Stockdill, January 7th 2011, HMV axes stores as sales plummet, Inside Retailing. *Online+, Google Access, Available at: http://www.insideretailing.com.au/IR/IRNews/HMV-axes-stores-assales-plummet-68.aspx [viewed on 28th May] Superbrands, n.d. [Online] Google Access, Available at: http://www.superbrandsbrands.com/volII/brand_hmv.htm [viewed on 28th May 2011] Tagcompany, June 2010, TAG company secures Exclusive Agreement with HMV. *Online+, TagCompany Access, Available at: http://www.tagcompany.com/pr/pr-hmv3.aspx [viewed 18th May 2011] The British Embassy Washington, n.d., Culure & Heritage. *Online+, Google Access, Available at: http://ukinusa.fco.gov.uk/en/visiting-uk/about-uk/cultureheritage/ [viewed 28th May 2011] The Embassy of Ireland - USA, May 2011, Arts & Culure. *Online+, Google Access, Available at: http://www.embassyofireland.org/home/index.aspx?id=75869 [viewed 28th May 2011] Txt e-solutions, Supply Chain Management, n.d., [Online], Google Access, Available at: http://www.txtgroup.com/scm/it/index.shtml [viewed 18th May 2011] Webdesigner Depot, October 14th 2009, WebdesignerDepot.com. [Online], Google Access, Available at: http://www.webdesignerdepot.com/2009/10/an-analysis-of-the-amazon-shoppingexperience/#comment-188535606 [viewed on May 29th 2011] Website of Amazon.co.uk, [Online], Google Access, Available at: http://www.amazon.co.uk/ [viewed on 29th May 2011] Website of Game, [Online], Google Access, Available at: http://www.game.co.uk/ [viewed on 29th May 2011] Website of iTunes, [Online], Google Access, Available at: http://www.apple.com/itunes/ [viewed on 29th May 2011] Website of Play.com, [Online], Google Access, Available at: http://www.play.com/ [viewed on 29th May 2011] Website of Tesco Entertainment, [Online], Google Access, Available at: http://www.tescoentertainment.com/store/browse/home/ [viewed on 29th May 2011] Website of Sainsburys, *Online+, Google Access, Available at: th http://www.sainsburys.co.uk/sol/index.jsp [viewed on 29 May 2011] Website of WH Smith, [Online], Google Access, Available at: http://www.whsmith.co.uk/ [viewed on 29th May 2011] Wilson, December 11th 2008, Woolworths woe: HMV expects to benefit, The Telegraph. [Online], Google Access, Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/3706582/Woolworths-woeHMV-expects-to-benefit.html [viewed 18th May 2011]
21
Laws
The British government has chosen to fight against illegal downloading. The Digital Economic Act, signed in 2010, has been made to increase the ease for authorities to pursue and catch persistent offenders: that is to say movie companies and music labels will be able to track IP addresses from the peer to peer network to find offenders (Rimmer, 2010). The Irish governments act for fighting against illegal downloading is in the process of passing. Controversial issues are surfacing, including statements that declare this legislation is against European laws on commerce and privacy (BBC, 2010).
22
Inflation
-1.6% (2010 est.) -1.7% (2009 est.) 94.2% of GDP (2010 est.) 65.5% of GDP (2009 est.)
Public Debt
Before the financial crisis, the UK and Ireland were two strong economies. The UK is still the third major economy in Europe (CIA, 2011, United Kingdom) but it has suffered from the crisis. Ireland was denominated as the Celtic Tiger, in reference to the successful Asian countries, as its growth was extraordinary. However, the crisis put Ireland in recession and significantly increased its debts. Consequently, unemployment and purchasing power have been impacted in Ireland. Whereas, the crisis has a different impact on the UK: a steady increase of inflation and a growth rate collapsing between 2008 and 2009. But the UK has recovered quite well from the difficulties (increasing growth rate and purchasing power parity re-increasing).
Environment
In 1990, with the Environmental Protection Act, the British government had made the environmental policy a law, with a pollution prevention and control over the country, in order to minimize the effects of human activity on the environment (the Parliamentary Office of Science and Technology, 2004).
Social-cultural factors
UK 62,698,362 (July 2011 est.) (22 nd worldwide) 0-14 years: 17.3% (male 5,575,119/female 5,301,301) 15-64 years: 66.2% (male 20,979,401/female 20,500,913) Age 65 years and over: 16.5% (male 4,564,375/female 5,777,253) (2011 est.) Median age: 40 Literacy3 Urbanization Consumer behaviour 99% 80% (2010) British are taking care of their benefit (price, quality, design, brand, environment) when they want to buy. Ireland 4,670,976 (July 2011 est.) (119 th worldwide) 0-14 years: 21.1% (male 503,921/female 483,454) 15-64 years: 67.3% (male 1,581,959/female 1,560,238) 65 years and over: 11.6% (male 246,212/female 295,192) (2011 est.) Median age: 34.8 99% 62% Quality is more important then, prices and services come second. Young are looking to brand/notoriety
Population
23
Consumers are aware of their rights and dont hesitate to use them. Consumer recourse to credit Internet users It is a loan culture. Sometimes, some British cant repay their loans. 83.6%
and price whereas adults consider brand with quality. It is a high rate of recourse to credit in Europe. 67.4%
Population, age, literacy and urbanization information are found on the UK and the Irelands profile in The World FactBook (CIA, 2011). Consumer behaviour and Consumer recourse to credit information are found on the UK and Irelands profile on La Poste Export Solutions.
Culture UK (British Embassy Washington): The UK is well-known for its music thanks to worldwide bands and musicians from traditional music to contemporary music. Concerning the film industry, the UK has a wide range of films. The trend is to focus on themes reflecting life in the country. The UK also provides a lot of their landscapes and locations to international and blockbuster movies. Ireland (Embassy of Ireland USA, 2011): Music has always been an important part of Irish culture For the past century, Irish film-makers have been creating a lot of movies but mainly in amateur ways. Nowadays, some landscapes have been used in important movies (e.g. the Lord of the Rings) and alternative films are produced to show the real Ireland, not like the Ireland, foreigners have represented before.
Technologic Factors
R&D expenditures: The BERD survey (Merrionsquare.ie, 2011) estimated the expenditures on R&D in all sector activities in Ireland in 2010 at 1.8bn, which is quite lower than the previous year (1.9bn). The UK has much more significant expenditure in terms of cash terms, - 29.824bn-, but it is a bigger and richer country than Ireland. This amount is a 1.84% of GDP, a slow increasing expenditure (Office for National Statistics, 2011). Digital Infrastructure: The British Council for Science and Technology (2010) consider that the digital infrastructures are not considered sufficient for both speed and penetration and need to be improved. The technologic market is defined by a much reduced product lifetime, due to the fact that this market evolves very quickly (Evadoc, 2009). However, some categories of technologic products such as MP3 players, androids and tablets have completely changed the entertainment industrys landscape. They redefined how music, movies, games and news are used in the consumers life and behavior: with mobility and great accessibility (Jennifer L., 2008). The video games sector has a greater health than CD and DVD sector, its maintaining its creativity, a lot of new games are released every month, and the improvement of the technology
24
allows the manufacturers to release new game consoles almost every year, that people have to buy if they want to have access to the new games (Oxford University Press, 2007)4.
Gillespie: Foundations of Economics Additional chapter on Business Strategy, 2007, Pestel Analysis of the Macroenvironment, Oxford University Press. [Online], Google Access, Available at:http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm [viewed on 21st May, 2011]
25
Music Diversification
The CD device is in constant decrease whereas new methods to listen to music are being developed or rediscovered: concerts, festivals, venues, radio, television, internet, music platforms, etc (Julien L., 2010). So music is still something listened to and bought a lot but means are evolving.
Illegal downloadings have developed exponentially. Copy and sharing freely have
26
been the behaviors of a lot of people these past years on the web. Physical music has suffered from this development (Oboulo.com, 2008), especially because gaps are or were present. Piracy is a major concern for artists, authors and publishers. Continued growth of new and existing digital formats will intensify of illegal usage. (Nielsenwire, 2009) In this context, the UK parliament passed a law, the Digital Economy Bill, to restrict downloading and unable authors not to be pirated (Julien L., 2010). Free Platform Legal and free platforms have developed to provide music while surfing on the Internet, such as Deezer, Jamendo, Musicovery, etc. But these platforms are not profitable. It might disappear for the benefit of not free and subscription platforms. (Dupuis, 2009)
27
Figure 1: HMV UK sales structuration in 2009-2010 and in estimations in 2012-2013 (HMVgroup, 2010)
Music:
Competitive intensity:
The music is one of the main SBUs of HMV and is therefore the most profitable of the firm. It represents almost 80% of the UK music retailing market and thus is the market leader in the United Kingdom and Ireland. Despite this, the sales continue declining about 10-15% (HMVgroup) a year, and its on a continuing path for the next few years. This is not because of physical competitors but virtual competitors. Indeed more and more people now buy music via downloading platforms such as iTunes, Amazon, Virgin.com, Play.com etc.
28
Movie:
Competitive intensity:
Visual is the leading product category. Indeed it provides about 45% of the revenue of HMV sales and remained the highest growth category last year (UK volumes up about 9%). It is also the DVD retail market leader in England and Ireland (Stockdill, 2011 and Ferguson, 2002). But according to their prognostics, this segment will decline about 5% a year in the next few years (HMVgroup). We can also hope that 3D movies will be profitable for the market.
29
blue ray disc) at low cost. Consumers are now very attentive to the price of DVD/BLUE RAY because of these others alternatives.
Video games
Competitive intensity:
The results of HMV are really bad concerning video games, indeed the UK market for gaming software and hardware has declined about 25% in value (HMVgroup) and HMVs sales fell about 8%, but this is due to the maturation of the market. HMV hopes that this market will return to growth with a new generation of consoles. We can add that HMV is not the market leader in video games retailing, the famous game retailers GAME is the actual market leader in UK and Ireland (Game group). A lot more competitors are also in the marketplace: Game stop, virgin megastore, game station, etc. This market is therefore a very competitive market.
30
Many elements can determine in which stage the product is located within. The current economic situation is one of them, but also the competitiveness of the market, that could cause the quick arrival of a saturation situation. The market environment can be influenced by political and economic situations, the technology innovations and so on. For HMV, considering the products that they are selling, the worst for them is the technologic environment, with the advent of the internet and digital downloading, that could be legal, but most of time that is not.
CD industry
In this climate of quick technologic evolution, with the economic crisis, the competitive market and the illegal downloading now available, it is obvious that the CD industry is in the final step of the life cycle: decline. This is mainly explained by its competition by other storage devices that are a lot more successful (MP3 storage, Androids, Tablets) (Scribd, 2020). The advents of the new MP3 market also cannibalizes the CD market and will end its life by making it disappear (Soldera, 2007).
DVD industry
The DVD industry has the exact same problem as the CD industry: basically what could be downloaded is actually downloaded: movies, music, even books, or others. The DVD industry is one of the most hurt by downloading, and a lot of DVD shops or DVD rentals have closed down during the past years because of the technology innovation that brought downloading.
31
Company
Amaz on
WH Smith
Tesco
Point of Sales (POS) Stores (1) Online ordering (2) Downloading (3) Range of offer Range of Products (downloading possibilities are included) Services Response to Customer Expectations (Range of offer + POS) Price (1 low 10 high) Customer Loyalty and Brand Awareness
0 2
1 2
1 2
1 2
1 2
1 2
0 0
0 0
9 2
11 4
9 2
9 3
11 3
8 2
15 5
7 14
7 17
7 15
6 12
8 17
6 11
5 9
4 10
10 21
10
10
32
33
Visual Industry
Table 4 Visual SBU characteristics
Company
Amaz on
2
WH Smith
3
Tesco
0 2
1 2
1 2
1 2
1 2
1 2
0 0
1 2
Range of offer
Range of Products (downloading possibilities are included) Services
10
15
7 11
7 12
7 12
6 11
8 13
6 11
5 11
4 10
10 21
Price (1 low
10 high)
10
10
34
35
Games Industry
Table 5 Games SBU characteristics
Company
Amaz on
5
WH Smith
3
Tesco
0 2
1 2
1 2
1 2
1 2
1 2
1 2
1 0
0 0
Range of offer
Range of Products Services
10
10
10
11
10
15
7 15
7 15
7 16
6 11
8 16
6 11
7 14
7 11
5 11
10 26
Price (1 low
10 high)
10
10
36
37
38
39
The model had been constructed with the help of Dossier Marketing Vivendi (Charles V., 2009, pp 32-34)
40
Appendix 7 - HMV UK & Irelands Value Network & drivers: CDs, DVDs, Games
Figure 6 HMV Value Network
41
The value network is the inter-organisational links and necessary relationships to create the products. This is the value network and drivers for CDs, DVDs and Games which represent 93% of HMV UK & Irelands sales. From the prime resources (tangible, intangible, human) to the distributors (HMV UK & Ireland and its competitors), each intermediary adds value to the products and therefore increases the prices. For example, HMV UK & Ireland buy their products, add marketing, communication and services (an attractive place to make choices, people who can advice consumers on their purchases...) and then they sell the products for more than what they bought them for originally. See HMV UK & Ireland value chain.
42
1. Infrastructure
General management (Hmvcarreers) Head office in London: - Over 300 colleagues - 8 departments (finance, HR, product, marketing, e-commerce, operations, IT and supply chain.) In store: - 250 HMV stores across UK and Ireland - Team colleagues on the sales floor, in the stock room, in the cash office or in loss prevention Distribution: - 3 distribution centres: Canning Town in London, Merlin Park in Birmingham, Guernsey Data network infrastructure Key to stay ahead of the competition is HMV data network infrastructure, which provides the core framework for the delivery of the applications on which its business relies. HMV chose PrimeCare, the IT network support division from Prime Business Solutions. Therefore HMV beneficiates from all PrimeCares Capabilities (e.g. strategic relationships,
43
technical expert... Recent changes There have recently been changes in Organisation Structure. They reorganised some of the key business area within the organisation. For example, to be more responsive to the pace of changes in their markets they have introduced new skill sets, new expertise, and new functions. They arranged some of their operations. For example the IT and fianc functions have been brought together into a shared service centre which has made them more effective and more efficient (Midlane, 2008). 40 HMV stores are supposed to be closed at the end of the year 2011. On Sunday January 30, the first wave of closure took place shutting smaller secondary outlets in locations where the company has larger stores: Birmingham, Croydon, Ealing, Glasgow, Liverpool, Nottingham, Oldham and Plymouth (Cardrew, Jan. 2011).
44
3. Technology Development
In theory, HMV enjoy all the technological development of its partners, and beyond all the partnership evoked in this value chain, here are others important technological development depending on the channels. E-business technology development (Chouaib, 2009) The technology is an opportunity for e-business (that expand physical UK & Ireland business to the international) to eliminate certain barriers such as time, space, language, cultural, legal and infrastructure issues present in the physical markets. Their strong relationships with the giant information technology, Microsoft, prevent them to reach all potential consumers. Indeed, music previews and movie clips are broadcasted in proprietary format of Microsoft, respectively Windows Media Player and Windows Media Video that are legible in Internet Explorer but not in Mozilla, Opera... Internet explorer is used by almost 50% of all visitors that makes HMV ignoring the other half of visitors. In-store technology development (PRnewswire) Liquid Audio Software is used in digital download kiosks that will enable HMV in-store customers to create their own customised CDs. This is the launch of U-Mix -- an in-store shopping service that will enable customers to preview selected songs and create custom compilation CDs from digital music kiosks in-store. HMV, known for pre-empting trends in retailing, selected Liquid Audio, Inc. to supply the technology for the U-Mix kiosk, which it will pilot at its Oxford Circus flagship store in London.
45
HMV uses EDI (Electric Data Interchange) system, since 1997, to manage their supply chain: coordinate transaction and initiates deliveries. It is used for ordering stock to twentyseven suppliers and has built trustful relationships.
5. Inbound Logistics
Recently, SDI Group, innovative provider of systems and solution to the retail industries for all aspect of distribution centre materials handling, has provided HMV UK and Ireland a total logistics solution package which includes materials handling consulting, as well as design, engineering fabrication, installation and services (Sdigroup, 2008). Call-off to suppliers - The majority of the suppliers of HMV UK & Ireland are from the country and foreign exchanges are limited (HMV group, 2009) - Altech : suppliers of labelling machine (Website of Alteck) - Unipart group provide effective supply chain - HMV UK & Ireland chose Txt e-solution (demand forecasting and replenishment solution: based on Microsoft technology that provide coverage for the entertainment value chain): the very short product lifecycle of the entertainment industry implies difficulties for predicting the demand, so they chose this e-solution to facilitate deeper collaboration with its suppliers (help to have the right product at the right time). That enables a reduction of cost and to make profit on an effective selection of product. (Website of Txt Group) - HMV buys the majority of its stock directly from manufacturers contrary to its rivals. (Wilson, 2008) Furthermore they have excellent relations with them and have never had difficulties in obtaining stock. (Laing, 2011) - TAG Company, a leading supplier of Electronic Article Surveillance (EAS) products and services, secures Exclusive Agreement with HMV (EAS Hardware, Maintenance and Consumables). (Tagcompany, 2010) Materials handling - They have done a reduction in transportation (HMV group,2009) Warehousing - HMV has distribution centres which have a key role in the supply chain, delivering stock to stores and consumers from their supplier. Online sold products The warehouse is in Guernsey because packages sent from Guernsey below 18 in value are exempt from VAT (HMV can charge less for CDs and DVDs) (Music Week, 2005). Inventory control - They have a best-in-class inventory management system to manage their fast moving chart and deeper range inventories (HMV group, 2009). - Inventories are stated at the lower of cost and net reliable value on a first in first out basis (HMV group, 2009).
46
6. Operations
Packaging Since the partnership with SDI group, HMVs packaging dispatching operations are less much labour-intensive without products being handled on several occasions during the process. Now they can package and label 6, 000 pieces per hour. Their solution integrates four packaging machines (Sdigroup, 2008).
7. Outbound Logistics
From in stores Customers have a walk in the store. They choose their items. They pay. And their items are theirs. If the items are not in the store they can order them and pay the day of the order or the day of the delivery. From the Internet
Warehousing
The warehouse is in Guernsey because packages sent from Guernsey below 18 in value are exempt from VAT (HMV can charge less for CDs and DVDs) (Music Week, 2005).
Picking & Order processing
Once the customers have selected a product they click on the add to basket button underneath. They can create a personalised list of all the things they want to buy by creating a wish list. Then they can add a product to the wish list by clicking on the add to wish list button. If the customers are not already logged into their account they have to log in by clicking on my account link at the top of the homepage and enter their email and password. They can check out the process (i.e. review the items in the basket), they just have to click review basket to review their order (Website of HMV). By submitting an order, they are accepting the Terms and Conditions of the HMV web site. Orders for the sale of downloaded music are made with, and subject to the terms of the End User Licence of HMV UK Limited (Website of HMV).
Shipment
Since the partnership with SDI group, packaged merchandise from Guernsey distribution centre, such as DVDs and CDs, is fed directly from the automated packing machines, with customer address. (Sdigroup, 2008) Each item of the customers order will be charged and shipped separately, as soon as it is available in HMV UK & Irelands warehouse (Website of HMV).
Delivery
HMV UK & Ireland post a courier for the goods ordered. The delivery is made as soon as possible after the order. The customer becomes the owner of the goods he or she has ordered (Website of HMV). Depending of the type of delivery (UK Standard Delivery, UK Express Delivery, Standard Airmail, Overseas Courier Delivery), customers will be charge differently (Website of HMV).
47
8. Marketing Sales
Product, pricing, advertising and promotion, distribution
Product: - HMV UK & Ireland was first selling music, video, games (HMV group case study, 2010) - HMV has, over the last three years diversify into new and related-entertainment product areas (technology, clothing and merchandise). This strategy leads them to conclude that they must accelerate HMVs product mix evolution, with a particular focus on technology, where the opportunity for range expansion in high-growth products is greatest (Daily Mail Reporter, 2010). Indeed, the main driver of the growth from new product is the Technology and it is forecast to increase from 6% to 12% by 2013 as it is shown on the Figure 1. Theyll launch Smart Phone gaming offer on the HMV website in partnership with Orange. Fashion is also expected to grow increasing of 6% by 2013. This diversification has helped to survive (HMV group case study, 2010).
48
All the ideas of product have to meet certain criteria: (HMV group case study, 2010)
49
Live event: HMVs acquisitions and ventures have diversified its portfolio. They are the following: (HMV group case study, 2010) Mama Group (live venues, festivals and artist management) HMVtickets (provided a platform to the retailer for selling tickets for the live events) HMVcurzon cinemas (has been proved successful) Gamerbase (customer can try consoles and games before purchasing) Pricing (Himelstein et al., 2009): According to the survey of Himelstein et al., a basket of purchased in-store goods are about 7.4% more expensive that the same purchase online.
50
Prices Many products show inexplicable price variances. However, some price discrepancies across channels can make strategic sense as they leverage a specific property of a channel. For example, a promotion offering 4DVDs for 20 in-store can be an enjoyable browsing experience predicated on serendipitous visual browsing and discovery (Himelstein et al., 2009) whereas, it could be an unpleasant and less attractive experience to search through the website. While the offline environmental offer an attractive visual search, online enable the speed of a specific search (Himelstein et al., 2009).
51
- The strong image of HMV comes from the companys commitment to advertising, promotions and personal appearances. HMVs logo, featuring Nipper the Dog (dog and trumpet), remains an integral part of HMVs advertising and promotion that plays an important role in publishing the brand. Its the experience and heritage associated with the brand. Accompanied by the slogan Top Dog, this, more than representing the positioning, brings the brand to life (Superbrands). - HMVs overall marketing strategy is rooted in the need to generate new and maintain existing customers with an abiding interest in entertainment - music, video and games. In-store design is tailored to creating atmosphere and ambience via video screens, listening posts, graphic elements and the like. (Superbrands). HMV want to make its stores attracting, exciting to visit and simple to shop for the customer. - In addition to strong merchandising activity, HMV pursues an aggressive marketing strategy across a broad spectrum of media, including TV, radio, posters and press advertisements. HMV actively promotes more than 500 different releases in any one year via co-operative advertising approaches. Personal appearances by the rich, famous and musically talented - celebrities such as Bon Jovi, Sir Elton John, Public Enemy, Van Halen, Kylie Minogue, David Helfgott, kd lang, Lenny Kravitz, Celine Dion, and more recently shock rock star Marilyn Manson - generate consumer interest and a wealth of PR activity (Superbrands). - Most major brand promotion are co-ordinated across channels, although local store manager have some discretion to tailor smaller promotion to local tastes (Himelstein et al., 2009). - Customers promote the company (products and websites) developing loyalty, thanks to the community sites, sharing their experience. Distribution: multi channel distribution HMV are present on high street and e-commerce channels such as: - HMV.com: Positive evolution since the creation of the website. Revenue and visits have increased to significant levels (HMV group case study, 2010). - HMVdigital.com: HMV established a joint venture with 7digital (HMV owning 50% equity stake) in September 2009. Important for the B2B market. The company has now experimented social media not only opening a Facebook shop but also creating their own networking site. HMV UK & Ireland has opened a Facebook shop. Ilana Fox (April 2011) wrote an article ensuring that Facebook shops are a flash-in-the-pan trend that wont increase retailers profit. She argued that expecting people to use this mini
52
version of a shop shows that you dont know anything about how communities behave online (New Media Age, 2011). The networking site Get Closer at http://getcloser.com, establish a community among its loyal customers. They have also launched a blog site at http://blogs.hmv.com, promoting their new products thanks to opinion leading staff. But they are not promoted in-store (absence of messaging). The only channel HMV is not present is the mobile channel which could open new way for entertainment transactions in the future (Himelstein et al., 2009). Customer value, cost to consumer, convenience, communication
Consumer value: Customers are passionate about the products, sell by HMV UK & Ireland, which derive from customers experience. The brand shares the customer perception that shopping for the product is not buying but a pleasurable experience. Change is led by customers (Chapter 15). Cost to consumer: (Website of HMV) - Charges are in UK Pounds. - From an internet order, for an overseas order, the customer will be charged in his or her respective currency based on current exchange rates.
53
- Prices in customers shopping bag are the current prices of the goods and the amount theyll be charged for. - Prices from the website may be different from the stores and are subject to change without notice. Convenience: - Multi-channel (online, in-store, direct catalogue) to satisfy the maximum of customers. Integrate multiple channels lead to a more relevant retailer to more customers (Himelstein et al., 2009). - Online channels and offline channels are complementary to enable in-store staff to access customer data and to really understand their customer in order to put them at the centre of their business decisions (Himelstein et al., 2009). - For an optimal customer experience HMV has to focus on three factors (Himelstein et al., 2009): o Choice: the customer can control the way he wants to interacts with HMV o Consistency: information are consistent across all channels, but there is a lack of coordination between channels. Languages can also be an issue: e.g. The website is visited by different nationalities and culture, and each visitor has to think this website has been done for me. But diversity of languages in HMV UK & Ireland website has not yet emerged contrary to the stores (Chouaib, 2009). o Continuity: all customers have a unique id number that is recognized by all channels Communication: - Bad referencing on big search engine: Google, Yahoo, Bing, and MSN by using following key words: Music, Download MP3, names of famous singer, Buy MP3... That is important not to neglect a big part of visitors (Chouaib, 2009).
54
24% of sales come from games and technology (Facts and Figures, HMV). - The new Live division (venue business, HMV Tickets) perform strongly even if established festivals have underperformed against expectations, knowing that their, now finalised, acquisition of Mama Group has resulted in a decrease in the fair value of the net assets acquired. (Investis, 2010) 3% of sales come from related-entertainment product (e.g. product and fashion clothing ranges inspired by music and film) (Facts and Figures, HMV).
9. Unique services
Beyond threshold services such as online services (reservation, payment, free delivery...) or in-store services (space offered for physical presence of products, etc.), there are unique services that participate in reinforcing the competitive advantage. People Employees are aware of and understand customers expectations and needs. They really try to narrow the gap in customer services. They also try to close the knowledge gap for an effective and more personalised touch in their operations. HMVs Store Card Activities - The first specialist retailer of entertainment product which offer a branded store card product (in August 2003). This card is an instrument in securing communication between HMV and its regular customers. It gives access to: The HMV rewards programme, Special offer and promotions, Advance notice of in-store events and to entertainment news, And, other benefits (access to a secure part of the website (www.hmv.co.uk): exclusive online offers that can be paid through the HMV Card account. While HMV is able to be closer to their customers expectations (Commission Competition). The Social Space (Himelstein et al., 2009) Customer can listen, watch and click to buy if they scan barcodes on CDs and DVDs interacting with large screen of Apple computers. Their purchases can be delivered at home, downloaded to memory sticks or via digital music players. This cool experience brings this advantages and format flexibility of the digital world right into the store.
55
56
57
The sustainable competitive advantage can be defined as scarce, relevant, durable, immobile & unreplicable.
Brand:
Since 1921, HMV UK & Ireland have managed to build a reputable brand name assuring value for money (Website of HMV). The HMV Brand has built a long-term and profitable customer relationship. (See more details in the Value Chain)
Portfolio:
And complementarily, their variety of their product offerings also has contributed to various reasons why people choose HMV (Website of HMV).
58
59
Appendix 12 Benchmarking
Area of Potential Improvement: Distribution
UK & Ireland leading competitors in the area Game Group PLC: Even if they are younger than HMV in multi channel distribution, they have understood the fact that all the channels have to support each other explaining the advantages of each one compared to the other in order that the customer knows exactly where he goes when he chooses his favourite channel to buy products. Goals - To promote each distribution channel through one another. - To communicate the same message though all the channels, explaining how they are different and the different options available according to the customers choice.
60
Goal
61
New customers 2. Innovation of distribution via internet channel 4. New technologies: New product inside HMV even if already existing in the market: Ipod, Ipad...
62
rare piece of their favourite artist), CD/DVD release (including bonus video), the Open Disc format (including a book with song lyrics, pictures, internet link...
3. Diversification
Radios, headphones, phone covers, stereo systems, computer games, posters, magazines, books, T-shirt, mugs, cuddly toys, another area is the in live performance which is now about to be the more lucrative area in the music industry. The retail hopes to tap into this trend by selling tickets for shows.
4. New technologies: New product inside HMV even if already existing in the market
They just open the high technology sector in HMV stores; they now offer iPods, iPads, laptops, and blueray players. They have developed their floor space for selling electronic goods.
63
Entertainment skills
Declarative (Know-about)
- Staff employed at HMV UK & Ireland have probably chosen this work because they are passionate about music/DVD/gaming. In addition their individual knowledge of new brands, album, games and console are plentiful. - By allowing the customer to rate the items they have purchased, they enable other customers who can relate much easier to the review. This may not increase sales but this form of customer service not only encourages more customers to be loyal to the business, but also prevents the customer service departments time being wasted by questions that could be answered in these reviews. - HMV has already used a company called eGain. The eGain Campaign is an e-mail marketing and proactive customer service solution. It offers one-on-one marketing techniques for planning, targeting and executing high volume direct marketing programs. HMV took time to target their mailings based on customer preferences to ensure that emails only go to people who would be most interested in them. No wasted mail, and a cost efficiency advertising.
Procedural (Know-how) Causal (Know-why) Conditional (Know-when) Relational (Know-with) Pragmatic (useful knowledge for the organisation)
Table 5 Main Knowledge of the firm
64
Opportunities
Financial Crisis - UK is an important economic country which has started to recover Ireland and UK are both based on a very strong music culture, with eclectic styles. Downloading - Government strong will to fight against illegal downloading - Digital Economic Bill, passed in UK in 2010 Entertainment industry - Music is still listened to in many different ways - New technologies has brought new perspectives of innovation and development - The visual market is strong, in particular thanks to the 3D. - Development of a new generation of consoles: wireless consoles - The video games industry is at its maturity stage. Innovation can be considered now to develop a competitive advantage.
65
- Video Games offer by competitors is not very differentiated Consumer Behaviour - Rise of the use of Internet: e-commerce and buying online has become a consumer behaviour - High development of IT, mobile and online factors in consideration; a young segmentation
Weaknesses
- Financial situation: debt twice more than 2009; shares have collapsed for 1 year. - In-store sales diminishing - Bad coordination between channels - Excessive reliance on promotional pricing to stimulate sales - Non optimized website - Bad referencing on Google and other Search Engine (buy MP3, music, music seller, download MP3) - Late arrival on the online retailing - Fail to adapt to change: diversified too late - Competitors have various prices but lower than HMV; a comparison is easy
Strengths
Products and Brand - The Brand: well known brand name, strong image - Largest range of products on the high street: Very diversified (music, visual, games, live tickets, clothing, other related-entertainment product...) - Well perceived reputation for services - Multi channel distributor: offline and online stores - Good online and offline traffic consumers. - Free delivery - Wide presence on the Internet (social networks, website, blogs, etc.) Strong human resources basis - Vast amount of experience and expertise (large readily capable workforce) - Good HR Management (open management) - Stores cover a wide range of locations across the UK and Ireland and is easily accessible to the consumer Stakeholders - Many business solutions: PrimeCare,Txt e-solution, - Many partnerships: Unipart, Mama, Digital 7, etc. - Good relationships with suppliers - Well knowledge of their consumers
66
Anaylsis
Use HMV UK & Irelands internal strengths to take advantage of external opportunities
1. Being a complete multichannel retailer
Music is still listened to in many different ways and HMV is a multichannel retailer (website, stores, downloading, venues, etc.). The recent growth in mobile utilization and especially for listening music is an opportunity for HMV UK & Ireland to expand its channels through the mobile one. Make a partnership with operators to be able to distribute music by the mobile channel would be any beneficial.
2. Development of R&D
The huge opportunities with the development of new technologies make innovation possible. The visual market with 3D and the wireless consoles are growing. Video games lifecycle is in its maturity stage. HMVs brand strength and open and well-qualified management are helping to make HMV grow. These statements are keys to consider developing a R&D program or even a R&D department inside the company to use the human resources and make them participating, in order to be able to develop a HMV brand innovative products.
3. Internet, a segment not to avoid
The e-commerce and the online habits has become a consumer behavior. HMV understood it and is present on the internet (website, blog, social networks, etc.). Indeed, HMV has a good knowledge of its consumers. Moreover, with the downloading growth, governments have decided to regulate illegal downloading. This will helps to transfer these users to cheap legal downloading. These considerations comfort HMV on its presence on the Internet and encourage it to develop its online propositions on the interesting internet segment.
4. Development of friendly events
HMV stores are wide spread across UK and Ireland which help to reach easily its customers, especially when UK is getting economically better. In addition, the entertainment (especially music) culture in UK & Ireland is very strong and consumers like to enjoy music and games both alone and in group. Indeed sharing the entertainment tastes is very pleasant. Like this, it helps to find people who are similar. So it is an opportunity that HMV UK & Ireland cannot neglect. They should create social events (such as game competition) inside stores and promote it on internet (blog, site...). That would make people come back on the stores, maybe increase the sales of in store products, people would promote HMV talking about it on the internet (maybe video running on YouTube and social network). Improving internal weaknesses by advantage of external opportunities
1. Attraction of potential customers
HMVs sales are decreasing in-stores and its different channels are not very well coordinated. The UK is recovering from the crisis but HMV has higher prices comparing to its competitors. However, the music culture is strong in both countries. By developing events in stores, e.g. karaokes, can attract customers in physical stores
67
that are close to them. As said, before, HMV can provide information about its event on its other channels (e.g. social networks, blog, etc.) and create coordination between channels to be more efficient.
2. Improvement of their online presence
HMV is not very well referenced on search engine (see image below) whereas customers are buying a lot online and on e-commerce websites. This obvious statement makes the improvement of their online presence recommendation clear.
In a context where innovation in high technology is fast growing and the UK is getting economically better, HMV has a difficult financial situation. Furthermore, the company is offering products at a higher price than its competitors while trying to catch up with them concerning its offer. Consequently, HMV should re-consider its offer concerning its pricing and products to overcome its financial situation. Using HMV UK & Irelands strengths to reduce the impact of external threats
1. Conservation and increasing of B to B relations
The power of suppliers is very strong and can restraint retailers decision powers. However HMV has established strong relationship with its suppliers based on trust and assiduousness. Consequently, HMV should keep and increase it B to B relationships.
2. Development of other products and distributions
The CD and DVD physical products are in the decline lifecycle stage while internet is becoming an important new channel for dematerialized products. HMV has great potential
68
to respond to this context as it is present on the internet (website, blogs, social networks, etc.) and distributes by multi channels. To answer to this context, HMV should develop the new dematerialized products on the IT channels such as Internet and mobile ones. In a long term perspective, the CD and DVD offer should be reduced regarding its shares in the global turnover of HMV. 3. Generation of an offer advantage to customers In the context of the economic crisis, customers have a weak purchasing power. Moreover, buyers have a strong power on entertainment retailers since illegal downloading is huge threat. However, HMV has a good knowledge of its consumers and is well-known about its services. Considering these statements, HMV should keen on evaluating its services to make the customers feel an offer benefit and buy in HMV instead of its competitors. Defensive tactics aimed at reducing internal weaknesses and avoiding environmental threats
1. Difficulty to emerge from the crisis
In a context of crises economic crisis and materialized music and visual crisis , HMV is in a financial crisis situation. In fact, the CD and DVD products lifecycle is in its decline stage and the CD/DVD sales are decreasing. Even if customers have a weak purchasing power, HMV is operating a higher pricing system than competitors. HMV is in a tough situation to resolve its difficulties. So it is necessary to reconsider their pricing strategy to attract more customers and improve sales.
2. Development of a cheap product to buy legal music
As said above, the CD/DVD products know a lifecycle in its decline so as their sales. Even if HMV is discounting articles too often, its regular prices are higher than its competitors and are not competing against illegal downloading. Consequently, HMV should develop a new product a lot cheaper, instead of discounting too often, which can bring customers to buy legal music, attracting easily another segment of customers.
3. Development of R&D
HMV had to catch up with its technologic and strategic delay comparing to its competitors; it diversified too late and arrived late on the online retailing. However, new technologies are constantly evolving, so it is hard to provide innovation at the right time but it has to be since the CD and DVD industries are in their final lifecycle stage. By identifying these threats and weaknesses, it seems necessary to develop a R&D program or department to be always updating on innovation.
69
70
2. DVD
The visual sales represent in 2009/2010 45% of HMV UK & Ireland total sales which is only 2% less on the total sales than in 2006/2007, but 6% more than the estimations for 2012/2013. That shows that DVDs sales are in decline. This explains our consideration for DVDs as Cash Cow products.
3. Video Games
Video Games sales represent in 2009/2010 18% of HMV UK & Ireland total sales which is 2% more on the total sales than in 2006/2007, and 4% less than the estimations for 2012/2013. That shows that video games sales are in growth. This explains our consideration for video game as Star products.
4. Technologies
Technology is a recent sector in HMV sales which began the last 2 years. Technologies sales represent in 2009/2010 6% of HMV UK & Ireland total sales which is supposed to double according to the estimations for 2012/2013. Thus, we have considered them as stars products.
71
Intensive Strategies
a) Market Penetration Market Penetration is defined as seeking increased market share for present products or services in present markets through a greater marketing effort. (Lynch, S.) The market is structurally defined in two major parts: off-line and online. Off-line The off-line market is saturated; some SBU have a lot of competition. The usage rate of present customers can be hardly increased since HMV sales are decreasing and some segment (CD and DVD) are in their decline lifecycle. Moreover, the total industry sales are not increasing a lot. The off-line market penetration shouldnt be considered. Online The online market is offering a infinitive possibility but there are already a lot of competitors and customers have their habits that are difficult to change quickly. As not each person has access to the Internet and so not everyone is buying online, there is a significant potential of growth. Indeed, this online industry is growing but not as much as it can be because of the illegal downloading. The online market penetration seems to be interesting to consider. b) Market Development Market Development is defined as introducing present products or services into new geographic area. (Lynch, S.) HMV can provide new channels of distribution that are reliable and inexpensive, such as downloading platforms. This industry is also rapidly becoming global but HMV is in a very bad financial shape to develop a new market.
72
This option seems interesting but quickly hard to organise because of HMV financial problems. c) Product Development Product Development is defined as seeking increased sales by improving present products or services or developing new ones. (Lynch, S.) CD and DVD industry are in their maturity stage of their lifecycle in a context of rapid and constant technological developments. As seen on the Strategic Groups matrix above (appendix 5), HMV is offering at a higher price similar products comparing to its three major competitors (Play.com, Amazone.co.uk, Tesco). They are also competing in the high-growth industry which is the MP3 music downloading, and there are still other segments such film downloading not much developed. But HMV hasnt a strong R&D capability as it doesnt have a R&D department (finance, HR, product, marketing, e-commerce, operations, IT and supply chain). Despite the fact of a R&D lack, improving and developing products can be considered as an interesting strategic option.
Diversification Strategies
a) Concentric Diversification Concentric Diversification is defined as adding new, but related, products or services. (Lynch, S.) On physical support as CD and DVD, HMV competes in a slow-growth industry as seen on the BCG matrix (appendix 16). They are in decline stage of their lifecycle. Merchandising and IT devices which are introducing a bit in stores can be helpful to attract on the core products: music, movie and games. Deciding cheap prices and develop more services can give a competitive advantage to grow. This option seems very interesting to consider due to its great potential in many satellite (around the core products: CD and DVD) products such IT devices or merchandising. b) Conglomerate Diversification Conglomerate diversification is defined as adding new, unrelated products or services. (Lynch, S.) HMV is in financial troubles and the market is saturated. However, HMV is an entertainment retailer and diversifying in a complete way would not give a clear strategy for the company. c) Horizontal Diversification Horizontal Diversification is defined as adding new, unrelated products or services for present customers. (Lynch, S.) The current customers are difficult to reach since they have a lot of many alternative ways to listen to music or to see a movie. So developing new or unrelated products in the present stores wont be an excellent idea. The best is to concentrate on the industry.
73
Defensive Strategies a) Joint-Venture Joint-Venture is defined as two or more sponsoring firms form a separate organisation for co-operative purposes. (Lynch, S.) HMV, an international entertainment retailer, leader in the UK market, has financial problems. It is closing stores in Canada and in the UK but still has a wide coverage. Associating itself with a complementary industry such as an IT device can be interesting to develop its own brand with innovative products and services. It might help to develop a common R&D program to introduce new technology in a context of an IT and mobile fastgrowing industry. b) Retrenchment Retrenchment is defined as re-grouping through cost and asset reduction to reverse declining sales and profits (Lynch, S.) As said several times above, HMV is in financial troubles but it is not one of the weakest competitors for the moment, since it is one of the leaders in the UK. Performance should be improved about sales although of its high performance. One sign of troubles can also be that the former chairman resigned because he felt not being able to run the company. Waterstones has already been sold. CD and DVD might be the next step of retrenchment as it is at its decline lifecycle and almost becoming dog products (see appendix 16). c) Divestiture Divestiture is defined as selling a division or part of an organization. (Lynch, S.) HMV group decided to sell Waterstones its book specialist retailer. It was part of the most difficult industry on the entertainment one: book retailing. This sale has permitted to obtain a large amount of cash to absorb HMV group debts. This option has already considered. It shouldnt be considered again and should start to improve its core products: music, movie and games. d) Liquidation Liquidation is defined as selling all of a companys assets, in parts, for their tangible worth. (Lynch, S.) Waterstones sale is extremely recent. It is too soon to consider this option. Other options could be considered first.
74
75