Custom «Debenhams Strategy Selection and Evaluation» Essay Paper Sample
Business strategies refer to the methods or plans used by companies in conducting different functions in their business operations. It is the responsibility of the company managers to formulate as well as implement the most appropriate strategy to enable it to compete effectively and thrive in its environment. It also requires the efforts of the entire company to achieve the preset goals. For this to be achieved, it is important for the company to view the corporate level strategy as it is accountable for definition of the market and also helps in deciding on which markets to compete in as well as the geographical regions to function in. This document mainly focuses on Debenhams Company by evaluating the corporate level strategies. It gives a brief explanation of the strategies and then recommends the appropriate strategy that can be embraced by Debenhams Company.
Brief description of the company
Debenhams is a British retailer that operates under the department store format in the United Kingdom, Denmark and Ireland. It also operates other franchise stores in other nations. It was founded as a single store in London in the eighteenth century but remarkably, it has grown to more than 160 shops that cover more than 10 million square feet of retail space throughout the UK and Ireland. Its franchise stores are mainly in Philippines and other countries (Debenhams 2012). Currently, the company has been ranked the second largest department store in the UK. In the corporate level strategy, some of the strategies that can be used in running firms include vertical integration, horizontal integration and strategic outsourcing (DuBrin, 2008). This document will however spotlight on strategic outsourcing and horizontal integration.
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Outsourcing basically refers to contracting out a business operation to a provider outside the business unit. Companies outsource their products, not for economic gain, but for the sake of improving their services and even going beyond the expectations of their clients. Two organizations may for instance enter in an agreement to exchange payments and services. As such, outsourcing is important as it helps firms achieve more in their area (Jones & Hill 2007). This consequently mitigates the risk of expertise shortage within companies that are willing to outsource. Due to the growing technologies day after the other, outsourcing has been made possible and many organizations can comfortably outsource.
Suitability of Outsourcing
There are innumerable reasons as to why outsourcing can be considered beneficial to companies. One of these reasons includes the fact that it is cost effective as it lowers the cost to the business unit (Furrer 2010). Another advantage is that outsourcing mainly focuses on the main business by ensuring that resources such as peole, infrastructure and investments are all directed towards the improvement of the business. Outsourcing is also aimed at improving the quality of products through giving contracts to experts who manufacture products that are of high standard. It is also a source of knowledge to the less experienced employees as they get knowledgeable after interacting with other people.
Another advantage of outsourcing is that it improves capacity management. This comes about through the introduction or improvement of technologies within the organization (Rockford Consulting Group 2009). Outsourcing also reduces both time and money that could otherwise be used in advertising of the company’s products. It also takes part in risk management by pairing a weak company with another stronger one that can be able to provide remedy for some risks.
Feasibility and Acceptability of Outsourcing
For a particular strategy to be considered feasible and consecutively acceptable by not only the stakeholders but also by the clients, it must offer security to the products and guarantee the people involved that all the dealings will be free from fraud, loss and unnecessary delays. Before outsourcing, a company is accountable for all its actions as well as those of its entire staff (Jones & Hill 2007). This gives a feasible sense of security as well as compliance issues that can be negotiated between the supplier and the client. Fraud can be prevented by ensuring that credit cards are secure for the outsourcers involved in the contract.
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Horizontal integration is a corporate strategy that entails the acquisition of a business in the same level. This form of integration contrasts with the vertical integration in that the business acquired is usually aimed at leading the company to expand in an upstream manner. The company can achieve horizontal growth by external expansion or internal expansion through mergers of firms offering similar services and products.
Advantages of Horizontal Integration
Through horizontal integration, Debenhams Company will be able to enjoy economies of scale. Economies of scale take place when the firm is able to sell more of the same product. After a firm is able to merge with another firm in the related business, the firm is usually able to achieve geographical expansion (Frank 2000). Also, horizontal integration leads to economies of scope. This is achieved by the firms sharing resources similar to different products. This aspect of growth is usually referred to as synergetic. Another importance of horizontal integration is the increased market power that could not be exploited when the firms had not merged together (Hitt, Ireland, & Hosk 2010).
However, there are disadvantages associated with horizontal integration. For instance, firms usually acquire their competitors in tthe endeavour of increasing the market share. This leads to industry concentration which increases the anti- trust issues in the industry by a significant margin. These issues may lead to price wars which are very harmful to the firm’s profitability in the long run (Hill & Jones 2009).
Another concern is usually geared at the materialization of the anticipated economic gains. Most of the plans that the firms make are usually hypothetical. Therefore, the management should be sure that the anticipated benefits are real before expanding the firm’s scope (Gaughan 2010). In the past, many firms have rushed to broaden their horizontal scope so as to achieve synergies, but have adversely failed to achieve any of the imagined benefits. For instance, if Debenhams entered the market for supplying the raw materials with the hope of possible synergies, proper connection should be considered so as to ensure that the synergetic approach and economies of scale are attained (Gaughan 2010).
Feasibility and Acceptability of Horizontal Integration
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For horizontal integration to be adopted as a strategy for use by the company, it ought to offer assurance for enhanced security of the organizational operations to the stakeholders. Feasibility is an evaluation tool that focuses on whether the institution has the necessary resources to implement its strategic options. This involves focusing on the internal capabilities of the organization. There is a number of theories for internal evaluation of an organization which can be applied to carry out this task. Before implementing horizontal integration strategic option, the company faces various risks (Hitt, Ireland, & Hosk 2010). Analysis of these risks is weighed against feasibility so as to arrive to a satisfying management decision. Implementation of horizontal integration strategy will come along with many benefits to the firm such as increase in economies of scale through application of synergetic effort in production and distribution of its products (Frank 2000).
Suitability of Horizontal Integration
Suitability is a management tool that requires the stakeholders to determine whether the strategic decisions made are attuned to the present and projected external atmosphere of the company. This is evaluated within the political, social, legal and economic settings. Suitability approach helps to find out whether strategic options available for implementation will help the organization to make use of the available opportunities and prevail against impending threats. It helps to find the viability of any strategic decision that is arrived by the management (Frank 2000). Through adoption of this strategy, Debenhams Company will be able to increase its market control and penetration. It will also be able to attend to customers that are currently unattended to. According to the above evaluation, it will be advisable and convenient for Debenhams Company to adopt horizontal integration strategy.
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