Table of Contents
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- 2.1. Core Competences and Unique Resources
- 2.2.1 Bargaining power of customers
- 2.2.2 Bargaining power of supplier
- 2.2.3 Thereat of new entrants
- 2.2.4 Threat of substitutes
- 2.2.5 Rivalry among competitor
- 3.1 Strengths
- 3.2 Weaknesses
- 3.2.1. High turnover rate and labor strife
- 3.2.2 Increasing operating cost in the company
- 3.2.3 Inconsistency in sales
- 3.3 Opportunities
- Improving sales productivity of existing buildings
- 3.4 Threats
- Increasing proportion of consumables have a significant margin impact
- Wal-Mart overlap
- The existence of fluctuations in global sourcing
- 5.0 The Big Problem
- Incompetent managers
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Big Lots, Inc. is an American corporation that sells closeout and overstock merchandise in a series of departmental stores. The corporation is headquartered in Columbus, Ohio and runs more than 1400 departmental stores in at least 47 states in America. Back in 2011, the firm bought stakes at Liquidation World to become an international business venture after successful operations in the United States. The takeover of Liquidation World was a major business deal for Big Lots as the purchased firm had 89 outlets in Canada. This was a very significant move as the firm could now rollout its business ventures in the 89 new markets in the overseas market.
Big Lots corporation traces its the beginning of its operation in 1967 following the formation of Consolidated Stores Corporation by Sol Shenk. Since then, the firm has successfully expanded its business outreach to many other areas stretching from one state to another, before launching its activities in Canada. The expansion strategies has seen the firm acquire and sell a number of product lines like Toy Liquidation, KB Toys before finally changing its name from Consolidated Stores Corporation to Big Lots. Today Big Lots runs retail business in all its departmental stores through selling a variety of merchandises like clothing, furniture, electronic goods, and house wares among other household goods. Apart from retailing house wares, the firm also sells grocery in its stores. This paper, based on the many achievements and problems that the firm has faced, succinctly analyses that the internal issues of Big Lots in order to evaluate the firm’s market and financial position in the current business environment.
2.0 Internal Analysis
2.1. Core Competences and Unique Resources
One of the key competencies of Big Lots is the price cuts given to customers on a range of products. With the Christmas season soon coming, the firm has placed a lot of Chrisman offers from the company site where buyers can made a saving of up to $200 on a single item. Other than the price under cuts, Big Lots also has a reward scheme for their loyal customers (Big Lots 2012a). The Buzz Club Rewards is an avenue for saving more money for the loyal customers. The scheme has unique offers for their clients as it offers prior notices to customers on new closeouts and buyouts. Moreover, the receipt lookout for up to thirty days on purchase makes it easy for the customers to find their lost receipts within the stipulated period. Members cal also find out about new adverts two days before others can view the same adverts. Finally, members also access exclusive “VIP shopping events” (Big Lots 2012b).
Big Lots outstands as a departmental store operator because of the number of stores it has opened in most states in America. Over 1400 departmental stores in 47 states is a big market for the firm. Loyal customers can get access to Big Lots stores with ease as the firm has an online platform that allows customers to locate the stores in the most appropriate and convenient places. The new acquisition of Liquidation World further opened the market for Big Lots in the overseas market for the first time in history. This comes with an additional 89 stores that has tremendously opened the market for the firm. With more branches, Big Lots can now enjoy economies of scale. According to Hill & Jones (2009), “Economies of scale arise when unit costs fall as a firm expands its output. Sources of economies of scale include, cost of reductions gained through mass-producing a standardized output and discounts on purchase of raw materials in bulk. The takeover of Liquidation World in Canada is strategic as Big Lots inherited the Canadian customers.
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2.2. Porter’s Value Chain
2.2.1 Bargaining power of customers
Customers with substantial bargaining are likely to have a massive take on what should inform a business strategy. The advances in technology and the use of internet ahs significantly increased such of information and for customers. As a result, customers can make online inquiries and make comparison of prices with those of other firms like Wal-Mart before buying. The information is available online as Big Lots has its own website for general customers and loyal customers. Choice is made depending on the desired pack and price for a goods and services. High bargaining power of customers increases rivalry in the retail store business.
2.2.2 Bargaining power of supplier
The number of suppliers who are able to deliver goods to Big Lots affect suppliers’ bargaining power. In the retail business, there are many suppliers in the market and this reduces their bargaining power in supply of goods and services. On the other hand, if there are many suppliers are in an industry, their bargaining power will be diminished leading to low costs of goods and services to Big Lots.
2.2.3 Thereat of new entrants
New entrants are firms that are not currently in market completion in a given industry; but they have the ability to do so if they decide. In the retail chain business, it is unavoidable to eliminate the threat of a new entrant in the market. Big Lots has Research and Development, (R&D) to improve delivery of goods and services.
2.2.4 Threat of substitutes
If market situation allows for substitutability of goods and services from other competitor, then the management needs to find alternative measures to limit the threat. If the degree of substitutability of goods and services is low, threat of market share will be low. Big Lots sources for new markets, has competitive prices, and takes over other firms in an attempt to make the company maintain its market share.
2.2.5 Rivalry among competitor
All the other forces lead to increased rivalry among firms in a given industry. Retail chain in the US has a number of established brands like Wal-Mart that is the greatest threat to Big Lots. In addition, new entrants who also create stiff competition and rivalry. Depending on the type of brand that an organization creates to the consumers, popularity will come from product pricing, design, and dedicated funds for advertising (Hitt, Ireland & Hoskisson 2008). The online platform through which Big Lots creates consumer awareness also increases popularity of the firm.
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2.3. Functional Analysis
Big Lots reported of $0.36 per share, $0.05 while its revenues increased by 4.4% annually to $1.22 billion and the $1.24 billion. The company lowered guidance for fiscal year 2013 with EPS of $2.80-2.95 from prior guidance of $3.50-3.60 versus the $3.29. Big Lots sales declined by a range of 3% to 4% in 2011. However, on aggregation its inventory ended at $881 million compared to $780 million the second quarter of fiscal 2011. The increase shows a growth in its US store growth of inventory. The company’s sales in the US stores decreased by 1.9% for the quarter (Big Lots, 2012a).
3.0 SWOT Analysis
The company is privately owned – therefore there is no decision that is short term and meant to satisfy Wall Street. The company enjoys the liberty of private ownership which can make it prosper very fast since there is less public interference.
The company has a great value proposition, which is priceand convenience. This value proposition sells it much to the people.
It has a loyal shopper base. Loyal shoppers and customer are a great impetus to the growth strategies of the company. Therefore, the company should put down plans on how to attract and maintain this customer base for future growth.
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Financial viability is relatively good; low debt. This makes the company to have a good footing in the market for a formidable foundation for development.
It is large and centrally managed; this makes it easy for strategic decision to be made, (Belk & Sherry 2007).
3.2.1. High turnover rate and labor strife
The company faces a high labor turnover, which is attributed to inadequate motivational factors in the company. This poses a great problem to the company performance. Employees play a pivotal role in the development and growth of a company. Therefore, it is prudent for the employers to appreciate their efforts. In this regard, employee motivation is critical for increased performance in a company. It should be noted that an employer who ignores the aspect of workplace motivation is likely to experience high employee turnover. In the above question where one works hard and is well paid
3.2.2 Increasing operating cost in the company
Economic crisis coupled with inefficiency has led to high operating cost in the company. This has put the company in a compromising situation.
In-store execution very inconsistent
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3.2.3 Inconsistency in sales
There has been fluctuation in sales, which present a problem of planning and budgeting
Improving sales productivity of existing buildings
The company has a great opportunity of turning around the sales potential of the already existing building.
Increasing supply chain, inventory levels, and in-store operation
The company has a huge untapped potential of supply chain, inventory levels, and in-store operation, which can generate high volume of revenue.
Improved Dollar Market; The improved dollar market makes the company to reap more since its import will be cheap, hence higher sales
Improvements supply chain and the company efficiently.
New branded stores; the company has new stores which is a competitive advantage which it should enjoy.
Increasing proportion of consumables have a significant margin impact
Economic pressures on core customers (fuel, unemployment)
Global economic pressure poses great threats to the company. This is because many customers of the company’s customers shy away.
Wal-Mart is a renowned international retail company that is not only a market leader in the retail industry but also the biggest company in revenues. The significant strides made by the company are commendable since the incorporation of the firm into a public corporation in 1970 Wal-Mart is making meaningful progress in meeting both its local and international market targets. Because of this, the firm is focusing on expansion of international portfolio given the lucrative markets in Africa, Asia, and Europe. In addition, Wal-Mart is an international brand that takes this advantage to roll out new product lines.
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Wal-Mart pose a great threat to the growth of Big Lots Inc. This is because Wal-Mart is a big competitor and it is currently overlapping into the presumed territory of the company.
The existence of fluctuations in global sourcing
The global outsourcing market is full of fluctuation that makes the company to lose money. In this regard, it is difficult to have a strategic plan for growth.
4.0 Strategic Choice
Strategic choice, which the company has opted for, is to re-brand its existing store to ensure that it rises above the competition. However, this choice has not been easy. This is because it has got its limitations
5.0 The Big Problem
Reduction in sales since there has been public outcry that the company sell goods, which are cheap, do not last and has no meaning in the lives of consumers. The company has found it difficult to swiftly respond to this allegation and win the public trust (Mooij 2004).
Human resource plays a great role in the development of a company. The role of the leadership cannot be underscored. The company’s managerial leadership has not come out strongly to display competency in their job. This is because the global competitive business environment calls for extraordinary leadership style. However, this kind of leadership style has been lacking in the company.
The above discussion illustrates that Big Lots Inc. must establish a clear strategic plan for its expansion program. However, the growth options for the company are many but it will call for strategic planning coupled with a paradigm shift in management. In addition, the company should also work hard to gain the public trust so that its sales can go up.
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