Dixons_v3 14/10/98 8:51 am Page 1

Organisational Change

BUILDING A CHAIN WHICH MEETS THE REQUIREMENTS The Dixons Group Strategic alternatives Mastercare was part of Currys when it was acquired by Dixons. A key benefit OF DIFFERENT GROUPS OF CUSTOMERS When Sir Stanley Kalms, the current In order to pursue its corporate aim, from acquiring Currys was that chairman of Dixons, joined the business Dixons was faced with two simple Mastercare would help Dixons to If you looked at some of the largest and most successful organisations twenty in 1948, it had a turnover of £105 per alternatives. It could go alone and develop a lead in the area of ‘service’. years ago and then compared them with those of today, you would probably be week. The Dixons Group today is one of expand internally, which would mean PC World was not a major competitor surprised. Closer examination of these organisations would show numerous the largest publicly quoted retail groups relying upon expansion within the when it was taken over. At the examples of success, failure or transition over this relatively short time period. in the UK, with a turnover approaching company or it could opt for external time it only had four stores serving Some of the largest business organisations today might not even have been £3 billion. expansion which would mean acquiring largely niche markets. However, other parts or businesses which would Dixons recognised that PC World around 20 years ago! There are many reasons why organisations excel, die or The Dixons Group comprises: add to the overall effectiveness of had uncovered a formula which simply survive from year to year. Management theory shows that organisations Dixons as a business. Dixons opted for could provide a successful platform go through periods of evolution followed by periods of revolution. Many ● Dixons, the UK’s leading high a strategy including elements of both. for further development in the field changes occur because of pressures from the business environment to which Its internal strategy involved further of computer sales. Each of these street retailer of consumer electronics, of the ‘group’ as a whole in areas such represented by its massive turnover in organisations have to react. Other changes occur because employees and selling the latest video, audio, development of Dixons stores and the organisations, except for Mastercare, creation and development of The Link. as purchasing, product development, the computer marketplace which today personal computer, photographic and broadly represented horizontal level managers want to move an organisation forward in pursuit of far-reaching Dixons’ external acquisitive strategy management, channels of distribution is £572 million, an increase of 23 per communication technology. integrations which involved the aims and are prepared to make key decisions which enable it to do so. led to Currys, Mastercare and PC addition of similar products and and customer care and service. cent over the last year. PC World has World becoming part of the Group, services to complement the existing become a talking point in the industry as ● Currys, the UK’s leading electrical where they could also be further Dixons’ portfolio, whilst at the same Currys/Mastercare well as in towns and cities where each retailer, providing a comprehensive developed. time helping to increase market share. new store is located. selection of domestic appliances, video, Currys and Mastercare were a REVOLUTION audio and communications products particularly good choice for the Dixons Meeting the demands and personal computers. portfolio in 1984 because they enabled DIXONS GROUP the Group to stay close to its expertise of different groups in electrical and electronic retailing. of customers EVOLUTION ● TIME PC World, the UK’s largest specialist Dixons and Currys were then managed computer superstore retailer, featuring ACQUISITION INTERNAL DEVELOPMENT together to gain economies of scale and In an industry which is fast-changing, PERIOD OF CHANGE comprehensive ranges of personal competitive benefits from buying in organisations need to know their computers, printers, software, peripher- volume and reduced overhead costs. customers and their changing needs CURRYS DIXONS STORES This case study focuses upon how the Dixons Group developed a business als and accessories. The Group then developed the ‘out of and requirements. The biggest threat MASTERCARE INTERNAL DEVELOPMENT THE LINK town’ concept for Currys Superstores strategy which enabled it to achieve its corporate aim ‘to be number one in the for any organisation is to fail to PC WORLD and began to close Currys in the adjust to changes in the market-place. electrical and electronic market-place’. In a changing world it is important for ● The Link, a high street retailer High Street. With this change in In an increasingly complex retail an organisation to have a clear idea of its strategic direction. By developing a specialising in communications services market positioning it was decided in environment it also became clear that goal identifying where it wanted to be, Dixons was defining a future state of and products. Acquisition There were many benefits from 1994 to separate out the management not all customer requirements and affairs it wanted to achieve which helped everyone within the company to focus these acquisitions. The ‘group’ concept of Dixons and Currys for Marketing purchasing habits were the same! As a method of development, acquisition and Sales (not Buying or central on the process of change. enabled Dixons to develop its business makes sense, particularly in markets across a horizontal plane which support) so that each Chain would have As a retail organisation, Dixons ● Mastercare, the UK’s leading after which are relatively mature. Acquisition provided growth and at the same time the freedom to develop its own needed to understand their potential The process of strategic management means setting a pathway for an sales service organisation for consumer enabled Dixons to take over a large enabled it to stay close to its expertise market and customer focus. customers and any likely developments organisation to change and then putting in place plans and policies which enable electronics and business products, company which already existed in the in electronic and electrical retailing. in their buying patterns. By developing it to achieve its corporate aim. Strategic decisions are means to achieve ends. supporting customers of Dixons, Currys, electrical market-place (Currys) and Acquisition provided Dixons with the PC World a clear direction which responded to also to acquire a developing organisation These decisions encompass the definition of the business, products and markets PC World and The Link. opportunity to take over a major these changes using this acquisitive with a bright future (PC World). At the time of the acquisition, PC competitor and rapidly increase its strategy, Dixons could further develop to be served, functions to be performed and the major policies needed for the World had just four stores. With a market share. The fusion of resources its market not just through the nature of organisation to execute these decisions. Within this case study we look at the rapidly increasing market for personal across the business allowed a larger the products and services it provided nature of key decisions made by Dixons within the process of change as it built computers and related products, the DIXONS GROUP Dixons to gain from economies of but also through the improved distribu- (HORIZONTAL RETAIL ORGANISATION) acquisition of PC World was viewed as a chain designed to meet the requirements of different groups of customers. scale and improve its commercial effi- tion opportunities it created. ciency. a way of increasing Dixons product authority. The sales of PCs were likely A strategic decision was taken to focus DIXONS CURRYS PC WORLD THE LINK to move on from businesses to consumers Acquisition also allowed Dixons to and Dixons needed to develop its entry upon individual brand building which (FORWARD VERTICAL DEVELOPMENT) benefit from synergy. The synergy potential into consumer markets still would then position the chains in relation STRATEGY AIMAIM equation 2 + 2 = 5 signifies that a further. The growth of PC World is not to each other. This would involve portfolio of businesses is much more simply reflected by the growth in the emphasising the benefits of each chain (MEANS) (ENDS) MASTERCARE valuable than each business as a stand- number of stores from four to 53 under of stores to meet the needs of the alone entity, because of the influence the ownership of Dixons, but is better customer, by product and competitive Dixons_v3 14/10/98 8:51 am Page 2

attributes. The belief was that this strategy could be used to create a broad THE PROPOSITION range of retail opportunities, each of TASKS & ACTIVITIES which would serve different customer requirements. Service would underpin each of the retail brands’ strategies.

The policy led to Currys moving away THE CUSTOMER from the High Street to larger edge of town superstore units in order to satisfy IMPULSIVE RETAILING DESTINATION RETAILING KNOWLEDGEABLE CUSTOMERS COMMUNICATION RETAILING customer needs such as a wider product • Individuals, younger, male, wanting excitement, • Families, all ages wanting choice and value. • Category killer, appealing to all sectors of • Individuals wanting advice. range, emphasis upon bulkier and larger wanting the latest/newest /smartest. • Need security that products are good and prices keen. the market. • Looking for best price and the right service. goods, improved space for browsing and • Looking for a deal. • Know product they want but not the model. • Business customers, households and individuals. • Small businesses. car parking. In contrast, the strategy for • Wanting uniqueness/exclusiveness. • To meet a ‘need’ rather than a ‘want’ and the • Some customers seeking choice and value, Dixons was to remain in the High Street • Instant gratification. purchase will be planned and will not be instant. others seeking technical advice and know-how. • Desire to see latest/newest but need security by where it would provide a more portable • Individuals and small businesses wanting computers • Require convenience, high quality service and simple methods of payment/delivery. purchasing dependable products with reasonable range of goods. Space made available and related products. • Few business customers, some individuals. life cycle upgradeability. by reductions in the large screen televisions and domestic audio ranges THE PRODUCT was then used by Dixons to create a much wider selection of photographic PRODUCTS FOR THE INDIVIDUAL PRODUCTS FOR THE HOME SPECIALIST RETAILER COMMUNICATIONS FOR THE INDIVIDUAL Carry out a survey to find out about Over a period of several months, and portable audio products and computer • New technology, latest, newest model, • Comprehensive range with keen prices and deals • Huge choice. • New communication products and services. software, in which Dixons has been understandable deals, variety from which to choose. on prices/exclusiveness. • Expanding categories as technology grows. • Latest and comprehensive range of mobile phones. 1shopping trends. In your survey 4analyse the competitive behaviour rapidly developing its market share. • Strong emphasis on portable (take-away) products. • Dependable names/major brands. • Products with short life cycles and subject to • Internet. find out: of one or more competing organisations. • Convergence of technologies and products. • ‘One stop’ electrical shop. continuous change. • Office communication equipment and organisers. a) about use of city/town centre Use newspapers to help you and try • Mobile phones/organisers. Products accessible • Products for the home often delivered. • Brands important. to build up a database of information. for mass markets. • Some products linked to major purchases shopping versus out-of-town shopping; (i.e. link to kitchens). Comment upon the activities of DIXONS/CURRYS b) times of week and day when these organisations. Try to identify THE COMPETITION shopping is most popular; their strategies. What conclusions do • Out of town electrical superstores. • Comet, Clydesdale/Regional Electric Companies. • Little in retail. • Car Phone Warehouse. c) the products people look for in you draw? • Growing competition from niche specialists. • Possible threat from discounts. • Substantial in mail order and direct sales. each location; • Quality of service key barrier to entry. What is meant by product CUSTOMER BASE d) any developing areas for shopping needs such as mail order, 5positioning? Describe how Dixons, Retailing propositions The Link repair and technical centres in Currys 1. Coping with change: recruiting and Currys and PC World have positioned and PC World Superstores and the developing the people needed to adapt tele-shopping or use of the Internet. Whenever we go shopping, different The objective for The Link was to their retail operations at different groups expansion of personal computer service. to a changing marketplace and rate of stores or different ways of retailing develop a specialist communications All organisations should have some of consumers. If necessary visit a store have alternative meanings for us. For current growth. chain trading in a market in which Responding to the changing 2form of corporate goal or aim. Find in order to make your comparisons. HIGH STREET OUT OUT OFOF TOWNTOWN example, we might prefer to shop in one substantial growth is expected over the out the aim or goal for the college or supermarket rather than another. We are 2. Proximity to customers: a challenge next few years. The Link is concerned business environment school you attend. Interview a member Explain the meaning of the following thus influenced, for a number of complex facing every retail organisation - the with communication products such as of staff in your school to find out how words and phrases: reasons, by different retail propositions. Dixons may be market leader in the ability to meet customer needs. 6 Strategies used by Dixons to develop phones, faxes, pagers, organisers, retailing electrical and electronic the school has attempted to achieve ● brand building connection devices and navigation markets but it cannot afford to be that aim over recent years. Across many ranges the products in different customer propositions were 3. Product knowledge: with developing ● market position equipment such as Traffic Master. The complacent. Changing technologies both Dixons and Currys were designed to help the Group’s products technological advancements, the product ● mass market identical. It was important that prices and approaches to retailing to appeal speed with which this niche-category offer many opportunities for moving Using an example, explain what ● knowledge of sales staff is key to entrepreneurial approach were the same in each store as many to different groups of customers. These store expanded and developed was into new fields of business but provide is meant by the term strategic increasing market-share. 3 ● niche markets customers visit both. For many positioning propositions were broadly unrivalled. Within a four year period a threat if these new fields of business management. are not successful. Dixons has to be ● competitive advantage customers shopping at Dixons tends to related to customer, product and The Link has moved from 0 to 127 aware of the development of niche Business strategies means planning ● life cycle upgradeability take place during working hours with competitive attributes. stores to develop a pre-eminent position markets where small businesses may ● internal development. visits being made to Currys superstore how organisations use their resources in the High Street arena. offer specialist products and services on units at weekends and in the evenings. Internal development in a changing business environment. In the one hand and worldwide-backed The Link is a specialist communi- The other strategy adopted by Dixons some ways it is similar to a football organisations on the other. cation chain. Over a short period it The objective for PC World was to was that of internal development. This is Mastercare team preparing a game plan which 7 has opened 48 stores with a turnover of provide an outlet which would develop usually a particularly effective strategy To have the strongest image for customer Dixons strength comes from its builds upon its strengths. However, a £21 million. Make a list of competitors the sales of PCs to consumers. for developing products and services service among the electrical and entrepreneurial approach to doing strategy, as with this case, is not just in markets where high growth is likely electronic retailing multiples was business. It has developed into a non- about winning one game, it is a long for The Link. Compare features of The The strategy was, therefore, to combine to take place. For Dixons this led to the paramount if Dixons was to maintain bureaucratic organisation which is quick term plan which takes into account not Link with those of the competitors. List Dixons retail skills with PC World’s development of The Link and Mastercare. its competitive advantage. Customer to respond to new ideas. Its group one competitor, but many. The Link’s competitive advantages. product authority to stimulate additional Dixons used internal developments service together with product after sales structure with the four separate chains consumer interest in the market. Until to segment its markets, increase its service, is a cornerstone of the Group’s offers the potential to operate a business This case has focused upon how Using an example from the case the launch of multi-media PCs, the market penetration, take advantage of strategy. Mastercare was designed to which focuses upon diversified customer Dixons has made key decisions which 8study, describe how a horizontal market was viewed as specialist. The further business opportunities and help provide sustainable competitive needs in a fast-changing marketplace. have involved strategic planning and business development differs from a opportunity to use sound, colour and improve its overall competitive advantage for each of the retail chains. Yet, much still remains to be done. implementation. It has seen Dixons vertical development. movement through the use of CD-ROM advantage. Both the development of exploded the multi-media market and The Link and Mastercare enabled Mastercare today employs over 1,500 Dixons cannot afford to rest on its advance from being a single chain into a http://www.dixons-group-plc.co.uk helped to move PCs into the mass Dixons to move into related areas which skilled engineers and technicians, laurels. It has identified three barriers to its Group of businesses ready to face and market. complemented existing markets. reflecting greater numbers of in-store corporate vision with which it must deal: take part in future market developments. Whilst every effort has been made to ensure accuracy of information, neither the publisher nor the clients can be held responsible for errors of omission or commission.