Investigation and evaluation of organisational environment

TERMS OF REFERENCE

The Business Management teacher, Mrs Karen Abberton, requested environmental analysis report on the organisation, where the students doing their work experience. The assignment was to be submitted by 2nd December 2009 in partial completion of the FETAC Module Level 6. I chose Dunnes Stores in Liffey Valley Shopping Centre, Fonthill Road, Clondalkin, Dublin 22, where I am doing my work experience.

Recommendations were requested.

METHOD OF PROCEDURE

In order to obtain relevant information, the following procedures were adopted to acquire the information in the report:

  1. I am spending two days every week, Thursday and Friday, in the workplace, used observation was used to collect information about the organisation.
  2. I obtained information from the manager of Kidswear section, where I am doing my work experience, and interviewed the employees at the company.
  3. I obtained some additional information from company website www.dunnesstores.ie.
  4. I used some information from Press Release about Dunnes Stores.

FINDING SECTION

Description of Organisation

I am doing my work experience in Dunnes Stores in Liffey Valley Shopping Centre.

I am working there as part-time shop assistant for last 18 months.

History of the Organisation

The first store of Dunnes Stores was open on the 31st March 1944 on Patrick Street in Cork. The entire company began from the savings owner, Ms Ben Dunne, putting in to start his own business. Since opened day, shop was very popular and soon more stores were opened across the country.

The second shop was open in 1947 on the North Main Street of Cork, the next was in Waterford, Mallow, Limerick and Wexford. In 1957 was opened first store in Dublin, in Henry Street and in 1960 in South Great Georges Street.

Grocery was introduced in small range of boxes with apples and oranges in 1960's.

By 1965, there were nine stores in Dublin and in 1966 Ben Dunne decided to expand to out-of-town shopping centre with his business in Carnelcourt. People could drive to car park and after shopping fill up bags in their boot.

The first Dunnes Stores in Northern Ireland was opened in Bangor in 1971. The next step in the company growth was overtaking of eleven grocery stores which come on the market in 1978.

In Las Rampan in Fuengirola on the Costa del Sol in Spain was opened first shop abroad and at the moment there is five stores in the South of Spain. In 1986 company expanded in England and there are now six stores in England. Dunnes Stores also has five shops opened in Scotland.

The entire company operates:

  1. Republic of Ireland (112 stores);
  2. Northern Ireland (23 stores);
  3. England (6 stores);
  4. Scotland (5 stores);
  5. Spain (5 stores).

Ownership

Dunnes Stores from very begin in privately owned company. Ben Dunne, the founders and inventor of the company, died in 1983 but business stays in his family up till today. The director of the company is Mrs Margaret Haffernan, daughter of the man who established Dunnes Stores, Ben Dunne.

Type of Enterprise

Dunnes Stores is an international enterprise retail company, offering everything a customer might need all under one roof, including food, textiles(ladies, mans and kids clothes, Footwear and Nightwear), homewares and cosmetics.

Dunnes Stores provides a full range of own brand and branded products; fashionable clothing for Ladies like Savida, Capture, Sinequanone, Miss Real, for Homeweares - Paul Costello and Food brand - St. Bernard.

The company also offers mobile top-up credit on every till, credit cart and laser payments, gift vouchers, savings stamps, Bureau de Change and tax free shopping.

Organisation Chart and Explanation

The vice Manger and HR Manager are directly under the instruction of the Store Manager. The Secretary is reporting directly to the HR Manager. Under the Vice Manager instruction there are a lot of Managers, which are directly responsible for the day to day running of the store. This include Cash Office Manager, Security Manager, Childrenswear Manager, Goods Inwards Textiles Manager, Homewear Manager, Ladieswear Manager, Lingerie Manager, Menswear Manager, EPOS Textiles staff,

Customer Service Textiles staff and Indirect Hygiene staff. All of those Managers have a number of staff under their instruction who directly reporting to them.

My involvement in the organisation would be as part of this staff.

The childrenswear section is made up of a Manager and a number of staff directly under his instruction. The staff includes permanent full time, permanent flexi-time, permanent part-time and Christmas staff positions. My involvement in the Childrenswear section would be as part of permanent part-time staff.

Organisation Structure

The branch of Dunnes Stores where I am working is an example of flat organisation with a large number of managers and with a wide span of control. The manger is responsible for a number of staff members. For example in the childrenswear department he would be responsible for 12 members of staff.

Internal Influence on the Organisation

The internal environment is described as a Micro-environment. It is everything that is in the company and the business should control. This includes the company, the suppliers, the customers, marketing intermediaries (every body, who exists between manufacturer and customer) and publics.

The tools used for internal marketing environment analysis are:

  1. Resource Based View
  2. Value chain analysis.

Resource Based View

The resource based view is a tool used by the organisation to formulate a strategy to take competitive advantage in its markets and industries. A competitive advantage is made of resources and capabilities and is what one firm can improve over another in a given market industry.

Resource organisation:

  • valuable,
  • rare, not every has them;
  • inimitable, impossible to imitated it perfectly;
  • non-substitutable, impossible to replace;
  • immobile, impossible to removed.

Three broad classes of assets are identified as elements of a firm's resource pool. They are: tangible assets, intangible assets and capabilities.

Tangible assets include buildings, machines, cars, money, fittings, stock and IT system.

Dunnes Stores owns almost 40% of shopping centres where they have stores, example The Mill in Clondalkin. The company also owns all fixtures and fittings in the shops and stock. The stock is exchanged for cash during the process of selling products. Dunnes Stores is a partner with Atlas Products Ireland to provide low cost, flexible and secure solution which suits all the suppliers and also the company. The company set up web version solution, where the suppliers can upload and type invoices, credits, prices and advice for lower cost.

Intangible assets include brand, reputation, and goodwill.

The entire Dunnes Stores company was set up 65 years ego and this is the biggest advantage of the company that has many years of experience and brand loyalty from the customers. The company became famous by using the words "Better Value".

The new logos are "Because we'll Irish" and "65 years of Better Value". As well as all of that business provides VALUE card, where customers can collect points straight away for every 1 spent in store. Each quarter the customer receives a letter where points are exchanged for vouchers to be used in shop.

The capabilities describe all abilities the company has, including human resources, the number of staff, quality and skills.

The branch where I am working employees over 100 people and most of them are qualified and experienced in retail management and business.

Value Chain Analysis describes chains of activities in a business and analysis them in the context of competitive strength of the business. All activities are transforming inputs into outputs that customer's value. The activities of a business can be grouped under:

  • Primary Activities, concerned with creating and developing a product;
  • Secondary Activities, not involved in production, but may increase effectiveness or efficiency (http://tutor2u.net/business/strategy/value_chain_analysis.htm).

Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, service.

The company Dunnes Stores has set up in China, where they have cheaper labour and switching of material for less cost. The whole company is working with range of suppliers and can afford to give direction to the suppliers after ordering more products.

From 1st May 2009, the company Dunnes Stores changed politics and requires from all his suppliers to be 100% EDI and also 100% price matched.

In the process of marketing and sales the company is offering new design collections like Savida and Miss Real. The store is also offering bed linen collections designed by celebrities Kate Price and Kylie Minogue.

The company also provide a 24h customer service help line. The customers can communicate also by internet, using e-mail.

Secondary activities include firm infrastructure, HR Management, technology development and procurement.

The company offers a range of own brand and branded products. In fashionable clothing for Ladies the "Dunnes Stores" brand provides, which is cheaper, and branded products like Savida, Capture, Sinequanone, Miss Real; in Homeweares - Paul Costelle and Food brand - St. Bernard.

The customers can use the website where they can find the newest promotion, collections, special offers and sales. They can also update their VALUE club card by internet and find the nearest store.

HR management is concerned with recruiting, training, motivating and wages in the company. The staff is not paid well enough but is very motivated at this time of year with the Christmas bonuses coming up. The HR department makes all the decisions about recruiting more people for Christmas. This is an advantage to provide more customer service and helping customers.

Dunnes Stores the company has a good financial and legal system, which is beneficent of 65 years of business in the Irish market.

External Influence on Organisaton

The external environment that affects the company is described as a Macro-environment. This includes socio-cultural, technology, economic, natural, politics and law environment. All of that is outside the company; the business must accept and adapt it.

The tools used for external marketing environment analysis are:

  1. PEST, stand from Political, Economic, Social, Technological Factors;
  2. Porters Five Forces, made by Competitive Rivalry, Power of suppliers,

Power of buyers, Threats of substitutes, Threats of new entrants.

PEST Analysis

PEST analysis is used to describe a framework for the analysis of macro-environmental factors. PEST stands for political (and legal) forces, economic forces, socio-cultural forces (including demographic, cultural and natural) and technological forces.

Political factors:

  • Dunnes Stores respects the restrictions about governing the recycling of food, paper and plastic. All paper bags used in store are made from 100% recycled material. The company provides separate bins for plastic, paper and rubbish;
  • When the Grocery Order of selling goods below the cost or below the invoice price was disbanded, it makes businesses more competitive and attractive for customers;
  • Dunnes Stores and all their managers are concerned about employee rights for holidays, maternity leave and breaks in work;
  • The company is also concerned about selling alcohol and cigarettes to under 18's and the regulation for selling alcohol;
  • The company supplies each employee with work cloths and with regular manual training and fire procedures;
  • There is always a trained first aid person present in all shops.

Economical factors:

  • In the economic recession, many businesses have to adapted survival techniques. Dunnes Stores still is making profit and is investing money in new business plans, like reopening shops on Patrick's Street in Cork, which was originally opened in 1944, and on Grafton Street in Dublin;
  • The customer lower income will mean there is less disposable income in the household budget;
  • The exchange rates of Euro to the English Pounds might effect company trade with the UK, where it is nearly 1=1;
  • The low VAT rate in the UK and Northern Ireland is an advantage for cross boarder shopping insted of buying goods in the home market;
  • The Trading Economics and global economic research website stated that Inflation rate was -6,56% in October 2009. This shows that people are not spending money, but there are paying debts on their credit carts and saving money;
  • The ECB interest rate of 1% may help support people to try paid debts and give them a more disposable money freed up from mortgages.

Socio-cultural forces (including demographic, cultural and natural):

  • The increasing population growth rate has made companies to look after older population. Dunnes Stores has a large selection of cloths for the older customers and for small children, which parents are buying;
  • Attitudes to work and career attitudes have changed dramatically over the last few years. With the high unemployment level now, more people are looking for a job in every section of economy;
  • Attitudes to socialise are changing as well as a family budget. If people stop spending money on going out or going on holidays they will stop buying also cloths, cosmetics, etc;
  • With all the pay cuts and lower income in the family budget people may consider spending less money on shopping or start buying cheaper substitutes;
  • The recession also increases migration, more of the population in the country means more income from taxation and therefore more money is coming to the budget and more profit, companies are making;
  • Dunnes Stores provides access for wheelchair customers.

Technological forces:

  • Dunnes Stores is using high technology in every day running business, like scanners, barcode reader equipment, ordering software connected with warehouse, security tags;
  • The business needs to change and upgrade the distribution channels, like Internet shopping;
  • Using new innovative products and services to make the customers life easier and more comfortable, like offering mobile top-up credit on every till, credit cart and laser payments, gift vouchers, savings stamps,

Bureau de Change, tax free shopping;

  • Offering delivery for customers;
  • The company is using way to communicate with the customers by internet ( by email) and 24h available customer service help line.

"The five-forces framework allows a firm to see through the complexity and pin point those factors that are critical to competition in its industry, as well as to identify those strategic innovations that would most improve the industry's - and its own - profitability."

Michael Porter (1985) 'Competitive Advantage'

Five Forces analysis provides help the marketer to contrast a competitive environment. This tool focusing on the single, stand alone, business. Five forces analysis looks at five different areas named the threat of entry (potential entrants), the power of buyers (buyers), the power of suppliers (suppliers), the threat of substitutes (substitutes), and competitive rivalry (rivalry among existing firms).

The treat of new entry describes existing or new companies began competing with the company, how easy or how difficult is for those companies to start to be competitive and if there are any barriers. The three main sources of barriers to new entrants are: Brand loyalty, Cost Advantage and Economic of Scale.

The entire Dunnes Stores company was set up 65 years ego and this is the biggest advantage of the company that has many years of experience and brand loyalty from the customers. At the moment, in the downturn of the economy, there are very few new entrance in business, especially in retail business. None of the large international companies will move in to the Irish market and start business.

The existing companies would not try and start competitive rivalry because they are only trying to survive the crisis. The government may help set up a new business with the help of grants but there is much rivalry in the market so it could be very difficult for small company to enter and survive in the market. There is also a high cost of setting up a new company and offer low prices to customers. That means, if businesses keep giving special low prices, it will received low levels of profit. Not every company can afford it.

The power of buyers is telling how strong or weakness is the positions of buyers. In nowadays is significant that the buyers has the power and they can decided where to spend their money. Many businesses is doing so bad that they have to persuade consumer to deal with them. In retail market companies can offer special prices, sales, etc. There are so many available cheaper substitutes and the buyers have big price sensitivity, sometimes even bigger than brand loyalty. For that reason Dunnes Stores has very good organised VALUE club with collecting points and receiving vouchers, special offer with top-up credit phones, tax free shop and special prices for customers.

The power of suppliers describes position of sellers compare to the buyers, in this case to the company Dunnes Stores. Because the business is many years on the market, the company has set up in China, where they have cheaper labour and switching of material for less costly. The whole company is working with range of suppliers and can afford giving direction to the suppliers after ordering more products.

From 1st May 2009, the company Dunnes Stores changed politics and requires from all his suppliers to be 100% EDI and also 100% price matched. As well as that, the company is partner with Atlas Products Ireland to provide low cost, flexible and secure solution which suits all the suppliers and also the company. The company set up a web version solution, where the suppliers can upload and type invoices, credits, prices and advice for lower cost.

The threat of substitutes is characterise how difficult or how easy the product might be substituted, especially cheaper. In a market, there are many different competitive companies, which are offering similar products. The product is slightly different in quality and price. The customer, who has a power, is choosing product which is meeting his expectation and which is satisfactory for him. Because Dunnes Stores has many years experience in a market, people known and accepted his brand, what is called loyalty brand.

But nowadays, when buyers have big price sensitivity, what is affected by economic crisis and all pay-cuts, they may choose cheaper available substitutes, what the best deal in their opinion is.

The competitive rivalry defines level of competition between the existing players. The whole market is very highly competitive; there are many rivals who would like to hold market shares and customers for themselves. The main competitive company for Dunnes Store, if we take clothes industry, is Penny's. There are many indirect stores, like New Look, Mark & Spencer, Next, who are offering products for a little higher price. In a food industry, the main competitors are Lidl, Aldi and Tesco, which offering the lower prices but as well as that, lower quality of product. The biggest issue is that they selling products made in Northern Ireland (England), where is lower VAT. Dunnes Stores is supporting the Irish farmers and is selling Irish, which may be a little more costly.

In the process of taking advantage over the rest of competitive rivalry, Dunnes Stores began cutting prices up to 20%, improving and differentiation is on offer by new design collections like Savida and Miss Real. The store is also offering bed linen collection designed by celebrities Kate Price and Kylie Minogue.

SWOT Analysis

SWOT analysis is a tool for auditing an organisation and environment of the company. It is the first stage of planning and helps marketers to focus on key issue. SWOT stands for strengths, weaknesses, opportunities and threats. Strengths and weaknesses are internal factors, and opportunities and threats are external factors.

STRENGTHS

  1. Dunnes Stores is a powerful retail brand, known as a company that provides its customers with a choice of good quality products at competitive prices;
  2. The company became famous by using the words "Better Value".

The new logos are "Because we'll Irish" and "65 years of Better Value".

  1. The company provides a range of Food, Textiles and Homewares all in one super store. This makes the business special; the store offers nearly everything in one shop.
  2. Dunnes Stores sells a full range of own brand and branded products; fashionable clothing for Ladies like Savida, Capture, Sinequanone, Miss Real, for Homeweares - Paul Costello and Food brand - St. Bernard
  3. Using the Dunnes Stores VALUE card customers can collect points straight away for every 1 spent in store. Each quarter the customer receives a letter where points are exchanged for vouchers to be used in Dunnes Stores.
  4. The company has been growing continuously and has invested in global expansion. The company operates 112 stores in Republic of Ireland, 23 stores in Northern Ireland, 6 stores in England, 5 stores in Scotland and 5 stores in Spain.
  5. The Dunnes Stores Group owns 151 stores and employing 17,000 people.
  6. The Dunnes Stores Group owns almost 40% of shopping centers where they have stores, example
  7. The Mill in Clondalkin.

WEAKNESSES

  1. The company is international, but has presence in only a few countries Worldwide.
  2. There is a low of level of empathy for the employer, especially from part-time staff
  3. There is a low level of employee morale as a result of low salary and lack of promotions.
  4. There needs to be more floor staff and current staff needs more training
  5. The company needs more focus on customer service rather than selling on cash register
  6. There is a lot of pressure on existing staff to do more work instead of hiring more staff
  7. There is not enough management on the floor to help customers and staff
  8. The business needs access to developing markets like internet shopping.

OPPORTUNITIES

  1. The company is operating a small number of countries. There are opportunities to expand consumer market to European countries
  2. Financial crunch - people will start buying cheaper product in Dunnes Stores.
  3. New locations and stores will expanse popularity for company.
  4. Needs update technology like access to ordering goods from internet
  5. New budget plans with reduce duty on alcohol and reduce VAT up to 18%. It could stop people travelling and buying in Northern Ireland.

THREATS

  1. The increasing unemployment level might affect the company policies and services provided to the customers.
  2. Increasing the VAT rate in the budget for next year will affect company profit and level of prices offered to the customers
  3. The economic recession, all the private and public sector pay-cuts and customers saving and not spending money
  4. There is a higher risk of an increasing in store theft due to financial recession
  5. Cross-border shopping in Northern Ireland

Conclusion

The Dunnes Stores company has a very strong and competitive position in the Irish retail market. From the beginning of business, 65 years ego, the store has a good reputation and brand loyalty from customers. The company is focused on the market of quality, style and low price products.

With a huge range of products including Food, Textiles, Homewares and Cosmetics with own brand or branded products, Dunnes Stores is one of the stores where customers can find everything they need all under one roof.

Even now, in the downturn of the economy, the company is doing very well with plenty of customers every day.

Recommendations

  1. I would recommend the company should pay more attention to staff, change the employees attitudes to work, invest in more training and customer service.
  2. I would recommend the company hire more shop assistants to provide help and advices for customers.
  3. It is strongly recommended to develop new technology, like internet shopping.
  4. There are opportunities to expand consumer markets to other European countries. At the moment the company is operating only a small number of European countries.

Bibliography

  1. Teacher notes
  2. http://www.dunnesstores.ie/page.php?pid=1
  3. http://en.wikipedia.org/wiki/Market_environment
  4. http://www.marketingteacher.com/powerpoint/d.The%20Marketing%20Environment%20and%20Competitor%20Analysis%204.ppt#256,1,The Marketing Environment and Competitor Analysis
  5. http://www.marketingteacher.com/Lessons/lesson_marketing_environment.htm
  6. http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?symbol=IEP accessed 28 November 2009
  7. http://www.quickmba.com/strategy/porter.shtml
  8. http://www.coursework4you.co.uk/essays-and-dissertations/value-chain-analysis.php
  9. http://www.valuebasedmanagement.net/methods_barney_resource_based_view_firm.html
  10. http://tutor2u.net/business/strategy/value_chain_analysis.htm

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