1

Strategic Planning for Next Plc

 2

Abstract

This report focuses on importance of strategic planning by taking into consideration the case of
Next plc, one of the largest retailer in the UK. Porter’s Generic strategies, corporate level
strategies such as BCG matrix, Ansoff matrix etc., different leadership and strategic changes
along with appropriate strategic conclusion and subsequent recommendation is also provided
from the perspective of the company.
 3

Table of Contents

1. Introduction ................................................................................................................................. 4

1.1 Company Background .......................................................................................................... 4

2. Porters generic strategies ............................................................................................................ 4

3. Corporate level strategies ............................................................................................................ 5

3.1 Ansoff matrix ........................................................................................................................ 5

3.2 BCG matrix ........................................................................................................................... 6

3.3 Strategic methods and evaluation ......................................................................................... 7

4. Leadership and strategic Change ................................................................................................ 8

4.1 Types of strategic change...................................................................................................... 8

4.2 Managing change .................................................................................................................. 9

4.3 Force field analysis ............................................................................................................. 10

4.4 Strategic Leadership roles ................................................................................................... 10

5. Strategic Comment.................................................................................................................... 11

5.1 Strategic issues and recommendation ................................................................................. 11

6. Conclusion ................................................................................................................................ 12

Reference List ............................................................................................................................... 14

 4

1. Introduction

Strategic planning includes critical analysis of the environment within which an organization
functions. Strategic analysis facilitates in proper utilization of organizations resources by
understanding the existing threats, strengths and competition within the environment. The
primary aim of strategic planning and evaluation is to maximize resource utilization and be able
to meet competition existing in the market effectively (Johnson, Scholes and Whittington, 2008).
The following research work is an effort towards understanding the strategic advantages and
position of Next Plc.

1.1 Company Background

Next Plc is the largest retailer of the U.K in terms of volume of sales. The company offers
clothing and accessories for men, women and children. They also sell home furnishing and
kitchen appliances. Next owns 500 retail stores in the U.K alongside of 200 franchise stores
around the world (Next Plc, 2014). Next is also a highly active online retail service provider with
over three million customers who avail the company’s online shopping facilities.

2. Porters generic strategies

Cost leadership Differentiation Focus

Competitive Next products are Next gives much Focus is mainly upon
advantages price moderately importance to quality quality and
higher than other of its products and development of new
retailers. This is services. Innovation products to expand
mainly done to and CSR related products range.
indicate higher activities are also
quality. undertaken at a larger
scale then most of the
other firms.

Potential threats and Since the company Lack of development Less focus upon cost
does not follow the of low cost products
 5

weaknesses economic pricing and initiatives to reduction strategies.

concept, it fails to expand market size
attract the low income hampers growth as
group. industry saturates.

3. Corporate level strategies

3.1 Ansoff matrix

The ansoff strategy is essentially a corporate growth strategy that analyses the products and the
markets of the firm. Essentially there are four types of combinations for markets and products as
shown below:

Existing products New products

Existing markets Market penetration Product development

New markets Market development Diversification

Next is already well established in its existing markets. However the company may consider
reducing the price of their current products and establish themselves more strongly in their
existing markets. Additionally the company may strengthen market penetration through effective
advertisement and promotional strategies. New product development may also be considered to
be an effective strategy for the company to establish themselves more strongly in their existing
markets. Next is seen to primarily concentrate upon its clothes division. It may consider
expansion of their markets by developing new products in the segment of footwear and other
home products (Ault, McDonald and Burt, 2003). Next is seen to have lower presence in the
markets of Asia and the Middle East. However if the company considers entering new markets in
Asia, it must reduce the prices of their products. Next may also consider entering the nations
such as India and China by developing new products which are economically priced. The
 6

challenge for Next would be to maintain their existing levels of quality alongside of cost
reduction (Austin, 2002).

Therefore it can be stated that the company is required to crucially consider price reduction for
enhancing growth based on products and markets. This can be effectively done through
implementation of strategies such as decreasing cost of production, transportation, enhance
manpower efficiencies and effective stock management (Aaker, 2008).

3.2 BCG matrix

The BCG matrix is an analysis tool which facilitates understanding the growth and relative
revenue generated from the products of a company. The matrix essentially facilitates developing
long term strategic plans for their products.

The matrix essentially divides the company’s products into four categories. These are star, cash
cows, question mark and dogs. Firms are expected to enhance the products or try to shift their
products to the categories of stars and cash cows (Bensoussan and Fleisher, 2013). For Next Plc
there exist no products which belong to the category of dogs for which both market share and
growth is low. However few of the brands of clothes, footwear and home décor sold by the
company are seen to fall into the category of question mark whose market share is relative low
but display a high rate growth in the markets of the U.S and the U.K due to the existence of high
brand value. Most of the products sold by the company in the category of clothes are seen to fall
in the category of stars ( hm, 2009). Similarly few of low priced garments band sold by Next is
 7

seen to fall into the category of cash cows as they generate a large proportion of revenue
incurring low costs. By reducing the prices of many of footwear and home decor products of the
company, it is possible to shift them into the category of stars or cash cows (Beattie and
Thomson, 2007).

3.3 Strategic methods and evaluation

Next plc essentially follows the strategy of organic development and strategic alliances in the
process of developing strategies for growth and market development. Organic development is a
process by which the company focuses upon growth based upon their own capabilities. The
efficiency of the management and the employees plays an important role in this respect. Next
gives much importance to their talent recruitment process and ensures that the workers of the
firm and strategically aligned with the needs and objectives of the company (Thompson and
Martin, 2005). Additionally, Next tries to enhance their power in the markets by focusing upon
the need of the consumers. Next essentially targets a niche segment and most of their products
belong to the category of the high end market. Next crucially analyses the needs of the
consumers belonging to this category and develops their products. The company spread their
investments overtime based on the needs of the niche market they serve. Quality of products is
one of the uttermost points of focus for Next. In respect of developing strategic alliances, Next
forms tie ups with efficient and renowned suppliers for procuring products on time. Next also has
developed strategic tie ups with a number of distribution companies in the markets of Europe.
For establishing integrated marketing communications policies, the company has also formed tie
ups with a number of media firms (Burt, 2000).

Next evaluates their strategic options on the basis of suitability, feasibility and acceptability.
Every strategic decision undertaken by the company is evaluated on the basis of its feasibility,
suitability and acceptance in the market. This would require matching the objectives of the firm
and the consumers with the offering arising out of the products. Rational decision making is
facilitated and it becomes possible to meet market objectives more effectively. The company
analyses the risk returns return policies for long as well as short term period before developing
strategic plans of growth. The firm also carries out sensitivity analysis, shareholder value
 8

analysis and financial implications before taking suitable decisions relating to new product
development or any other type of innovative strategy (Doherty, 2000).

4. Leadership and strategic Change

4.1 Types of strategic change

The retail market is characterized with frequent changes. Companies such as next Plc is therefore
required to frequently upgrade their products or make changes in them so that market needs can
be met effectively. Strategic change implementation is not a very easy task. Firstly the firm
needs to understand the needs to change and whether undertaking such change can facilitate
achievement of competitive advantages. There are essentially four important types of strategic
management changes a firm may undertake namely; adaptation, reconstruction, revolution and
evolution. Adaptation strategy is undertaken when the products and strategies of operations need
not be altered much. Minor changes are made so that the products can easily adapt with the
market. Such changes are mostly related to advertising or promotion of products. If Next plans to
enter new markets it requires undertaking the reconstruction strategy. The reconstruction strategy
requires organizations to alter strategies to a very large extend. Alterations are made in respect of
pricing, distribution of products, product attributes and their quality. Reconstruction is also often
undertaken with changes in the culture. Such reconstruction is not implemented upon the
organization as whole but only upon a particular product division or a strategic business sub unit
(Doherty, Ellis-Chadwick and Hart, 2003).

The firm may also undertake the revolution strategy when complete changes in respect of the
basic strategies and operations are required. Next undertakes such strategies very rarely. The
company takes up such strategies only at times when market changes are immense and it
becomes essential to fundamentally alter many aspects of operations. Evolution is a change
which is seen to automatically occur with firms over time. Retail organizations are often required
to alter their product strategies along with changes in the tastes and preferences of the market.
Over time immense changes are noticed in the manner in which organizations operate. Both
revolution and evolution are changes which take up immense time (Easey, 2009).
 9

4.2 Managing change

Next is seen to manage change on the basis of participation, collaboration and training. Next
believes that participation of employees and managers cohesively is essential for the
implementation of change. Unless managers and employees develop adequate understanding
amongst themselves implementation of change becomes difficult. For such reasons it is often
seen that Next encourages managers and employees to communicate with each other effectively
and promotes the development of understanding between them. Employees are more eager to
change if management provides them with adequate support (Stroope and Hagemann, 2010).
Change also requires suitable training efforts. Managers must train employees regarding the new
policies so that they are able to understand why such change is essential and there implications
upon growth. Such participatory change management techniques lead towards lowering the
resistance caused from the employee side and they find it easier to associate themselves with the
needs of the organization. Next also ensures that change strategies direct the organization
towards the right path. Hence before implementation of change, Mangers are required to forecast
their long term implications and accordingly take decisions relating to implementation of change
(Grant, 2005).

Next ensures that change is perceives by all members of the firm as a positive phenomenon.
Being in the retail sector adapting to change is a necessary organizational feature. Next not only
takes into consideration the needs of the firm and its employees, but it is also required to
incorporate the requirements of all its stakeholders. Organizational change usually has a long
term impact upon the firm. Hence it requires the acceptance of all related parties of the
organization. One of the most important operational objectives of Next is to provide sufficient
returns to shareholders. Hence it must ensure that all types of strategic changes lead towards the
enhancement of profits so that ultimately higher returns can be provided to shareholders.
Ensuring the quality of products is also a highly essential strategic goal for Next. Hence changes
brought about in the organizations structure or mode of operations must not cause any type of
alterations in the quality of the products (Harris, 2000).
 10

4.3 Force field analysis

In order to implement a strategic change it is essential to have adequate impetus which pushes
the management and the organization as a whole to undertake alterations. Force field analysis is
a strategic tool which facilitates recognizing the grounds upon which an organization should
undertake changes. Force field analysis can be carried out using a number of different types of
frameworks such as mapping of different activities, stakeholder mapping or the 7-S framework.
In most cases Next is seen to use the 7-S framework to identify situations that requires them to
change. While conducting force field analysis, organizations are required to evaluate three
different types of factors. These are essentially the push factors, the resistance factors and the
additional factors. The push factors are essentially those aspects which force the organization to
undertake change (Pearce and Robinson, 2000). In case of Next the push factors are essentially
changes in customer needs, changes in style and fashion, enhanced competitive powers of rivals
and development of substitute products. Such factors may mandatorily require the organization
to change so that Next may continue to procure competitive advantages in the market. Apart
from changes occurring in the market, political factors also forces Next to undertake changes in
their operations or production policies. Alternatively there may also exist a number of factors
which causes resistance towards changing. Such factors may include organizational culture,
worker opposition, past experience or legal contingencies. While implementing change, Next is
required to carefully evaluate the forces which are the strongest and accordingly formulate plans
of action (Johnson, Scholes and Whittington, 2008).

4.4 Strategic Leadership roles

Leadership plays an important role in the implementation of changes within an organization.

Leaders who are essentially managers are required to guide employees towards the adoption of
change. Leaders may share their experiences with employees and motivate them to accept
change in a positive manner. Change is usually initiated by the top level mangers. This means
that are adequately aware of the situation and why changes are necessitated. Hence they are able
to guide employees at lower levels more effectively (Lennox, 1994).
 11

5. Strategic Comment

Next has displayed a steady rate of growth over the years. The efficient management of resource
and proper strategic planning have facilitated the firm to emerge as the second highest apparel
firm in the U.K. Next is also known for operating in a responsible way with adequate
consideration for the environment. The company however lacks strong presence in overseas
markets, particularly in Asia. Entering these markets would facilitate Next to counter the issue of
high competition existing in its home nation (Grant, 2010).

5.1 Strategic issues and recommendation

On the basis of the strategic evaluation conducted for Next Plc, the following important aspects
require to be considered.

Factor Reason What needs to be done

Advertising Next is losing consumer Enhance advertising efforts

impression due to lack of through television and
media presence internet. It is also essential to
indulge in celebrity
endorsements.

Create stronger message .There are many retailers Next requires

indicating quality offering similar quality communicating with its
advantages as Next, at lower consumers more strongly
prices. that their products offer
supreme value and
symbolize class and status.
This can be done through
more integrated marketing
communication channels.

Diversification In order to survive in the Enhancing product range and

market, it is essential to inclusion of more brands is
 12

invest in product essential. Hence greater

diversification. efforts towards innovations
need to be applied.

Adoption of low cost strategy to Nest will achieve less Develop differentiated low
enter merging markets. success if it enters the and economic pricing
emerging markets with its policies for penetrating into
existing high price strategies. the developing nations. This
would require acquiring new
brands and develop new
products, to match the
pricing policy.

Popularise CSR Consumers are hardly aware Include greater media

of the social initiatives presence while addressing
undertaken by Next. social needs, conducting
seminars, charities and
pursuing activities for the
betterment of the society.
This would encourage more
consumers to be associated
with the brand and indirectly
lend a helping hand towards
society’s growth.

6. Conclusion

The strategic evaluation of Next Plc reveals some of the shortcomings as well as the attributes
for success of the company. However, such strategic evaluation requires being performed from
time to time to identify potential threats existing in the market and accordingly formulate plans
for overcoming them. Next Plc adopts a dual strategic operating approach by focussing on the
 13

needs of both shareholders and the consumers. Due to such excellent policies and well through
operational plans, Next Plc is one of the best known stores of the U.K, in the high end retail
sector. However, in order to continue to remain as one of the well known firms, the company
must invest in greater innovation related activities and capture new market avenues.
 14

Reference List

Aaker, D. A., 2008. Strategic market management. New Jersey: John Wiley & Sons.
Ault, G. W., McDonald, J. R. and Burt, G. M., 2003. Strategic analysis framework for evaluating
distributed generation and utility strategies. IEE Proceedings-Generation, Transmission and
Distribution, 150(4), pp. 475-481.
Austin, J. E., 2002. Managing in developing countries: strategic analysis and operating
techniques. New York: Simon and Schuster.
Beattie, V. and Thomson, S. J., 2007. Lifting the lid on the use of content analysis to investigate
intellectual capital disclosures, Accounting Forum, 31(2), pp. 129-163.
Bensoussan, B. E. and Fleisher, C. S., 2013. .Analysis without paralysis: 12 tools to make better
strategic decisions. New Jersey: FT Press.
hm, ., . The SWOT Analysis. nchen N Verlag.
Burt, S., 2000. The strategic role of retail brands in British grocery retailing. European Journal
of Marketing, 34(8), pp. 875-890.
Doherty, A. M., 2000. Factors influencing international retailers' market entry mode strategy:
qualitative evidence from the UK fashion sector. Journal of Marketing Management, 16(1-3), pp.
223-245.
Doherty, N., Ellis-Chadwick, F. and Hart, C., 2003. An analysis of the factors affecting the
adoption of the Internet in the UK retail sector. Journal of Business Research, 56(11), pp. 887-
897.
Easey, M., 2009. .Fashion Marketing. Chichester: John Wiley & Sons.
Grant, M. R., 2005. Contemporary Strategy Analysis. New Jersey: Blackwell Publishing.
Grant, R. M., 2010. Contemporary strategy analysis and cases: text and cases. New Jersey: John
Wiley & Sons.
Harris, L. C., 2000. The organizational barriers to developing market orientation. European
Journal of Marketing, 34(5/6), pp. 598-624.
Johnson, G., Scholes, K. and Whittington, R., 2008. Exploring corporate strategy: Text and
cases. New Jersey: Pearson Education.
Lennox, M., 1994. Model Strategy for Change Management. Management Development Review,
7(6), pp.16–19.
Next Plc, 2014. Annual reports and accounts. [online] Available at:
<http://www.nextplc.co.uk/~/media/Files/N/Next-PLC/pdfs/reports-and-
results/2014/Next%20AR2014%20web.pdf> [Accessed 2 April 2015].
 15

Pearce, J. A. and Robinson, R. B., 2000. Strategic management: Formulation, implementation,

and control. New York: Irwin/McGraw-Hill.
Stroope, S. and Hagemann, B., 2010. Managing Change. Leadership Excellence, 27(4), p. 10.
Thompson, J. L. and Martin, F., 2005. Strategic Management: Awareness, Analysis and Change.
Connecticut: Cengage Learning.
 16

Bibliography

Bell, J., Crick, D. and Young, S., 2004. Small firm internationalization and business strategy an
exploratory study of ‘knowledge-intensive’and‘traditional’manufacturing firms in the
UK. International Small business journal, 22(1), pp. 23-56.
Bianchi, C. C. and Ostale, E., 2006. Lessons learned from unsuccessful internationalization
attempts: Examples of multinational retailers in Chile. Journal of Business Research, 59(1), pp.
140-147.
Homburg, C., Hoyer, W. D. and Fassnacht, ., . Service orientation of a retailer’s business
strategy: Dimensions, antecedents, and performance outcomes. Journal of Marketing, 66(4), pp.
86-101.
Knox, S. D. and Denison, T. J., 2000. Store loyalty: its impact on retail revenue. An empirical
study of purchasing behaviour in the UK. Journal of retailing and consumer services, 7(1), pp.
33-45.
Newman, A. and Cullen, P., 2002. Retailing: environment & operations. Connecticut: Cengage
Learning EMEA.
Zhu, K. and Kraemer, K. L., 2005. Post-adoption variations in usage and value of e-business by
organizations: cross-country evidence from the retail industry. Information Systems
Research, 16(1), pp. 61-84.