The strategies used by the Dixons Group to become the dominant player in the electrical retailing market
The Dixons Group’s 2003/2004 Annual Report demonstrates the growth cycles the organisation has gone through since its inception as a photographic studio (in 1937). The management strategy has consistently been one of expansion and acquisition. Though the company went public in the 1960s, Dixon’s did not change its product line until the 1970s when it first entered electronics retailing. The electronics retailing business prospered so, within a short time, the Dixon’s Group bought out Currys, a major competitor, and a move that added to the organisation’s product line and placed it in a strong competitive position. The Dixons Group also developed a high profile in the industry.
In the early 1990s, the company went through a restructuring – as did many other UK companies — ridding itself of unprofitable entities. John Hunter, economist, explains the external changes in the macroeconomic environment that increased UK company failures in the recession of the late 1980s and early 1990s. “Empirical determinants suggest that during the 1990s recession, shifts in the real exchange rate and rises in the nominal interest rate…[led] to a loss in competitiveness and to the effects of high gearing” (Hunter, 2003, p. 1). Hunter’s evaluation suggests that the Dixon Group’s restructuring and retuning to its “core markets” was a management effort to reduce risk in an unsettled marketplace.
The restructuring allowed Dixon to emerge from the general recession – and management to take advantage of new acquisition opportunities. This is when it acquired PC World and The Link. These strategic acquisitions not only added to the growing Dixons “empire” but to its product line.
The company’s market mix (location, distribution, competitive pricing, quality products) reflects its sensitivity to consumer demands. It recently began to restructure store formats and placing new stores in locations “where consumers are travelling to the out-of-town stores and retail parks” (Dixons Group, 3) such as shopping centres, high street stores, e-commerce, and malls. The new stores formats conformed to growing consumer demands in both shopping environment and in goods offered. The PC City superstores add another variable in the marketing mix. The Annual Report 2003/2004 pictures store layout, product display, and customers, which provide micro models of the environment, the goods sold, and – always – store identity.
The data supports Dixon’s claim to holding the position of Europe’s leading electronic retailer. It also indicates the company’s strategy of going to consumers, rather than have them search for Dixons. At present, Dixons is negotiating with the European Union countries – a strategy that could generate even greater revenues from EU nations. The Dixon Group’s success has not been a matter of luck, but of strategy: “Before going ahead with a new development Dixon’s cross-references the different types of research (both internal and external) to make sure that all of the results agree.” The evidence of its use of market research is demonstrated by the Dixon Group’s attention to Porter’s five forces.
The company can offer competitive prices because of its buying power. It has the ability to negotiate with suppliers, pass the benefits on to consumers, while still making a profit. Suppliers want the advantage of the number of Dixons Group’s retail outlets, so are willing to negotiate price. Consumers want the advantage of substitutes. The electronics technology is rapidly changing, so retailers are required to keep up with changing consumer demands. Again, the size of the Dixons Group allows for negotiations with producers. Consumers benefit from the broad product selection (e.g., the PC World web site offers over 40,000 items).
Though the case mentions a growing number of new entrants and competitors, Dixons has been able to expand its markets with its own new entrants in European markets. The company now has retail outlets in the Czech Republic Denmark, Finland, France, Hungary, Iceland, Ireland, Italy, Norway, Spain, Sweden, and the UK. (Annual Report, 2003-2004, p. 03) This is significant to the report because it demonstrates how Dixons Group dominance has spread further into Europe. However, the annual report does not include the number of stores in some of these countries, but the Dixons Group’s Chairman’s letter suggests that some of these entities are business-to-business suppliers (e.g., MicroWarehouse).
However the theory of production and costs indicates that Dixons Group may be forced to limit its acquisition programme as more and more competitors enter the market. This depends on its debt/equity ratio and the external economic environment. Though the case discusses the possible effort to acquire the Darty chain and Powerhouse, it also explains that the Dixons Group market share is threatened by the increased number of competitors. The suggestion is that Dixon’s use of economies of scale, its management, and its ability to survive (e.g., recession of the 1990s) suggests that it will continue to compete in the marketplace as long as it continues to set trends in retail electronic sales. (Note: This projection is, in part, based on the Annual Report 2003-2004.)
Question #2: Despite putting a lot of resources on the website, e-commerce is still not as profitable as it could be. What do you think the Dixons Group can do to entice more customers to shop online? Your answer should include reference to the marketing communications mix.
The lack of attention to Dixon’s web sites demonstrates a weakness in the company’sMarketing Department. The organisation’s major business is retailing electronic communications products, but marketing is overlooking one of the most common form of marketing tools in the 21st century. As an example, www.pcwb.com site (PC World Business) demonstrates little creativity in design, though it clearly defines the company’s business, offering help to new users, latest news, advertisements of products, links to more products and several “search” options. There is also a short list of product departments in the upper left-hand corner of the site. The list reads: “computers & notebooks, furniture & office environment, networking & communications, office supplies, peripherals, printers & office equipment, and software & training’ (pcwb.com). Given the small sign under the “Welcome to PC World Business” area that states PC World sells “over 40,000 products,” the list appears to be somewhat limited.
The picture advertisements of products show a market mix of PCs and laptops, tax computing software, computer peripherals, and a shopping cart. Even though there is sizeable blank space on the home page, there are no offerings of products that would appeal to a broader consumer segment. There are no computer games (for children and adults), no cameras that can download to computers, no cell phones-all business peripherals that would expand beyond the computer-only user. The unused space could easily accommodate some of these items without crowding the web site. This is a serious oversight in the marketing mix for several reasons; the PC World stores have brand identity, but the products pictured are directed to a single market segment. There is no mention of DVDs, DVD players, CDs, CD players, or other similar products that could be used privately or in business and are popular with the public.
Another oversight; the site does not give store locations and telephone numbers. Some consumers are still hesitant to order from the Internet because they fear hackers may access their confidential data (e.g., credit card information). However, these same consumers may collect data from the web site, then go to the nearest outlet to make purchases.
When a retail outlet makes a sale, it has special packaging for many of its products. Why not have a web site stamped on the outside of the package? This simple, inexpensive form of marketing could produce sales. Another question about the PC World ad is how the web site is monitored. Most sites have a way of recording the number of hits. This number should be monitored as a way of determining where consumer interest is highest. Monitoring not only indicates the number of hits, but can pinpoint exactly what the consumer is interested in (e.g., 25 hits on cameras in a single day, etc.). The totals of these hits tells Marketing where its weaknesses and strengths exist in Internet advertising.
Another recommendation is that web sites be listed on the store receipts. Such information would not interfere with the store’s calculations of the sale, but could provide yet another way of advertising the web site. Then there are the weekly or monthly e-mail newsletters. TV ads, newsprint formats and other media should carry the local or Dixons Group home web site in its advertising.
On a personal note, when I lived in the U.S., I ordered some supplies online from Best Buy (a chain that is similar to Dixon’s). Thereafter, I received e-mails regularly listing sales, or special offers to Best Buy’s customers (e.g., coupons that could be printed out and taken to the closest store for cash rebate or discount on a purchase). If I placed an order of more than US$50, I would get free home delivery of my order.