Business Fundamentals

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Business Fundamentals

  1. Analyzing key functional aspects at Poundland Chain Stores

Poundland represents a chain of variety stores specialized in selling their items at a general cost of one pound. Having been established by Stephen Smith and Dave Dodd in the year 1990, the organization now boasts of stocking a variety of products ranging from healthcare, home appliances, kitchen ware, tools, consumer electronics, automotive parts, gifts among other products. The idea behind the invention of price-point retailing strategy as that used by Poundland dates back to 1870’s when an American entrepreneur begun selling all retail merchandise at a general price fixed at a certain amount. Apparently the price-point retailing strategy was initiated into the European markets by Poundland which has grown over time to become the biggest retailer using a single discount price for all commodities. Among the chain stores owned, managed and operated by Poundland include Croydon Store which is currently the busiest single-priced discount retailer in the world. The store serves over 30000 customers each week which enables it generate approximately 9 million pounds as annual revenues. All the Poundland stores serve an estimated population of 2.75 customers every week (Lozano, 2010).

Marketing

From the introduction, it is evident that Poundland has marked great strides in advancing its marketing campaigns. First is the reality that Poundland runs multiple variety stores in Europe so as to take their goods and services closer to the customers in a bid to increase its market share. Secondly, owing to the extensive rivalry in the variety stores industry, marketing has proved to be a major functional aspect at Poundland chain stores. The “everything goes at a pound” slogan has been the biggest marketing strategy used by the organization (Henley, 2009). Unlike other conventional variety stores which differentiate their prices to attract customers, Poundland has embraced a sales strategy of setting a single price for all its commodities. By so doing the marketing department can cut down on the need to produce multiple price tags for each and every item on the shelves. Also, the use of one price has been helpful in reducing the complexities incurred while transmitting pricing information between different stores.

Apart from some manufacturers who were worried about their products and brands selling at a discounted price, the marketing strategy has been profitable. For the manufacturers who do not prefer their products being sold in a discounted environment such as that used at the Poundland chain stores, the marketing department has offered them with the alternative of marketing and selling their products as an in-house brand owned by the Poundland chain stores (Henley, 2009). The single-price retailing and marketing strategy is challenging in the aspect of initiating a price change especially after inflation because manufacturers have in the past reacted to recession by forwarding the production costs to the final consumer. This means that pricing all products at a single price possess the risk of loses during financial crisis. Additionally, price changes might result into many changes where some prices will be overpriced while others are underpriced leading to lose of potential customers to competitors.

Marketing as a functional aspect of organizational management has greatly impacted on Poundland where the management embarked on extensive research on stabilizing the prices so as to ensure that the customers gets value for their money. In order to balance value proposition and inflationary effects on pricing, the company might decide to decrease on the amounts of expensive items stocked at their variety stores while increasing the stock of items priced below £1 so as to balance sales. Therefore the company uses stock control to manage increasing demand and supply of various items which might result into unfavorable financial figures (Knopf, 2011). This marketing strategy is complex because the dynamics behind its application seem to balance themselves for instance, a weakening pound means that the cost of freight and shipping will reduce significantly and thus the cost margin can counteract the possible loss incurred as a result of a weakening pound against the US dollar.

Most of the marketing activities by the Poundland chains of retailer stores are done using social media as well as online forms of marketing. In particular is the application of soft selling marketing strategies where the marketing department has a systems administrator in charge of sustaining public relations. These administrators use social networking sites such as Facebook, twitter, Instagram among other networks to keep a personal touch with the customers and in return they win the company wins customer loyalty (Crane & Matten, 2010). On the other hand there are customer service personnel who deal with the issues raised by the customers. The current website created for the company has been integrated with automated options to facilitate online ordering. This system is majorly used to sell seasonal items and best seller commodities.

Operations (Retail operations, logistics and service operations)

Businesses have to undertake various operations in order to ensure posterity. Among the common operations undertaken by any business include manufacturing, retailing, inventory management, logistics and service operations. Poundland serves as a retailer which means that they have retailing, logistics and servicing operations. At the company, retailing has been defined as the act of sealing goods and services to consumers in small quantities. This is evidenced by the marketing efforts initiated by the use of a single retail price strategy for all commodities. This implies that the organization has to divide its goods to reach the one pound mark. This process facilitates retailing operations (Henley, 2009).

Retailing and logistics operations have been facilitated by use of automation. At Poundland, marketing goes hand in hand with retailing and logistics operations. In order to achieve efficiency, the retailing division has developed an in-house point of sale system which is controlled by automated touchscreen Intelligent Registers (IR) (Henley, 2009). The point of sale system has an inbuilt tracker that records the purchase pattern exhibited by the customers. The information is then used by the marketing department to determine which products to advertise or promote using various forms of marketing. The real time data also influences inventory management because the IR system provides another option for initiating automated ordering of commodities from the manufacturers and suppliers. The company is underway with another plan to improve its retailing operations by advancing its POS further so as to enhance the customer’s experience. Poundland stores in London have plans of investing in an automated contactless payment system so as to ensure efficiency and effectiveness during payments.

Both retailing and logistics operations have been advanced through provision of a range of products. The company currently deals in more than 3000 product lines while the major stores feature 10000 new brands of products each year. In order to attain profitable logistic operations, the stocks are divided into three categories with the first being goods directly acquired from manufacturers; the second category consists of clearance stock while the third category includes seasonal goods (Finch, 2008). Research aimed at increasing profitability by transforming the logistic operations identified that branding using such different names had the impact of increasing sales. Furthermore the company has increased its stock keeping units so as to stock a wider variety of goods which include grocery and kitchenette. Apart from increased retail and logistics efficiency, Poundland has attained a seamless services operation. This is because of its commitment towards filing in the market gaps in a bid to increase consumer satisfaction. Among the services the company is indulged in include blending of goods so as to come up with favorable goods and mix of products that can be sold cheaply to attain maximum profitability.

Another incidence of service operations has been increased efforts towards branding such as the ‘sweet heaven’ bags of sweets, branded Colgate, Cadburys among other products (Knopf, 2011). The services are provided at competitive prices. The company further offers services to other retailers who make bulk purchases on commodities they think could be much cheaper bought at one pound rather than bought from the manufacturers at a discounted rate of purchase. As a result the company has a delivery department that deals with the transportation and delivery to the retailers who make orders from various retail stores across Europe. The impact of efficient servicing operations is also experienced by online customers who make purchases through the automated company marketing website. The delivery of these services is supported by outsourcing where shipping to overseas countries is involved.

Finance

Finance represents the most pertinent part of any organization. The finance department is managed by a finance manager who oversees operations regarding crediting and debiting of accounts. The finance department is essential in initiating cost cutting strategies and advising the company on its budgets. The financial department at Poundland produces financial reports for stakeholders at the end of financial periods. This process comes after auditing operations where external evaluators are contracted to check the accuracy of the company’s books of accounts. Specifically focusing on the financing attributes of Poundland chain stores, each and every store maintains its own financial reports but at the end of the fiscal years, the proceeds are sent to the parent store for allocation. Poundland have a strong financial system marked with a favorable turnover. This trend has been evident during economic crisis because the company has continuously made profits.

In order to foster a stronger financial system, the company has had to close down underperforming stores. For instance the West-Ealing store was closed because it failed to break even because of high operation costs resulting from high rental charges (Knopf, 2011). The company has advanced its mastery of the market dynamics which are adjusted from time to time to ensure that the prices remain at one pound even after the government increases its value added tax or when the suppliers increase their prices because of increasing costs. The company operates by using its financial profits to explore and penetrate new market segments which in turn increase its profitability while diversifying operations which ensure stability even during recessions or low economic seasons.

Human resource management

            Human resource forms up the work force at Poundland chain stores. Even though automation has eliminated certain job description but there still remains the human aspect to provide services that cannot be automated. The Human resource manager is charged with the duty of ensuring that the employee’s welfare is prioritised. Poundland has more than 150 chain stores across the United Kingdom and because of this they have approximately 1500 employees. The human resource manager performs the functions of aligning the employees to the business strategies, reengineering organizational processes so as to suit the policies made by the regional managers as well as those made by the parent plant. The main purpose of human resource managers at the Poundland stores has been to recruit suitable employees, train and develop the employees to enhance their operations, rewards the employees as well as performing employee appraisals. The corporate culture of Poundland does not allow unionization of employees thus the employees lack a collective bargain to lobby for salary agreements (Goergen, 2012). The employees are rewarded using both financial and non-financial incentives which range from increased pay and gifts respectively. The company has in the past engaged in employee retention efforts to minimize its costs of attracting new employees while at the same time ensuring that they make good use of the employees after investing in their training and development.

  1. Inter-relationships between key organisational functions

Apparently at the Poundland organization, there is a lot of interdependence among key organizational functions. This interdependence also extends into shaping the relationship between Poundland and other affiliate organizations and those specialized in offering support services such as the banks and freight companies. Analysing deeper into the impact of interrelationships between organizational functions, Poundland has in the past made contracts with other companies as a way of outsourcing organizational processes in which it is not well suited. Among the areas that have been contracted has been shipping and freight which has been given to the DHL excel organization (Kingsolver, 2008). Outsourcing transportation services has been beneficial to enhancing logistics operations because it is much cheaper to seek a specialised freight and shipping company. DHL transports supplies from suppliers in foreign countries such as China as well as those from the United Kingdom especially Bellingham, Bellshill and Hatfield.

In addition to the external relationships, there are internal relations. The integration of the various operations is vital in determining profitability. Poundland has enjoyed profitability indices courtesy of its maintaining an advanced retailing channel. Retailing has enhanced relationships with customers who find it easier to make repeated sales. Additionally customers are beginning to prefer the concept of single pricing as compared to the discriminative pricing strategies used by conventional supermarkets. There seems to be a seamless flow between the organizational functions of acquiring goods facilitated by DHL to retailing to the final consumer (Crowther, 2010). This is because of the automated systems which have advanced the ordering process together with the IR system which has increased efficient and effective billing thus the financial system is also integrated. With automation planning and conducting other services are also made to be cost effective and as a result the company has enjoyed consistent growth.

  1. Current organisational issues, evaluation, impact on marketing, advertising and public relations of the business, and how successfully they have been solved

Reviews made by business analyst support that Poundland chain store has been true to its word by ensuring that they serve their customers with valuable products at one pound. The stores are however affected by overcrowding, poor designs and layout which are unattractive to some customers (Branco & Rodrigues, 2007). The excuse given for the overcrowding is that the stores provide a bargain market where customers are free to pick the goods they desire at only one pound single price.

Business ethics

Poundland has been accredited for being ethical in its business dealings. This has been implied by its adherence to charters and regulations set by governmental institutions related to sustaining of business ethics and consumers rights groups. Poundland chain stores have managed to remain ethical despite cut throat competitions and hard economic times. In the UK markets, the company has been among the large multinational corporations that have had an impact on the communities in which it has operated by observing CSR which has been attributed to the accelerated optimization of its corporate ethics code. At Poundland, the ethics code has been designed to capture many components including fair trade activities, issue of financial contacts, CSR, terms and conditions of trade, marketing and sales, advertising, consultancy and tax payment, internal and external auditing, and compensation of the management teams (Borgerson & Schroeder, 2008). With regard to legality of business practices and contravention of corporate ethics code set by the government, Poundland has managed to excel by being creative in presenting its accounting and financial records. It has avoided insider dealing, frauds concerning securities, misleading advertisements, and corrupt dealings. Basing on the macro environment, Poundland has had a good reputation with regard to scams dealing in foreign exchange, or criminal dealings in the international markets

Environment concerns

In the year 2008, Poundland failed to impress its customers and activists for green corporate branding when it transported sweets (peppermints) over a distance of 1100 kilometers from Indonesia. Environmental concerns were created by the fact that the general public was being incited against Poundland because it failed to promote the growth of Nestle Rowntree Company which produces the same peppermint sweets (Bevan, 2008). To the environmentalists, the act of transporting the mints by air could negatively impact the atmosphere. Poundland defended itself by providing evidence that it was after cheaper products which could help it break even after selling the goods at one pound. Additionally the company won the customers and retained its public relations by using water transport instead of air.

Corporate Social Responsibility

In terms of corporate social responsibility which defines the need for a company to take care of the environment in which it is situated. Poundland has been vibrant in offering people employment opportunities and has even aided in supporting charities and environmental management initiatives (Mallin, 2011). There is only one case regarding CSR where an employee on February, 2013, was forced to work at the premises for two weeks without pay as a part of the sector based work academy initiative used by the firm to train its employees. The employee by the name Cait Reilly sued Poundland in a lawsuit that the government reprimanded the company to pay her and refrain from applying the unemployment benefit payment plans citing that they were oppressive

Legislation

The need to provide low cost goods has often made Poundland to provide goods that do not meet health and safety standards thus calling for legislative action (Samuelson, 2009). In 2008, safety checks made by the quality assurance determined that Poundland had sold Halloween hats with dangerous chemicals that were unsafe for children. The company reacted by recalling the items and making replacements. Again legislative measures were taken against Poundland for overcrowding which led to the blocking of the fire exit. The company responded by accepting charges from a court of law.

 

 

References

Bevan, D 2008, Philosophy: A Grounded Theory Approach and the Emergence of Convenient and Inconvenient Ethics. Cutting Edge Issues in Business Ethics. Springer: Boston

Borgerson, J & Schroeder, E 2008, Building an Ethics of Visual Representation: Contesting Epistemic Closure in Marketing Communication in Cutting Edge Issues in Business Ethics. Springer, Boston

Branco, M & Rodrigues, L 2007, Positioning stakeholder theory within the debate on corporate social responsibility. Electronic Journal of Business Ethics and Organization Studies 12: 5–15. Retrieved 13 March 2011.

Crane, A & Matten, D 2010, Business Ethics, Oxford University Press, Australia

Crowther, D 2010, Social and Environmental Accounting, Financial Times Prentice Hall, London p. 20

Finch, J 2008, Poundland’s profits up, The Guardian, London, Retrieved 2008-10-11.

Goergen, M 2012, International Corporate Governance, Prentice Hall, United States

Henley, J 2009, How Britain fell in love with Poundland, The Guardian, London, Retrieved 2009-08-28.

Kingsolver, A 2008, Capitalism: Encyclopedia of Race and Racism. Macmillan reference, Detroit

Knopf, J 2011, Corporate Social Responsibility National Public Policies in the European Union, Publication Office of the European Union, European Commission

Lozano, J 2010, Corporate Social Responsibility and Human Rights. Kluwer Law, Holland pp. 183–204.

Mallin, C 2011, Corporate Governance Developments in the UK: Handbook on International Corporate Governance: Country Analyses (2 Ed.) Edward Elgar Publishing, United Kingdom

Samuelson, S 2009, Introduction to Business Law, Cengage Learning, Canada

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