Report of Hudson’s Bay Company
A #:
Introduction
Founded in 1670 in Canada, Hudson Bay Company (HBC) is the oldest firm in North America, operating in the retail segment across Canada, United States, Germany or Belgium (HBC official website, n.d.). With a long tradition in the fur market, the company adapted to socio-dynamic changes that marked clients’ loss of interest in fur, and adjusted to more modern requests, entering the general retailing business, currently operating in luxury fashion, after acquiring brands such as SAKS Fifth Avenue, Lord & Taylor, but also owning department store (GAMERIA Kaufhof, Galeria INNO, Sportarena), off-price stores (Designer Depot) or furniture, appliances or electronics (HBC, n.d).
Current Mission
HBC’s mission is “to best serve the needs of the majority of Canadian consumers through several highly focused formats, linked by customer bridges and enables by common and integrated support” (HBC, official website, n.d.).
Current Vision
The company is guided by two core visions, which define its internal and external focus. The internal vision of the company is “We are one HBC” (HBC, n.d., p. 1), aligning the management team and the associates under a unitary business approach. The external vision briefly comprises the company’s future endeavors into new territories: “Company of Adventures” (HBC, 2014, p. 1)
Current Strategic Objectives
Related to financial management, HBC’s strategic objective is “to maintain ample liquidity to support the operations of the Company [] and provide adequate returns to its shareholders” (HBC, 2014, p. 39).
Another objective, related to its market share growth, is to open seven new full-line Saks Fifth Avenue locations and 25 new OFF 5th stores over the coming years in Canada, suggesting market penetration plans (BHC, 2014).
SMART Analysis of Strategic Objectives
The first objective is specific because it delineates what the company intends to achieve, namely to maintain ample liquidity, significant for advancing its growth plans. It is relatively measurable, because it does not specify the value of the liquidity, but it implies its existence; the word maintenance offers the background for measuring the liquidity, only by linking them with the financial statements of the company. The objective is also achievable and realistic, as the company has the capital, plus the resources and capabilities for reaching maintaining liquidity and returning to its shareholders. Nevertheless, the objective is not time-bound, as there is no mentioning about the time span for realization of this objective.
The second objective that targets corporate growth is specific, because it mentions what exactly the company plans: opening new stores. It is measurable, because it specifies that it pursues the opening of 7 new luxury and 25 new off-price stores. It is achievable, because it possesses ample liquidity for investing in new store development. It is realistic because it takes into consideration the market demand. Finally, it is relatively time-bound, because it indicates that the new stores are planned to be opened over the coming years, without mentioning the exact time for implementing this objective.
External Analysis
External Environment Scan – PESTLE Analysis
This HBC’s case will be analyzed through the terms of political, economic, socio-cultural or demographic, technology, ecological, legal or regulatory factors.
Impact of Macro – Environmental Trends on HBC
The macro-environmental analysis presented critical external aspects that can impact the company’s future performance. From the above, the most crucial are coming from the political, socio-demographic and technologic sphere.
The most prolific political factor that affects the company is the terrorist threat. As a result of this trend, the tourism has fallen significantly in the countries with a high terrorist threat like Germany, which provides political asylum for immigrants, and Belgium, where the recent terrorist attacks have caused the closing of stores (Strauss, 2015). As the terrorist threat persists in this part of the world, the company might be required to close its operations in these markets, where it acquired the department store chain Galeria Kaufhof and the Belgian subsidiary from Metro Group in June 2015 (HBC, 2015).
The most important socio-demographic trend that influences HBC’s business is the changing tastes of consumers. This is a major threat for the company, because it should strive to remain relevant for clients. In the global market in which it activates, clients have the opportunity to compare brands and offers. While specific brands may influence their tastes in fashion, due to the innovative designs or trendy styles, others can remain obsolete, hence losing ground in terms of attractiveness.
Not only must the company follow trends, but it must act as a trendsetter, challenging the mainstream brands like H&M or Zara, known for their rapid refreshment of collection, which makes them popular among clients (Petro, 2012). This trend can influence HBC by pushing it to create hot styles, and to produce less pieces of clothing, but refresh more the collections, taking into consideration the changing nature of consumers’ tastes, as they want new designs for their wardrobe.
The technology cannot be ignored in the 21st century, as it brings considerable opportunities, but also threats. The most prevailing technological trend is the seizing of the online shopping. This trend generates enhanced business opportunities for HBC, because it allows the company to maximize its market share by penetrating in the existent market and exploring other, new markets, where it does not have a physical presence. The online shopping would be a solution for avoiding the effects of the terrorism in markets where this trend is a real threat that could impact physical store, but not so much the online activity. However, this opportunity also comes with the threat of piracy and cybercrime, which could damage the company’s reputation (Gottschalk, 2010).
Key Industry Pressures (KIP)
Fashion industry, wherein HBC activates, is highly dynamic, as different forces interact and sometimes even reject each other, creating pressures for the players in this market. For instance, the challenge for a sustainable performance, which implies reducing prime resources like water, energy, cotton or fur is disproportionately related with consumers’ changing tastes, which means that they require more collections, hence more resources consumption. A third key industry pressure is the currency exchange rate. The company purchases imported merchandise from its Asian suppliers, using U.S. dollars, but the fluctuations of the U.S. dollar impacts the Canadian dollar and implicitly the cost of sales, which can result in losing money (HBC, 2014).
Competitive Industry Analysis – Porter’s Five Forces
There are five forces that indicate the attractiveness of industries and the level of competitiveness, which are: the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, the threat of new entrants and the industry rivalry (Porter, 1980). In the fashion industry, wherein HBC activates, these forces are impacted by the above mentioned KIPs.
Bargaining power of suppliers
HBC collaborates with suppliers from developing countries in Asia, which means that it pays its manufacturers lower prices than it would have paid them in developed markets. While the company employs more manufacturers, which reduces the bargaining power of its suppliers, by switching orders and pressuring them to demand lower prices, the company is nevertheless dependent on this region. Therefore, the bargaining power of suppliers is moderate.
This force is influenced by the currency exchange rate KIP, which affects the import-export trade. As explained earlier, the imported products are purchased with U.S. dollars, whose fluctuations impact the Canadian dollar, causing loses to HBC. The environmental sustainability also affects this force, as the manufacturers are required to decrease the level of water used and to selectively dispose the waste and to reduce it overall (Centuries of Sustainability, n.d.). The changing consumer trends also impact the supplier bargaining power, by pressuring the manufacturers to provide more collections across the year (Petro, 2012).
Bargaining Power of Consumer
Consumers have the potential to influence the fashion trends, but also the prices of their products, because there are many alternative brands from which they can choose, pressuring them to innovate and reduce prices. This means that the consumers’ bargaining power is very high.
The bargaining power of consumer is mostly influenced by the changing tastes of consumers KIP, which allows them to pressure the fashion brands to continue to innovate, refreshing its collections more rapidly. The environmental sustainability sometimes determines the consumers to bargain against the sweatshops in Asia and to militate for more sustainable actions in fashion industry (Moore, 2011).
The Threat of Substitute Products
There are fake products imitating original brands, which threat HBC’s business, mostly for the high end category of products. This force is moderate.
This force is not influenced by neither of the identified KIPs, because it activates outside the macro environment of the original fashion products.
The Threat of New Entrants
For HBC, globalization implies the major threat of new fashion brands opening their business in the markets wherein it operates, hence threatening its market share. The entry barriers are moderate, as the new entrants need to comply with consumer and employees’ safety, environmental and other legal and political regulations. This force is moderately high.
The changing consumer trends impacts this force. Consumers are always curious to try new brands, hence new entrants might determine them to demand HBC to adapt to the collections of the new entrant companies.
Existent Rivalry
The existent rivalry is a complex force. Because HBC activates on different market segments, varying from Designer Depot in the low market segment to Saks Avenue activating in the haute couture segment, the competition is diverse. Burberry, Channel, Prada, Tiffany, etc., the mainstream market is dominated by brands such as H&M or Zara (Khan “Fashion Brands of the World”; Petro, 2012). Therefore, the existent rivalry is very intense and the threat of this force is very high.
The other brands, against which HBC competes, also face the same challenges from the identified KIPs. They are also impacted by the currency exchange rate, by the consumer changing tastes and by the environmental sustainability compliance. Therefore, the existent brands challenge each other to innovate and to align their environmental sustainability plans with the changing tastes.
Conclusion
Based on the conducted analysis, the company faces significant challenges, but also opportunities coming from the industry and the external environment. The macro – environment poses several key industry pressures, namely the challenge to comply with the environmental sustainability policies and practices, consumer changing tastes or the currency exchange rate. These KIPs impact the competitiveness in the industry in which Hbc activates, further impacting the company’s mission, vision and strategic objectives, demanding various market adaptation in order to keep on serving the majority of Canada’s clients.
References
Gottschalk, P. (2010) Policing cyber crime. Ventus Publishing ApS.
HBC. (2015). Hudson’s Bay Company to acquire Galeria Holding, Parent of Kaufhof, #1 depa- rtment store in Germany. Retrieved from http://investor.HBC.com/releasedetail.cfm?releaseid=917844
HBC. (2014). Hudson’s Bay Company 2014 Annual Report. Toronto: HBC.
HBC. (n.d.). About us. Retrieved from http://www3.HBC.com/HBC/about-us/
HBC. (n.d.) Hbc_Strategy. Retrieved from https://www2.hbc.com/hbc/about/strategy/Hbc_Strategy.pdf.
Hudson’s Bay Co. (n.d.). Centuries of sustainability. Retrieved from https://www2.HBC.com/HBC/HBC_csr/BuildingStrategiesSustainability-HBCSupplement.pdf
Khan, E. (n.d.). Fashion brands of the world – top 10. Retrieved from http://www.wonderslist.com/top-10-fashion-brands-of-the-world/
Moore, B. (2011). Has campaigning for an ethical fashion industry had any impact? Retrieved f-rom http://www.theguardian.com/environment/green-living-blog/2011/nov/01/campaigning-ethical-fashion-industry
Petro, G. (2012). The future of fashion retailing - The H&M approach. Retrieved from http://www.forbes.com/sites/gregpetro/2012/11/05/the-future-of-fashion-retailing-the-hm-approach-part-3-of-3/#f96dbbc6dbfb
Porter, M.E. (1980). Competitive strategy: techniques for analyzing industries and competitors. New York: The Free Press.
Strauss, M. (2015). HBC cuts outlook for 2015 and 2016 ahead of Saks Canadian launch. Retrie-ved from http://www.theglobeandmail.com/report-on-business/HBC-cuts-outlook-as-struggles-continue-at-saks-terror-threat-impacts-european-business/article27714387/
