Kiddcare Expansion Strategy

Kiddcare is a U.K. retail entity specializing in children furniture and equipment, owned by grocery chain Morrison Supermarket.  Morrison Supermarket was housing Kiddcare store until 2011 when they acquired ten stores previously owned by Best Buy Store. These developments have made Kiddcare one of the largest children goods’ dealers in the U.K. Prior to the new stores acquisition, the retail had been operating one store in Peterborough, which was the largest in Europe. Kiddcare online sales make up 70% of its total sales. This online success is feeding confidence to replicate in their new level of business (Kaplan 2001). This report will identify potential Kiddcare’s competitors, draw their weaknesses and strengths in relation to Kiddcare, as well as outline potential business challenges based on their expansion strategy. It will also come up with a research proposal appropriate in addressing these challenges.

Kiddcare potential competitors, strength and weaknesses

One of the most established chain stores dealing in children products are Mothercare Stores. It was established half a decade ago and currently has 1220 stores in 55 countries. In terms of the number of stores, Kiddcare comes far behind Mothercare, which has over 60 stores in the U.K. alone. This implies Mothercare has a wider presence and more client outreach than Kiddcare. Another strength Mothercare has over Kiddcare is that, with branches overseas, the risk factor is well distributed in different markets (Kimberly, 1980). This means, even though it is not doing well in the U.K., it still records growing profits abroad. The main weakness with Mothercare is that it has witnessed a steady profit decline in the U.K. and some overseas branches. For this reason, it plans to close hundreds of stores to mitigate the losing streak in many of its stores. On the other hand, Kiddcare and Morrison supermarket have been seeing impressive profits over the years.

Sainsbury’s is another multi-store chain with a presence in key cities in the U.K. where it has successfully cut a niche in babies and kids products for some years. Sainsbury’s has been able to attract and maintain a wide pool of customers through its innovative marketing strategies, such as Sainsbury’s Active Kids, where every pound spent on kids items earns a redeemable voucher. This has given it a niche for its perceived community responsibility by enabling many schools and sports clubs to redeem sports equipment through these vouchers. Kiddcare is yet to embrace such a corporate social responsibility strategy. On the other hand, one of Kiddcare strengths will be the prospect of riding on Morrison Supermarket locations and logistical strategies. The proximity of Kiddcare stores to their mother stores will give it a competitive edge in terms of customer shopping experience. Customers will get a wide range of groceries and baby products all at a one-stop destination. Customers can be assured of various and fresh grocery products since many of Morrison’s stores are located closer to the source than most stores.

There are potential challenges to Kiddcare expansion strategy. Many retails expansions overemphasize the external market factors to the detriment of internal processes, capabilities, and resources. This leads to many expansion operations to be difficult since the retail may be lacking internal capabilities to carry them out. Among the internal capabilities necessary for a successful expansion are logistical resources, adequate and skilled human capital, or provisions for hiring one and strong relationships with suppliers. For example, Kiddcare’s main channel of sales is online. With the opening of 10 new stores, the management should assess the capability of the existing online platform to support extra business volumes. Since it envisions a walk-in shopping to surpass the online sales, available workforce required to support it should be focused too.

The above challenges can be addressed well in advance through an internal assessment of available capabilities. Some of the critical assessments to look into include assessment of goals, i.e., what is the goal of expanding? These are certain objectives of Kiddcare in opening its new stores across the country. Return-on-investment and timing in respect to the overall goal of the retail should be put into focus. Assessing the goal and documenting the findings can help stir the organization through a successful path to expansion.

Assessing internal capability is another critical task in an expansion plan. Kiddcare will be able to close the gap between what they have and should have for the expansion drive. One essential feature of this exercise is to assess whether resources available match the tasks ahead. Assessments on whether the capabilities are transferable to other locations and what adjustments ought to be brought in to make them well suited for a wide scope business. By such assessment, Kiddcare will be able to realize what necessary capabilities need transfer, duplication or elimination so as to align with the goals of effective practices for the intended market.

Assessment of resources is decisive in determining the resource portfolio of Kiddcare. These include human resource, skills, and other resources. In determining the resources available for the retail, the level of flexibility and limitations should be scrutinized for a successful expansion strategy. This will be especially critical since expansion success hinges on set targets, return-on-investment, and market penetration among others. This will help avert a scenario where the expansion program overruns its budget before a break-even point is reached. Thus, Kiddcare should evaluate its human resources, information technologies, inventory management, marketing, and customer service in order to put up successful expansion groundwork. Lack of understanding of the internal capabilities can lead to an expansion plan which is flawed and can be extremely costly to overturn the consequences in the future.

A Research Proposal for Capability Assessment

To successfully conduct an internal assessment prior to executing a successful expansion strategy, a deep understanding of customer base and location selection is critical. Kiddcare can create strong internal capabilities, like customer service and control on supply chain, to enable it to respond faster to customers’ needs and external changes. In internal assessment, the status quo of the current business operations and processes is challenged to underscore existing strengths and weaknesses. This leads to the next level of assessment of internal capabilities in respect to the overall retail expansion strategy and goals.

With an assessment of goals and capabilities, the next frontier is to determine the where and how. Kiddcare has already had the ‘where’, so the how remains the strategic question to answer. Kiddcare should consider the targeted market’s potential against its internal capability to determine which capability meets the threshold of an expanded operation and which one is not. It will inform Kiddcare on how to remedy the shortfall in inadequate capabilities. One way to mitigate the shortfall in capabilities is to outsourcing, (further) acquisitions, and extra budget allocation to absorb any shocks ahead. This will result in developing a roadmap that leverages on the retail strength and bridges the capabilities gap. A thorough market-entry method is the ultimate goal Kiddcare should achieve in this exercise. Entry methods include “Solo expansion”, mergers, and acquisitions.

Goal and Capability Assessment against Prospective Market

Strategic assessment: In this assessment, Kiddcare will look, for instance, at a desired timeline and risk tolerance. The parameters used to measure the strategic assessment are Low, Moderate, and High. If the assessment for risk tolerance is high, the strategic results for risk tolerance can be the “Solo expansion” plan.

The desired timeline parameters are Slow, Moderate, and Fast. If the assessing of desired timeline capability yields slow, then a joint venture will be recommended.

Internal Capabilities: The capabilities will include marketing, supply chain, store operations, and support structure. Each of these capabilities will be evaluated as being Low, Medium, or High. After evaluation, the results will show whether Kiddcare should seek more mergers, outsourcing, or carry on solo.

Resource assessment: Available resources, capital, and expansion experience will be looked at. The results will be decided just like in the case of other internal capabilities.

These examples show briefly how decisions based on internal capabilities of the retail can be derived. The factors which will influence, for instance, risk tolerance will be more complicated than appear here. The final results of the evaluation, however, are critical in arriving at some informed decisions (Roberts 1985). For example, in closing inadequacies in supply management capabilities, Kiddcare will have to team up with a third party logistics firm, which is already established. Alternatively, they can collaborate with an established retail business until they have gained the necessary experience to do it alone. Thus, the aim of carrying out a capability assessment will help to foresee challenges and avoid them in the planning rather than execution stage. At the end, a thorough market entry method will be employed.

Conclusion

Global economy is in recession, especially in Europe. Many Superstores are closing down most of their outlets. In choosing to take over the 10 stores previously owned by Best Buy Stores, Kiddcare and, by extension, Morrison Supermarket have shown prudence in their expansion strategy. Kiddcare brand has reached a saturation level with online channels and it was just the right time to open physical stores round the U.K. Moreover, a good choice for the retail would be to execute its expansion now (recession time) than wait for economic conditions to improve. One of the most obvious benefits to this choice is that better deals are available now than in ‘good’ times in future. This is because many other stores are closing down and few others are willing to enter the business.

In addition, most of retail businesses are too weak, thus providing a level playground for new entrants and those who are expanding. Besides, due to the fact that many retail businesses are struggling, acquiring top talents from companies facing financial problems will be easier.

Retailers who expand during these difficult times, such as Kiddcare, acquire prime rental locations for their businesses. This will yield dividends, especially when the economy picks up. Expansion has also put the company far ahead of its competitors and allowed it to make use of the economy of scale (Burgelman 1986).

Expansion planning is a long process and the rule of thumb is to start ‘now’. This is true for any retailer who has an intention of expansion even in the future. It also enables a retailer to position as a trendsetter rather than following the market competition.