STRATEGIC ANALYSIS

TABLE OF CONTENTS

1. INTRODUCTION

2. INTERNAL ANALYSIS

2.1 Ashridge Mission Model

2.3 Value Chain Analysis

2.4 Financial Analysis

3. EXTERNAL ANALYSIS

3.1 Porter’s Five Forces Analysis

3.2 Ansoff Matrix

3.3 PEST Analysis

3.4 SWOT Analysis

4. CORPORATE APPRAISAL

4.1 SPACE Analysis

4.2 TOWS

4.3 Strategic Choices

4.4 SAF Analysis

5. IMPLEMENTATION

5.1 Balanced Scorecard

5.2 Strategy Mapping

5.3 Monitoring

2. INTERNAL ANALYSIS

2.1 ASHRIDGE MISSION MODEL

Mission:

Holland and Barrett is a natural food supplement company. Its aim is to provide

quality products with affordable pricing.

Values:

Holland and Barrett places a huge confidence on their products because of high

research and development and quality of their product. The company is very

careful in choosing its raw material and takes special care of health and safety

standards. The company does not believe in the intermediary. When a customer

buys from H&B, the money charged according to the manufactures rate. The

company believes in testing the manufactures drug for any potency and purity.

This is done to provide the highest quality of product to the consumer.

Standards and behaviours:

The company retails health products and nutrient supplements with a wide

variety. With having more than fifty more products in the same industry, H&B

makes sure that all the products sold by them would have top quality material

used for their products.

H&B is a market leader in the UK. Being the market leader the company excels

in the Health and nutrition market. The uniqueness about the company is that

the company has never diverged from this industry since its introduction to the

UK. One cannot consider H&B low cost product producing company but it would

have one of the most competitive prices in against its competition, which

would be Julian Graves, which is a large independent specialist natural food

and ingredients retailer. Being a market leader the company has strict policies

in relation to environment and has popular initiatives such as “PLANT IT

GREEN”. The company invests into this policy every year, which makes this

company a responsible company.

Strategy:

The company is a headliner in the nutrition and special food supplements

industry. With over five hundred stores across UK and having a store on every

major high street in the country, the company plans to portray itself as a day-to-

day product for every household. The company has various tie-ups with local

vendors, which makes it a unique company as it tries to support its industry and

the local UK market in totality.

With its Plant-it-green, initiative the company has invested heavily into waste-

management. This makes the company a Green company, which is the need of

the hour in today’s day and age. The company also in the year 2001 committed

itself to no plastic bags policy. This initiative had put the whole industry into a

change, as they had to reinvent the way packaging was finished for their

products. As H&B had used 90% of the recycled material, which was, made in

their own plant, this saved them the cost of buying new packaging material and

made them a Green company, which had a minimal carbon footprint.

Using all the merits, the company has to its name and with various awards

under its belt. The company has expansion plans to other parts of Europe. The

company has the capability both ethically and financially to move on to other

EU and non-EU zones. Using current topics such as ban of genetically modified

organisms, the company would gain a lot of attention from the countries, which

has Farming as their Primary business. Having a huge chain of suppliers in UK

makes it a reliable retail company, which can guarantee good quality products

at any given point of time. The companies return policy, which is very flexible,

makes it an attractive business model, and is an attractive business strategy.

Key Points from Ashridge Mission Model:

The company has a huge diversified strategy, which makes it difficult for

themselves to follow their goals.

In spite of being the leader company in its sector, the company has difficulties

growing into the sector.

Using good resources and testing it makes this company unique.

The various Green initiatives is a marketable point and strategically it would

help the company go into zones and countries which are green conscious for

example ICELAND where the government has strict emission and recycle laws.

2.3 VALUE CHAIN ANALYSIS

From the value chain analysis it clear that H&B tries to focus a lot on its quality of

products both at the time of sourcing to selling. The company also focuses to be an

environment friendly company. The company in spite being a market leader tries to

keep its product pricing competitive to the market. The various green initiatives taken

by the company such as “plant a green” and “save a mug scheme” gives a positive

image to the consumer.

Inbound Logistics

Operations Management

Outbound logistics

Marketing/Sales

Service

Ensuring right raw materials

Quality controlled packaging.

Fuel consumption in transportation

Medium-too high range products

Home delivery

Strong belief in ethical purchasing of raw material

Various environment friendly initiatives

Shared delivery mechanisms with various shippers and other firms

Few advertising campaigns.

Assured money back service in case of faulty product.

Monitoring environmental impact of the suppliers.

Use of recycled products within the company.

Less stock of any range of products retailed by the company.

Market leader and a very strong presence in the industry

Quality assurance.

Source organic equivalent

Reducing carbon footprint.

Using internet as a mode of making sales.

In store advisors.

Keynotes from Value chain analysis:

The companies Inbound and Outbound logistics are of key importance as the

company is essentially a retailing business with additional measures such as quality

check, it becomes very important to the company to take certain measures such as

checking and monitoring the goods they choose to put on their shelves. The other

notable factor would be the company’s 90% effort to use recycled material as much

as possible. This step makes the company an ECO-FRIENDLY Company that is the

need of the hour and is a positive marketing technique. Company’s Weak attempt

on selling its products on the internet should be looked into as the company’s

reports claims that there are some products, which are not available on their

website. Companies website can also be upgraded to the Industry or competition

standard as this would help company to generate and attract more sales. The

procurement by the company is streamed line. However, looking at the company’s

value chain and the service quadrant the companies on-site help is not a major

attraction point as it was in the past.

2.4 FINANCIAL ANALYSIS (Internal & External)

Income Statement, Balance Sheet and ratio Analysis:

31.57Profit Margin 17.32 16.49 18.95 23.61 24.30

1,02,543 57,453

58,150

Shareholders Funds 92,042 93,985 76,140 68,429

Net Tangible Assets (Liab.) 91,867 93,531 76,239 69,199 1,02,907

Profit (Loss) before Taxation 47,716 41,161 46,284 61,972 64,204 81,286

Turnover 2,75,571 2,49,645 2,44,303 2,62,455 2,64,204 2,57,498

UK GAAP

Unqualified Unqualified

Unqualified Unqualified Unqualified

Uncons. Uncons. Uncons. Uncons. Uncons. Uncons.

12 months 12 months 12 months12 months 12 months 12 months

th GBP th GBP th GBP th GBP th GBP th GBP

30/09/200530/09/2008 30/09/2007

Unqualified

30/09/200630/09/2010 30/09/2009

The two main factors for growth and sustainability have been affected in the following

fashion:

The company has witnessed a sharp fall in revenues by 6.9% for the FY – 2008

as a comparison to YOY performance with FY 2007. This under further

investigation has not only been attributed to the economic downturn caused by

the recession but also due to the fall in demand of particular health supplement

products.

The profits to the company have been a concern area since FY’ 07 which have

been on a decline mode owing to the increase in operational costs which can be

attributed to operational inefficiency.

Balance Sheet:

UK GAAP

Unqualified Unqualified

Unqualified Unqualified Unqualified

Uncons. Uncons. Uncons. Uncons. Uncons. Uncons.

12 months 12 months 12 months12 months 12 months 12 months

th GBP th GBP th GBP th GBP th GBP th GBP

30/09/200530/09/2008 30/09/2007

Unqualified

30/09/200630/09/2010 30/09/2009

30,313Fixed Assets 52,378 37,386 38,374 36,761 29,336

1,80,649Current Assets 4,45,315 3,99,859 3,59,446 3,28,516 2,23,946

-1,52,435Current Liabilities -4,05,316 -3,43,170 -3,21,177 -2,95,649 -1,49,921

58,527Total Assets less Cur. Liab. 92,377 94,075 76,643 69,628 1,03,361

2,53,282 2,10,962

28,214

Total Assets 4,97,693 4,37,245 3,97,820 3,65,277

Working Capital 39,999 56,689 38,269 32,867 74,025

Examining the current assets of the company indicate a steady growth pattern which is evident from the expansion of the firm in the form of multiple stores across UK. This displays that the firm has chosen an aggressive growth strategy to capture potential market share that the firm has lost out to supermarkets and chemists.

Ratio Analysis:

GBP GBP GBP GBP GBP GBP

Current RatioLiquidity RatioShareholders Liquidity RatioSolvency Ratio (%)Asset CoverGearing Ratio (%)Return on Shareholders Funds (%)Return on Capital Employed (%)Shareholders Funds per EmployeeWorking Capital per EmployeeTotal Assets per Employee

30-09-2010 30-09-2009 30-09-2008 30-09-2007 30-09-2006

1,38,788 1,31,069 1,16,220 1,03,507 71,227 60,069

11,154 16,993 11,180 9,313 20,817 8,034

25,667 28,173 22,244 19,390 28,837 16,359

51.65 43.75 60.39 89.00 62.12 138.89

51.84 43.80 60.79 90.56 62.61 141.48

330.31 378.74 385.86 117.38 207.24

53.49

21.49 19.14 18.73 40.49 27.23

1.19

1.04 1.02 0.99 1.28 0.96

Structure Ratios

Profitability Ratios

Per Employee Ratios

1.10

0.98

274.75

18.49

379.63

n.s. 151.37 57.07 125.36

1.17 1.12 1.11 1.49

30-09-2005

The current ratio, though positive, indicates a fluctuating behaviour of the firm

that puts the liquidity at risk which could result in instability of the firm.

The significant increase in gearing ratio beginning with FY’07 demonstrates that

the firm has been on a growth strategy since FY’07.

3. EXTERNAL ANALYSIS

3.1 PORTER’S FIVE FORCES ANALYSIS

Bargaining power ofbuyers Notes

Buyer leverage – information

Medium: The company can improve its marketing by giving more information about their product.

Importance of quality in final product

High: The intense commitment to quality goods at exceptional values is one of the prime objectives of the company.

Brand identityHigh: A market leader in the industry, is known for the quality products.

Easily copied

Medium: There are companies which are producing similar products but Holland & Barrett is well known by its quality products and the other products may not be of the same standards.

2) Bargaining power of suppliers Notes

Presence of substitute

Medium: Substitutes are present in the same industry, but due to the firms history the firm is not challenged in respect to its product quality.

Impact of IT – better access to information

High: A detailed information about all the companies product would help them generate more sales.

Impact of IT – closer supplier relationships

Medium: advertise the suppliers name or any associations with any supplier.

3) Threat of substitutes NotesRelative price performance of substitutes

Low: H&B tries to keep the prices of its product as competitive to the market.

4) Entry of new competitors Notes

Brand identity / customer loyalty

High: Company has long history and strong brand identity but their customer base is getting cut because of new incomers to the market.

Capital requirements

Low: H&B is owned by corporate giants such as NBTY & Carlyle Group. So capital generation is not a big threat to the firm.

Distribution channels

High: Company has already good distribution channels but due to consolidated market the entry barriers are high for the competition.

Product knowledge

High: The company is known for the specialist products, this gives them an edge over the competition with the years of expertise.

5) Rivalry among existing competitors Notes

Industry growth

High: Due to the subtle industry growth the companies growth is matched evenly to the market.

Product differencesMedium: Some product are similar but most of the products they are producing in their

Brand strength High: Company has 80 years of experience in

the health supplement industry.

Diversity and concentration of competitors

High: With the competition in the industry from Superdrug or boots who are not the exact competition to H&B.

3.2 ANSOFF MATRIX

The Ansoff Growth Matrix can help to evaluate product and market growth strategy, in

fact from the table n. x it is clear that H&B has pursued a market penetration strategy.

This thanks to online pricing strategies and new more attractive packaging,

nevertheless it is possible a market development are still possible in this sector, by

promoting their products during Olympics and by extending the variety of sport

integrators.

Existing products New Products

Existing Markets

Online price reductions

New packaging for evening primrose and cod oils

Increase food variety offer

Extend of Whey Protein substitutes

Improve in-store qualified advice

Develop anti-age and baby products

Premium indulgence yogurt

New Markets

Natural beauty products

Promote the benefits of healthy food during Olympics

International export, especially in EU

Diversify product lines of food (i.e. gluten free)

Targeting new customer segment

Opt for a diversified conglomerate

3.3 PEST ANALYSIS

PoliticalProbability Impact Total

EU's Food Supplement Directive (FSD) (the company was burdened with this directive)

4 -5 -20

Company still had products, which were still under government investigation.

3 -4 -12

Industry growth rate (2%) (source-Mintel) 5 -2 -10

Social     

Older generations have various health conditions such as heart, joint related problems etc. such problems can be controlled with the help of VMC’s.

5 4 20

Specialised VMC’s is the need of the hour. 5 3 15

Many people are Opting a healthier lifestyle due to various health related problems.

4 3 12

There are questions in relation to the scientific reliability of some of these VMC’s.

2 3 6

Economical     

Rising taxes have always been an issue for the company, but due to the slowdown, it has become more evident in the companies function.

3 -4 -12

Market sensitivity, the nature of the market is very fragile, due to which it becomes very news driven market.

3 -5 -15

The company has a very small target market, cause of which demand of the products are highly consumer-oriented.

4 -2 -8

Technological     

The companies store can revamp their stores to match competition like Superdrug or boots

3 2 6

Company’s website can provide all the range available with them as this would help in increasing sales and would help in developing the market.

2 3 6

Company’s stores could use in-store advisors who can help the customer to choose the right product for them.

2 1 2

Key points from Pest analysis:

Holland and Barrett is a VMC specialist, the company has been one of the pioneer

companies in this market. Doing an in-depth research on this company revealed that

company has many external factors, which could be the reason for the little growth it

had seen. The industry, which was already “overburdened” by various laws and

regulations lead to the series of meetings with various European commissions in order

to find a practical solution to such problems. (http://www.whitehouseconsulting.co.uk/case_studies.html).

According to the company’s website, there are various products, which are not

approved by the FDA. This could be a worrying factor for the company as these are

the most commonly used indigents used in all H&B products.

(http://www.hollandandbarrett.com/pages/healthnotes.asp?Resource=%2Fassets%2Ffeature%2Fare-herbal-supplements-safe_13011_4%2F~default) . The

company also challenges an issue of health supplements being considered a safe

haven for its consumers as there is no confirm scientific explanation or result which

proves it to be 100% safe. (http://www.hollandandbarrett.com/pages/healthnotes.asp?Resource=%2Fassets%2Ffeature%2Fare-herbal-

supplements-safe_13011_4%2F~default).  

The company has been in a market, which has not seen too much growth in the last

few years. According to Mintel, the industry grew by 2%, which makes any industry

very unattractive, due the economic slowdown in the year 2008 the company faced a

further crisis of selling the product as its product was considered a luxury product.

Looking at the current market scenario the company faces a hoard of external factors

which are affecting the business. Some of these factors are bound to get solved,

whereas some would have no immediate solution but, would have a temporary one.

PEST helps in pointing out such problems or so called “grey-areas” which a company

would use to chart out their future plans.

3.4 SWOT ANALYSIS

Holland & Barrett has decades of brand loyalty and awareness from its customers, but

in order to keep its competitiveness it must not surrender to its Financial limitation

due to the franchising formula. H&B has many opportunities such as Olympic Games

could bring greater focus on sports and fitness and this could help the market of Whey

protein.

However the Company has to deal with new EU regulation of self medication products and the rise of 

similar but competitive shops in the food supplement sector.

SWOT AnalysisSTRENGHTS Brand awareness

Brand Loyalty Broad offer of healthy foods and sport supplements High coverage of UK territory

WEAKNESSES Holland & Barrett should turnaround declining sales Financial position limitation due to franchising formula H&B is not presented as a contemporary, lively retailer

OPPORTUNITIES Sports nutrition supplements, as Whey Protein Online shop development, which offers detailed products

info Olympics could bring greater focus on sports and fitness  Introduction of natural beauty, baby products

THREATS European Law regulation of self-medication products Adverse publicity and boycotts, due to the use

of workfare participants Low controls on franchising shops Fitness product shops that sells similar items with

competitive prices

4. CORPORATE APPRAISAL

4.1 SPACE MATRIX: A snapshot of firm’s posture

Further   to   the  analysis   from the   Internal  and  external  audit,   key   interpolative   factors   influencing   the 

performance of the firm have been subjected to be plotted on a Cartesian graph. This helps in determining 

the current posture of the firm and therefore hints the firm of the future strategy to incorporate.

Business Strengths (BS) Score Brand Image 4Market Share 5Vertical Integration 3Product Quality 4Technological Know-how 2 Average -2.4

Environmental Stability (ES) Score Inflation 3Technology 5Competition Intensity 6Price of competing Products 5Elasticity of Demand 4Average -1.4

The plotted graph above indicates that the firm is in an aggressive posture owing to

the financial leverage the firm has in addition to the leading position they have

attained for years. A strong financial support by Carlyle group and an enjoyable

market share also indicate that the firm has substantial competitive advantage in their

line of business. However, with the outcomes from the Ansoff growth matrix and the

industry dynamics, it is suggested that the firm chooses a market development

strategy in order to consolidate the market leadership position in order to avoid losing

out to the non-specialists such as supermarkets and chemists who compete indirectly

with H&B in this scattered market.

Financial Strengths (FS) ScoreFinancial Leverage 4Liquidity 3Return on Assets 1Financial Risk 2Cash Flows 2Average 2.4

Industry Attractiveness (IA) ScoreGrowth Potential 2Entry barriers 5Consolidation 5Access to Financing 4Financial Stability 3Average 3.8

Space Graph:

Aggressive

4.3 TOWS

EXTERNAL

OPPORTUNITIES(O)

1. New Sports nutrition supplements i.e. Protein Powder

2. Online shop 3. Olympics ads invite to an

healthier lifestyle

EXTERNAL THREATS

(T)

1. European Law regulation

2. Adverse publicity 3. Franchising

disadvantages4. Competitive

substitute sellers

INTERNAL STRENGHTS

(S)

1. Good brand awareness

2. Brand Loyalty3. Broad offer of

healthy foods and sport supplements

4. High coverage of UK territory

1. Improving Online shop experience by offering more detailed product info (S1,02)

2. Increasing variety of sport supplements (S3,01)

3. Creating a mktg campaign in line with Olympics games(S1,S3,S4,03)

1. Increasing online ads to promote their fair-trade (S1,S4,T1)

2. Creating specific promotion after the segmentation of potential clients (S1,S4,T4)

INTERNAL WEAKNESSES

(W)

1. Possible turnaround of declining sales

2. Financial limitation due to franchising formula

3. Old fashioned style retailer

1. Training franchisees on the newest products (W2, O1)

2. Launching online new sport supplements i.e. L-Carnitine drinks (W1,W3,O1,O2)

1. Reducing threat of competitive seller by re-innovating company style (W3,T2,T4)

2. Creating a new marketing campaign eco-friendly (W1,W3,T2)

Strategic Priorities

1. Reducing threat of competitive seller by re-innovating company style (W3,T2,T4)

2. Creating specific promotion after the segmentation of potential clients (S1,S4,T4)

3. Improving Online shop experience by offering more detailed product info (S1,02)

4. Training franchisee on the newest products (W2, O1)

4.4 STRATEGIC CHOICES

TOWS strategies have been prioritised in 4 levels which have conducted to a choice

evaluation (Ansoff):

1. Improve market development initiatives by facilitating experiential

marketing strategies and increase the awareness of health supplement

products which can stimulate increased perception towards consumer’s

behaviour and market growth both on line and in stores.

2. To enhance vertical Integration and develop premium products or

create bundle offer for segmented groups. For instance, developing

specialist products for special needs could help create a niche area which could

demand a premium pricing, thus resulting in greater profit margins.

3. To consolidate the market leadership position with an approach

towards horizontal integration by allowing the available store presence to

offer extended and complimentary health advisory services to premium

customers which translates into customer loyalty and return on space. This can

further be supported by enhancing the existing online experience by providing

the consumers with information related to all products and latest developments

in the market.

4.5 SAF Analysis

SAF: A multi - dimensional screening

The emerged strategic choices from above are subjected to SAF framework for the

purpose of assessing their Suitability, Acceptability and Feasibility of the options

before contributing to the firm’s strategy.

Suitability Matrix: Firstly, the evolved strategic choices are graded against the

objectives of the firm in order to gauge the weighted average of each choice. A

stronger average yields a better fit against the firm’s objectives. Below are the options

weighted along with the objectives of H&B.

OPTION

OBJECTIVE 1

Sustaining Market leadership

OBJECTIVE 2

Increasing customer base

OBJECTIVE 3

Lower operating costs

Weighted

TOTAL

RELEVANCE

PROBABILITY

Weighted

SCORE

RELEVANCE

PROBABILITY

Weighted

SCORE

RELEVANCE

PROBABILITY

Weighted

SCORE

1 2 0.35 0.70 3 0.35 1.05 1 0.30 0.30

2.05

2 4 1.40 4 1.40 2 0.60

3.4

3 3 1.05 5 1.75 1 0.30

3.1

Acceptability Analysis: To check the acceptability of the options by the various

stakeholders involved in the firm.

Stakeholders Option 1 Option 2 Option 3

Franchisee NO (Involves high upfront costs to revamp stores)

YES NO (Increases operational costs)

Investors YES (compliments and justifies the previous investments)

YES NO (is an extra cost and time taking to achieve ROA)

Customers YES (provides a pleasant shopping experience)

YES & NO

(While the selection of products might get easier, they come with additional costs)

YES (educates the consumers better and offers additional services. This is a key differentiator from non-specialists.)

Staff YES YES YES (opens up new areas for learning and offerings & NO (could affect in store sales)

Suppliers YES ( Promotes sales)

YES (results in Increased market)

NO (Increased awareness might result in rejection of lower quality products.)

Overall Acceptability Grade

Overall Acceptability Outcome

YES Strong YES YES (With a strong support from customers despite 3 NO’s from other stakeholders).

Feasibility of options:

Option Finance Time Resource

s

Technolo

gy

Personn

el

Feasible

1 NO YES Partial

YES

NO YES

(partial

training

required

)

Partial

YES

2 YES YES YES YES YES STRON

G YES

3 NO NO NO

(Addition

al

staffing

required)

YES NO

(Intensiv

e

training

required

)

NO

Summary:

Investigation into Suitability, Acceptability and Feasibility of the strategic choices have

led to the consensus that the option 2 of vertical integration leading to the

development of segmented products might be the appropriate course of action to

formulate a market development strategy to HnB. However, the only anticipated

obligation arising from this option could be the extra premium price that the

consumers might to bear with. This could be justified by also considering a partial

horizontal integration strategy which allows at least a few selected stores of the firm

to offer additional services such as health consulting, dieticians and an initiative to

build increased awareness of the need for health supplements to the target

consumers. Though Options 1 and 3 could not be completely ignored, it is advised to

educate the potential consumers with the benefits of products where the firm holds a

market leadership in order to consolidate the position before the firm chooses to

deploy a horizontal integration in the future.