Matalan and Topshop as Investment Destinations | Free Essay Example

Matalan and Topshop as Investment Destinations

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Topic: Business & Economics
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Executive summary

The aim of this research project was to critically analyse Topshop and Matalan with the view of identifying the firm that is most appropriate for investment by Caifu Investments Ltd. The analysis shows that Matalan is a small firm that is easy to control. On the other hand, Topshop has proven its ability to penetrate international markets. The paper recommends that Caifu Investments Ltd should invest in Topshop because of the security it offers to the investor.

Introduction

Matalan and Topshop are privately-owned British fashion retailers. Topshop has been in operation since 1964 and currently has numerous branches within the United Kingdom and various other countries around the world. Matalan started its operations in 1985 and has numerous branches within the United Kingdom. Both firms have recorded impressive returns over the past decades because of the management approaches each of them has embraced.

However, it is important to note that they have also faced a number of issues in the market which have affected them in one way or the other. The 2008-2009 economic recessions that affected the United Kingdom and many other countries around the world slowed their growth (Appelo 2011). It specifically affected the fashion industry that these two firms operate in because consumers were forced to reduce their expenses on luxury products and focus on basic needs.

The globalisation that is increasingly making it possible for foreign firms to operate locally has also increased competition in the local market. The successful entry of Chinese Cocoon Networks into the London market and Qataris heavy investments into London’s real estate market is an example of how London is very open to foreign investment. The changing tastes and preferences of the customers are others issue that these firms have to deal with (Robbins & Coulter 2012).

They have to monitor and keenly understand the emerging trends in the fashion industry and find ways of coming with products which meet the expectation of customers in the best way possible. In this paper, the researcher will critically analyse these two fashion retailers with the view of choosing the one that is the most appropriate for investment.

Companies’ Profile

In this section, the researcher will critically analyse the profile of the two fashion retailers in order to understand the one that is the most appropriate in terms of being a target investment firm. Matalan Retail Limited was founded in 1985 by John Hargreaves, who was keen on applying a business concept that he had learnt while in the United States. He launched his business in Preston, and his initial store had four departments, Men’s, Women’s, Kids’, and Home-ware.

The firm grew very fast, and its headquarters was relocated to Knowsley. The firm currently has about 220 stores which are spread across the United Kingdom. The management of this firm has been keen on embracing emerging technologies and trends as a way of staying ahead of the competition. Besides the 220 brick-and-mortar stores that it operates, the firm has a heavy presence in the online market. Clients can view the products they want in their website, choose that one that meets their needs pay for the product online, and the product be delivered at a place of their choosing (Meifert, Ulrich, & Potter 2013). Alternatively, clients can pay for the product online and pick it at the nearest store of their choice.

In 2012/2014 financial year, the firm’s turnover was £1.1 billion. The firm has been using the social media platforms to interact with its customers, explains to them the new products that have just been introduced into the market, and any other issue of concern. Facebook has offered it a community of customers and potential customers. In this community, customers can interact with this firm, ask relevant questions, and get a better understanding of how each of the products of this firm should be consumed. YouTube and Instagram have been very useful in demonstrating to the clients about the new products in video and pictorial forms (Rothaermel 2013). This company has also been very active on Twitter and Google+.

Topshop is a privately held British multinational retailer of shoes, clothing, accessories, and make-ups. Founded in 1964 in Sheffield, this firm has experienced tremendous growth to become one of the leading fashion houses not only in the United Kingdom but also in the global market. It has over 500 shops in the global market, out of which 300 are in the United Kingdom. In the financial year of 2015, the firm registered a turnover of £2.07 billion.

According to Nehls (2010), Topshop has made a successful entry into most of the European markets. The firm also has a heavy presence in North and South America, Asia, Oceania, and parts of Africa. The decision to go global was motivated by the growing demand for fashion-ware in the global market, and the fact that emerging technologies made it possible for it to operate globally. Moreover, it realised that the market within the United Kingdom could no longer support its growth.

Like most of the apparel stores in the global society today, this firm has developed a strong online store that allows it to sell its products to the online clientele who do not have time to visit its stores. Through its website, clients can make their purchases and get the product delivered to a place of their choosing. It has also developed effective marketing strategies using both mass and social media marketing.

Mass media marketing through television and radio commercials, newspapers, and magazines are mostly used in the local market in the United Kingdom. It has also been using other traditional promotional campaign platforms such as billboards in major urban centres within the United Kingdom. Outside the home country, this firm has been relying on social media marketing as the main way of reaching out to its clients. It has been keen to communicate with active users of Facebook, YouTube, Twitter, among other social media platforms.

SWOT Analysis

Caifu Investments Ltd needs to understand which of the two firms is the most appropriate to make an investment based on a number of factors. To make this decision, Caifu needs to understand the strengths, weaknesses, opportunities, and threats that each of these two firms faces. This way, it becomes easy to identify the firm which is more likely to give it good returns out of their investment. Using a comparative SWOT analysis would be appropriate at this stage.

Strengths

The main strength of Topshop is the wide market coverage that makes it easy for it to survive even when there is a recession in one part of the world. The firm has active branches in Europe, the Americas, Asia, Oceania, and Africa. This wide market coverage means that if there are economic woes in a given regional market, the firm can still benefit from its branches in other parts of the world (Goodpasture 2010).

Numerous branches of this firm have been earning it good returns. The huge financial revenue that it generates from its operations has also made it possible for the firm to finance research and development projects without straining. The brand of this firm is one of the strongest fashion brands in the apparel industry in Europe. It means that there is a pool of loyal customers who strongly believe in products offered at this firm. It has experience in the market of over 50 years, which means that it understands the market trends and knows how it should be managed.

Matalan has demonstrated its unique ability to understand the changing tastes and preferences of its customers in the market, and to modify its products to meet these changes. The firm has also been active in social media, which has helped it interact with its clients and develop a close business relationship with them. Its relatively small size compared to Topshop has enabled Matalan to remain dynamic. The firm is often able to respond to emerging market trends within a very short time and without a struggle. Its heavy presence in the social media platform has helped it promote its brand within the local market in the United Kingdom (Boxall & Purcell 2000). It has also reduced its cost of operation by embracing online shopping to supplement its few stores.

Weaknesses

Topshop has a number of weaknesses which are worth noting. Most of the shops that this firm operates outside the United Kingdom are franchised. It means that it has no full control over these overseas branches and does not enjoy all the profits made from them. The management policies that are used in the firm’s branches in the United Kingdom have also proven ineffective in some of the global markets because of the difference in socio-political and economic forces.

It means that the firm has to allow some of the branches to come up with their own policies, some of which are seen to be in conflict with the values of this firm. For instance, the cultural environment in Saudi Arabia is so different from that in the United Kingdom. However, to operate successfully in Saudi Arabia, this firm has to embrace cultural practices in this country (Berkun 2008). It sometimes forces it to compromise on some of its principles.

Matalan’s main weakness is that it only has its operations within the United Kingdom. If this market is affected by economic or political problems, then it may suffer serious losses that may not be easy to recover from under the current operational structure. This firm has been in operations for over the last thirty years. Its inability to explore other markets, even in neighbouring countries such as France, is considered a weakness. The management has not been aggressive enough in trying to find an external market for its products. The financial strength of this firm, compared to that of Topshop, is low, a sign that it may not support some of its research and developmental projects.

Opportunities

The current markets where the two firms operate offer opportunities that they should take advantage of in order to achieve continued growth. In the United Kingdom, both firms currently enjoy stable economic growth that has been experienced since the end of the recent recession. The purchasing power of the targeted customers for the fashion product has been growing locally, which demonstrates that the two firms have a huge market locally.

Topshop enjoys the opportunity of economic growth in other countries outside the United Kingdom. For instance, the size of the middle class in Asia and Africa has been on consistent growth, an indication that its clientele base in the overseas market is growing. The two firms are currently enjoying the opportunities brought by emerging technologies. They can now sell their products in online stores instead of operating expensive brick-and-mortar stores. The improved means of communication and transport networks in both local and international markets make it easy for these firms to operate more efficiently than was the case some years ago (Balu 2015).

Barriers to international trade have increasingly become less in many countries around the world, as many nations have come to realise that foreign direct investment is very important in boosting economic growth. This is an opportunity for these two firms to explore new countries and expand their market share.

Threats

The market has a number of threats that the two firms will need to know how to deal with in order to continue operating successfully. The biggest threat that they have to face is stiff market competition. In Europe alone, there are brands in the fashion market which are stronger than both Topshop and Matalan. It means that these two firms have to find ways of managing this stiff competition and convince their customers that they offer superior value. The emerging trends in the market are a threat because it forces these firms to invest more regularly on new systems and structures to meet the changing customers’ needs and preferences. For Topshop, the growing political instability in the Middle East may affect its operations there.

Challenges Facing Both Organisations in General Management Functions

These two organisations are often faced with challenges in general management functions. Looking at each of these challenges in the management functions may help in identifying the most appropriate firm to invest into between Topshop and Matalan. Topshop has had more challenges than Matalan in planning and organising functions because of its size and the fact that some of its overseas shops are franchised.

For example, Topshop has particularly found it difficult to plan and organise its operations in the Middle East, in the same manner, it does in the European markets. The cultural differences in these two regions mean that buyer behaviour is very different in the two markets (McLoughlin & Aaker 2014). In most of the cases, it forces this firm to allow the regional managers to do the planning and organising functions in line with the local environmental forces instead of having the functions done at the central point.

Matalan has had some challenges in leading, especially after the recent expansion programs. The top management unit has faced criticism over some of its directives seen to exploit its employees. Controlling has been a bigger challenge at Topshop than it is at Matalan. For example, the firm finds it difficult to control all the operations at the headquarters, forcing it to devolve this function to regional heads. A comparative analysis of leadership and management styles and strategies shows that Matalan is more creative in managing emerging trends than Topshop, and the leadership of Matalan is keen on promoting change. For example, it has created azuz, an online shop meant to meet the need of online clients.

Type of Organisation Structure Used to Communicate within the Organisations

According to Newton (2011), successful firms have a very effective organisational structure that they use to guide internal communications. At Topshop, the management has embraced an open-door communication policy that allows employees to interact with the top managers and share their views and ideas on issues relating to the development of the firm. In this structure, the junior employees are free to reach out to the top managers with issues affecting them within the firm. For example, a junior sales assistant can book an appointment and have a discussion with the marketing director to discuss any issue of concern.

The firm believes that it is ethical to allow junior employees to interact with top managers (Robbins & Coulter 2015). Matalan, on the other hand, uses a structured communication system where a junior employee must report to the immediate supervisor when there is an issue of concern that needs to be addressed within the department. For example, a cleaner cannot directly engage the operations director without having consulted the supervisors first. Communication flows from top to bottom or bottom to top through the system of hierarchy, and this is the ethics that is maintained in its communication structure.

Ethical Concerns
Matalan Topshop
Child-labour Environmental pollution
Poor remuneration Limited participation in corporate social responsibilities
Poor working environment Over-emphasis on profitability

Conclusion

The critical analyses of the two firms have demonstrated that they have fundamental differences that make them unique in their own rights. Topshop is a large firm that has operations in Europe, the Americas, Asia, Africa, and Oceania. It is a stable firm with attractive profits. Matalan is a relatively small but successful firm that only operates in the United Kingdom. It is highly recommended that Caifu Investments Ltd should invest in Topshop because of the security that it offers, and its wide market coverage.

Reference List

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Balu, T 2015, Digital Marketing using Google Services: Make your website visible on Google Search, LSDP Limited, New Delhi.

Berkun, S 2008, Making Things Happen: Mastering Project Management, O’Reilly Media, Sebastopol.

Boxall, P & Purcell, J 2000, ‘Strategic human resource management: where have we come from and where should we be going’, International Journal of Management Reviews, vol. 2, no. 2, pp. 183-203.

Goodpasture, J 2010, Project Management the Agile Way: Making It Work in the Enterprise, Ross Publishers, Ft. Lauderdale.

McLoughlin, D & Aaker, D 2014, Strategic market management: Global perspectives, Wiley, Hoboken.

Meifert, M, Ulrich, D & Potter, L 2013, Strategic human resource development: A journey in eight stages, Springer, Dordrecht.

Nehls, V 2010, Private Label Brands at ASDA: Why Supermarket Retailers Should Understand Consumer Behaviour, GRIN Verlag GmbH, Munich.

Newton, R 2011, The management book, Financial Times Prentice Hall, Harlow.

Robbins, S & Coulter, M 2012, Management, Pearson, Harlow.

Robbins, S & Coulter, M 2015, Management, Pearson, Amsterdam.

Rothaermel, F 2013, Strategic management: Concepts, McGraw-Hill Irwin, New York.