Qvc_Case_Analysis

Introduction Since QVC was founded in 1986, it has relied on strategy and innovation to become number one in the television-retail industry. It has achieved this by gaining customer loyalty and providing customers with a unique shopping experience. QVC has a clearly defined value proposition structured around 3 customer-focused elements: delivering Quality products and at the same time providing Value to the customers in a manner that focuses on Convenience. The mission of the company is give the consumer as many choices and brands as possible while ensuring entertaining programming and great values. The strategic objectives are to continue in their position as the leader in the home shopping industry, achieve greater efficiency in operations, search for profitable products and continue to expand their customer base while positioning the company for future growth. What Challenges Does QVC Face' The major challenge facing QVC is maintaining their position as the leader in home shopping and increasing their customer base in both the present and moving forward while facing increasing competition due to the barriers of entry in the industry being essentially brought down with the rise of e-commerce. In 1986 when QVC was founded there was no Internet. Being able to have the ability to see and purchase products on the television was a very new unique buying experience. Today anyone with a computer can become a retailer and a vendor. The rise in interactive media and communication has allowed competitors to enter the e-commerce market. Most department stores have created their own websites witch like QVC allows consumers to purchase merchandise without leaving their home. Online retailers such as Amazon.com and Walmart.com with continue to tap into QVC’s market share with a similar notion of simplicity. Another challenge caused by the increased competition is to continue to find and sell profitable products. In order to maximize profits QVC has to be able to find and sell products with high profit margins. These may mean moving away from products such as books and electronics that have low profit margins and into products such as apparel and toy’s that have higher profit margins. Product differentiation will also be a growing competitive challenge. Most retailers carry the same types of products with little differentiation. While QVC is a large company they now have to compete with the likes of Amazon.com and others large retailers who also have the capacity to sell a lot of merchandise putting greater pressure on QVC’s pricing and quality. The Analyses: Porters Five Forces • The threat of entry of new competitors: High Pressure The rise of e-commerce has lead to many new competitors entering the market. The barriers of entry have been greatly reduced and the amount of capital needed for market entry has also been reduced. Competition can come from both large and small retailors. Selling products on television still has the highest barriers of entry. • Threat of substitutes: Medium Pressure The threat of substitution is a big deal in this industry. Many other large retailors carry the same products with little to no differentiation. This can make it difficult for companies to keep customers coming back and will place a great emphasis on building a goods reputation with customers. • Bargaining power of suppliers: Low pressure Since QVC holds so much of the market share, they offer a lot of business to manufactures and wholesalers. This gives QVC a lot of power because QVC threatening to switch to another supplier would create a scare tactic to suppliers. Also QVC deals with many small suppliers who have little bargaining power with them. • Bargaining power of buyers: Low pressure The individual buyer has little to no pressure on QVC. The bargaining power of buyers does allow QVC to assert greater leverage in competition with smaller retailors. • Complementors: Medium Pressure QVC’s main competitor is the Home Shopping Network that also offers buyers the chance to buy products over the television. There is also a few smaller television shopping channels, however for the most part complementors do not effect QVC’s business model. The alternatives The first option for QVC is to continue running the operations similar to how they are now without any major changes. The business is running very successfully right now, as their sales have grown to match those of Amazon’s with higher profits. They should continue to focus on what has made them so successful and excel at it. Making unnecessary changes could lead to QVC losing sight of what got them here and it risks affecting customers depending on how well the changes are implemented and received. This option would allow QVC to continue to work towards improving the efficiency in operations and providing industry leading customer service. This strategy could position the company well for future growth but it does require the company to continue to stay ahead of the curve by picking the right products and diversifying it’s products and incorporating brand names and designers. This option would eliminate the risks and expenditures associated with major strategic changes. The second option would be to focus on the top selling products in fewer select product categories and claim the majority of the market share in those product categories. Focusing on product categories that are high margin and not as competitive. QVC’s has been trying to carry something for everyone from screwdrivers to diamond rings and everything in between, now they must remind themselves, that it’s not how much merchandise they have, it’s how much merchandise they have that is selling. Drop product categories with low sales and look at marketing to younger demographics. QVC should push for better prices from suppliers of similar products and go with the ones that give the best deal while eliminating the higher cost suppliers. With all of QVC’s resources focused on a few product categories the potential to strengthen sales significantly in these areas would be very good and achievable. This approach would take constant evaluating and monitoring because with fewer product categories, each one would take on a greater significance and it would be critical to forego and replace non-performing products and product categories in a timely manner. This option also includes some risk, as sales will be lost in the product categories that are dropped and will need to be replaced by increased sales in the targeted product categories. Fewer buying options also could mean fewer customers and fewer impulse buys. The third option is to continue operations while looking to expand. This option concentrates on speeding up the expansion of Internet based sales and expansion into foreign markets. This option allows the company to continue leveraging competitive advantages and operating efficiencies while expanding the customer base and increasing sales. Improving the Internet based sales will include carrying more products on their website along with greater advertising of their website and better pricing to attract new customers that may not fit into the television shopper demographic. The Internet allows them to provide the content the customer wants when they want it. Right now when you hear QVC you think television retail shopping, when you hear Amazon you think Internet retailer. QVC should aim to be the first choice whether it’s Internet or television retail. Though QVC has been expanding internationally the last decade, they need to speed up their expansion into foreign market’s as the emerging markets will continue to provide a tremendous opportunity for growth. QVC will need to work with cable and satellite providers in foreign countries to ensure that they are being broadcast there. Before entering foreign markets, research will need to be done to ensure that the products being marketed are the right ones for the foreign markets and cultures. This option will require substantial investment though it has a great chance for return on investment. Recommendation After careful review of the alternatives, the recommendation is to continue the operations while pursuing expansion in the areas of e-commerce and expansion into foreign markets. This option has the potential to greatly strengthen the company and almost certainly guarantee future growth. Television sales have been great for QVC, but pursuing e-commerce and new technology hedges against the television becoming obsolete with technological innovations. Conclusion Even though QVC is one of the largest electronic retailors in the U.S, there still is a lot of room to grow. QVC will need to move fast to implement today’s technologically such as interactive television and the Internet to expand their business. Expanding beyond cable shopping will give their consumers more choices and more ways to access their products. Implementing a website where customers can search for and browse products they have seen on television will be very beneficial in the long run. QVC has been a tremendously successful company that has been committed to superior customer service and has achieved great operating efficiency. Building trust and consistency in consumer relationships is the key to success in the retail business and has been a key in making QVC successful. By continuing the things that made them successful and adapting to a new business climate QVC is positioned well for future growth.