Key Elements of the Strategic Management Plan

PESTEL Analysis

PESTEL analysis allows one to identify external factors that affect the company’s activities. In particular, this tool includes consideration of political, economic, social, technological, environmental, and legal factors. This analysis allows one to consider the impact of the macro-environment on the organization and adjust the strategy to minimize the risks presented in it (Matovic, 2020). It is important that the PESTEL analysis allows managers to identify potential threats and opportunities that can be considered later as part of the SWOT analysis (Yuksel and Dinçer, 2019). Yuksel and Dinçer (2019) note that this tool can be most effective when combined with other market analysis models. The results of the PESTEL analysis for Chalhoub Group are presented in the following slides.

Political and Economic Factors

Political factors include:

1. Government policies regarding domestic and international trade can have a significant impact on a company’s operations.
2. Interaction with local governments is key, as all regulations are their responsibility.
3. Relationships with nonprofits and civic organizations are especially important to maintaining a brand’s reputation.

Economic factors include:

1. The company’s cooperation with global brands and international companies implies the need to take into account foreign currency exchange.
2. Price fluctuations in the local and international market can lead to inflation and currency depreciation.
3. It is necessary to take into account the structure of the financial market and the availability of capital.

Social and Technological Factors

Social factors include:

1. Demographic changes in population composition can have a significant impact on a company.
2. It is also necessary to take into account the attitude towards health and safety to regulate the activities of the company.
3. Aspects of culture can change society’s perception of luxury products.
4. The gender composition of the workforce is an important aspect nowadays, which is significant when interacting with international brands.

Technological factors include:

1. The development of e-commerce requires the company to pay more attention to online marketing.
2. Advances in technology also allow the company’s supply chain partners to acquire more power, which requires more transparent operations.
3. The spread of online payments and the legal features associated with them is especially important when working with international brands.

Environmental and Legal Factors

Environmental factors include:

1. The level of carbon emissions is forcing many companies to reconsider their activities and wish them to be more sustainable.
2. Climate change is also impacting the transformation of supply chains increasing risks.
3. Waste management is currently a significant concern for many global companies.
4. Environmental regulations and policies at both national and international levels must be taken into account.

Legal factors include:

1. Business legislation, both national and international, shapes the activities of the company.
2. The legal framework for dealing with international brands is also critical.
3. Legislation regarding employment, as well as health and safety, is important for maintaining the company’s image.

SWOT Analysis

Strengths within the SWOT analysis determine what unique properties an organization has. These aspects describe what characteristics will distinguish the company from competitors. Strengths include:

1. Strong brand identity and consumer base;
2. Cooperation with many international brands;
3. Focus on customer experience;
4. Well-developed supply chain;
5. A variety of goods and services including clothing, cosmetics, and other products;
6. Numerous physical and online stores in the Middle East.

Weaknesses, on the other hand, describe characteristics that give a company a smaller advantage over its competitors. They include:

1. The need to adapt goods and services to the culture of the Middle East;
2. Operation within the limited region;
3. Focus exclusively on luxury goods and brands;
4. Limited brand presence in the international market.

Opportunities, in turn, describe the characteristics of the external environment that offer the profitable company opportunities for expansion. In particular, these indicators are the driving force for the development of the company within the industry and market. Opportunities include:

1. Expansion into emerging markets such as Africa;
2. Cooperation with new brands;
3. Development towards the market of more budget clothing and cosmetics;
4. Diversification of goods and services.

Threats describe environmental conditions that could potentially harm the company’s operations. Such situations should be considered as risks and mitigated within the framework of the strategy. Threats include:

1. The growing market of mass-market retailers;
2. Society’s interest in conscious consumption;
3. Active development of international players in the Middle East market.

Strategic Positioning

The strategic positioning of an organization is determined primarily by the industry in which it operates. In particular, the characteristics of the market sectors determine how promising opportunities are presented to the company (Nadube and Didia, 2018). The company achieves strategic and competitive positioning through effective defense against the negative forces present in the industry and the use of positive ones (Ferrer Lorenzo et al., 2018). The main strategies are cost leadership and diversification, which determine the focus of the organization (Ferrer Lorenzo et al., 2018). Chalhoub Group uses a differentiation strategy that involves competition in directions other than price. In particular, the organization is committed to providing a unique customer experience.

Resources and Capabilities

Whereas industry characteristics refer to external factors, resources and capabilities that describe a company’s internal features that influence its strategy. Resources are what a company owns and controls to produce goods or provide services (Hussain and Waheed, 2019). Capabilities refer to the organization’s ability to use available resources to ensure the operation and development of the company (Hussain and Waheed, 2019). Strategic resources and capabilities become when they are used to acquire or maintain a competitive advantage (Ferrer Lorenzo et al., 2018). Chalhoub Group has strategic resources in the form of its partners of large international brands. The company’s capabilities lie in strong supply chains as well as strong brand awareness.

Porter’s Five Forces

Porter’s five forces describe the characteristics of the industry in which the organization operates. This model includes five main features: the threat of new entrants, the threat of substitutes, the bargaining power of customers, the bargaining power of suppliers, and competitive rivalry (Isabelle et al., 2020; Goyal, 2021). Within the luxury goods and services industry, in particular cosmetics and clothing, barriers to entry (as well as exit) are high. In particular, this is due to the need for investment, as well as uneven access to the distribution channel of goods. Chalhoub Group enjoys unique connections with big brands that require both financial and reputational investment. This aspect characterizes the industry as favorable for the organization.

Another important characteristic of the industry is the threat of substitutes when a product that is similar but more attractive to customers appears on the market. In the industry in question, this risk is extremely low, as the Chalhoub Group offers products from major global brands. This aspect makes the company’s products indispensable, and the possibility of establishing cooperation between international companies and competitors is limited. The bargaining power of customers in the industry is also low, as they cannot put pressure on the Chalhoub Group. International brands set prices and dictate trends, which is the subject of bargaining. Thus, the company has enough space to establish its own rules in the market.

The bargaining power of suppliers refers to how much pressure suppliers and partners can exert on a company. In this case, the big luxury brands have the ability to put pressure on the Chalhoub Group, allowing them to control prices and products. This aspect is a potential threat to the functioning of companies within the industry. Competitive rivalry in the industry within the Middle East market is quite low. Chalhoub Group is the largest distributor of luxury goods from world brands not only in the UAE but also in other countries. However, the company’s competitors may be direct representative offices of brands in the region.

Analysis

Analysis of the macro-environment made it possible to identify key areas of strategic development for the company. First and foremost, Chalhoub Group has a competitive edge in the form of strong brand awareness and a focus on customer experience. The industry offers favorable conditions for maintaining an advantage in the luxury segment. However, at the moment, Chalhoub Group should consider diversifying its activities towards mass-market brands. This aspect is supported by a shift in the public interest, consumption patterns, as well as a greater focus on environmental issues. Additionally, this approach will allow the company to capture a large market share, as well as be able to enter emerging markets. It is also important that such a step will reduce the possible influence of suppliers on the company’s activities, strengthening its position.

Reference List

Ferrer Lorenzo, J. R., Maza Rubio, M. T. and Garcés, S. A. (2018) ‘The competitive advantage in business, capabilities and strategy. What general performance factors are found in the Spanish wine industry?’, Wine Economics and Policy, 7(2), pp. 94-108.

Goyal, A. (2021) A critical analysis of Porter’s 5 Forces model of competitive advantage. Web.

Hussain, R. T. and Waheed, A. (2019) ‘Strategic resources and firm performance: an application of the resource based view’, Lahore Journal of Business, 7(2), pp. 59-94.

Isabelle, D., Horak, K., McKinnon, S. and Palumbo, C. (2020) ‘Is Porter’s Five Forces framework still relevant? A study of the capital/labour intensitycontinuum via mining and IT industries’, Technology Innovation Management Review, 10(6), pp. 28-41.

Matovic, I. M. (2020) PESTEL analysis of external environment as a success factor of startup business. Web.

Nadube, P. M. and Didia, J. U. D. (2018) ‘Market targeting and strategic positioning’, International Journal of Marketing Research and Management, 8(1), pp. 32-45.

Yuksel. S. and Hasan, D. (2019) Making techniques in financial marketing. IGI Global.