MODULE(FY028) INQUIRY BASED LEARNING:
HOW BUSINESS FAILS: MOTHERCARE
STUDENT NAME: LOREDANA
STUDENT ID:
LECTURER’S NAME:
DUE DATE:7 MAI
- INTRODUCTION:
The academic paper has as a topic :” How business fails” and it will be consider a British company that decline in profit . The company it is Mothercare that it is a British retailer that it is facing difficult periods, being at one step to close all of its 79 British stores and also online websites with the potential of losing more than 2,8000 jobs. (Kollewe 2016)Therefore, the academic paper it is divided into different sections that will analyse the company history background, it will be identified the areas of failure of the Mothercare, the current trends in the market that this business it is operating, it will be perform both the SWOT and Pestle analysis of the company and in the lasts part will be consider different recommendation of what the specific retailer can do , followed by a clear and simple conclusion.
BACKGROUND:
Mothercare it is a British company that opened its stores in the 1961 in Surrey, UK. At the beginning the company has concentrated just on pushchair, furniture and accessories for nursery and maternity clothes. It is consider a “ truly global company that caters for many different cultures and also marketing” , selling products for kids, babies and also parents. The company it is now providing a large range of maternity and kid’s clothing, home furnishing, bathing, travel equipment et.al through Europe, Latin America , Asia and also Middle East.(Kollewe 2016)
The company started to be a public one in 1972 and in the end of 1982, the company merged with the Habitat chain of retailers as a way to form the Habitat Mothercare PLC. By the end of 1986, the company started to expand in a faster way internationally through delivering franchise agreements with different partners in specific countries. In 2000, the company became the sole brand and the name of it was changed in Mothercare PLC.(Mothercare 2016).From March 2018, the company faced a difficult period where it was required to enter in a restructuring programme, but with no success. Thus, in November 2019 , the company was placed in administration with all its retail stores in the UK both online and also physical.
The company failed because British stores “not financially viable” in discount driver market. The chief of the company stated that the company has entered administration due to its store estate was not financially viable and capable in a market that it is driven constantly by discounting.
(Mothercare 2016)
Why business fails:
The UK, Mothercare company failed because its store are not financially viable in the market based on discount-driver. The chef of the company which is Mark Newton has suggested that the company had gone into bankruptcy because its store was no longer viable in terms of the financial in an industry driven by discounting.(Mothercare 2016)
Many analysts have suggested that the company failed because it was not moving with the trends, and times, as rivals soared, and clients appealed to e-commerce (online stores) or even supermarkets to buy maternity and baby accessories. According, ti the Richard Lim ,chief executive at Retail Economics, suggested that the company have been beaten not being able to move with customer preferences” on price, convenience and the overall customer experience’. ‘
The company has failed also because they didn’t change and not taking into consideration how the UK retailers are changing” have continued doing well as the UK’s population continues to grow”.(Dobson and Walmsay 2021)
However, the company has not spent enough money on digial : which it is actually a key growth area as parents not always are able to leave their home, this it is why the company was not able to compete against Amazon and also other retailer:
“Once again it is the prominence of internet competitors that has played a key role in taking down this high street staple, highlighting the difficulty in doing business on a brick-and-mortar model.”
Additionally, the company failed to turn its fortunes around despire implementing a business voluntary arrangement and required to close around 55 stores.“This collapse goes to show that CVAs cannot fix everything if fundamental problems faced by a business aren’t addressed properly.” Therefore, the company has becomean outdated brand that has been destroyed also by intense rivals.
(Kollewe 2016)
Trends:
But , the inability of Mothercare to respond to the trends of that moment of the year of 2019 has caught up the company and this it is why in 2019 the retailer announces that the company has fall into administration. More than 2,5000 jobs from UK have been out because of the Mothercare. After 58 years in the UK High Street, the company has gone into disappear because of its lack on interest of responding firstly to the e-commence. A lot of the company rivals have invested into a website, being able to sell online, which the company has remained outside.
(Mothercare 2016)
This inability of adapting to e-commerce trend it is one of the reasons why the company fall into administration. Additionally, while other companies has adopted to the trend of social media, started to place different marketing on its unique selling product, Mothercare was lack of both,as the company has no unique selling product and didn’t consider to use social media trend, as a marketing strategy to attract new clients.
Meanwhile, fast fashion trend has appered which is used to new trends in terms of weekly fashion that are at lower prices and not so good quality. However, clients have showed a high interest over this trend, starting to buy weekly fashion items.
The company failed to respond to this trend too while Zara and H&M, fast fashion retailers have become to provide:” on-trend children’s clothing at low prices.”
One of the issues as has been suggested has been also pointed by , Mr Lim, is “that Mothercare failed to differentiate itself from rivals as a specialist retailer.” The company didn’t offered a medium where parents were supported.
“Parents didn’t have a strong enough reason to go and visit Mothercare”.
(Mothercare 2021)
Pestle Analysis Mothercare:
Political:
In 2019, political stability was somewhat stable in the UK, with just little fluctuations in policies because of Brexit, however there are so many political factors that have been impacted the company. The company has also take advantage of the trade treaties that have been developed and sign and also trade blocks that have facilitate the company to lower its resource costs, lowering cost of doing companies, as well as growing the supply of talented individuals.
(Jordan 2019).
Economic: The inflation during that period has been favourable for the company that has leads to an increase in available income which increase power of buying. The GDP was been a little fluctuate due to Brexit which has impacted a little bit power of purchase of clients. Also, the other factors of the economic such as employment rate was good in that year which impacted positively the company .The UK’s employment rateincrease to 4.34 percent in 2010-2020. Howeer, the impacts of the global financial crisis was still seen in terms of high inflation and high interest rates, when the company loans has been translet into lower puchases and consumption patters by the clients.
(Jordan 2019)
Social factors:
As stated above, the clients patterns of buying has been impacted by the trends in the market such as social media, e-commerce, fast fashion that in the case of the Mothercare was impacted negatively the company sales as the company has not addresses and responded to this changes.
Additionally, clients have started to move toward sustainable companies and Mothercare was not making its client aware of any sustainable innitiaitves.
(Fernando 2021)
.
Technological factors:
The growth of innovation and technology advancement, has impacted the business environment, offering a big advantage to companies that have adopted it. However, Mothercare was not consider to start to sell its products online, and this it is why the company has loss a lot of clients.
( Mothercare 2021)
Environmental factors:
The growth of the medium consciousness and also Climate Change agreementhas impacted the company that has not consider the climate change regulations and sustainable trend not even adopting and implement any waste management practices .The international presence of the company demands the business to consider these differences to avoid undesired circumstances faster.
.”(Global Data Retail 2018)
Legal:
The company needs to consider to reach the minim wage saleries workers safety, consumer protections, and anti-discrmination laws. Also the company operates internationally,demanding to consider each country regulations too.
( Fernando2011)
SWOT ANALYSIS MOTHERCARE:
Strengths of the company are related to :
-Superb Performance in entering new markets, creating its expertise and this expansion has helped the company to create “build new revenue stream and diversify the economic cycle risk in the markets it operates in. “
-provide high quality items and has a large attractiveness for upper middle class families.
-highly skilled workforce, investing in its workers
-strong dealer community: has create a strong culture among both distributor and dealers where they can promote the business’ items
– Automation of activities as enable the company to gain a competitive advantage
– reliable suppliers and strong brand portfolio.
-more than 1,000 exclusivist stores
-an international presence in more than 400 counties
-good items quality and strong workers force of over 5500 individuals
(Mothercare plc 2016)
Weaknesses:
-difficulties to move to other product segments, faced a lot of challenges.
-gaps in the item range sold by the business
-lack of required new technology, as the company it is operating in a lot of countries
-many rivals in the segment, which leads to market share to be limited.
-organization structure it is not so compatible with the actual business model limiting its ability to enter into new product segment.
– No clear unique selling point and positioning
( Fernando 2011)
Opportunities:
-Non traditional promotions to growth word of mouth
-Growth rural penetration
-company can succeed in similar items firms
-invest in new technologies
-use of social media to growth the company sales and to use free marketing
( Kollewe 2016)
Threats Mothercare Plc Facing – External Strategic Factors :
The company it is exposed to currency fluctations as it is operating in different countries, in terms also the volatile political medium in different countries.
-new technologies developed and how the competitors are easily getting a competitive advantage , threat to the company in the long run
-shortage of skilled workers in different global markets
-changing customer buying , to move toward e-commerce could be a threat to the existing physical infrastructure driven supply chain model.
regulations under Paris agreement a relevant threats to the company could be a threat to certain existing product categories .
( Fernando 2011)
RECOMMENDATION:
As simple has seen the issues, the company should firstly research actively and identify the current market trends. After that, Mothercare should invested in digital, having a website, creating its presence in the social media and consider having a unique selling point. The company
Should also invested in traditional advertising as a way to differentiate itself from its rivals.
The company. should study the buyers, looking for ways to increase customer experience and trying to make customer to known why they come to Mothercare.( Davenport and Westerman 2018)
As the sales have been more than five years in a constantly decline, the company should “improved product quality and design, better buying negotiations and a focus on full price sales. “. The company should concentrate on creating a strong and more resilient company for the future, transforming the actual company into one based on innovation and more professional,and also concentrating more on exportable. The company should therefore take lesson from its weaknesses, making a full review of their UK operations in comparison withinternational operation, , looking for ways in which the company can improve and strengthen the operations. (Mothercare Plc 2021 ).The company should work more closely with its pattern and even “support their businesses and strengthen the franchise model, ensuring that we will be best placed to benefit when market conditions improve. “Therefore the company should, become a digitally led company, providing style quality, and technological products and service, stabiles and recapture the gross market share and merging, running a lean company while looking for the future, expanding more and more internationally.(Crane 2021)
Conclusion:
To conclude, as has been suggested the company was unable to adapt to the specific business environment of that moment , not being able to adapt any changes, trends, “ staying well while other companies were growing faster”. All of the company uninterest in terms of e-commerce, fast fashion, sustainability has leads to the company to fall into administration in 2019. However, this has been added to the fact that the company has no unique selling point, no stable relationship with its clients. Therefore, the company has not been able to resist within the changing business environment, having a lack of innovation, digital area , not being able to reach its pricing strategy , which has resulted to the company failure in the UK country.
REFERENCES:
Crane, B. (2021). Leadership mindsets: Why new managers fail and what to do about it. Business Horizons.
Davenport, T. H., & Westerman, G. (2018). Why do so many high-profile digital transformations fail? Harvard Business Review, 9, 15.
Dobson, S., & Walmsley, B. (2021). Fail fast, fail often… but don’t fail this course! Business and enterprise education through the lens of theatre and the creative arts. Industry and Higher Education, 35(4), 336-346.
Fernando,D(2011) Business Environment. Pearson.
Jordan, D(2019)’What has gone wrong at Mothercare?’. BBC NEWS UK.5 November. Available at:
https://www.bbc.com/news/business-50288603
Kollewe, J( 2016) ‘Mothercare shares plunge 20% after sales fall at non-UK stores’. Guardian .15 Aprilie.Available at:
MotherCare Plc (2016) Our Vision at MotherCare is clear’. Mothercare PLC
Available at:
https://www.mothercareplc.com/~/media/Files/M/Mother-Care/documents/overview.pdf