Comet Group Limited
30th, November 2012
Table of Contents
Company Overview.. 4
Business Description. 4
SWOT Analysis. 5
Five Force Analysis of Comet 9
The Strategy at Comet and its Possible Way Forward. 11
Works Cited. 16
Comet Company ranks among the top electrical retail companies in the United Kingdom. It comes second after Dixon. After its founding in 1933, Comet has continually changed its ownership. Most recently, a private investment partnership, OpCapita LLP took over the possession of Comet in February 2012. Today, Comet has succumbed to economic pressures, has closed most of its outlets, and is in administration under Deloitte (“Comet”). This collapse is attributed to the major losses incurred by the company, in addition to the withdrawal of its credit insurance by its insurer. The main strength of Comet is that it had developed the shopping experience of its customers, both in its online presence and retail store presence by use of modern computer technology (“Comet”). However, its main weakness is that it does not fully consider its customers, with whom it seems detached. Most of its strategies were not customer-centered, besides selling their products expensively. This paper therefore addresses the SWOT analysis of this company, in order to determine what could have led the company to collapse, and what can be done to revive the situation.
Comet Group Limited Company is owned by OpCapita, but is currently in administration by Deloitte. This specialized electrical retailer has its headquarters in Hertfordshire, United Kingdom, which is its primary location. It has a total of 8 000 employees and 240 electrical stores in the UK. Being part of OpCapita LLP, Comet does not release its financials. Comet claims to have prioritized its customers’ needs such as price, choice, and services (“Comet”).
Comet Company is highly diversified as it distributes a wide range of electrical products to its market. These include home appliances as well as electrical office equipment, among others. Home appliances sold include fridges, laundry, dishwashers, freezers, cooking products, and small kitchen appliances. In addition, it also distributes electronics such as televisions, digital versatile discs, computers, cameras, satellite navigation, camcorders, games and consoles, iPod, MP3, HiFi systems, blu ray, and a wide range of phones. Other special services offered by Comet are next day delivery, and home delivery services. Its representatives also perform full installation of products for customers, take back, and recycling facilities for large products, as well as after sale services (Moth 2011). Comet boasts of both the direct and online presence. Customers can shop directly at their stores or shop online through the company website, thus allowing convenient shopping. Online customers utilize the “click and collect” service, where they can select preferred products online and reserve them for later picking. Another service dubbed “click and chat” serves the purpose of connecting customers to a customer service advisor, who addresses customers’ queries on products and services. Apart from online and retail shopping, customers can shop using their phone by dialing a number provided by Comet. Comet also conducts weekly checks of its competitors’ prices in order to ensure a fair value for its customers (“Comet”).
Comet’s popularity in the UK, as a vast retailer of different electrical products cannot be understated. Since the company is popular, it is expected that this popularity will alleviate the business risk the company is exposed to. This in turn results in diversification of revenue stream and the business stands a chance to equally participate in the fast developing retail market of the UK. However, Comet faces intense competition both in its online business as well as from other retailers of similar specialization. This scenario continues to affect this company adversely, even as it is currently on the verge of collapsing (Anja & Böhm 2009).
The many retail outlets of the company in the UK should ideally lead to a reliable revenue stream of the company. With 240 different outlets in the country, it is expected that the revenue must be high. Due to Comet’s multiple presence in the UK, its sales are expected to be relatively high. Another major strength is that Comet has various models of operation including direct presence, and online presence. Ideally, this diversified business presence should serve to lower business risk of the company and increase profits (Moth 2011).
Consumer spending in the UK is not high; therefore, this negatively affects most companies. However, Comet’s strong brand portfolio enables it to be a participant in the renewing of consumer spending in the UK. In past years, Comet has undertaken an in-house research. This, in addition to other development facilities promotes a faster entrance into a market, as well as customer satisfaction. Through research, the needs of customers are made known to Comet, which is a competitive advantage. Moreover, if market research is backed by product development, this will see that the product is readily accepted by customers, while ensuring an easy market penetration. Comet also employs advertising, sales, and marketing strategies, which are appropriate for enhancing customer awareness of the company (Moth 2011).
Retail outlets of Comet lack good positioning in the country. This is in relation to Comet’s distribution strategy, which is limited, thus allowing overreliance on specific channels. Comet primarily distributes its products and services through departmental stores and freestanding stores, which are to some extent limited. This limited distribution strategy is a competitive disadvantage to Comet, considering that it competes with several other companies with high value products. This puts a limit on Comet to explore the market (“Comet”).
Incompetent prices and product quality are key to Comet’s failure. In addition, service assurance, as well as lack of convenience as compared to other large supermarkets, retail outlets, and other web based retailers, is another great weakness of Comet (Moth 2011). Most customers in the UK have complained about Comet’s expensive prices for products as well as its poor customer services. This has seen Comet lose potential and existing customers to its competitors such as the Amazon, which boasts of high quality customer services and reduced prices of products.
According to Weinberg (2009), an opportunity for growth is presented by the increasing popularity of online retail channels, as well as social networking media. The online Comet channel has been growing in popularity as one of the most preferred channels in the UK. Moreover, Comet’s internet sales are higher as compared to retail sales. There is hope that the online sales will increase as customers use the internet to make price comparisons, even as VAT tax increases. Additionally, internet retail bears many beneficial aspects on both the distributors and the customers. For instance, a producer may not incur operational costs, as they can pass this onto the consumers. Therefore, more people are opting to shop online because of the convenience factor it presents. Comet has also developed its e-commerce site, where it performs its online campaigns and marketing. It uses social media to focus on its customers, in addition to other marketing initiatives, which help to broaden its customer base. Comet therefore has the opportunity to attract new customers and retain the existing ones through an increased use of social media. However, Comet had planned on continued investment in the digital social media. Nonetheless, online marketing strategy is crucial in increasing the customer base of most companies (Weinberg 2009).
High competition in the market
The business environment of Comet is characterized by immense competition. Such competition is mainly from the bigger and more established companies, which are mainly local companies. The competitors of Comet are Dixon, Amazon, Play.com, PC World, Best Buy, among others. Apart from these, Comet also faces competition from independent brands, and other smaller retailers. Some of the competitors have more resources and more appropriate and better strategies than those of Comet in reaching their customers. They therefore stand a better chance of weathering the current storm experienced in the world economy. Due to Comet’s strategies and management that are deemed less competitive as compared to those of its competitors’ Comet has been negatively impacted and maybe there is no hope for its revival (Cole 2004).
The incompetent prices of Comet’s products make customers shy away from the company. The high prices of Comet have been responsible for the changes in their customers’ buying decision, thus affecting the sales. Sales of Comet have dropped when customers shop from other outlets that are less expensive (Moth 2011).
Increase in counterfeit products
Today, increase of counterfeit products continues to grow as compared to the previous years. This instance has been enhanced by the internet, where counterfeit market has thrived (Weinberg 2009). The abundance of these counterfeit products has a negative effect on the sales of genuine branded products. Counterfeit products have spread globally and more products are vulnerable to infringement. This is a threat to Comet as its products may face substitution.
Market failure is a contributing aspect to Comet’s downfall. First, amid the harsh economic climate, consumer spending has experienced a significant drop, leading many people to cut their purchase of items they consider are for luxury. Additionally, most business today is transacted online (Hill & Jones 2012). Comet has experienced numerous changes in its management system, thereby making it pay less attention to understanding the online business world in depth. Comet also did not effectively embrace multi-channel options for sales. Although Comet provided sales through their retail shops, mobile commerce, and through the company website, they still did not embrace or appreciate these as the driving forces in their retail business. In addition to the stiff competition Comet has faced in the market, its high cost of products is another disadvantage to its revenue. Moreover, people today are shifting from core visual products to combined platforms on smartphones and tablet computers. This is because of failure of Comet to research on customers’ product preference. All this makes Comet to be one of the biggest and oldest retail businesses to collapse, after the demise of Woolworths in 2008.
Five Force Analysis of Comet
Five major forces are responsible for shaping the attractiveness of a company in the market. This is according to Potter who argued that the probability of any company making profits in its market depends mainly on five factors, which include the likelihood of a new entry, the power of buyers, the power of suppliers, the degree of rivalry, and the substitute threat (Qin 2009). In the case of Comet Company, its competitive structure can as well be analyzed using this model. However, this must bring out the poor state of Comet as it faces extinction today.
Bargaining Power of Buyers
The consumers of electrical products in the UK have a considerable amount of bargaining power as they have a variety of electrical retailers to choose to buy from. However, their limiting factor would be the location and the type of products they want to purchase. Therefore, Comet cannot boast of being influential in the UK market ( Qin 2009).
Threat of New Entrants
The electrical retail market in UK is faced with slim possibilities of having new entrants. One of the reasons is the nature of electrical products, which are highly diversified. Nonetheless, making an entrance into this market is quite costly and not easily affordable. Additionally, costs of labor incurred in UK are high, thus limiting the quality and quantity of skilled labor for potential new entrants in this market. Considering that Comet may soon be phased out, Dixon, the largest electrical retailer in UK will possibly monopolize the market, making it hard for new retailers to enter the market (Moth 2011). On the other hand, if new entrants occur, it is because of the UK market, which is not fully saturated with electrical retailers such as Comet. If a chance is made available, the possible new entrants in the market will be forced to compete stiffly against the existing product prices in the market (Qin 2009).
Threat of Substitutes
According to Qin (2009), these could range from the biggest electrical monopoly to a small independent retailer. Given that, Comet is the second largest electrical retailer in the UK after Dixon; chances for a substitute are limited. In the case of Comet, for a substitute to be successful and stand out, they must have better products and be larger than Comet. However, it is possible that a replacement of Comet will present itself, as the probability is high that Comet is collapsing soon. This is because Comet will have created a gap that will need to be filled somehow.
Bargaining Power of Suppliers
In the electrical retail market, the bargaining power of suppliers is generally low. This is unless there be experienced some scarcity in the manufacturing materials of electronic products, which is unlikely to happen. Therefore, Comet can continue buying more electricals with limited constraints on the supply side.
Determinants of Rivalry among Existing Components
There are more competition opportunities in the UK’s electrical retail market as it keeps experiencing substantial growth each year. However, this market is greatly affected by the world economic climate, as well as the politics (Qin 2009). In addition, if an electrical retail company specializes in its sales, it minimizes the amount of competition it faces. However, this could turn out ineffective and lead the company to losses, if the consumers changed their product preference. On the other hand, giants in the electrical retail market in UK, including Dixon, are major determinants of how successsufl a business can be. These are capable of running marketing campaigns to boost their competition. Therefore, Comet is highly influenced by Dixon, which is much bigger.
The most influential force in the market structure of Comet is the bargaining power of its buyers. Today, buyers are exposed to many purchase information, including details about prices. (Moth 2011). This has made buyers to be more flexible and choose to buy from their preferred dealer. In addition, most of the financial problems experienced by Comet in the past, and even currently, all emanate from the relationship between Comet and its customers. Such relationships have a positive or negative influence on the perceptions of the buyer about the company, thereby, determining their buying powers (Qin 2009). Comet has lost most of its potential customers as well as existing ones, as it failed to provide best services to them, in addition to the high prices it tie to its products. Due to the bargaining power the consumers have, they have voluntarily left Comet after feeling dissatisfied and turned to other companies, such as Amazon. This in turn has greatly reduced the sale revenues of Comet. Additionally, the internet has made it possible for more producers to enter many markets, including the electrical retail market. The ability to sell online has broken the barrier to entrance into the market, which was faced by most companies in the past. This therefore has reduced the cost a company needs to develop a series of outlets. This factor has also increased bargaining power of consumers as they now have a variety of companies to choose from (Weinberg 2009).
The Strategy at Comet and Possible Way Forward
Comet has applied different strategies to address the challenges of limited revenues, quality services, as well as customer relations. In order to improve the shopping experience for its customers, Comet, in the late 2011, launched new application that gives users information about their products, reviews, and price checking facility. Android, iPhone, and Blackberry users were eligible to use the application. This was in form of a barcode scanner, which helps customers check prices in any retailer, and was the first application of its kind to feature in retail outlets. This valuable tool was instrumental in helping Comet draw to itself more customers, pulling them away from its top competitors PC World and Dixon. In addition, this came with the alternative of “click and collect,” as well as a store-finder for increased efficiency in shopping. Since this application provides more product information to customers, it made the customer shopping experience to be more interactive. The barcode scanner led to more than 15 000 customer reviews and 1 000 expert reviews and “how-to” guides on around 5 000 products (Moth 2011). Although this application was not transactional, it indirectly increased the customer base of Comet. Comet became the first electronic retailer to offer an interactive application for its clients. This way, Comet went a step further in beating its competitors. If only Comet would have based on this strategy to increase the awareness of its customers about their products, it would have recorded a considerable growth. This application would have been publicized by Comet, so that more people can download it, thus drawing sales away from their competitors, as this was a period, which many customers were price-sensitive (Moth 2011).
In an effort to counteract the economic heat, which has all along exposed Comet to a risk of incurring big losses, in May 2011, Comet adopted a short-term strategy of retrenchment, aimed at cutting on company costs due to its reduced profits. During this period, the sales at Comet were low by 15 percent. Therefore, Comet faced a great challenge considering its fixed costs of employees and rent for all its stores (“Comet”). In addition to the retrenchment, Comet planned on closing down 10 of its stores, as well as its 13 service centers. This decision came in anticipation that it would be able to lose a $20 million annual operation cost. However, this strategy was ineffective as today, Comet has closed down more of its stalls, and entered into administration by Deloitte, after losing its credit insurance and resulting in loss of 6 000 jobs for its employees (Moth 2011).
In 2010, Comet undertook the revamping of its brand identity, as well as its stores by running a television campaign to popularize its new “fun” brand personality. Comet introduced a slogan “Come and Play,” which made clients tie an “electrical” lifestyle to Comet. This rebranding strategy aimed at focusing on the relationship of the brand and customer emotions toward Comet’s products and services. Updating of the in-store language was a strategy to make the in-store experience conducive for choosing of products. All these marketing strategies were integrated to bring a change in the customers’ perception of the brand, as well as increase customers’ expectations of the electrical products (Moth 2011).
Nonetheless, the strategy taken by Comet was quite attractive; however, this was ineffective, as it did not lead to positive change today, as witnessed by the looming collapse of the company. According to Hill and Jones (2011), a customer-centered strategy is recommended as it puts into perspective the most of the preferences and needs of clients. In contrast, Comet concentrated only on the purchasing part of its customers, which is why it embarked on only making the buying experience more enjoyable. Comet needed to put into consideration the product preference of its customers by conducting an in-market research. It should have also set in place an avenue for addressing clients’ customer care needs. Besides, Comet did not care to consider its customers when coming up with its product prices. Comet is known for selling expensively, which is why most people preferred other cheaper outlets (Moth 2011). In addition, Comet should have embraced close relations with its stakeholders, as well as upholding transparency in its financial operations. This is vital as some stakeholders may offer expert financial advice to deal with an ailing company. I propose this integrated strategy mainly because the customer should be the “boss” in any business, hence needing a special treatment. Comet should be interested in their customers beyond just their pockets, in order to retain them and acquire others (Cole 2004).
In order for Comet to win back trust of its stakeholders and the customers, it needs to embrace transparency in its financial reporting. Currently, the investors of Comet are faced with lack of information on the company’s financial dealings, including funding, financial information, and business plans, thus miscommunication in the company. Recently, Comet had hired a reputable CEO to handle its insurance and supply problems (Moth 2011). However, this did not offer a lasting solution. Comet should embrace clarity and provide a proof that that its investment plans are moving forward. This should be tangible and proven by stockholders, not just based on rumors and hearsay.
The insurance cover of Comet was reduced previously due to its signs of poor business and definite collapse. This worse performance and lack of financial strength of Comet is because of the immense losses it has made in the past (Moth 2011). Just as in the case of Woolworths, Zavvi, Peacocks, and Focus DIY, Comet should realize that it is charged with responsibility for its own success. Therefore, to halt further poor financial performances, Comet ought to have invested highly in strong company-stakeholder relationship. If only it could show transparency and will to work with primary external stakeholders, this would have served to reduce pressure exerted on the company now, as well as the ease and aid of transition.
Conclusively, Comet’s predicament can easily be turned around if the necessary conditions are put in place. However, successful business rescues are only possible where there is confidence, clarity, and equality of information sharing with required and relevant partners. Actually, Comet lacked all these elements, thereby making it hard for its business rescue to be possible. Nonetheless, OpCapita is faced with a great challenge in reviving Comet given the circumstances and short-time frame of nine months between its acquisition and collapse. This has left a negative perception of Comet on its employees and creditors. OpCapita’s moving forward currently stands as an issue of reputation and image.
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