Page 4: A SLEPT analysis for Electro World
Communism in Eastern Europe collapsed at the end of the 1980s and since then a number of countries have moved rapidly towards developing Western European style economic systems with free markets.
Hungary and the Czech Republic have been leaders in economic reform and welcoming of business links with Western European companies. They join the expanded European Union in May 2004. The two countries are considered politically stable and have a growing business culture (e.g. an established Stock Market, companies with shareholders, and sound legal structures for enforcing business contracts).
Before developing a new business strategy it is always important to carry out an environmental analysis termed a SLEPT analysis. The purpose of this is to identify opportunities and threats in the business environment that may affect the likely success of alternative strategic options.
In deciding whether to expand into Eastern Europe and which markets to enter, the analysis included:
- Social factors included changing consumer patterns as those consumers began to demand lifestyles associated with modern societies - e.g. access to consumer durables such as washing machines, CD players, TVs etc.
- Legal factors included comparing different legal structures between countries and also the degree of risk provided by organised crime.
- Economic factors included the rising standards of living in these countries, coupled with the availability of workers to staff the new stores, and prevailing wage rates. The widening of the European Union in 2004 means that the economies of these countries are more likely to be buoyant into the foreseeable future.
- Political factors include the welcoming of new businesses by governments to help reconstruct their economies on western lines.
- Technological factors relate to the competitive advantage that Dixons is able to gain over rivals in offering modern sophisticated consumer electricals and other products from its worldwide sourcing, which are well in advance of local competition.
Clearly therefore there were many opportunities to be seized.
At the same time Dixons had much to learn because the business and commercial culture of these countries were quite different from that in the UK and elsewhere in Western Europe where it had existing operations. Dixons was prepared to seize this challenge and recognised that there would be difficulties, both in adapting to new ways of working and in introducing Dixons own best practices in retail into these countries.
Dixons carried out extensive research to check the future and stability of reforms in these countries. In moving into Eastern Europe Dixons wanted to enter economies where disposable incomes are relatively high so that consumers have more money to spend on electrical products. Working with partners in the Nordic division, Elkjøp, they found that Hungary and the Czech Republic provided the best initial market opportunities in which to pilot a new store format.
Electro World has proved a tremendous success and when the first store opened in Budapest (Hungary), selling products much like those found in a UK Currys store, a queue built up for five miles from the city centre. The stores bring together the best elements from the Group's businesses across Europe selling white goods, brown goods, consumer electronics and PCs etc.