Matalan’s and Topshop’s Management and Decision-Making

Introduction

Topshop and Matalan are British fashion companies that have operations both locally and internationally. Strong leadership and management structures in the two businesses have provided Topshop and Matalan a competitive advantage. This situation has been demonstrated by years of continued growth in the businesses’ operations both locally and internationally. Competitive pricing of products is also another source of strength of the two businesses since customers are attracted to fair pricing. However, Matalan’s heavy debt level has been a source of weakness, as it reduces the company’s profit margins and consequently its planning function. This paper presents the companies’ profiles, SWOT analysis, and the management challenges that they have been experiencing, including the significance of a code of ethics for the businesses.

Company Profiles

Matalan

Matalan is a British retailer of fashion and home ware. It operates more than a 120 retail outlets in the United Kingdom. The company’s stores are strategically located outside large cities. John Hargreaves founded the company in 1985. He was fascinated by the concept of retail club warehouses outside cities that offered favourable discounts during one of his trips in the United States. The company’s product portfolio includes a range of own-label and branded men, women and children clothing and a range of home ware clothing. The brands that the company sells include Wrangler, Cooper, Falmer, Playtex, Wilson, and Sloggi. The company’s mission is to continue providing modern families with outstanding value by offering high-quality fashion and home ware at the lowest price.

Topshop

Topshop is a British-based multinational fashion retailer of shoes, clothing, accessories, and make-up. Currently, the company operates over 500 retail shops across the globe with 300 of them being in the UK. Additionally, the company operates a number of online stores through which customers can make purchase orders at the comfort of their home. The company began its operations in 1964 as a department store in a basement. It has remarkably expanded its operations and gained popularity right from the time it became one of the most coveted and respected brands in both the UK and globally. Topshop has earned a reputation as a trendsetter with some of its brands being featured in catwalks such as the London Fashion Week. The company’s mission is to the lead in the fashion industry through influencing creativity and bringing style to its customers wherever they are by keeping them up to date with the latest collections and trends.

SWOT Analysis

Strengths

Matalan’s strong leadership has had a positive impact on the organisation’s growth. Jason, the company’s CEO, cited confidence in the company’s ability to beat its competition in the fashion industry (Holland 2013). Topshop has also established a strong leadership network both locally and internationally with each of its managerial functions being headed by competent managers. For instance, the company has an eCommerce manager, digital marketing manager, online trading manager, and merchandising administration manager among others.

Matalan’s initial retail concept was based on the strategic location of its stores outside the cities and towns. This situation allowed the company to cut down its pricing to a bare minimum, thus making its products cheaper than high-street stores. As a result, the business was able to attract a large number of shoppers all year round. Such prospects have enabled the company to enjoy growth in sales and profits over the years through increasing its market share in the UK clothing industry. Topshop has also managed to brand itself as a provider of “affordable luxury” products, thus tapping the low and middle-class families who are attracted by low pricing policies of the clothing company.

Weaknesses

Matalan has assumed a significant debt since it took a 500 million pound financing bond in 2010. The bond was aimed at restructuring the company. The high level of debt has greatly reduced the company’s profit margins, thus threatening its survival while limiting its growth. Therefore, there is a need for a moderation in Matalan’s level of debt financing to avoid pitfalls involved in such management decisions (Dube 2013). With reference to Topshop, Arcadia Group (a majority owner of Topshop) managed to pay out the company’s long outstanding debt of 350 million pounds, thus improving the retailer’s debt position (Ruddick 2012).

Matalan has a weak online presence compared to its competitors. This weakness has led to a loss of available opportunities. Online marketing platforms such as social media have become a trend for most businesses. They are often used as a means of communication and creating awareness to customers (Kiang, Raghu, & Shang 2000). The situation is not the same for Topshop, which has had an imposing market presence over the years. Topshop has formulated plans for expanding this platform to cater for the increased use of the internet. However, one of Topshop’s weaknesses is its limited advertising through television and radio platforms. The retail giant mainly uses digital platforms such as social media, YouTube, and its online website to communicate with its customers. Despite the advantages offered by the online platforms, there is the need to diversify its advertising strategy to include other elements in its marketing mix to capture and reach out to a broader audience.

Opportunities

The online markets offer a great opportunity for both businesses to market their products and reach out to new markets, owing to the extensive use of the internet and social networking sites by potential customers. According to Kiang, Raghu, and Shang (2000), the rapid advancement in online computing makes it imperative for fashion companies such as Matalan and Topshop to strengthen their competitive advantage through acting as a communication channel with its customers. In this regard, Matalan has set out to expand its online presence in an effort to compete with larger brands in the fashion industry (Affilinet 2016). On the other hand, Topshop already has an established online presence. Nevertheless, plans have been underway refining this platform to increase its market share.

Emerging markets such as Asia offer an important opportunity for both businesses to increase their market share. However, entrance into these new markets would require extensive research on the market dynamics such as fashion trends and preferences to adapt to market requirements (Cui & Liu 2000). According to a report by Douglas (2012), Topshop was planning to collaborate with Cape Town boutique with the goal of entering the South Africa market. Matalan has also not been left behind since it seeks expansion beyond the UK border in Brazil and the Middle East countries (Lovett 2012).

Threats

Intense competition poses a huge threat to both businesses. The clothing retail franchise illustrated a 10 percent increase in penetration by new players. Despite this trend, it is estimated that at least 160 companies are closing down due to inability to keep up with the competition. Therefore, there is a need for businesses in the industry to restructure their management practices to guarantee their solid survival (Brazioti 2013). Both Matalan and Topshop have managed to tackle this threat using the competitive pricing strategies for their products.

Challenges in General Management Functions

Planning

Reduction in Matalan’s earnings due to operational warehousing problems has posed a huge challenge to implementing its expansion plans due to limited financial resources. This situation has been worsened by its huge level of debt that has also been blamed for the dramatic reduction in profit margins (Gleeson 2015). Topshop has been aggressive in implementing its plans of entering new markets beyond the UK such as Australia. However, these plans have been met by the challenge of having to compete with the already established retailers in the new markets. However, the company continues to believe in its management strategies such as its marketing and pricing strategies that have allowed it to enjoy unlimited access to local and international markets (Hammond 2011).

Organising

Challenges facing Matalan’s stock flow across its distribution networks forced the company to reorganise its stock distribution and warehousing management system that would cater for its growing product flow across all its local and international distribution centres. This upgrade was capable of meeting the retailer’s expansion plans, thus demonstrating flexibility in meeting the different requirements of its warehouses. Increased competition in the fashion industry has posed a huge challenge to the companies’ ability to organise their marketing function. This situation has forced the two companies to embrace new strategic trends in marketing as a means of tackling this challenge. For instance, Topshop has stepped up its digital marketing platform by including social marketing sites such as Facebook and Twitter into its marketing mix. Customers are only required to tweet using the company’s specific product ‘hashtags’ to receive tweets updating them on the firm’s latest collection of trends (Beanne 2015).

Leading

Leadership has been a huge challenge for both Matalan and Topshop with reference to their human resource in Bangladesh. The large number of complaints emanating from the workers regarding their poor pay, including poor working conditions, has evidenced this situation. The case has prompted them to protest against the two retail giants. Therefore, the company’s human resource leadership has a duty to ensure that labour rights are observed at all levels of management and that workers operate in a quality-oriented environment (Weller & Weller 2000).

Controlling

Matalan has been facing an enormous challenge concerning the control of its level of debt, which has resulted in a decline in profits. This problem has been compounded by the poor control of its warehousing operations in Knowsley, Liverpool (Marlow 2016). Debt in a business is a direct control function of management. Before resorting to debt financing, the management should have considered the risk of high level of debt since it exposes the business to the risk of failure or bankruptcy (Gaspar 2006). Luckily, Lloyd bank has agreed to modify the payment agreements in favour of Matalan. This situation consumes the company’s time to tackle other management challenges that affect its profit margins (Marlow 2016).

One of the challenges that Topshop has faced involves controlling ethical trading among its contracted suppliers. This challenge has been mainly attributed to the lack of direct control of the factories. It has led to a rise in cases of mistreatment and poor pay among workers. Such issues have prompted the company to formulate an ethical audit programme of the factories. The programme requires its suppliers to meet particular standards regarding ethical practices such as payment above minimum wage and the provision of a safe, secure, and conducive environment for the factory workers. Breaches of codes of ethics have resulted in the termination of contracts to manufacture Topshop’s products (Arcadia 2016).

Organisational Communication Structure

Topshop

Topshop uses a functional matrix organisational structure to communicate with its respective organisations. This type of structure emphasises the technical expertise of each of the divisions involved in the structure. In this regard, each division is assigned a particular task after which it passes on to the next technical division to provide for the next functional step. Moreover, strong leadership characterises this type of structure with each division being headed by a manager, supervisor, or team leader responsible for seeing the assigned task through. The movement of communication in this form of structure can be both downward and upward (Kuprenas 2003). Unlike in a linear structure where one is only allowed to report to the superseding divisional head, a certain degree of independence and flexibility allows the finance supervisors to communicate directly to the managing director without having to go through the finance director (Topshop 2016).

Matalan

The company uses a simple functional linear organisational structure as a communication channel. This form of organisational structure paves way for direct vertical relationships between the various departments. For instance, in the case of Matalan, a manager who is answerable to the Chief Executive Officer heads each of the seven main departments. Additionally, the Chief Executive Officer reports on the company’s activities to the Board of Management, which is the ultimate decision-making organ in the organisation. However, unlike the matrix organisational structure in Topshop, each of the divisions can only report in a hierarchical manner to the superseding division and ultimately to the manager and CEO respectively. This plan presents the disadvantage of lack of decentralised decision-making and flexibility in the use of resources (Wu 2013).

Usefulness of a Code of Ethics in both Organisations

Codes of ethics can have positive or negative implications on managerial behaviour. For instance, when an organisation operates under an ethical background, it can influence the moral thinking of its employees because employees are provided with a clear set of ethical principles through which they are expected to operate. Failure to cultivate an ethical culture by an organisation can have severe consequences regarding its societal perception. The society will always hold the business accountable for its employees’ actions, hence negatively affecting its reputation (Vitell & Hidalgo 2006). To guarantee ethical managerial practices by its employees, Topshop performs an annual ethical audit programme that screens factory managers and suppliers to ensure that they operate under an ethical environment. This strategy has reduced cases of complaints by factory workers concerning unfair pay and poor working conditions.

Another implication of ethical practices by businesses is organisational commitment. Organisations that exhibit a strong background of upholding ethical values can benefit through increased worker motivation, enhanced worker retention, and increased performance. Research indicates that individuals are more committed to an organisation that illustrates a strong culture of upholding ethical values and principles (Vitell & Hidalgo 2006). Topshop and Matalan have often been accused of overworking their workers and paying them low wages to allow them to sell cheap clothes to customers. This case has greatly affected the commitment of their employees who took to the streets to protest against poor working conditions and poor pay by the retail giants (Frith 2006).

Conclusion

Topshop and Matalan have an excellent opportunity in online and emerging markets, which offer a great potential for both businesses to increase their sales. Regarding communication, Matalan uses a linear organisational structure whereas Topshop uses a matrix structure. Unlike a linear structure, the matrix structure offers more flexibility and independence concerning decision-making. In terms of ethical practices, both organisations continue to experience the challenge of observance of labour rights. As a result, they have been forced to establish measures to address this issue. I would recommend Topshop as a better alternative for Caifu investments because it lacks debt control issues as seen with Matalan, which may experience a huge bankruptcy risk if the company fails to meet its payment obligation. Moreover, Topshop illustrates a better presence in the market, including online marketing that assures it of stability in the business.

References

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Appendices

Appendix 1: Table illustrating SWOT Analysis of Matalan and Topshop

Appendix 2: Table illustrating challenges facing Matalan and Topshop in general management functions