RadioShack Company’s Operation Analysis

Executive Summary

The objective of this paper is to examine the operations of RadioShack. The paper starts with short introduction and brief explanation of RadioShack’s history. This section includes the explanation of evolution of RadioShack Company. The next section of this paper focuses on current industry in which nature of competition and market share has been explored. Here, names of the competitors are mentioned and comments about company’s Chief Financial Officer are also included. Focus on company’s current situation comes next in the paper, in which status of the company has been explained. It includes everything about company’s infrastructure, including how much space company is using and different branches of the company etc. This section also explains about the different types of products available in RadioShack and which company’s product they are selling. All internal strengths and weakness of RadioShack are analyzed in the section SWOT for RadioShack. This section also includes different kinds of threats the company is facing currently. Financial analyses are also included in this segment. The company’s annual report has been included in this paper. The annual report of the company has been taken from the report presented in the Reuters website. A short explanation about company website and analysis of website and its features are explained. Also, comparison of RadioShack’s websites with top rival Wal-Mart and Best Buy has been explained. Each of these website’s good and bad features are highlighted. Last part of the paper is conclusion and recommendation in which some recommendations are pointed out to improve the performance of RadioShack.

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Introduction and brief history

RadioShack “is one of the nations most experienced and trusted consumer electronics specialty retailers, offering innovative products and services from leading brands.” (RadioShack Corporation announces financial results for the third quarter 2009, 2009, para.19).

It was Theodore and Milton Deutschmann who started RadioShack in 1921 in Boston to provide radio apparatus to public. They opened small retail shop. At initial stage their store sold different equipments for ham radio operators and also for ships radio officers. RadioShack opened their first showroom in 1947. They provided amplifiers, speakers, turntables etc. RadioShack began to sell their private label product in 1954 under the name Realist. RadioShack became leading distributor in electronic parts in 1960. After that, company had many achievements.

Recent recession didn’t affect RadioShack at all; its CEO mentions that they got enough money to get through recession. “As communication technology advances, society has shifted from a thick client to a thin client model. Until recently, RadioShack employees maintained product knowledge in their heads and on paper that they could physically access.” (Sherri, 2008, para.5).

Focus on the industry currently

For RadioShack, there are plenty of competitors. Different competitors for RadioShack are Best Buy, Wal-Mart, Circuit City, Dell, Target, and Costco etc. Among these, big ones are Best Buy and Wall Mart who are rivals of RadioShack.

“Chief Financial Officer, Jim Gooch said the company’s financial performance improved in the latter part of the quarter because of strength in its wireless business “combined with an economy showing some signs of potential stabilization.”” (Lloyd, 2009, para.5). Because of this, its share price jumped on New York stock exchange.

To attract the consumers in market, there are some dominant trends that company needs to take care, such as promotion, pricing and distribution. Promotion means different methods to make the product aware to others. A very good distribution channel must be adopted at the time of promotion. RadioShack has got different promotional strategies; strategy includes advertising, publicity and sales promotion. Advertising is done through mass media. Publicity is done through articles, which are published in newsletters, newspapers and magazines. Sales are promoted through coupons and giving discounts. Distribution means selling the product or shipping the product. The perfect method chosen for distribution is based on the product. Pricing of product includes all the charges that have been incurred from manufacturing of that product. It includes cost for making product, cost for labeling and packaging, cost spent for labor and costs used up for distribution and promotion.

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Focus on the company currently

RadioShack has got very knowledgeable, helpful and dedicated sales associates for helping customers and also to enhance their shopping experience by finding best appropriate product which fit their needs. “Operating from convenient and accessible neighborhood and mall locations, the company has approximately 4,450 company-operated stores; almost 1,400 dealer outlets; nearly 600 wireless phone kiosks throughout the U.S.” and there are approximately two-hundred stores in Mexico. (RadioShack joins with Lance Armstrong to raise awareness for Livestrong day on Oct. 2, 2009, para.6).

Each of their stores has got space of approximately 2,500 square feet. Majority of their stores are located in suburban markets that have got more than 500,000 human populations. “In the fourth annual National Retail Federation Foundation/American Express Customer Service Survey, RadioShack was named one of the top customer service retailers in the nation.” (RadioShack connects technology with consumers, 2009, para.4).

RadioShack has got all kinds of products and accessories that people are seeking for. In their company, there are plenty of products available in order to fulfill the needs of the customers. In order to stay in the competitive market along with companies, RadioShack has maintained excellent relationship with world’s leading technology companies namely AT&T, Duracell, and Hewlett etc.

RadioShack’s wireless business holds 33% of annual sales. Personal electronics and modern home platforms hold 28% of annual sales. Accessories platform holds 24% of annual sales and other 15% are generated from power, technical and service platforms.

On November 9 RadioShack “announced that its Board of Directors has declared an annual cash dividend of $0.25 per common share. The dividend is payable on December 16, 2009, to shareholders of record on November 27, 2009.” (RadioShack corporation board of directors declares dividend, 2009, para.1).

SWOT for RadioShack

SWOT analysis helps in evaluating the strength, weaknesses, opportunities and threats of an organization. Main aim of SWOT analysis in an organization is to facilitate in recognizing the internal and external factors that are essential to accomplish the organizational goals. The SWOT analysis is sorted into two groups. They are internal factors which consist of the strength and weaknesses within the organization and external factors which consist of opportunities and threats outside the organization. The strength and weaknesses of an organization are based on the impacts that are faced by an organization in the internal factors. The external factors are the compilation of macro economic subjects, hi-tech changes, market place and competitive changes etc. SWOT analysis is only a single method of analyzing the strength, weaknesses, opportunities and threats of an organization, so it has its own disadvantages. The report collected on RadioShack on the basis of SWOT analysis helps in observing the organization’s arrangement and processes, about their products and also gives a summary about the company’s strategy.

RadioShack is a chain of stores associated with electronics and servicing materials in retailing. It was started in United States and is spread all over the world. The operations of the organization are carried through two sections i.e. through RadioShack’s operating stores and among the kiosks. Their main preferences are consumer electronic items. Global markets give information to RadioShack on various strategic, operational and financial analyses. Strength refers to the competitive benefit enjoyed by RadioShack in recognizing the requirements of its target market.

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The financial and strategic analysis helps RadioShack to make improvements in their work. The scope of it includes the following:

  • The Company’s strengths and weaknesses and areas of development or decline are analyzed. Financial, strategic and operational factors are considered.
  • The opportunities open to the company are considered and its growth potential assessed. Competitive or technological threats are highlighted.
  • The report contains critical company information – business structure and operations, the company history, major products and services, key competitors, key employees and executive biographies, different locations and important subsidiaries.
  • It provides detailed financial ratios for the past five years as well as interim ratios for the last four quarters.
  • Financial ratios include profitability, margins and returns, liquidity and leverage, financial position and efficiency ratios.” (RadioShack Corporation financial and strategic analysis review, 2009, para.3).

The current financial analysis can be viewed by comparing the past income and sales with the current income and sales. Making analysis of the stock performance and considering the opinion of the analyst help in judging the company’s performance. RadioShack is an electronic company, which also sells wireless phones. Customers are their real strengths as when more customers are attracted towards the company the sales of the company increase and thus their financial position becomes stronger. Most people prefer to buy products from the showroom itself than from the retailers. Customers are attracted towards the shop depending upon the behavior of the sales persons. The internal factors i.e. the strength and weaknesses may be the combination of many factors. “The factors may include all of the 4Ps; as well as personnel, finance, manufacturing capabilities, and so on.” (RadioShack – SWOT framework analysis, 2009, para.4).

RadioShack can meet their target market because of their competitive advantage. RadioShack face competition in the market for some of their products, as market is more competitive nowadays. RadioShack has decreased the sale of one of their products, namely wireless, with the aim of focusing on the consumer products like TV, ipods which face more competition in the retail market. Many retail business organizations are competing with RadioShack to recoup their advantage in the market of communication. The major competitors of RadioShack, “Best Buy and Circuit City, are opening more stores to drive up sales and profits, RadioShack is cutting costs and closing stores, which has increased its margins but at the expense of sales. It seems, therefore, that RadioShack’s improvement is less sustainable than Best Buy’s or Circuit City’s.” (RadioShack (RSH), 2009, Competition and Metrics, para.3).

Examine each element of the retailing mix

In retailing mix, merchandise assortment strength is the dealers. Good promotion strategy helps improve the sales, as it is the strength of the organization. Location of the store must be where more customers are attracted. Price must be fixed adequately so that all types of customers are able to buy the products. Supply chain must be made as short as possible in order to reduce the cost of the product. Otherwise, when the product reaches in the hands of the customers they have to buy the product by paying large amount of money. Distribution must consist of only retailers and wholesalers. Agents should be avoided. By recognizing the strength and weaknesses of the competitors RadioShack provides services to their consumers.

Strength of RadioShack

Merchandise assortment, Pricing Strategy, Promotional Strategy, Location, Supply Chain Management, Reputation, Political strength, Financial and Organizational structure etc are the strengths of RadioShack. Merchandise assortment helps in purchasing the product in a quantity prescribed by RadioShack as they are the providers of the product to the multi retail stores in the world. Due to this chain, RadioShack get their products in correct time. It helps in correct planning. Favorable location of the stores is strength of the company. Pricing strategy adopted by RadioShack for their product is average price. People make purchases from RadioShack as they get quality product at the average price. They also provide rebates and coupons. Promotional strategy is strength of the company, because by using various promotional strategies like advertisement in the television, people see this and buy their products. Thus, it increases sales of the company. RadioShack is a highly reputed company. Reputation is created by their brand name, services they provide etc. RadioShack’s supply chain helps widening their fame all over the world in less time. It strengthens the company. Financial position of the company is strong. RadioShack’s organizational structure is one of the best.

Weaknesses of RadioShack

The weaknesses of RadioShack are the limitations they possess in their internal areas. They are struggling to sustain in the market as there are many other similar markets like RadioShack. They are making an attempt to focus on the Circuit City and Best Buy. RadioShack, when focusing on the customers find that small retail stores are not matching with the large business stores because of fixing the newer brand names for their product. Credibility of customer towards the company is another weaknesses faced by the company. Lack of latest promotion strategy is another weakness of RadioShack. They eliminate the distributors’ cost by minimizing the supply to the private tagged products. Salary along with the bonus must be provided to the employees to reduce the turnover rate within the organization. Turnover of employees is one of the main weaknesses faced by the company. By implementing the marketing strategy, weaknesses of the company must be eliminated. Price, product, place, promotion etc are necessary to implement a good marketing strategy. High competition, non-motivated employees and other external factors may restrict the company to reach towards their objectives. Customers may look upon their benefit, not the companies when buying a product. Retailer’s perception must be entirely different from the customers as they take into account the matters from the business point of view.

Opportunities of RadioShack

By joining hands with some of new companies and placing their new brands in RadioShack has got golden opportunity to make more profit in their business. Opening more and more branches and placing new products made of new technology helps in earning more profit. International operations of the company are another highlighting feature. RadioShack has got an efficient marketing management team. These marketing teams are very good in implementing marketing strategy according to the different market situations. Also company has got the ability to take different actions that differentiate its product from the competitors’ products. This supports RadioShack to exploit the market where its competitors are failing to exploit. This also provides a unique position for RadioShack products in the market.

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Threats of RadioShack

Increase in number of competitors that is market competition is the major threat. Wal-Mart and Best Buy are the major two competitors causing threats to RadioShack. Market uncertainties are another major threat faced by RadioShack. Because of this, they need to change their strategy frequently. Market uncertainty includes all sorts of problems like if any two competitors merge, then it will be a big set back for RadioShack. If such a situation arises, then to overcome from it, lots of efforts and serious thinking will be required. Also RadioShack has to do lots of study again in order to stay as a major competitor for them. Next threat is shortage of goods; this will result in decrease in customers as they will go to the competitors for their requirement. This is a very serious issue for the Company. Uncertainty in economic conditions, moving of people from one place to another, natural calamities such as earthquakes, floods, storm etc can also cause major threats for the company apart from their competitors. Scarcity of educated workforce is also a major threat for the Company.

Short-term solvency ratio of RadioShack is as follows:

  • “Account payable/Sales-4.89
  • Gross margin-45.8
  • Current ratio-2.8
  • Quick ratio-1.7
  • Inventory turnover ratio- 3.4” (RadioShack, 2009).

The future facing

The main aim of RadioShack is to attain maximum profit. The company’s annual report is shown as follows and it has been taken from the Reuters website which has been shown in appendix.

“RadioShack Corporation (NYSE: RSH) today announced net income for the third quarter ended September 30, 2009, of $37.4 million, or $0.30 per diluted share, compared with net income of $49.1 million, or $0.38 per diluted share, reported for the third quarter ended September 30, 2008.” (RadioShack Corporation announces financial results for the third quarter 2009, 2009, para.1).

Operating income was $69.4 million for third quarter, or 7.0% of sales. Last year it was $84.9 million or 8.3%. Cash and cash equivalence of 2009 September 30 were $856.7 million. It was $824.1 million in 2008 September 30.

Total net sales and operating revenues was $2,957.8 million till September 30, 2009. It was $2,965.8 million in last year. $1,383.5 was gross profit for first nine months ended in September 30, 2009. Last year it was $1,396.4 million. $237.2 million was operating income, which was calculated for first nine months. It was $220.4 in 2008 for first nine months. “Consolidated selling, general and administrative expenses for the first nine months of 2009 were $1,082.2 million, or 36.6 percent of sales, compared with consolidated selling, general and administrative expenses for the first nine months of 2008 of $1,108.2 million, or 37.4 percent of sales.“ (RadioShack Corporation announces financial results for the third quarter 2009, 2009, para.15).

Impact of the Internet

“RadioShack continues moving consumers to action with increased awareness, knowledge, and product by moving into online”. (RadioShack continues moving consumers to action, 2009, para.8).

Online website is very important for a company to increase its stability. Through website, it is very easy to make the consumers aware about availability of the products and updates. Through website consumers will get knowledge about the product before visiting the company.

RadioShack website has got many features in the front page itself. Showing animated ad on newly available products in market is one of the attractive features about the website. Visitor can get idea without any click on the website. Scrolling facilities to know which companies’ products are available are another outstanding feature of this website. Search engine facilities available in the website help one reach the page one wanted just by placing the name in the textbox and by a single click. Structure of the site is also very good by placing the product category on the top.

Email facilities to get special offers are available in the website, but it takes long time to get reply from administrator of the website. Except this, all other features of this website are very good, and therefore, one can rate this website as four out of five.

Two competitor sites taken for comparison purpose are Wal-Mart and Best Buy site. Each of these websites has got different styles and each varies from each other. In Wall-Mart website various product-wise departments are placed in the first page itself. Buy placing mouse on each of the department, one can see various products available under that department. Best Buy website is similar to RadioShack as it has got animation facility for showing details about newly available products. All these websites have got search facilities in the website.

Analysis of Radio Shacks website compared to a competitor like Wal-Mart

While analyzing RadioShack website with Wal-Mart, RadioShack website has got more features than Wal-Mart website. RadioShack website is more attractive than Wal-Mart. Just from the front page itself, visitor can get an overall idea regarding the products and their details. Names of products given in first page of the website which has got free shipping are also very useful for the visitor to get awareness of those products. The email facility provided for knowing about the latest offers regarding products is also very attractive. Categorized sections placed on top of website are also very easy for visitors to know about details of the product visitors are seeking for.

Conclusion and Recommendations

Everything about RadioShack Company has been researched properly. Being a company started many years back in a very small way, now it has reached in a position where it is very difficult for others to reach. Even though there are many competitors fighting to get over RadioShack, nobody can make any impact on RadioShack. Success of RadioShack is strictly following their strategies and rules and also fine-tuning their rules very neatly. Even the recent recession didn’t affect them badly. This is because of adherence to their policy and rules.

As a recommendation, there are certain areas which should be taken into consideration by RadioShack to improve their overall performance to stay in the market among competitors. One important thing they need to keep in mind is regarding customer relationship. They should always be very careful while handling the customers. To make the customers happy is very important. Another important recommendation is regarding maintaining the website. Presently majority of the customers are retrieving information about product through company’s website. So, keeping the website without updating will make the customers confused and they won’t get the correct information when they search. This will be bad for company’s image and reputation.

Appendix

Annual Report

Annual Report

Annual Report

Annual Report

Annual Report

Annual Report

Annual Report

Key statistics

VALUATION MEASURES

Market Cap (intraday): 2.44B
Enterprise Value (17-Nov-09)³: 1.87B
Trailing P/E (ttm, intraday): 12.03
Forward P/E (fye31-Dec-10)¹: 12.88
PEG Ratio (5 yr expected)±: 1.10
Price/Sales (ttm): 0.58
Price/Book (mrq): 2.43
Enterprise Value/Revenue (ttm)³: 0.44
Enterprise Value/EBITDA (ttm)³: 4.126

FINANCIAL HIGHLIGHTS

Fiscal Year                
Fiscal Year Ends: 31-Dec
Most Recent Quarter (mrq): 30-Jun-09
Profitability
Profit Margin (ttm): 4.80%
Operating Margin (ttm): 8.39%
Management Effectiveness
Return on Assets (ttm): 10.77%
Return on Equity (ttm): 22.45%
Income Statement
Revenue (ttm): 4.25B
Revenue Per Share (ttm): 33.691
Revenue Growth (lfy)³: -2.90%
Gross Profit (ttm)²: 1.92B
EBITDA (ttm): 453.50M
Net Income Avl to Common (ttm): 204.10M
Diluted EPS (ttm): 1.62
Earnings Growth (lfy)³: 17.90%
Balance Sheet    
Total Cash (mrq): 930.80M
Total Cash Per Share (mrq): 7.436
Total Debt (mrq)²: 720.10M
Total Debt/Equity (mrq): N/A
Current Ratio (mrq): 3.42
Book Value Per Share (mrq): 7.988
Cash Flow Statement
From Operations (ttm)³: 296.90M
Free Cash flow (ttm)³: 167.26M

TRADING INFORMATION

Stock Price History
Beta: 1.95
52-Week Change: 101.55%
52-Week Change (relative to S&P500): 79.52%
52-Week High (): 20.57
52-Week Low (): 6.47
50-Day Moving Average: 16.80
200-Day Moving Average: 15.10
Share Statistics
Average Volume (3 month): 4,170,590
Average Volume (10 day): 6,721,600
Shares Outstanding: 125.19M
Float: 124.79M
% Held by Insiders: 0.43%
% Held by Institutions: 100.50%
Shares Short (as of 26-Aug-09): 14.78M
Daily Volume (as of 26-Aug-09): N/A
Short Ratio (as of 26-Aug-09): 5.3
Short % of Float (as of 26-Aug-09): 11.80%
Shares Short (prior month): 15.01M
Dividends & Splits
Annual Dividend: 0.25
Dividend Yield: NaN%
Dividend Date: 16-Dec-09
Ex-Dividend Date: N/A
Last Split Factor (new per old)²: 2:1
Last Split Date: 22-Jun-99

See Key Statistics Help for definitions of terms used.

Abbreviation Guide:

  • K = Thousands; M = Millions; B = Billions
  • mrq = Most Recent Quarter (as of 30-Jun-09)
  • ttm = Trailing Twelve Months (as of 30-Jun-09)
  • lfy = Last Fiscal Year (as of31-Dec-08)
  • fye = Fiscal Year Ending

1 = Data provided by Thomson; 2 = Data provided by EDGAR Online;

3 = Data derived from multiple sources or calculated by Yahoo! India

Reference

Lloyd, M E. (2009). RadioShack profit falls, but wireless sales show strength. The Wall Street Journal, Business. Web.

RadioShack connects technology with consumers. (2009). RadioShack: Corporate Information. Web.

RadioShack continues moving consumers to action – launches free online DTV transition. (2009). Reuters. Web.

RadioShack Corporation announces financial results for the third quarter 2009: About RadioShack Corporation. Web.

RadioShack Corporation announces financial results for the third quarter 2009: First nine months results: Selling, general and administrative. Reuters. Web.

RadioShack corporation board of directors declares dividend. (2009). Stock Watch. Web.

RadioShack Corporation financial and strategic analysis review: Scope. (2009). Bharat Book Bureau: Your One-Stop-Shop for Business Information. Web.

RadioShack Corporation (RSH): Key statistics. (2009). Yahoo Finance. Web.

RadioShack Corporation (RSH). (2009). Yahoo Finance. Web.

RadioShack joins with Lance Armstrong to raise awareness for Livestrong: About RadioShack Corporation. (2009). RadioShack. Web.

RadioShack (RSH): WIKI analysis: Competition and Metrics. (2009). WIKI Invest: Featured Brokers. Web.

RadioShack – SWOT framework analysis. (2009). Research and Markets. Web.

RadioShack. (2009). ADVFN, India. Web.

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