Kingfisher Plc (home improvements) in Greece
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Contents TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc69497134 \h 3Introduction: Organization firm specific advantages PAGEREF _Toc69497135 \h 4Political Economy of Greece PAGEREF _Toc69497136 \h 5Locational advantage of Greece: Porter National Diamond Framework PAGEREF _Toc69497137 \h 7Global Business Practice PAGEREF _Toc69497138 \h 9Market Entry PAGEREF _Toc69497139 \h 11Modes of Operation PAGEREF _Toc69497140 \h 12Conclusion PAGEREF _Toc69497141 \h 13Bibliography PAGEREF _Toc69497142 \h 15Appendix PAGEREF _Toc69497143 \h 16
Executive Summary
According to Kingfisher Plc (2021) website information, the firm is an international home improvement company with a range of over 1380 stores and a team of over 80,000 people. It has a presence in eight countries in Europe operating under retail banners. It provides home improvement services to customers and trade professionals at the stores and on e-commerce platforms. Before venturing into the Greece market, the firm needs to conduct a comprehensive analysis of the operating environment in the country so that they can formulate an effective strategy for success in the Greece subsidiary.
This report aims to conduct an all-round analysis on KingFisher plc and the viability of starting up in the new target market, Greece. It analyzes the firm-specific and country-specific factors that need to be considered for decision making. The report also gives an overview of global business practice, how Kingfisher fits in this practice and how the practices can be implemented in the new market. In the report, a thorough assessment of KingFisher plc's factors would need to assess before engaging in business in Greece was conducted. The advantages of investing in Greece outweighed the disadvantages, and this makes the proposition viable.
Through the proposed global practice strategies, the report has come up with solutions/strategies that may be adopted and implemented to make it possible for Kingfisher to execute their plan of setting up in Greece seamlessly. This report concludes that a company needs to mainly focus on country-specific factors that may affect their goal to set up in new markets. Different countries have different laws and regulations, government policies, economic factors that could either favour or affect business operations.
In this case, the choice of Greece as the target market is concluded as viable as the laws and regulations are lenient on foreign investors. The country's economic conditions are significantly developed, and advanced economically would work well for Kingfisher plc.
Introduction: Organization firm-specific advantages
Brand Reach: Kingfisher plc operates in 8 countries within Europe and with several retail stores, including B&Q, Castorama, Brico Depot, Screwfix, TradePoint and Koçtaş 80,000 employees (Kingfisher, 2021). That creates a suitable footprint for the company as they are easily accessible at the local retail stores. The company can offer products and services to customers and trade professionals, who can access services physically at the stores and through e-commerce channels.
Innovative capabilities: Kingfisher plc has been able to master the innovation of its services. For example, before the COVID crisis started, there was a shift in preference from DIY to D-I-F-M(Do-it-for-me) as the new generation of its consumers lacked skill and time. Since the pandemic started, however, there has been a notable shift in preference for DIY as it is safer, allowing for social distance and is cheaper. The innovation of DIFM opened opportunities, for example, towards the end of 2020, and Kingfisher was able to acquire one of Europe's leading home improvement online services, NeedHelp (Kingfisher, 2021). The DIFM service is expected to grow eventually as the only setback facing it now is the pandemic.
Flexibility: Kingfisher plc has a wide range of products and services ranging from decoration, maintenance, repairs, and extensive innovation projects enable their flexibility as they can meet the wide range of customer needs. Flexibility also in terms of channels of distribution enables, i.e., at the physical retail stores as well as on e-commerce platforms, enables them to widen their customer base.
Corporate Culture: Kingfisher plc has kept all their staff and colleagues in all the retail stores happy by making their welling a priority. That has helped to encourage them to keep doing their best. During this COVID period, all the outlets can handle this challenging time by staying committed, determined, and sensitive. That has helped the business run effectively despite the COVID disruption.
In June 2020, the "Powered by Kingfisher "plan was rolled out to aim for people empowerment and a culture plan (Kingfisher, 2021). The key priorities of this strategy include:
* Development of a balanced operating model
* Creating a trust-based culture.
* Developing capabilities to fuel growth
* Developing leaders who inspire, drive growth and create an all-inclusive culture.
Political Economy of Greece
Price Determination: Market prices of goods and services in Greece are determined in a free price system, i.e., by forces of demand and supply. That would be a challenge for KingFisher plc as the company would then allow the market to determine their goods and services. During this price determination process, there could be underpricing of Kingfisher's specific goods and services, which would cause losses on these goods and services.
Labour and Employment structure: A 2021 summary by the World Bank on Greece indicated that about 73% of the total employment is in the industry and services sector. That means that labour costs in these two sectors are pretty competitive; therefore, there is good pay for workers. Kingfisher plc will need to match the high salaries to keep their employees open up in Greece as the sector they are in (both industry and services) is competitive.
Tax policies: All businesses operating in Greece are subject to tax. The corporate tax rate and Value added tax are set at 24%. Other taxes levied include stamp duty (ranges between 2.4-3.6%) and withholding tax set at 5%.
Kingfisher plc would be subject to all these taxes if they set up in Greece. Taxes will generally reduce the company's profits, and therefore, there is a need to evaluate other countries tax rates and compare them before setting them up.
Transfer Pricing: (Reuters, 2021) states that all companies operating in Greece must comply with the arm's length principle that requires them to keep transfer pricing documentation file (the master file and the Greek documentation file) as well as annually submit a summary information table. The only exception is if the intra-group transactions do not exceed:
* EUR100,000 per tax year (if the annual turnover of the company in Greece is up to EUR5 million)
* EUR200,000 per tax year (if the annual turnover of the company in Greece is ein excess of EUR5 million)
Kingfisher plc can adopt a strategy to overstate their transfer pricing and reduce their reported profits to minimize taxes on their profits.
COVID-19 effect: One of the main economic activity in Greece is tourism. However, since the pandemic hit, there has been a total decline in the economy because of lockdown, banned travel. Therefore, the economy has taken a significant hit, and it would therefore not be advisable to open in Greece yet. Most customers are now opting for online purchasing of items and DIY skills to build and renovate their homes.
Locational advantage of Greece: Porter National Diamond Framework
Firm Strategy, Structure and Rivalry: Kingfisher plc has established a great strategy by ensuring their presence is felt all over the eight countries and 1380 stores that have the broadest reach, the most quality products within Europe. Operating under these large and influential stores has enabled them to establish a solid customer base which has been their competitive edge.
Opening their market in Greece, which is also in Europe, would create a great advantage to KingFisher plc as they are well known throughout Europe, making it easier for them to penetrate this market. Kingfisher plc is also well established regarding global sourcing and supply chain, with a robust operating model, decades of in-house expertise that would help them seamlessly operate new stores in Greece.
Factor Conditions: (Michigan State University, 2021) defines factor conditions as conditions relating to production factors and are relevant for competitiveness, for example, human resources (labour) and infrastructure.
* Human resources, i.e., qualified labour in Greece, forms the most significant percentage of total employment with employment in industry at 15% of the total employment while services industry takes up 73%. Kingfisher plc setting up in Greece would be advantageous as they would quickly source labour at relatively low prices.
* Infrastructure: Greece has very modern infrastructure, i.e., roads, railways, paved roads, and highways which would make it easy and seamless to move inputs into the new market. The communication networks are also relatively modern, making it easy to communicate within all the stores and e-commerce platforms.
Demand Conditions: Greece...