Essay: operation management

Introduction

In a new place a person tries to explore and find all those places which can fulfil his needs like shopping clothes, providing good food, cinemas and electronic good shops are among the top few of a long list. We came across in our search to various shops and organisations which provide the same type of services, but they do not provide the same kind of services (berry et al,1998) according to behavioural scientist when people recall their experiences they do not remember the whole episode in fact they tend to remember the ending if the ending is good then tend to remember that product ( chase and dasu,2001), though there are loads of retail shops on the high streets as well as on the internet but the unique concept of Argos attracts my loyalties towards it. In this case study i am going to talk about Argos, its service concept, its service delivery, and would finally conclude with some suggestions. Argos involve a unique concept of catalogue showroom retailing, was formed back in 1973 by green shield stamp entrepreneur Richard Tompkins, from then to now it has grown from strength to strength though the concept of catalogue retailing is not very successful in UK markets. Its corporate history, with two periods of independence and two periods as a business unit in a conglomerate, is of interest but all these managerial transfers Argos never brought a gap between consumer expectation and management perception of the consumer expectation (berry et al, 1988). Its innovativeness, through its catalogue development and format experimentation, makes Argos important (sparks, l., 2003). High street shops has been the traditional way of shopping and catalogue shopping has been termed as an option for high street shops, one of the striking features about Argos is that it is a hybrid between high street and catalogue shopping, ( McKay, 1987)

Argos is unusual in its approach and success, today Argos is UK’s number one retailer for toys ,jewellery, sports and leisure equipments, small electrical appliances, beds and beddings, home and office furniture, land line phone, watches the list is almost non ending because of this today it has got over �4.20 billion in annual sales and operating from over 700 showrooms across the UK, as well as through the Internet and television but still having a such wide range of products Argos approach is not product base, it is still very much focussed on customers that is reason the catalogue book is getting bigger year after year. Argos is important Firstly because it has a format that is innovative and different and one that has succeeded over a considerable period from 1973 to till date. Secondly, Argos gives a special importance to the consumer psyche, Clarke (1998, p 89] states, on catalogue use, ‘the Argos catalogue seems the ultimate handbook for the inactive armchair shopper … and acts as a portable shop window’. The basic operation of retailing is relatively simple to describe and understand. A seller gets together certain products or services and offers them for sale to consumers or customers. In traditional way, this offering for sale is done through a fixed store. Consumers make purchases from the store, which satisfy their needs. In such type of retailing there is a fierce Competition amongst retailers which changes from time to time depending upon the market scenario. The traditional way of purchasing is when the customer visits the store and selects, with or without the aid of the staff; the merchandise is then purchased and taken away by the customer or delivered later, depending on the products. Retailers have to pay an extraordinary amount of attention on obtaining the best locations and to provide an appropriate range of products in the store for their target customers. Apart from this the cost incurred in land building staff their training are expensive components of the retail operation. An alternative approach of retailing is a distance-selling operation such as mail order. Working from an advertisement or a catalogue, consumers choose, normally in their own home, the products they wish and order them for home delivery. From a business perspective, the use of catalogues and mail order compensates the need for high cost which is incurred in traditional retailing as mentioned above. This type of merchandising is different from traditional retail in one more ground that here there is a time gap between purchase decision and physical ownership of the product. Argos presents a perfect hybrid of these two broad approaches of retailing that is traditional and mail order which now has changed into multi channel retailing involving web, phone and television. Argos catalogue operates as showrooms. Historically Argos was known for its high street stores, still today high street shops account for the majority of Argos business these high street shops are fixed retail outlets, but they are not shops in the traditional sense they are Places to order and collect rather than to browse and purchase. The researching about the desired merchandise takes place at home through the catalogue ( in most cases), which is obtained from the store. In this way the high costs of prime sites and expensive fixtures, as well as sales staff, are reduced also the store are organised functionally for processing rather than organised for selling and display. The ‘merchandising’ expense is in the catalogue, which has to be made available to the customer, and in advertising the catalogue availability. The catalogue therefore plays the role of a sales instrument, which combines details about the product as well as its pricing to the consumer, it also illustrates both what the product looks like and, on occasion, what it is suited for. Few academic papers have looked at modern catalogues themselves and their use, Clarke (1998), examined catalogue use among selected families, considering Loot and Argos. With respect to Argos, Clarke identifies a social and reference use for the catalogue amongst families of different social groupings. She sees the Argos catalogue as “the ultimate handbook” . it is to be noticed that companies usually think of themselves as builder of things and state their operating profit and other measures of success solely in terms of the product, argos is different it sells the product but it is its unique service that attracts the people ( allmendinger and lambreglia,2005)

Service to customers can be divided into three major components (Rakowski, 1982)

Pre transaction, in this there is the pre contract of the customer with the service provider; this could be done by various means like advertising, technical information, written policy. In case of Argos the pre contact is basically through catalogue and also from mouth to mouth publicity of purchased products and hassle free service Transaction, this involves two points personal contract and pre delivery. In personal contract is included sales call, demonstration and order placement. In Argos there is personal contract through the catalogue, the catalogue gives every basic detail about the product, if a person visits the website then he can read reviews of other customers too. The second point in transaction is pre delivery. In case of Argos transportation facility is available for selected articles, but for most of the products customer has to go to one of the high street shops, before that one can only see pictures in catalogue and only imagine about the product. Post transaction, this again involves two parts delivery and post delivery, delivery involves the receiving and installation of the product, at Argos the customer takes the delivery and has to rely on the manual given with the product. The post delivery service involves technical assistance and support by the brands which have been purchased

One of the myths of business is the classic definition of marketing that is concerned with the getting and keeping customers. It is a general practise followed by most organisations whose effort focuses on getting the customer rather than the keeping of them. All plans to increase customers are focussed on hooking new customers rather than keeping of new customers, the stats show that it takes five times as much effort, time and money to attract a new customer than it does to keep an existing customer. The importance of customer retention is underlined by the concept of the lifetime value of a customer. Life time value = average transaction value*yearly frequency of purchase*customer life expectancy (Christopher, m., 1992). But if the organisation religiously follows and time to time evaluate customer service components then the chances of customer retention increase because excellent service is a profit strategy resulting in more new customers, more business with existing ones and loosing fewer customers, Argos have done the same from 1973 to till date.

Service concept of Argos

Edvardsson and Olsson,1996 refer service concept as the prototype for service and define it as the detailed description of what is to be done and how is it to be achieved. While lovelock et al,1999 denotes the WHAT with service marketing and HOW with the service operation concept. From its establishment from 1973 the slogans have been changing from time to time for Argos. In 1973 the slogan for Argos had been “buy it at Argos and pocket the difference” this changed to “famous names at unheard of prices” in 1977. One of the strongest features of Argos retailing is its catalogue and in 1983 Argos came up with a new slogan this time focussing mainly on its catalogue
“you cannot put a good book down”. For Six years this slogan was used and only in 1989 Argos changed it to “Argos take care of it” again this slogan was used for ten good years before it was replaced with “it is not just the money you save” this was one of the short lived slogans for Argos which was changed to “brighter shopping” very next year. Currently Argos is using the slogan “do not shop for it, Argos it” (Argos history, 2003). Here we see clearly that through out the years argos have been changing as per the needs of customer and trying hard to reach it (edvardson et al,2000) As we look into all the slogans used by Argos from time to time we see that they focus on few things in every slogan. These things are 1) prices are on the lower side compared to other retailers 2) at Argos one does not need to compromise on brands 3) catalogue contains all the necessary information about the products 4)shopping at Argos is an alternative to shopping for products offered by Argos. If we combine all these points we come up with the service concept of Argos: competitive priced, branded, wide range products which could be seen and understood at home with the help of catalogues, and bought in a hassle free way from nearest high street shop. It needs to be added here from customers’ point of view that they exactly what is in the service concept, at least the existence of Argos for last thirty six years strong hold this fact

Marketing position of Argos

As already discussed Argos have started as a private limited company then went to BAT conglomerate then again transformed into public limited company and currently is functioning in the home retail group conglomerate, for any business entity going from one hand to other can always be difficult, for Argos the story is not different but Argos sailed all odds and ends because of it unique hybrid nature of high street shop as well as mail order firm, it survived because not of managerial skills of its managers but because of unique concept it followed and which was liked by peoples, it has got a very loyal base of customer and its catalogue is an important book in many British household , Argos today claim to be the second most visited internet retail site in UK, the company serves about 130 million customers every year. For financial year 2008 Argos showed a sale figure of 4.2 billion pound sterling.

Argos elements of value

In service intensive business both explicit services and implicit services impact the customers’ level of satisfaction. Explicit services are the value offering services for which the customer is paying eg at a barber shop it is the haircut and implicit services are the customers unspoken expectations about how the explicit services will be delivered (Hanna and Newman, 2001 p22). The explicit characteristics of Argos can be summarised as 1)unique concept of retailing combining both mail order as well as high street shops 2) prices which are always on the lower side compared to other retailers 3)catalogues which are sort of window shops in fact better than them as they contain almost every basic details which a customer wants to know before making a purchase 4)shop which are easy to find, about 700 stores in UK and Ireland 5) availability of trusted brands 6) good after sales service, especially on those products which are manufactured by Argos itself 7)orders can be placed on internet. Well the implicit characters of Argos can be summarised as follows 1) at shops processing time for customers are displayed 2) the catalogue comes twice each year, so consumer gets a variety 3) availability of stock can be checked from via internet 4)reviews of consumers can be read, the reviews are neutral and do not favour Argos 5) shops are located in high streets which make it easy to locate(95% of great Britain population are within 10 miles of an Argos store) 6) Argos success over the years lies in one major factor its reputation build in years in terms of great customer choice, Argos aim to expand the range of products with as much choice as its customer want from it.

Service quality at Argos

Researches have sought attribute that are important in measuring the quality of various types of services. Zeithmal et al, 1990 have given five major attributes important in describing service

Reliability: it is the ability of performing the promised service dependably and accurately. Argos do a pretty reasonable job in this front, they provide a large range of products at a reasonable price through multi channel retailing. Responsiveness: it is the willingness of help the customers and provides prompt service. At Argos the catalogue is the first contact between the consumer and the shop the catalogues are so designed that they try to give every possible basic details of the product, though at high street shops it is difficult to get hold of some employee for details regarding products Tangibles: they are the physical facilities, equipment and appearance of personnel, for booking a order, order slips are placed properly, visual machines giving information about availability of products are installed. As soon as the consumer pays the money he/she gets a token number and also knows about estimated time to get the product. There are ample numbers of chairs to sit and wait for the item shopped, normally the waiting time is 2 to 5 minutes. Assurance: is the knowledge and courtesy of employees to convey trust and confidence, in Argos the basic information is given through catalogue and it has been the instrument of trust for last thirty six years, but if employees are enquired about a product they help the customer to best of their capacity. Empathy: is the caring individual attention provided to customer, since the customer knows what he/she wants, here the customer should easily get a order form, pen to fill the form, all these things are in abundance at several counters.( vonderembse and white,1996, p 80)

ARGOS: SERVICE DELIVERY SYSTEM

ACHIEVEMENTS OF ARGOS ITS FUTURE AND PROBLEMS

Argos has existed for last thirty six years and has moved from strength to strength. Instead of problems related their ownership issues they have emerged to be one of the biggest retailers in United Kingdom and Ireland, though they have tried to expand globally as in Netherlands and more recently in India but they failed but as far as the question is regarding its functioning in united kingdom it is among top performers. The success of Argos lies in the fundamental which it used from its existence and still is using it, any system with fault cannot remain in use for such a long period. In all its mergers and demergers every time Argos emerged to be more bigger than previously, reason being that Argos have never rested on its laurels and have continually developed new concepts to make customer shopping experience more benefit able and enjoyable, but still Argos need to look into certain key issues. Argos clearly understood waiting time effect on demand (Andrew and parson,1989) and surplus capacity effect on operating margins (Thompson, 1998) the challenge involved in balancing supply and demand. The company ran a lean operating model. Its stores tended to be relatively small, averaging about 14,000 square feet. Yet, within these stores, Argos typically offered 11,000stocked items. In many cases, only one item was in stock at any given time. When it sold, customers would have to wait up to a week or more for the item to be replenished. Complicating matters was the fact that Argos’ shops used 45 different systems to manage the company’s complex supply chain. Some of these applications were more than 15 years old and nearing the end of their useful life. Argos conducted a strategic review of its supply chain capabilities. The results confirmed what was suspected: the existing supply chain management systems would hinder the company’s ambitious plans for growth and the further development of its multichannel sales approach. After reviewing its options, Argos enter into an innovative co-development relationship with Accenture and Oracle Corporation to build a solution based on Oracle Retail Advanced Inventory Planning and also decide to outsource application management to Accenture. Following to the advices of Accenture Argos implemented a leading edge replenishment capability�based on advanced Oracle Retail technologies�without disrupting business operations or customer service. At the same time, Accenture worked closely with Argos to make significant in-store changes. For example, a new stockroom lay out for all Argos stores freed additional space and increased speed of service. The team also recommended Argos stockroom adjustments, making faster-selling items more accessible to sales associates now Argos stores have been able to reduce their levels of safety stock held in inventory, reduced inventory costs are on track to generate more than �100 million by 2010.

Conclusion

Till now retailing was basically from shop, mail retailing which further increased to teleshopping and internet shopping As other retailers move on to the Web, and as customers become more and more use to of internet usage that is the Internet searching and trusting of the medium, definitely the number of competitors for Argos is going to increase. Though Argos have done a good work in multi channel retail, in fact they are considered to be the pioneers of such retailing, in fact because of their excellent services they have won multi channel retailer of the year for two consecutive years, in 2006 Argos delivered 12.5 million items to customers home, which accounted for approximately one fifth of Argos sales. But still the catalogue still remains the backbone of Argos merchandising, with the catalogue in the home. Argos had a reference monopoly. With everyone on-line, this may no longer be the case as Argos would be opened up to a variety of comparisons and competitions. Argos has to build up on what it had earned in these years, it has to continue doing good work in internet and telephone retailing but it should also be aware of not getting carried away otherwise the uniqueness that is the hybrid nature of Argos on which it has survived would get lost. Argos should continue to carry on with multi channel retail but without losing its grip on catalogue and high street combination retailing.

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