Rebel Sports As A Cost Leader example essay topic

Introduction The objective of this report is to find out what would be the long-term effect on Pacific Fair's profitability if tenancies were given out to businesses with existing competitors in Pacific Fair. Evaluation was based on Michael Porter's model of generic strategies to determine whether two competing businesses, Rebel Sports and Zelus, are able to co-exist by exploiting their own competitive advantage. 4 Detailed analysis will be based upon whether Rebel Sports and Zelus engage a cost leadership or product differentiation strategy. Later on, the scope of these strategies will be examined and a conclusion will be deduced as to whether the level of competition between these two stores brings about any benefit to the center. Product Differentiation O Nike is world renowned for being a supplier of quality sporting equipment and clothing products. With such slogans as, "If you have a body, you are an athlete.

And as long as there are athletes, there will be Nike", Nike has targeted athletes specifically. This allows them to define themselves as a product differentiator in the sporting goods industry. O Zelus relies on the loyalty of Nike customers, and the belief that their customers see their products as superior to any competitors' in the industry. It is because of this loyalty that Zelus can charge slightly higher prices in its stores than general sporting goods stores, such as Rebel Sports. As stated in the text, customers are willing to pay more to obtain the extra value they perceive. O Focus strategy is a strategy with which an organization concentrates on a specific regional market, product line, or group of buyers.

3 Nike implements a focus strategy for groups of buyers as well as in regional markets. The focus on serious athletes is obvious from the company's advertisements and quality standards. There are also regionally focused products such as, Bauer Nike Hockey, based in Montreal, Quebec, which is the world's leading manufacturer of hockey equipment and a wholly owned subsidiary of Nike, Inc. If Pacific Fair were to allow another sporting goods chain to open a store in the center, it really should have no effect on Zelus' current sales. It is likely that more customers would be drawn into the center because of the new store opening; nevertheless the customers that are loyal to Nike would remain there. Cost Leadership "An organization implementing an overall cost leadership strategy attempts to gain a competitive advantage by reducing its costs below the costs of competing firms".

Rebel Sports is thought to be a cost leader due to the following observations made while visiting the store: O Rebel Sports is able to reduce its costs as a result of taking advantage of economies of scale. Through observation, it was noticed that the size of the branch in Pacific Fair is quite large, and that there are at least 11 salespersons on duty on a normal working day. Thus, Rebel Sports is taking advantage of managerial, technical and purchasing economies of scale. O After comparing the prices of some of Rebel Sports' products to other competitors' prices, it was noted that Rebel sports had an overall lower price level.

The same pair of sandals cost $80 in Rebel Sports, compared to $100 being the Zelus' price. A soccer ball costing $20 in Rebel Sports was found to be $60 at Zelus. Also, during an interview with one of the salespersons, another discovery made was that Rebel sports have a policy of beating its competitors' prices by 10%. It has thus focused on retailing sporting equipment at low prices, which is a quality of cost leadership strategies.

O The fact that Rebel Sports achieves economies of scale enables it to use its funds to concentrate on extensive promotion policies, noted at the store. Therefore, by keeping its costs low, Rebel Sports can offer its products at lower prices than those of competitors, while still making profits. Rebel Sports follows a cost leadership strategy. This gives it the strength of selling products at very cheap prices. If competition enters at Pacific Fair, Rebel sports will face the pressure of streamlining it's operations and hence reducing costs, which will further lower prices for customers. It will also persuade Rebel Sports to extend its product line and offer an extensive range of products to counter-competition.

The benefit for Pacific Fair 'a more customers attracted towards lower prices and a variety of products. Analysis: How these competing stores will prove profitable to Pacific Fair O There are advantages for Pacific Fair allowing competing stores with distinct strategies, such as Cost Leadership and Product Differentiation. These two competing stores for example, will vitalize the shopping center itself, attract a wide range of local customers as well as tourists, and make the best use of being the largest shopping center in Gold Coast. The vitalization of the shopping centre O Competing stores will be compelled to meet customers' needs according to their strategies.

For instance, Rebel Sports, as a cost leader, will challenge their price and carry a broad range of products whereas Zelus, being a product differentiator, will offer high quality image products, availability of new products and limited edition products. This competition will maintain current customers and likewise attract new customers to the shopping center. Attract wide range of customers O Location of Pacific Fair attracts local customers as well as many tourists. A product differentiator will definitely draw tourists to the shopping center along with a cost leader will satisfying ordinary needs of local customers.

Advantage of available extent shopping centre O Pacific Fair being the largest shopping center in Gold Coast is known as a convenient place for many shoppers. This shopping center is able to have competing stores under different strategies that will offer choice to customers and fulfill their needs. Competing stores with varying business-level strategies will be a great advantage to Pacific Fair in keeping current customers and drawing new customers in the future. Needless to say, attracting a wide range of customers and satisfying their needs will lead to enormous profit for Pacific Fair.

Conclusion From the analysis conducted, it is safe to conclude that although Rebel Sports and Zelus (Nike) are in competition with one another, their individual business strategies allow them to compete in a healthy business environment. An interesting point to be noted is that there is an unwritten business policy stating that should a store not carry an item needed by a customer, it will refer the customer to another store within the center that may carry the product in question. As such, it is right to say that each of these competing businesses has a unique strategy and is capable of identifying a competitive advantage to compete creatively with its rivals. At the end of the day, having such diverse businesses in Pacific Fair will help maintain the shopping center's image as a one-stop shopping center.

Inevitably, this will attract new customers to the shopping center while satisfying the needs of existing shoppers at the same time. Giving tenancies to new business in competition with existing businesses, will therefore allow the center to sustain long-term profitability. On the other hand, it should be kept in mind that a shopping center filled with stores of the same industry will not achieve this long-term profitability. Therefore, the management must be careful in considering which businesses in general, to give tenancies to, keeping in mind that there should not be an over-load of similar businesses. 1 web 2 Cost comparison conducted between store name and Rebel Sports on 17/10/2003.3 Griffin, R.W., Management, Houghton Mifflin Company, pp 231-261 4 web.