Global Strategic Management

Current Performance

After failing to secure a buyer following its woes that were financial, mid last year, it was revealed that Poundworld would be closing down all its stores that were still in operation. Like many other high street retailers, Poundworld had been faced with decreasing footfall, increased product cost inflation, reduced confidence of consumers and a discount retail market that had grown increasingly competitive. Competition was so fierce in the discounting industry and other big names came about like Savers, Home Bargains, and B&M all who hit the market with their individual discount lines (Cahill, 2018). For those studying business management and seeking business dissertation help, this case highlights the challenges faced by companies in a volatile market environment.

The woes of Poundworld can be traced back to 2016 when Poundworld began changing its prices. During this period, different Poundworld stores were observed to roll out new shelving bays, where prices would be written down by hand. Towards the end of the year, however, it appeared that the company was set to be saved, this was after a retail Irish family known as Henderson’s stepped in to buy out the best of Poundworld stores in terms of performance in the UK. What made this buyout notable is that back in 1984, Henderson’s had been responsible for opening up the first Poundworld store in Ireland. Towards the end of 2018, it was confirmed that the administrators of Poundworld UK had accepted the offer that had been made to them by Henderson`s to buyout the remaining stores. The collapse of Poundworld led to the loss of up to 4000 jobs and the closure of around 250 stores (MacDonald, 2018). With the buyout it was expected that most of these people who were losing their jobs would get back their jobs after all.

Organisation’s Competitive Environment

The discount retail industry is and has always been very competitive in UK. Next to Poundworld`s Hyde store is Bodyworks, an outlet that sells cosmetics at a discount. Additionally, there is also a B&M Bargains outlet in the vicinity. This is addition to the Quality Save store in the precinct, a Jack Fulton branch and the Iceland in the car park of the shopping centre, all which provide a lot of options for bargain hunters. B&M has been on a massive growth campaign opening up stores all over England.

The main Poundworld competitors are 99p Sores, PoundStretcher, Poundland, Boots and ASDA. 99p is a semi-urban, Middle income group household’s lifestyle and retail store which has quite a wide range of products available for less than £1. It is estimated that the store serves up to 1.5 million customers weekly. PoundStretcher is an Urban, Metropolitan cities lifestyle and retail outlet that is widely known for its pound value products.

PoundStretcher is properly established across the whole of England. Poundland is a lifestyle and retail outlet purposefully established for persons who purchase home, kitchenware, and healthcare products. According to the company`s estimations, it serves up to 3,000,000 customers each and every week. Boots is lifestyle and retail outlet that mainly provides products for the health and beauty conscious people. Boots is observed to sell its products at prices that are way cheaper as compared to its competitors across its 2,500 stores. Walmart`s owned ASDA is a lifestyle and retail outlet that has quite a wide range of product offerings which include financial services. As of today, ASDA has over 150,000 employees who work in its 500 stores. In 2015, Poundworld`s largest rival, Poundland secured a £55million deal that saw it absorbing 99p stores (Genevaz and Vidal, 2017).

Reasons for the Current Performance

One of the reasons for the downfall of Poundworld is certainly competition. During the sale of 99P stores, its co-founder Hussein Lalani says that that was the point he realised that the sector was not sustainable any longer. In an interview with BBC, he said that the single price point model was not a viable option any longer and that was what had prompted the sale. The most damaging move that Poundworld took, however, was introducing a range of multi-price products across its outlets. That had been aimed at offsetting the fall in the customers buying power that had come about as a result of the Brexit vote. That move was, however, largely a failure. The reasons advanced for the failure of this move include the presence of other experienced discounters in the multi-price point offering who retained their customers. The move also led to the loss of trust by customers in the retailer. Poundworld`s failure to maintain a price promise that was in its own name was met with mockery in social media and further created a lot of confusion about the identity of the brand (Usborne, 2018).

Pressure was continuously piled on the already struggling retailer by the Brexit fallout. The retailer had been struggling with huge profit losses that were a result of changes in the sectors shopping habits. Chris Edwards, the founder of Poundworld blames the downfall of the retail outlet on its most recent owners TPG. According to Edward, TPG started recruiting individuals from supermarket backgrounds whose understanding of the discount, fixed price model was vague. This blew up the wage structure of the firm (Morrison, 2018).

And with the widespread competition in the discount retail sector, all discount retail outlets should embark on creating incentives for their different customers. That could be done through the creation of deals that create a sense of urgency. Outlets should, however, not strain themselves to the extent of offering discounts that will be detrimental to them in the long run, or which they cannot sustain. The best way of going about this is keeping it simple. That could be achieved through simple acts like gifting customers with different samples of different products you offer in rather small quantities.

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References

• Genevaz, S. and Vidal, J., 2017. Going Digital: How Online Competition Changed Market Definition and Swayed Competition Analysis in Fnac/Darty. Journal of European Competition Law & Practice, 8(1), pp.30-35.
• Cahill, H. (2018). Poundworld set to disappear from the high street as final shop closures announced. [Online] Independent. Available at:
• Genevaz, S. and Vidal, J., 2017. Going Digital: How Online Competition Changed Market Definition and Swayed Competition Analysis in Fnac/Darty. Journal of European Competition Law & Practice, 8(1), pp.30-35. MacDonald, G. (2018). Poundworld. [Online] RetailWeek. Available at:
• Usborne, S. (2018). Not so penny-wise: the last days of Poundworld. [Online] The Guardian. Available