The situational analysis of Kinko’s, one of the major players in the market of printing and photocopy services, which currently experiences a decline in sales despite having a cult following in the past, has uncovered a wide array of problems and challenges the company has to face. These include the inefficient pricing strategy, a considerable level of competition, the lowered financial stability, and the lack of control over the operations of the store chain. The organization is capable of implementing one of the three strategic alternatives to address the issue – the management, financial, and marketing ones. The choice was made in favor of the management-related strategy, which is to focus on the centralization and reduction of the autonomy of the company’s functional units. The implementation is to be made on the basis of the principles of negotiation and shared responsibility to prevent the resistance to change and create the basis for further improvement.
The positive image of the company can be a powerful asset, but in most cases, it is not enough to ensure the survivability of the firm in the long-term perspective. Being one of the major players in the market of printing and photocopy services, Kinko’s is a vivid example of such a situation, experiencing financial difficulties due to the shrinking consumer segment. To address the problem and restore the stability of the organization, it is imperative to assess its internal and external environment, define the shortcomings in the policies and processes within the organization, and develop the course of actions on the basis of the obtained data. The following work focuses on the comprehensive analysis of Kinko’s and its environment, the identification of the strategic alternatives the company can implement, and the description of the process of implementation of the selected strategy.
Kinko’s was established in 1970 by Paul Orfalea, an entrepreneur who started offering photocopying services to the students of the University of Santa Barbara in California. The lack of competition allowed him to recruit more workers (mostly friends and family members) and expand the business by opening several shops in the area (McGovern, 2005). Moreover, the unique philosophy of the company (e.g. the focus on the provision of exciting experience) has resulted in the cult following, which led to the further growth of the organization during the period between 1980 and 1990. As a result, by 2003, the company has become an international chain, owning more than 1,200 shops in ten countries, including the U.S., and receiving around $2 billion in revenues. However, the XXI century has marked significant changes in the behavior of the consumers, as well as the structure of the market, with the company losing its positions and experiencing a considerable decline in sales and profits (McGovern, 2005).
Situational Analysis Kinko’s
The current economic conditions and trends can be described as unfavorable for Kinko’s. First of all, the copy industry itself tends to shrink, presumably due to the trends related to the digitization of the flow of documents in the companies. As a result, the revenues and margins of the company have decreased considerably, demonstrating a downward trend (down to $1.5 million per store). On the other hand, economic growth has resulted in the trend revealed in the emergence of a significant amount of family businesses, including the ones operating in the copy industry, thus providing for the increased competition. At the same time, there is a decline in the consumer market (around 2% per year) due to the availability of the in-home use of printing technologies (McGovern, 2005).
The cultural and social values and trends affecting Kinko’s are primarily related to the changes in the lifestyle of people over the years, with the busier schedule and a considerable amount of work at hand. As a result, one can observe the trends related to the speed of the provision of services, as well as the convenience of this process, becoming one of the most significant values for the consumers. Additionally, the very culture of purchase has changed significantly, with the clients paying little attention to such concepts as coolness, which has always been a distinctive feature of Kinko’s. As a result, there is a trend revealed in the changed attitude towards the company, from the unwavering, fan-like loyalty to the occasional business relationship (McGovern, 2005).
Finally, the opportunities and threats presented to Kinko’s by its environment are as follows. On the one hand, one can note the extreme loyalty of its customers, which ensures the stability of the company in the long-term perspective and prevents the rapid decline of sales. Moreover, there is a presence of a wide array of foreign markets that are yet to be occupied by the companies engaged in the copy industry, providing an opportunity for successful expansion. At the same time, the list of threats includes the growing share of the mom & pop companies (e.g. small family businesses) in the copy market, the locations of which can be more attractive to the consumers. On the other hand, there is an emergence of the superstores that are more convenient than the specialized ones, meaning there is a risk of the outflow of the clientele. Finally, the printers and photocopiers become more affordable, leading to the loss of customers (McGovern, 2005).
Kinko’s is engaged in the copy industry, which possesses the following characteristics. First of all, it is propelled by governmental entities and educational institutions, as well as technological progress. At the same time, the emergence of the digital methods of the documents’ transfer, as well as the reduction in the usage of paper, has halted the growth of the industry. In turn, the companies started to strengthen their positions and increase their attractiveness to consumers by lowering the prices for the provided services, adding value to them (convenience, speed, etc.) and updating the existing technologies (Lamberg, Ojala, Peltoniemi, & Sarkka, 2012). As a result, the level of competition in the copy industry is quite high, which, in combination with the declining consumer segment, results in unfavorable conditions for such companies as Kinko’s.
The primary competitors of Kinko’s are the superstores and small family businesses. In the first case, such entities offer a wide array of services without limiting the assortment to the printing and photocopying ones. As a result, such convenience may attract walk-in clients. On the other hand, the strong point of small businesses is a significant coverage they provide, as they are often located in the places unavailable to the larger companies. In turn, the majority of walk-in consumers may prefer them to Kinko’s (McGovern, 2005). Moreover, in the commercial solutions market segment, Xerox and IKON are the major competitors, with the first of them being the most developed (over 2,000 reps), while the second one is the most flexible (McGovern, 2005).
The opportunities and threats presented by the copy industry are as follows. First of all, the technological progress provides for the emergence of the printing and photocopying technologies that may attract new groups of clients. Moreover, the paperwork remains one of the key components of many businesses, with physical copies of documents being considered the most reliable ones. Finally, the markets of the developing countries are yet to be penetrated by the companies engaged in the copy industry. As a result, there is a possibility of not only retaining the old clients but also attracting the new ones. On the other hand, the digitization of the flow of documents within the companies reduces the need for the outsourcing of the printing and photocopying services. As a result, Kinko’s may lose many of its loyal customers, suffering considerable financial losses. Moreover, many of the solutions and technologies used by the company are now available for private use, which contributes to an increase in the level of competition and the outflow of customers (McGovern, 2005).
The primary objectives of Kinko’s include retaining the philosophy established by the company’s founder while providing an exciting shopping experience to the customers, maintaining its position on the market, and expanding its presence. On the other hand, the constraints of Kinko’s include the uniform approach to the needs of its customers (e.g. the lack of flexibility). Moreover, the range of services offered by the firm is relatively limited, making it attractive only to the specific groups of the population. Finally, the autonomy of the company’s functional units makes it difficult to coordinate their activities (McGovern, 2005).
The financial condition of the organization is far from being ideal due to the recent decrease in sales, inefficient pricing policy, and declining sales. In particular, during the period between 1995 and 2001, the average revenues of Kinko’s stores dropped from $2 million to $1.5 million. The local business market segment, which generates up to half of the company’s profits, is also declining at a rate of 5% per year. However, the segment of business consumers demonstrates the growth of 5% per year. Still, with it generating only 20% of the revenue, it is not enough to compensate for the losses described above. Moreover, the pricing policy of the firm is quite inconsistent, which also contributes to its problems (McGovern, 2005).
The management philosophy of Kinko’s is based on the principle of autonomy, with each of the company’s branches being handled on the basis of personal talents, values, and abilities of their brand managers (McGovern, 2005). On the one hand, this approach contributes to the flexibility of the firm, making it easier to address the problems that may emerge in the course of its activity. At the same time, such managerial inconsistency provides the conditions for the problematic centralized management of the organization as a whole, making it difficult to implement changes and introduce new strategies.
The organizational structure of the company can be described as functional, as it consists of numerous branches (stores) that retain relative autonomy. In other words, all of them possess a fraction of the action. Despite the presence of a central structure governed by the CEO, most of the problems are being solved at the local level by the brand managers. The organizational culture of Kinko’s focuses on the provision of the exciting shopping experience to the customers. Such a goal is achieved through solving the problems of the clients they are unable to solve on their own. Moreover, the personnel of the organization is to relieve the anxiety of the clientele by contributing to the coolness of the stores and ensuring that the consumers become fans of the firm (McGovern, 2005).
The strengths of Kinko’s include the flexibility of its branches, which makes it possible to adapt to the changes with relative ease, as well as the organizational culture that is attractive to the customers. On the other hand, the weaknesses of the company include poor control over the organization due to the different approaches utilized by the brand managers for managing the branches of the enterprise. Moreover, the coordination of efforts and implementation of changes and new strategies may also be hindered due to the managerial diversity described above. Finally, the poor pricing policy has a negative effect on the profitability of the enterprise (McGovern, 2005).
The firm’s opportunities and threats are as follows. On the one hand, a high level of consumer loyalty makes it possible to retain the majority of the clientele even after the changes in the firm’s strategy have been made, thus giving a chance to avoid considerable financial losses. Moreover, the firm has managed to penetrate several foreign markets, which can be used as the basis for further expansion, as well as the additional sources of income, which are not affected by the local trends. At the same time, the emergence of the competitors that offer the same services while adding the value in the form of convenience (e.g. superstores) may hinder the company’s plans for expansion. Finally, the lowered prices of the printing and photocopying technologies may reduce the need for the services offered by Kinko’s (McGovern, 2005).
The major challenges faced by the organization are as follows. First of all, it is the lack of financial resources due to the decline in sales over the past several years. Moreover, there is an increase in the level of competition, with the other players offering more to the customers (e.g. superstores) or being better equipped to deal with the problems presented by the market (e.g. Xerox and INKO). Finally, there are changes in the attitude of clients towards the company, which affect its consumer segment (McGovern, 2005).
The strategy of any commercial organization is defined by the four core marketing mix variables. The first of them includes products, which are relatively scarce in the case of Kinko’s. In fact, the company offers a limited range of services, apart from using the uniform approach to the customers. In turn, it is possible to expect its popularity to waver in the long-term perspective. The next variable is the price of products. In the case of Kinko’s, it is quite inconsistent, being defined by the brand managers. At the same time, it depends solely on the manufacturing volume (McGovern, 2005). As a result, its services are perceived as quite expensive by the clientele, which does not contribute to the growth of the company’s consumer base. The next variable, the promotion, is entirely in the hands of the firm’s brand managers. As a result, it meets the needs and tastes of the customers in a particular region, making such an approach quite efficient. Still, the number of signs not seen by people (over 30) at a single location dictates the need for improvement. The final element of the marketing mix, the place, is essential for the company. In particular, the outflow of the customers due to the inconvenient location of Kinko’s stores accounts for almost 60% of the total loss of consumers (McGovern, 2005). As a result, it is imperative for the problem to be addressed in the mid-term perspective.
Recommendations and Strategic Alternatives
The situational analysis makes it possible to recommend the following strategic alternatives to Kinko’s. The first of them is the management-related one, which focuses on changing the approach to the supervision of the company’s branches, namely through the centralization and reduction in the level of autonomy. The benefits of such alternatives include constant monitoring of the processes that occur within the organization, and thus the opportunity for the forecasting and prevention of potential problems in the future. Moreover, the tighter control over the activity of the branches may result in reduced resistance during the implementation of any subsequent changes, which is likely to have a positive effect on the firm as a whole (Mudie & Pirrie, 2006).
Another option, the financial alternative, is to be aimed at the improvement of the profitability and stability of the enterprise in the long-term perspective through the identification of the less profitable activities of the company, which are to be limited or even halted. The benefits of such a strategy will include a more rational allocation of resources, as well as the improvement of the cost-efficiency of the internal processes. In turn, the company will be able to utilize the methods of price competition without considerable risks, which will increase its attractiveness to the consumers of all segments (Baker & Powell, 2005).
Finally, the marketing strategic alternative is to change the focus of the company by shifting it towards the most profitable segment of the market (business consumers), as well as implementing the flexible approach towards the needs of the customers (Jain, 2010). In this case, the financial condition of Kinko’s will become more stable due to the reliance on long-term contracts with the business segment representatives rather than the walk-in clients. Moreover, the flexibility will allow the company to stay on par with some of its major competitors, namely INKO.
At the same time, the implementation of any of the listed strategic alternatives is bound to be accompanied by challenges, which stem from the current financial condition of the organization, as well as the threats presented by its environment. In particular, the financial resources of the firm are limited, meaning that the strategic options are relatively scarce. Moreover, the growing level of competition may prevent the alternative from paying off in the future. Finally, the principle of autonomy utilized by the enterprise may result in resistance to changes.
Selection of Strategic Alternative and Implementation
The strategic alternative to be implemented is the management-related one. In particular, it is necessary to centralize the managerial activity, with the core operations being controlled by the single functional unit that includes the CEO, deputies, and directors. Additionally, it will be required to reduce the level of autonomy of the regional branches. The reason for prioritizing the selected strategy stems from the philosophy of Kinko’s management. There is no doubt that the implementation of the other two strategies will have a positive effect on the financial condition of Kinko’s. However, currently, the autonomy of the numerous branches of the company, as well as the diversity of the managerial methods and techniques applied by the brand managers, will make such a goal quite difficult to achieve. In particular, one can expect a considerable resistance to changes in the field of activity related to finances and marketing. In this case, the number of resources and efforts required for their implementation will be considerably larger, which may undermine the competitiveness and even survivability of the firm in the long-term perspective (Cameron & Green, 2015). As a result, it is imperative to adjust the company’s system of management and, in turn, prepare the ground for further improvements.
The new strategy is to be implemented in the following way. First of all, it is required to start the negotiations with the brand managers, which will provide an opportunity for partial concessions and mutual agreement. Team members can also express their opinions concerning the initiative (Cameron & Green, 2015). After the degree of change has been defined, the work with people is to begin according to the following principles. First of all, the staff should become aware of the existing problems. It is also imperative to ensure that the initiative comes not only from above but also from below through sharing the responsibility for the success of the implementation of the new strategy at all levels of the organization. Additionally, there may be the need for the individual compensation of the personnel, including re-training, psychological training, and other similar measures (Cameron & Green, 2015). Finally, at the initial stage, the implementation is to be carried out only at the local level, without affecting the foreign branches of the company, to identify any of its shortcomings and address them before implementing the selected strategy on a global scale.
Any market that exists in the competitive environment, including the one that is focused on the photocopy products and services, is not static. Such factors as consumer values, technology, competitors, etc. are dynamic in their nature. The lack of attention to such changes, as well as the presence of the internal problems, can have a negative effect on the organization as it has been demonstrated by the example of Kinko’s. The analysis of the company has demonstrated that there are many areas in need of improvement, but the management is to become the primary focus of the new strategic alternative. As a result, its internal processes will become more coordinated while the involvement of all workers in the activity will lower the risk of resistance. Consequently, it will be possible to expect an increased efficiency of the firm, as well as develop and implement the rest of the reviewed initiatives.