Hudson's Bay Company Mission Statement

When one recalls numerous companies in North America, an endless list of organizations can be compiled, ranging from recent start-ups to historic organizations. Last year, I had an opportunity to gain knowledge in the corporate business field from the most historic company in North America. Hudson’s Bay Company(HBC), a department store retailer focusing on fashion apparel, accessories and home products, which was incorporated in 1670 and has ninety locations in Canada. This paper will explore HBC’s recent changes in a strategic direction as well as corporate level strategies and its implications with using relevant strategy typologies and Michael Porter’s competitive strategy frameworks.

An organization is generally known as a group of

people who creates goals and tries to achieve it, and those goals and objectives are determined by Chief Executive Office(CEO) and top management teams. From an educational textbook, Organizational Theory and Design, where Richard Daft and Ann Armstrong have commented on the importance of external environment and consequential role of top management team, “More often than not, however, the new goals and strategy are selected based on environmental needs, and then top management attempts to redesign the organization to achieve those ends” (55). Hudson’s Bay Company had a change, rather a turning point in 2008 that an American real estate based business man Richard Baker has appointed as a new Governor and Executive Chairman for Hudson’s Bay Company since he bought the company. This is when HBC realized current issues and environmental needs. As Daft and Armstrong argues, “The role of top management is important because managers can interpret the environment differently and develop different goals” (55), Richard Baker sensed the incremental and potential customer needs and he was firm with his new strategic direction. Baker had two main goals: expanding the department stores (M&A) and adapting technology as the main catalyst for satisfying customer’s needs and ultimately for company’s growth.

Hudson’s Bay Company’s vision clearly reveals Baker’s ambitious plan of expanding HBC: “One HBC”.

Owing to the fact that HBC is a parent company, which owns and operates Zellers, Home Outfitters, Lord & Taylor, Designer Depot and Sportarena, it has been challenging in order to manage all to be profitable. In 2013, Baker added one more company to its list, that HBC bought an American fashion apparel retailer Saks Fifth Avenue(Saks), and it is successfully opened in Toronto in 2016. Moreover, it is noticeable that HBC’s new CEO and management team seeks for a growth. According to company’s official goal, which is more commonly known as a mission statement, it states, “HBC targets $1.5 billion in incremental sales and revenue” (“About HBC”), that one of HBC’s main values is Growth-oriented. “We have a 900,000-square-foot store in downtown Toronto,” Baker told the Financial Post after buying HBC in 2008 from American investor Jerry Zucker. “It’s not productive. Instead of having anemic sales in this building that’s too big, why not do something truly exciting?” (Shaw, Financial Post). Additionally, and luckily, Torontonians want Toronto to be more modernized, wherein 2016 John Tory a Mayor of City of Toronto has announced details of a plan to modernize Toronto, (Draaisma, "Tory announces the plan to improve service, save money"). Thus, HBC’s decision of buying and bringing Saks Fifth Avenue to Toronto, a modernized mall with an elegant atmosphere was a rewarding decision and

showcases it was based on keen analysis of external environmental factors. Furthermore, having Saks Fifth Avenue as an extended profit line provides premium and luxury brands, which Hudson’s Bay did not have in the past and as a result, it has been built a level of competency to compete with other premium retailers such as Holt Renfrew and Nordstrom. HBC also announced that it will expand on online sales and Saks will launch an online website as well to better assist customers’ shopping trend. This strategy is highly suitable for HBC’s goal, which is to obtain $1.5 billion in incremental sales and revenue due to HBC’s expanded profit line. However, there is still a question regards to its potentials as it only has two locations out of seven locations decided. Therefore, if HBC decides to operate Saks in long-term, they would have to open five more stores within five to ten years and generate more cash flows from those five other stores.

Daft and Armstrong defines and elaborates strategy as “A strategy is a plan for interacting with the competitive environment to achieve organizational goals” (61) and this assertion assists in understanding Michael Porter’s competitive strategy frameworks. Porter suggested three types of competitive strategies: low-cost leadership, differentiation, and focus and later on differentiate competitive strategies and operational effectiveness, arguing operational effectiveness is merely performing similar activities better than rivals do. Porter then asserts, “A company can outperform rivals only if it can establish a difference that it can preserve” (Porter, 62). According to my experience and learnings from working at HBC, I have noticed there is various attempts in assisting customer’s needs not merely to increase operational effectiveness. For example, HBC has developed an online application, which helps customers to shop with a customized and personalized shopping expert A.I system. On HBC’s website, it states, “Providing customers with a seamless, personalized online experience across all banners and geographies; and establishing a robust all-channel presence using technology that allows for adaptability and facilitates fulfillment regardless of purchase location, fulfillment channel and/or delivery destination” (“Fact Sheet”). According to Daft and Armstrong’s explanation on a differentiation strategy, organizations should attempt to distinguish their products or services from others in the industry (62). Yet, this strategy itself is lacking in uniqueness and has not yet stabilized that it cannot be seen as the differentiation strategy. Competitors play a huge role in determining strategies within the industry where a lot of different or similar strategies battle. Holt Renfrew has been serving personal VIP shopping service longer than, and better than HBC. I have seen many people use Holt’s personalized shopping service while just a few uses HBC’s one. Holt provides highly specialized and personalized service based on a customer database with experienced and fashion-knowledgeable expertise as an associate. Holt’s most of the products are the luxury, which is targeted exclusively to people with ample amount of financial resources. As Daft and Armstrong explained with Porter’s definition of low-cost strategy, “low-cost leadership strategy tries to increase market share by emphasizing low cost compared to competitors” (63), and it does not sufficiently apply to HBC’s new strategic direction either due to the existence of other powerful low-cost competitors such as Walmart and Giant Tiger. HBC’s products are cheaper than Holt’s premium brands, and while Zellers still remains a discount brand from HBC, it does not mean that HBC utilizes low-cost leadership strategy as their main strategy. Then what is the single most applicable strategy for HBC’s recent strategic direction? The various conflicts associated with differentiation and low-cost leadership strategy can be solved with one word: focus. From the understandings and experiences, I have had at HBC have confirmed that HBC’s recent strategy is focused strategy. “With Porter’s third strategy, the focus strategy, the organization concentrates on a specific regional market or buyer group” (63). Last few years HBC has tried to capture a middle-class market by introducing various high-profile international partners such as Top Shop from England. Not only introducing new trendy brands, HBC also has been operated numerous collaborations with the beauty industry. From Josh Kolm’s article in 2016, it showcases HBC’s fine effort in maintaining its original customer segment with adapting new customer trend and technology, “Hudson’s Bay is looking to capitalize on the growing popularity of online makeup tutorials, and it’s enlisting help from the brands it carries to do so” (Kolm, “HBC Collaborates for Beauty”). At the same time, HBC is now able to target a narrower market of premium buyers by having Saks Fifth Avenue. Through this set of activities, HBC could gain a competitive advantage again.

While Porter’s generic competitive strategy framework provides an overview of how HBC’s focused strategy has been applied to its recent strategic directions, Raymond Miles and Charles Snow’s prominent strategy typology gives the wider perspective of the understanding of business strategy.

“The Miles and Snow’s typology is based on the idea that managers seek to formulate strategies that will be congruent with the external environment” (64). There are four types of strategies that can be established under this typology that is, the prospector, the defender, the analyzer and the reactor. While prospector is innovative and risky, the defender is conservative and concerned with stability. I have mentioned above that HBC is now able to compete with premium brands retailer due to an acquisition of Saks Fifth Avenue, and yet they are not utilizing low-cost leadership as their main competitive strategy. Nonetheless, Daft and Armstrong showcases a perfect example of the defender positioning using HBC’s case. “HBC has carefully monitored its margins and spending, maintained its discount brand (Zellers) in order to successfully compete with Walmart, and survived as one of Canada’s only two national department store” (65). Then they further describe how HBC refurbish its brand, “HBC hired Bonnie Brooks in 2008 to revamp its brand”, “She dropped many underperforming product lines and brought in trendy product lines such as Coach and Top Shop” (65). This explanation also supports my

assumption: HBC targets middle class by introducing various trendy and high-profile international brands. Further, and again, HBC is not only targeting the middle class. HBC has decided to take a risk, which is to buy Saks and penetrate the premium brand market and this is the main reason that supports my assertion that HBC is recently treated as the analyzer position. “The analyzer tries to maintain a stable business while innovating on the periphery” (65). As stated in HBC’s “About HBC” page on their website, HBC values growth, and investing in acquiring premium brand was their brave attempt of targeting toward new and more dynamic environments.

In the final analysis, a business strategy has been requiring organizations to be more unique as society’s demand and technological developments are rapid in this information-based society. As Porter has argued and with the further explanations by Daft and Armstrong, a company’s competitive strategy must be different, unique, which means deliberately choosing a different set of activities to deliver a unique mix of value (Porter 64). Moreover, applying Miles and Snow’s strategy typology provides easier understanding of why strategic positioning is an important basis for developing unique activities to differentiate you from competitors in the eyes of customers. Although HBC have had weak quarters and some drops, developing its strategic positioning from the defender to the analyzer as they have been established fine, will further assist HBC in diversifying risk and maintain various targeted groups of customer, which eventually benefits the HBC as a whole.