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Marketing Research of Dick's Sporting Goods -
April 1st, 2011
Dick's Sporting Goods, Inc. (NYSE: DKS) is a sporting goods retailer, headquartered on the grounds of Pittsburgh International Airport in Findlay Township near Pittsburgh, Pennsylvania, Dick's has 409 stores in 40 states as of August 1, 2009, primarily in the eastern half of the United States. The company also owns Golf Galaxy, Inc., a multi-channel golf specialty retailer, with 91 stores in 31 states.
Founded in 1948 by Richard "Dick" Stack at the age of 18, the chain has expanded enormously since the 1990s, in part through acquisitions, and is now one of the largest in the world.
Teece (1982) acknowledged that that basic premise is that higher the resource requirements of one particular mode of entry, the harder it is for a firm to recoup its investment and to make a profit. Cost argument suggests that the costs of setting up and running a wholly owned operation may be lower than those of an equity joint venture, for instance. The reason for this is that firms often simply duplicate what they have done successfully in other overseas markets. Thus, they incur minimal new resource-based costs. Further, some resources are consumed in coordinating the interests, goals, and management between the partners (Madhock, 1997). The main premise of the cost argument is that the total combined costs are often higher for venturing than in operating in wholly-owned. Foreign firms choosing the full ownership mode can pursue their own strategies, while partnerships have to incorporate the needs of local parties, local responsiveness versus cost reductions, that is (Pan, Li and Tse, 1999). Market share performance therefore is also important for firms pursuing expansion strategies.
Franchising is the method of practicing and using other individual’s or business’ philosophy of business or the proven methods or trademarks on conducting businesses. Franchising is more common to service industries like the food retailing industry. The advantages of franchising are quicker start, expansion and training. Franchising offers the advantage of starting a business with trademarks and practices that are already proven effective (Kissikov). As well, franchising allows cross-country expansion and the opportunity to choose to leverage to build a distribution network. Finally, franchising comes handy with training support to start the business. However, franchising disadvents individual franchisors with control, price and conflicts (Steinberg and Lescatre, 2004).
Franchising is the most viable method to distribute goods and services that knows almost no boundaries in terms of business categories in such a way that can positively influence the economic development through establishment of new business and job creation (Mendelsohn, 2004, p. 5). Franchising is a proven way in developing successful new business ventures whereby the keys are said to be prêt-a-porter solutions and tried and tested method and systems with the support of experienced franchisors. Franchising offers a variety of business opportunities for any potential franchisee. The principle of franchising follows a simple logic: as the companies continuously grow, there is the drive to permit a license to others to assist in further establishing product or service, especially in new territories.
Andersen (1992) categorised franchising into two: product-trade name or as business format franchisor. The difference is that product-trade name franchising makes use of franchisees to distribute a product under a franchisor's trademark while business format franchising is designed for the purpose of replicating the entire franchisor's business concept including the marketing strategy and plan, the operating manuals and standards, and quality control in various locations. Rapidly increasing demand for goods and services, expanding urbanization, increasing mobility, more women in the work force, rising disposable incomes, and a shift to service-dominated economies are the developments that makes international franchising a dominant force in the market (Preble and Hoffman, 2002). Preble and Hoffman (2002) maintain that franchising is sufficiently developed in these countries to warrant a trade association. Fast food, food retailing, and non-food retailing were most frequently reported as areas of rapid franchise growth. Huszagh, Huszagh, and McIntyre (1992) regarded that either these sectors are more suited to franchise strategies, or that first movers in these sectors have developed efficient routines.
The first step in conducting research is to examine the reasons why research is being undertaken. Determining the research purpose sets the stage for the rest of the research plan because it lets everyone (e.g., researcher, client, outside firms) with a stake in the outcome of the research know the general philosophy of the project and also establishes the urgency of the research.
As we noted in the Marketing Research Tutorial, marketing research serves as the foundation of marketing since it is used to support all marketing decisions. Marketers use research to support decisions in five important ways: explanation, prediction, monitoring, discovery and hypothesis testing. Thus, the purpose for research falls into one of these categories.
Explanation - Possibly the most cited reason for conducting research is to use it to explain why something is occurring. Most often this means identifying and explaining a problem facing the marketing organization. For example, marketers may seek to know why sales in a certain geographic region are declining when it was forecasted to rise.
Prediction - Research is used to help assess a situation and predict what may happen in the future. This type of information is critical in many marketing decisions such as forecasting demand for a new product. It is also used to predict what may happen if something is changed such as a key marketing variable decision (e.g., effect on sales if price is changed).
Monitoring - Many decisions made by marketers must be monitored to insure that goals are being attained. A sales manger, for instance, will look to monitoring research in order to track the performance of the sales force in meeting sales targets.
Discovery - Most marketers are continually on the look out for ways to improve their marketing efforts. Improvements may include such things as new product options, ways to increase sales or decrease costs, promotional approaches that improve the company’s image and many more. Finding new opportunities is sometimes the result of luck but more often the marketer engages in research to locate these.
Hypothesis Testing - Finally, marketers use research to help test theories or “gut feelings” about some issues. For instance, a marketer may suspect there is a difference between the purchasing habits of one type of customer as compared to another type. Hypothesis testing, which is at the heart of scientific research, relies on statistical analysis to help evaluate a hypothesis. It should be noted that each of the previously described purposes for doing research can also be undertaken as a hypothesis test. For example, a marketer looking to explain why sales are declining in a certain region may have a “gut feeling” for why this is occurring and thus can combine explanation with hypothesis testing.