the warehouse statergy analysis
DESCRIPTION
Strategic analysis of The WarehouseTRANSCRIPT
Group Assignment
The Warehouse Group
Submitted By:
S. No Name Student Id No.
1. Prem Chand 1000021885
2. Prathamesh Edirisinghe 1000016435
3. Sheng He 1000003683
4. Mingya Hu 1000014087
5. Pengyue Ding 1000001813
Submitted To:
Ms. Lydia Harrell
Lecturer in Strategic Management
Submission date: 02nd March 2015
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EXCECUTIVE SUMMARY
The Warehouse group is a largest retailer in New Zealand. It has different stores in under
different brand names all over New Zealand. In this report we have done an extensive
research on The Warehouse, we have given a brief description of the Warehouse along with
the vision, missions and goals and objectives. This report contains macro environment
analysis which includes PESTEL analysis, Porter’s five forces along with the SWOT analysis
of The Warehouse. Report also contains internal analysis of The Warehouse in which we
have written VRIO and VRIN. The Aim of this report to analyse all the factors of an
organization and recommend business level strategies and its implementation.
Business-level strategy is about the way a company use to allocate its resource such as
finance, supply chain management and human resource in order to adopt the strategy that
cannot be imitated by its rivals (Besanko, Dranove, Shanley, & Schaefer, 2013). It aims to
integrates the company’s resource into core competencies that contribute to its competitive
advantages (Hill et al., 2007). It is about to improve a company’s functional operations in
manufacturing, logistics, human resource and so on. The Warehouse is one of the largest
retailers in New Zealand. Its strategies determine its market position and competitive
advantages. The objective of this report is to discuss the business strategies of the Warehouse
Group.
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TABLE OF CONTENTS
S.No. Content Page Number
1. Executive Summary 02
2. Introduction 04
3. Vision, Mission, Goals and Objectives 04-05
4. Macro Environment 05-07
5. Porter’s Five Force 08-09
6. Internal Analysis 09-13
7. SWOT 14- 16
8. Strategy 1 17
9. Implementation of Strategy 1 18
10. Strategy 2 18
11. Implementation of Strategy 2 19
12. References 20
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1. Introduction
As a New Zealand owned and operated large scale retailer, the Warehouse sells a variety of
goods to customers ranging from apparel, sporting, gardening, groceries, and entertainments
to electronic goods. It was established in 1982, and has grown to have 92 warehouse stores
across the country, 77 Noel Leeming stores specialising in electronics and appliances, 64
Warehouse Stationery stores and several online businesses (The Warehouse, 2015). The
group has been publicly traded on the New Zealand Stock Exchange. With the steady growth
and development, the Warehouse has become the biggest general merchandise and apparel
retailer in New Zealand. Besides its own operations, the Warehouse also owns a variety of its
own brands that are located within the stores such as the brand ‘Just’ for the gardening.
The major rivals of the Warehouse in New Zealand are Kmart (discount department stores),
Farmers (groceries), the Briscoe’s (discounted Apparel and home ware stores), and Super
Cheap Auto (automotive products). However, the variety of products sold in these department
stores is significantly lower than those of the Warehouse. The Warehouse is usually able to
offer more choices with lower prices because it has established an extended supply chain with
manufactures in Asian countries and maintained close relationship with these suppliers.
However, although the Warehouse offers lower prices and various choices to customers, it
has been criticised for the poor quality of goods it sold and has recalled some items it
exclusively sells.
2. Vision, Mission, Goals and Objectives
Vision – In 1982, Sir Stephen Tindall founded The Warehouse with a vision of
revolutionising retail industry in New Zealand. The Warehouse group vision is to remain true
to Sir Stephen Tindall’s vision and build a hundred year business which help KIWI’s to
flourish.
Mission Statement
The Company’s mission statement is “Where People Come First and Quality is Affordable”
and it is through this management style of putting people first that The Warehouse has
managed to grow at such a rapid rate. (The Warehouse, 2013)
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Through this mission statement warehouse group mainly concentrates on the customers and
their expectations. To fulfil the customers’ expectations and to amuse them by lucrative deals
this attracts more customers. Quality plays an important role in the retail industry. Warehouse
has a reputed name when it comes to
customer service and quality of the products. Fresh quality products are put for sale in
warehouse. The Warehouse employees work as a team and have a very friendly and good
environment to work in. It all represents the mission statement laid by the founder of The
Warehouse.
Goals & Objectives
Goals - The Warehouse group has an ambitious goal to drive its newly expanded outlets to
rival with the competitors. The NZX-listed retailer has made numerous acquisitions in recent
years, including Noel Leeming, Warehouse stationery. To compete with its rival’s better
customer service and lucrative deals are the main criteria to compete. For better customer
service proper training to the staff and motivational program are carried out by the
management team of warehouse. Motivational program such as increment, incentives
program will motivate the employees. All these factors help to expand the business of
warehouse. The main strategy of warehouse was to dominate sales through sales online as
well as in stores.
OBJECTIVES: The main objectives of Warehouse are to fulfil the customers’ expectations
and also to keep its employees motivated. To compete with its competitors and to rise in the
retail market customer’s expectations has to be fulfilled. To top the retail sector online
shopping also has to be more convenient to use.
3. Macro Environment Analysis
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Macro environment also referred as the external environment are the components used for the
strategic planning for an organisation. The macro environment consists of PESTEL i.e.
Political, Economic, Social, Technological, Environmental and legal.
PESTEL analysis which is also referred as PEST analysis is a concept in marketing values,
it’s a concept used by an organisation to track the environment they are operating or planning
to launch a new venture. (Weberience LLC, 2015)
Political - This factor determine the government stability and its influence in the economy of
a certain organisation. For e.g. The Indian government has passed its new budget in which the
price of Cigarettes, tobacco products, liquor , plastic bags etc. have increased due to which
the entire revenue generating structure of the referred industry might change. (Hindustan
Times, 2015) The New Zealand government has a direct impact on the retail industry in
regards to the trading hours, fair trading and competition. Because of the support from the
government the retail industry in New Zealand is booming and generating a huge amount of
revenue. When it comes to taxation NZ, imports into NZ are tax-free if the duty payable is
less than $60. NZ operates minimum duty on the products which is been import in NZ itself.
(Scholar, 2012) The NZ government has implemented a scheme for the retail market that the
employees can have benefits from the workplace, Warehouse also have benefits for its
employees which help them to save their income as most products are at a very cheaper price
for the staffs. Childcare benefits, medical aid when needed to the employees and its family
will be provided by warehouse.
Economic - This factor determine the economic performance of an organization which
directly impacts and boom for the long term effects. Economic factors include business
cycles, GNP trends, interest rates, exchange rates. The NZ economy showed a strong sign of
recovery following the global financial crisis and the 2010 & 2011 earthquake. Minimum
wages of an employee has been increased by the government which has a positive effects on
the retain New Zealand.
Socio Cultural - Socio cultural is a major factor influencing consumer’s choice. In New
Zealand changing societal concerns, attitude, and lifestyles have resulted in dramatic changes
in the retail industry in New Zealand. In modern world customers are more concerns about
health, obesity etc. due to that health food and eco-friendly organizations are in high demand
in New Zealand. Immigration policy of New Zealand has attracted a ton of migrants from all
around the world and due to that different regional cuisine foods are in high demand.
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Technology & Environment - In modern times due to expansion in internet and electronics
customers prefer online shopping in comparison to traditional shopping. In New Zealand
online shopping behaviour of consumers has forced all the retailers to provide online
shopping facilities to their customers. Retailers are providing new and in-innovating self-
check-in counters in their stores for their customers. Technological advancement has allowed
organizations to reduce carbon emissions, Energy management, reduce waste and recycling.
Porter’s Five Forces:
Threat of New Entrants - New Zealand positive and strong economy and changing
shopping behaviour of customers are attracting new entrants in New Zealand retail industry
big retail giants like wall mart are planning to start their operation in New Zealand. The
Warehouse Group has several years of experience in retail business and existing retail giants
(i.e. Kmart and PacknSave etc.) puts a strong barrier for a new entrant.
Bargaining power of buyers - The bargaining power of customers determines how much
customers can impose pressure on margins and volumes. In New Zealand retail industry
numbers of customers are large but they do not buy in bulk which indicates that bargaining
power of consumers in weak state. In New Zealand it is more economical to buy from one
retailer rather than from a host of retailers.
Supplier Bargaining Power - Supplier bargaining power is likely to be high when the
market is dominated by a few large suppliers. In New Zealand retail industry switching from
one supplier to another is not costly for a retail giant like The Warehouse. The Warehouse
group market share and dominance allow them to dictate the price they are willing to pay the
supplier.
Industry Competitors - Concentration, fixed or variable costs, differentiation, capacity,
pricing, behaviour and market and company growth are some of the factors considered in this
force. The Warehouse's chief competitors in the national retail scene include Farmers (low
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scale department stores), Kmart (discount department stores) the Briscoe’s (discounted sports
and home ware store chains) and Super Cheap Auto (automotive products). In New Zealand
retail industry The Warehouse rivalry is very intense as their rivals use price cuts to boost
their unit sales.
Substitution - In retailing industry there are large number of competitors. In retail industries
switching from one chain to another create low cost for the consumers. The Warehouse
competitors are focusing on price reduction and better customer service.
Internal Analysis:
Internal Analysis is a process through which strengths and weaknesses of an organization can
be identified by analyzing their competencies. In business differentiation in products and
services can be attained through competences which are its resources and capabilities. In
business tangible and intangible asset both are valuable because it reduce cost and add value
to firm’s outputs. Customer gives preferences those products over those of their competitors.
Value Chain Analysis
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Firm Infrastructure – The Warehouse group is a large retailer in New Zealand. It has 92
Warehouse stores, 77 Neol Leeming stores and 64 Warehouse stationary along with several
online businesses. This high number of stores located all over the New Zealand allows The
Warehouse to serve more than 10,000 customers in a day. The Warehouse group follow
“REDUCE, REUSE & RECYCLE” motto in all the stores which give them a competitive
advantage as their operating cost reduces and they earn a good carbon rating which is
appreciated by the government along with customers.
Human Resource Management – Human resource is a key component of The Warehouse
group as they value their employees the most. The Ware house group follows an open door
policy for their employees in which employees can communicate with managers easily. The
Warehouse encourages their employees to communicate openly to share new ideas, take
risks, and have fun. The Warehouse employ 90% of its workforce on hourly wages which are
competitive along with the wages all the employees get comprehensive benefits which
include medical coverage, holiday pay, leave of absence etc. All the benefits are available for
both part time and full time employees.
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Technology Development – The Warehouse group incorporate new technologies into their
daily operations. They have computer base warehouse technology like bar code, self-
checkout counters, and inventory management systems. The Warehouse group has adopted
Wayne’s award winning software programme in their stores. This software allows them to
regulate electricity, air conditioner water supplier etc. on their optimum utilization.
Operations of The Warehouse – The Warehouse group operates on a very large scale in
New Zealand, they have stores all around the New Zealand. The Warehouse group aims to
provide a safe shopping experience for customers and safe work place for all their employees.
The Warehouse group operation give a high priority to environment they give a high priority
to re-cycling.
Primary Activities
1- Inbound logistics - The Warehouse adopts Just-In-Time (JIT) to manage its supply
chain and logistics to maintain its supplying and inventory levels.
2- Operations - There are 92 Warehouse stores, 77 Noel Leeming stores, 64 Warehouse
Stationery stores in New Zealand.
3- Marketing and Sales – The majority of sales in the stores for nationally advertised
merchandise. Ware house stores are open for 13 hours throughout the week. All stores
maintain uniform prices to meet local competition.
4- Services – The warehouse has made after sales standards in their organization.
VRIO Analysis
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FACTORS Valuable Rare Inimitable Organization
Support
Good Price
Positioning
YES YES YES YES
Supply Chain
Integration
YES YES YES YES
Market
Proximity
YES YES YES YES
Customer Service YES YES NO NO
Diversification YES YES NO NO
HR Management YES YES YES YES
According to the VRIO framework of Ware house, there are six types of factors need to
discuss. Firstly, the value of warehouse business, such as their product, thousands of products
have been shown on the warehouse stock, it is a good price positioning that in strategic
management, because of the cost of product is very profitable price, compare with other shop,
warehouse dose have definitely advantage about their price strategy. The completive
advantage is very important for a firm, warehouse own a vary of product which include the
most of using facility in our life , it rely on their good supply chain integration in strategic of
business ,one of advantage is that ;the customer purchase the product is almost cheap than
any other company ,because of the resource of product is come from many factory ,they can
combine those opinions to determine the best value product for customer and take the
advantage to against others . It is a most simple question that warehouse has been deal with it,
which is their customer service can cover all of city, if the product has the quality problem or
some other issue, the customer could contact the customer service to exchange it or other
affording issue, they have many of shop in every area of Auckland such as city central or
western field. Because of the product might be same or even better than warehouse if a
customer to buy something in other shop, however for the area of service covering,
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warehouse does have advantage, that will not coping from other easily. As of January 2015,
The Warehouse employed over 12,000 people in New Zealand. The Warehouse's corporate
headquarters are located in North Shore, New Zealand. Apart from its 242 retail locations, it
operates 2 distribution centres located in Wiri, New Zealand and in Rolleston, New
Zealand as well as 12 online stores. A Warehouse Manager earns an average salary of
NZ$55,580 per year. People in this job generally don't have more than 20 years' experience.
Pay for this job does not change much by experience, with the most experienced earning only
a bit more than the least. It shows us that HR management system is very strong and it is a
competitive advantage.
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4. SWOT Analysis
SWOT analysis is a fast way to examine organization by looking at its inner strengths and
weakness along with the external opportunities and threats.
Strengths - Warehouse is the largest retail chain in New Zealand, which created more than 30
years and still going strong. The strength of Warehouse involves wide knowledge of retail
industry, cost leadership strategy, financial investment backing, existing customer base, and
strong IT returns through internet shopping. First of all, Warehouse exceeds a lot of
competitors because it has more than 30 years retail industry experiences, so Warehouse may
get enough wide knowledge of retail industry. Secondly, the cost leadership strategy is the
one of main strategy of Warehouse, it provides very low price for its products, and so many
consumer would like shopping in Warehouse, which is because Warehouse provide the
pricing strategy such as $1.99 for a product, the price is a different between $1.99 and $2
when customers see the price. Then, the existing customer base of Warehouse may make lots
of profits and benefits as there are many fixed customers in Warehouse and use to shopping
in Warehouse. Also Warehouse has strong financial investment backing. For example,
Warehouse purchased Noel Leeming Group in 2013, and also there are many Noel Leeming
chain stores in New Zealand, which show Warehouse has strong financial investment
backing. Strong IT returns through internet shopping, customers may require returns when
they are not happy with the product or the product has problem in online. For instance, one
customer purchased a product of Warehouse online, and the customer find the product has
some problem and require to return the product, so customer service department may accept
the requirement of the customer and solve this problem after finish checking product.
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Weaknesses - However, the weakness of Warehouse includes high labour cost and work
inefficiencies, high labour cost, negative publicity and little differentiation. For example,
there is a problem which is staff have to communicate with manager before consumers
require refund, it wastes so much time when many consumers require refund. Therefore, it is
better to provide some automatic refund machines, which may save a lot of time between
consumers and staffs. And then, high labour cost may reduce the benefits and profits of
Warehouse. For instance, there are 8 employees work in Warehouse, but Warehouse does not
need 8 employees because 6 employees may enough to support Warehouse, so other 2
redundant employees may increase the labour cost. Then, negative publicity may lose
customers, as we know women like shopping, when one women is not happy with products,
the women may tell her friends, so the reputation of Warehouse will reduce, some customers
will be affected. The products of Warehouse are very similar with other competitors, so there
is no much different between products, therefore, Warehouse may provide some new products
which from different countries, it may attract lots of customers.
Opportunities - There are 3 opportunities in Warehouse such as expansion of target market,
healthy market environment and increasing detraction of small retail businesses in New
Zealand. Warehouse may expand target market, first of all, if Warehouse’s new target market
is younger customers, focus on how the product or service of Warehouse may help them in
the long run, also take into consideration which advertising medium Warehouse want to use,
and some customers may spend most of their time on social media while others watch
television (Warner, 2013). Secondly, Warehouse may provide a healthy market environment.
For example, there is a family who usually shopping in Warehouse, parents often busy for
shopping and ignore their children, so Warehouse may provide some recreation equipment’s
for children so that parents may pick up their children after shopping, which is very
convenient. And then, increasing detraction of small retail businesses in New Zealand would
be an opportunity because it may help businesses to exceed competitors, nowadays, more
customers would like to see and choose cheaper products, so Warehouse usually provide the
lowest price to customers so that more customers shopping in Warehouse, also provide some
discounts and rewards so that attract customer to come back and shopping again.
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Threats - The threats of Warehouse involve intensified competition, government regulations
and rising commodity prices. First of all, intensified competition could be 1 main threat for
Warehouse, as we know, there are some markets usually provide low price for products to
customers such as Parking Save, K mark and Countdown, so many customers may compare
the price of products between these stores, therefore, not all customers may shopping in
Warehouse, which cause Warehouse may lose lots of profits and benefits. Secondly,
government regulations may influence Warehouse. For instance, Warehouse usually import
some clothes from different counties, when government regulations change some clothes are
limited for import, so Warehouse may not import these clothes. Consequently, Warehouse
may lose many benefits and profits. Thirdly, commodity prices may also influence the
benefits of Warehouse, if one product of Warehouse is higher than competitors, customers
may not choose the product. For instance, a customer may consider purchasing a fan, the
Warehouse of the fan price is $59, and the Kmart of the fan price is $55, so the customer may
choose Kmart.
1- Strategic Options –
1- Diversification & Cost Leadership Globalization
2- Globalization
Diversification & Cost Leadership
Previous literatures have identified three basic business-level strategy, which are cost
leadership, differentiation, and focus strategies (Hill, Jones, Galvin, & Haidar, 2007). The
Warehouse adopts the cost leadership strategy with the aim of offering the lowest prices and
various types of goods with low level of product differentiation to customers. The objective
of the cost leadership strategy is to reduce costs and increase efficiency in the production and
delivery process (Kumar, Jones, Venkatesan, & Leone, 2011). By using this strategy, the
Warehouse can establish an extended international supply chain to ensure efficient
manufacturing and cost effective logistic management. Almost all of the products sold in the
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Warehouse are manufactured and supplied by foreign companies. This approach makes full
use of the comparative advantages in the international businesses as the Warehouse could
enhance profits by sourcing these goods from countries where has low-cost labour and raw
materials. The high standardisation of the goods also aims to wholesale large amount of end-
products to reduce the costs and enhance the profits. The Warehouse can target different
target markets in New Zealand like construction business. After the earthquakes construction
business in New Zealand is flourishing at a very high price. This increase has created a large
demand for construction goods like construction material, tools etc. The Warehouse has a
large capital asset and stores located all around New Zealand. The Warehouse due to its
operating size can negotiate a better price with the suppliers of the construction materials and
can sell it in its store. The Warehouse group can penetrate this market easily and can attain
above average returns easily as construction material has been neglected by its main
competitors.
Globalization
Integration of world’s governments, firms and people are defined as globalization.
International trade also known as bilateral trade agreements are defined as globalization in
modern world. Global trade agreements increases cross country investments; this increment
has benefited information technology and communication sectors in past two decades.
Globalization expands markets for the organizations; it allows firms to sell their products in
different countries along with selling it in their domestic markets. The Warehouse group can
adopt this strategy to open their business in different country and continents. The Warehouse
group should enter in the Asian markets like India, China etc. Asia contains almost half of the
world’s population which is clear indicator that The warehouse group with its large capital
asset, new technology and experience can easily enter this market by strategic alliance, joint
venture etc. Asia’s large population will ensure that maintained cost leadership and
diversification policy will still offer them above average returns and which will be more than
the domestic market of New Zealand.
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Implementation
The Warehouse can adopt Just-In-Time (JIT) to manage its supply chain and logistics to
maintain its supplying and inventory levels. Efficient logistic management requires a
company maintaining the proper level of inventories in order to ensure stable supply and low
level of inventory storage costs (Flynn, Huo, & Zhao, 2010). In relation to the Warehouse, it
has its warehouse close to the main port. JIT in the electronic version will ensure on-time
order and appropriate level of inventories. By using this strategy, it not only helps the
Warehouse to reduce logistic costs, but also enhance its elasticity and adaptability to the
changing customer demands and market trend (Gimenez, van der Vaart, & van Donk, 2012).
For the supply chain management, the Warehouse has both internal and external suppliers in
the upstream of the supply chain in order to ensure the stable supply of different products. It
also has both in-house sales and independent sales channels in the downstream of the supply
chain, which enables the group has a diverse sales channels through its different brands to
enhance its sales flexibility and vulnerabilities to the market fluctuations and other risks
(Besanko et al., 2013). The Warehouse group can open new stores in South Island as due to
earthquake construction and rehabilitation is on a boom and it is been sponsored by New
Zealand government, govt. is offering subsidies to people and organization to open business
in south island. The Warehouse group can capitalize on this situation as they can open more
and more stores over there on a subsidize price as these stores will create new jobs for the
locals as well.
The Warehouse can do a strategic alliance with Big Bazar and reliance fresh who are big
retailer in Indian market. This alliance will help them to gain experience and knowledge of
the Indian market, values, culture and consumer behaviour. Their expertise in cost leadership
and supply management will be a key point for them to become a market leader in the new
Indian market. In India and China labour is cheap and agriculture sector is the main sector
which indicates that The Warehouse group can attain employees as well as products on a
cheaper price. They can make alliance with the farmers to sell their goods to them only which
help them to eliminate middle men for their imports from India and China.
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References:
http://www.thewarehouse.co.nz/red/content/homepage/about-us/stephen-
tindall
http://www.mindtools.com/pages/article/newSTR_66.htm
Barney, Jay B and Hesterly, William S. Strategic Management and Competitive
Advantage: Concepts. 2005 Pearson Education, Inc., Upper Saddle River, New
Jersey, 07458.
Strategic Management Journal, 5, pp. 171–180. Barney, J.B. (1991). “Firm resources
and sustained completive advantage “Janel management.
Barney, J. B., & Hesterly, W. S. (2010).’VRIO Framework. In Strategic Management
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Flynn, B. B., Huo, B., & Zhao, X. (2010). The impact of supply chain integration on
performance: A contingency and configuration approach. Journal of Operations
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Gimenez, C., van der Vaart, T., & van Donk, D. T. (2012). Supply chain integration
and performance: the moderating effect of supply complexity. International Journal
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Hill, C. W. L., Jones, G. R., Galvin, P., & Haidar, A. (2007). Strategic management:
An integrated approach (2nd Australasian edition). Sydney: John Wiley & Sons
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Kumar, V., Jones, E., Venkatesan, R., & Leone, R. P. (2011). Is Market Orientation a
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Journal of Marketing, 75(1), 16-30. doi: 10.1509/jmkg.75.1.16
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http://www.thewarehouse.co.nz/red/
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