MS60043E

INDIVIDUAL STRATEGIC MANAGEMENT REPORT

Executive Summary

The following report is a business analysis on the context of JD Sports plc, a British sports shoes and other fashion accessory company. This report will serve the purpose of a consultation which will guide the company in a strategic path towards business expansion in Asian markets. The Indian market has been chosen as the target point for this study due to the growing demand in sportswear and other sports utilities. The report will be formed and structured as a traditional report with emphasis on theoretical and practical alignment. The analysis will divulge useful information which will then be applied to the context of the strategic plan of expansion. The mode for this proposed expansion will be suggested as well with a detailed organisational analysis.

Table of Contents

1.0 Introduction

1.1 Company and industry background

1.2 key challenges faced by JD Sports PLC

2.0 External environmental analysis

2.1 Macro environment

2.2 Microenvironment

3.0 Internal environment analysis

4.0 Identification of competitive strategies

5.0 Strategic directions

6.0 Recommendations

7.0 Conclusions

References List

 

1.0 Introduction

1.1 Company and industry background

“JD Sports Fashion plc“, also known as JD or JD Sports is a UK based fashion retail organisation. JD Group is a subordinate of “the Pentland Group”. The company is named after the founders, “John & David”, and was established in 1983. At the initial stage, “John Wardle”, and “David Makin” started trading from a specific store in Greater Manchester. In 1996, JD Sports entered the “London Stock Exchange” list. By 1996, this brand opened almost 56 stores. In 2011, JD Sports started to dominate the EU markets, especially Ireland, France, Germany, Spain, and the Netherlands.

In 2005, the shares of “Wardle’s and Makin’s” were bought by Pentland Group for 44.6 M dollars. By 2007, JD acquired Bank Stores to sell fashion clothing like Alu, Firetrap, Adidas, and Henleys for around 19M pounds. This organisation is also a famous sponsor and supplier of multiple football teams, associations, and players. In 2008, this group declared deals of sponsorship with Charlton Athletic, Bournemouth, Blackpool, Dundee United, Oldham Athletic, and Luton Town.

JD Sports officially launched a store in the continent of Asia. In 2016, it started serving the Malaysian market. By November of 2016, JD Sports launched a flagship store in Kuala Lumpur, and also JD’s third Asian store was opened in Cheras’s Sunway Velocity. JD also holds the authority for the group of “Clothingsites.co.uk“. By 2016, JD Sports acquired almost 80 per cent stake in “the Australian retailer“. In 2017, Melbourne got its first JD Sports stores. At the same year, the company’s sales rose 30 percent (JD sports, 2020).

JD is looking for expansion in a new Asian market for better revenue. This assignment will focus on the Indian market and will prepare a report suggesting a competitive direction for the company. Through the analysis of the internal and external environment, this report will produce the best strategic direction for the group to dominate the new Asian market.

1.2 key challenges faced by JD Sports PLC

Some challenges faced by JD Sports are:

• JD has not given the rent for its 390 stores established in the UK because of the covid-19 outbreak (Kollewe, 2020).
• JD has come under criticism because of the “worse than prison” situation at its warehouse (independent, 2020).
• Shoppers are complaining about poor consumer service facilities (Butler-Young, 2020).

2.0 External environmental analysis

2.1 Macro environment

The table below will discuss the external environmental factors affecting the operations and business strategies of JD Sports through the PEST framework. Apart from that, analysing the framework will assist in identifying the potential scopes for growth in the new Asian market.

Political	· Changes in the government body or a new government can affect the company’s profitability and operational strategies. · For instance, the recent government of India has changed the taxation laws and the regulations regarding foreign investment (Aldeia, 2020). · Developing countries like India have adopted strict regulations and taxes on foreign business to protect its domestic business organisations. · Brexit like situations has also forced JD Sports to change its policies as the Prime Minister, Boris Johnson has changed the country’s labour laws.
Economical	· The current economic situation of the host country and also the operating country can influence any business very deeply. · The economic condition of the UK is suffering from a covid situation, which has decreased JD’s sales. · At the same time, the spending limit of the consumers helps the organisations a lot to strategise their investment policies. · The GDP per capita of Indians is most likely to reach 3,273.85 US dollars in 2023. It will increase the consumer’s spending, especially in some areas like fashion, food, housing, transport, communication, and consumer durables. · Skilled workforce in any country contributes a lot to that country’s economic condition. In the retail sector of India, the skilled workforce is very low. There is only 4.69 per cent of skilled labour available in India’s total workforce. The number of skilled labour in the US is 52 percent, and in the UK is 75 percent (financial express, 2020). · Another economic factor that influences a country’s domestic market, and also the foreign investment is the labour cost. Labour cost in India is very low compared to some other countries like the UK, or the US. This can be an advantage for JD Sports.
Social	· For market a new product, JD Sports has to analyse multiple social factors like education level, sex ration, attitude towards environment and health, culture, “interest in sports“. Through the analysis, the organisation will be able to understand the market of India, and also the marketing head of the company can design their promotional strategy according to the analysis or social needs. · The sports industry and its market size in India were almost 91 M Indian rupees in 2019. The market size is increasing year by year, which is an advantageous sign for JD Sports (statista, 2020). · The health consciousness across the world is increasing. In India, brands like Nike and Adidas Original are undoubtedly selling plenty of apparels regarding sports. It indicates the need for sports apparel in the market. So, it also can be beneficial for JD Sports as the brand will be able to sell its products to sports enthusiasts. · The demographic position of a country matters a lot for any business, especially when an organisation is seeking to invest in that country. India is “the second most populated country” in the world. Apart from that, almost half of its population are “under the age of 25” which makes it a potential market for sports fashion manufacturers. Y young people are more interested in sports, and so India can be a beneficial market for JD Sports.
Technological	· Technology is not only helping JD Sports, but it is also helping all the businesses across the world. New technological equipment and systems are supporting brands to provide a specialised service to the consumers. · JD Sports has adapted a new consumer feedback system across its stores. · The TrueRating technology linked with the existing payment system of JD Sports asked an anonymous question to the consumers as they paid for the services. The technology helped the brand to collect immediate feedback on the consumer’s experience (fashionnetwork, 2020). · A brand new “digital LED display screen” is assisting the company to enhance footfall at “Oxford Street’s flagship store”. · India has an emerging market, and the government of India is investing a lot in technological advancement. So, JD Sports can utilise the technical facilities to capture the Indian market (retailtechnology, 2020).

Table 1: PESTLE analysis of JD Sports

(Source: Self-created)

2.2 Microenvironment

Application of “the porter’s five force model” can assist JD Sports to analyse the attractiveness of the industry, and also can help to determine its competitiveness in the operating market. Apart from that, applying this model also will help to design some strategically innovative decisions that can assist to enhance the performance level of the company. The below picture is representing the elements under the “five force model”.

 

Fig 1: Porter’s five forces

(Source: ryortho, 2020)

“Threats of new entrants”:

• Product differentiation in the industry is strong, where organisations sell differentiated items instead of a standardised item (ÖNEREN, ARAR and YURDAKUL, 2017). Consumers also search for a metamorphosed product. A strong prominence on consumer services and advertising can be noticed in the industry. All these aspects make this factor (“threat of new entrants”) a comparatively weak force for the JD Sports.
• It is tough to achieve the “economies of scale” in the sports fashion industry. Organisations like JD Sports who produce large capacities can encounter a cost-benefit. It makes the manufacturing costlier for new businesses or entrants. This factor turns the threat weaker.

“Consumer’s power”:

• Supplier’s number in the sports fashion industry is very high than the organisation’s number, which produces products in the industry. So, buyers do not have a lot more options and hold very low control over costs. Therefore, the “bargaining power of the buyers” is low in the sports fashion industry.
• For JD Sports, the scale of “product differentiation” is large. It means that purchasers are not capable of searching for alternative organisations which manufacture a specific product. It enhances the difficulty level in switching from one brand to another, and so makes the “buyer’s bargaining power” weaker.

“Supplier’s power”:

• Suppliers of JD Sports supply raw items to the organisation and also play an important role in the company’s operations. If the suppliers understand the dependency of JD Sports on them, then the suppliers can easily manipulate the brand by changing their demands and requirements in prices. So, the supplier’s power for JD Sports is comparatively high.
• This organisation manages this force by diversifying their supplier’s list and researching and developing new items from distinctive raw materials.

“Threat of substitute products”:

• When a brand new service or product fulfils a similar needs of the consumers in distinctive manners, then the profitability of the industry suffers.
• Competitors like Nike or Adidas provide a “value proposition” which is innovatively distinctive from the current industry offerings. It makes the force of the “threat of substitute products” comparatively higher for JD Sports.
• JD needs to focus more on its service instead of only focusing on the products to counter the threat.

Rivalry or competitiveness among existing organisations”:

• The number of rivalries in the sports fashion industry is very limited. Apart from that, most of the competitors are very large and popular in size. It means that organisations in this sports fashion industry will not be able to move or serve without being noticed. So, the rivalry factor among existing businesses is very strong.
• The competitors hold a huge market share. It means that the competitive actions for establishing a position or for holding the market position are very tough. It also indicates that the rivalry force in “porter’s five forces” is very high for JD Sports.
• JD can collaborate with its competitors to enhance the market share instead of only competing with them.

3.0 Internal environment analysis

An analysis coupled with the outputs from the external environment analysis can help the organisation understand their competitive position, certain advantages and disadvantages. Researchers like Bukhoriev (2018) have showcased how the internal analysis can add to the strategic competencies of a company and how these competencies can help the organisation avert various crisis situations. There are studies like Soemantri (2019) which specifically focus on the internal side of the business environment in the context of companies outsourcing, investing or expanding in foreign territories. The report will conduct the VRIO model by Barney (1991) to drive home the proposed benefits.

Valuable

• The suppliers of JD Sports plc are loyal. Since its foundation in 1983, the company has managed to spread across 56 stores in the UK alone, and with footing in other EU, markets ensure this fact. The ability to retain suppliers in a market which is prone to volatility and as per the research of Paparoidamis et al. (2019) very prone to supplier loss due to increasing competition. But the ability of JD Sports in retaining suppliers is a valuable factor which adds to their competitive advantage.
• The market entry strategies adopted by JD sports have been very successful due to their competitive positioning and unique products. With a target mark of 29 additional shop outlets in the EU alone, this strategic positioning has been a valuable resource for the company, and it also adds to their competitive advantages. (Nadkar and Khan, 2019)

Rare

• Increased market share is a strength which has been in favour of JD sports. The company has garnered close to 77% increment in investment opportunities, and this has contributed to its expansion strategy as well. Securing such a level of customer and investor confidence is an asset in itself and one which can provide a competitive advantage for the long run. (Nadkar and Khan, 2019)
• The company has received positive receptions from its previous US and Asia ventures. In 2018 they established close to 44 outlets in the USA alone, which is a rare instance for any sports brand. Their partnership with “Finish Line” has also been revered as an effective market move. (JD Sports Fashion plc, 2020)

Inimitable

• JD sports plc with their products lineups runs a whole different segment of sportswear which have often been labelled as “athleisure”. Their target points have been generation Z and millennials who are most likely to indulge in sports or fitness lifestyles. There are very few companies which can offer the sports utility and the fashion statement of JD sports in a single platter. The designs and products can be counted as their permanent competitive advantage. (Nadkar and Khan, 2019)

Organised

• JD sports focuses more on the well being of their employees and provides activities like ” First Aid and Mental Health First Aid training”. This is a unique approach which differentiates their internal organisation from other peer companies. (JD Sports Fashion plc, 2020)
• The company allows employees to have all the rights and privileges allowed by the legal or political overheads. In doing so, they create a working environment which is equally positive and effective. These factors contribute to the overall performance of the company. (JD Sports Fashion plc, 2020)

4.0 Identification of competitive strategies

The identification of competitive strategies will be seen in the context of the Indian market. Porter’s Generic strategies will be applied in this instance, as it will allow a better comprehension of the product market. There are various examples of similar strategies applied previously by the company itself in various market contexts as well-

• Market Penetration: Market penetration has been and continues to be a steady strategy adopted by JD Sports. The company is closing in with 300 active stores in 11 economically active countries. A developing Asian market like that of India promises great potential if the company could implement similar strategies to their Malaysian or American operations. The primary strategy which has propelled the company to gain acceptance in these markets has been an effective partnership with distribution channels. In the case of the USA, it has been “Finish Line”, and for Malaysia, it has been “Glue business”. (Fish, 2019)

Thus the company will need to find suitable partners for distribution or promotion in the Indian market, which will make market penetration a smooth experience.

• Product Development: The PESTEL analysis of the Indian market has made the fact clear that there is a distinct advantage in the ways in which a developing economy functions. It dependents more on brand authentication than premium products. This is the exact opposite of developed markets and economies. But the upside in the Indian market is its demographic spread. The youth population constitutes close to 229 million people which is significantly higher than 43.90 million in the USA and 40.50 in Indonesia. The primary strategy of JD Sports will be product development and especially exclusive product development, which can help the organisation get a better reception from this sprawling youth demographic. (Thehinducentre.com, 2017)  
• Market Development: JD sports in the context of the UK have concentrated on the development of the gym and fitness industries. They had previously managed to align their market goals with that of the gym industry. The marketing and product development teams have continued to take major steps to offer sponsorship to 30 plus gyms in the UK. This initiative has resulted in close to 158,000 membership increments between 2018 and 2019. This is a primary example of market development by making agile decisions which can contribute towards overall brand promotion and performance boost. A similar strategy can be applied in the Indian market as well. The fitness industry in India is growing with the pacing of 16-18% increment on an annual basis. The fitness retail industry in India has seen a growth of 28% since the last decade. Developing the market to the right conditions is the ultimate goal which can be achieved by simply aligning market trends and organisational goals. (Smergers.com, 2019)
• Diversification: The achievement of product diversification and differentiation coupled with cost focus will be another dimension of the generic strategy which can be applied in the context of product specifications. The Indian market needs to be studied by JD sports before investing resources or forming business strategies effectively. They will need to follow the footstep taken by their Japanese correspondents by making exclusive products such as “Footpatrol” and “Deadstock”. These will provide exclusive products for the particular market segment and will allow competitive advantages throughout. (JD Sports Fashion plc, 2020)

5.0 Strategic directions

The strategic directions for the company will be based on all the theoretical analysis done on the internal and external environment in this assessment. The goal will be to suggest the most plausible strategic direction which will fulfil the strategic objectives seen in the previous section of the report. Upon these suggestions will depend on the future of the expansion and the ways in which the company can excel at marketing and business promotions. These directions will be given under the domain of-

• Markets: If market penetration with the prospect of the youth demographic in India is to be considered as a strategy, then it is to be coupled with the prospect of the market itself. The steady boom in the Indian athletic market segment gives assurance of any investments made in its favour. With the current valuation of the market close to US$3,232 million, the CAGR is estimated to increase by 13.6% till 2021. This market does not have any segmentation as the products in these markets fulfils any one of two given criteria, namely, sports utility and fashion statement. The approach of the marketing will be to highlight these specifications with close links with a local favourite distributor or retail chains. (Gautom and Gulati, 2019) 
• Products: The specification of the products with the market insight gathered from the economic part in external environment analysis and product development do lead towards the fact that cost focus is to be considered as a main controlling factor. The development of the products is to focus solely on the way it can deliver quality and authenticity by adhering to the financial and economic limitations. The R&D department will have a great influence in the way it can contribute towards product development. A study of the current trending products in the same market is the way to go for the initial phase. (Gautom and Gulati, 2019)
• Services: The Indian market will require some form of service inclusion such as feedback or query handling, order replacement and portfolio selection. These services have to be tailored to the current Indian standards for the majority of the investment for this expansion will go towards the market study and also product R&D. It will be advised that JD sports hire a third-party solution for the feedback and services prospects. This is the exact strategy adopted by various international tech companies in India like JBL or “Optimum Nutrition”.

Methods of expansion: The methods of expansion will be suggested as a direct investment with a half capacity of production from India simply due to the immense lack of skilled workers 4.69% which is significantly lower than 24% in China and 52% in America. The direct investment will ensure that the distribution channels will be in full control of JD sports plc, and it will also have a constructive effect on the brand image. The expansion track record of the company in the USA, Malaysia and Japan ensures the safety of this investment.

6.0 Recommendations

After analysing the internal and external environmental situations and examining JD Sports strategic position, the below recommendations can be suggested to the “JD Sports Fashion plc”:

• JD holds a competitive advantage in the European market; however, challenges in the Indian market will be different for the company. So, it is suggested to proceed with an approach of the joint venture (Zhang and Wen, 2016). JD Sports and Nike can combinedly develop products for the new Asian market. It will provide an upper hand to the company as Nike is already a market manipulator in India.
• Multiple reviews have revealed that consumers are not happy with the after-sales services of the company. So, it is recommended to enhance the communication process with the consumers even after selling a product. It will help consumers to put more trust in the brand, and they also will invest more resources to purchase a JD product.
• Another recommendation which can assist JD Sports in terms of establishing its business in India is that it should focus more on the product’s quality and diversification rather than prices. India is a big market, but most of the buyers are from middle-income backgrounds. So, price matters a lot for most of the consumers in the country. JD Sports need to develop its products with a comparatively lower price so that people of the country feel attracted towards the price.

7.0 Conclusions

From the study of this report, it can be concluded that JD Sports needs to develop its strategy very carefully before entering the market of India. This country has a lot of potential for the company; however, JD will need to face multiple challenges like high taxation, or price-related issues. There is a demand for sports fashion in the Indian society, but in this field also JD will encounter serious competitions from brands like Adidas or Nike. This report also identified a serious lack of labour work skills in the Indian workforce. This can be disadvantageous for JD Sports as limited skilled labour will hamper the productivity of the company.

References List

Journals

Aldeia, S., 2020. THE INDIAN TAX SYSTEM AS A FACTOR OF BUSINESS COMPETITIVENESS. Economic and Social Development: Book of Proceedings, [online] pp.274-283. Available at: <https://www.researchgate.net/profile/Venelin_Terziev/publication/339390083_Programming_as_mechanism_of_managing_oriented_towards_results/links/5e4edf61a6fdccd965b43985/Programming-as-mechanism-of-managing-oriented-towards-results.pdf#page=283> [Accessed 8 November 2020].

Bukhoriev, S.M., 2018. some aspects of organising strategic Management accounting in Crisis Management. Accounting, Analysis, Auditing. 5(4), pp.40-45. DOI: 10.26794/2408-9303-2018-5-4-40-45

ÖNEREN, M., ARAR, T. and YURDAKUL, G., 2017. Developing competitive strategies based on SWOT analysis in Porter’s five forces model by DANP. Journal Of Business Research-Turk, [online] 9(2), pp.511-528. Available at: <https://isarder.org/2017/vol.9_issue.2_article25_full_text.pdf> [Accessed 8 November 2020].

Paparoidamis, N., Katsikeas, C. and Chumpitaz, R., 2019. The role of supplier performance in building customer trust and loyalty: A cross-country examination. Industrial Marketing Management, 78, pp.183-197. DOI: 10.1016/j.indmarman.2017.02.005

Soemantri, A.I., 2019. The Influence of Internal Environment, Strategic Management of Human Resources and Quality of Work Life To Job Satisfaction and Employee Performance Outsourcing Company in East Java Province. Archives of Business Research, 7(3), pp.244-254. DOI: 10.14738/abr.73.6340

Zhang, X. and Wen, J., 2016. The impacts of economic importance difference of a joint venture (JV) held by partners and partners’ size difference on the extraction of rivalrous and non-rivalrous private benefits in a JV. International Review of Financial Analysis, [online] 48, pp.46-54. Available at: <https://core.ac.uk/download/pdf/46523592.pdf> [Accessed 8 November 2020].

Online articles

JD Sports Fashion plc, 2020. Report 2020. Annual reports and accounts. [online] New York: jdplc.com, pp.3-10. Available at: <https://files.jdplc.com/pdf/reports/annual-report-and-accounts-2020.pdf> [Accessed 8 November 2020].

Thehinducentre.com, 2017. YOUTH IN INDIA. Social Statistics. [online] Delhi: Central Statistics Office Ministry of Statistics and Programme Implementation Government of India, pp.9-13. Available at: <https://www.thehinducentre.com/multimedia/archive/03188/Youth_in_India-201_3188240a.pdf> [Accessed 8 November 2020].

Websites

Butler-Young, S., 2020. JD Sports, Finish Line Shoppers Are Complaining About Rampant Order Delays, Poor Customer Service. [online] Footwear News. Available at: <https://footwearnews.com/2020/business/retail/jd-sports-customer-service-order-delays-complaints-finish-line-1203066080/> [Accessed 8 November 2020].

fashionnetwork, 2020. JD Sports Rolls Out Customer Feedback Technology. [online] FashionNetwork.com. Available at: <https://uk.fashionnetwork.com/news/jd-sports-rolls-out-customer-feedback-technology,953242.html> [Accessed 8 November 2020].

financialexpress, 2020. Explained: Gap Between Skill India Goals And Current Status. [online] The Financial Express. Available at: <https://www.financialexpress.com/opinion/skill-india-why-there-is-a-gap-between-current-status-and-goals-explained/1520633/> [Accessed 8 November 2020].

Fish, I., 2019. JD Sports Says It Is ‘Constrained’ By Nike And Adidas. [online] Available at: <https://www.drapersonline.com/news/jd-sports-defends-footasylum-takeover-bid> [Accessed 8 November 2020].

Gautom, S. and Gulati, G., 2019. A Step In The Right Direction: The Booming Sports Footwear Market In India – Indiaretailing.Com. [online] Indiaretailing.com. Available at: <https://www.indiaretailing.com/2019/03/05/fashion/a-step-in-the-right-direction-the-booming-sports-footwear-market-in-india/#:~:text=The%20Indian%20athletic%20footwear%20segment,percent%20over%202018%20to%202021.> [Accessed 8 November 2020].

independent, 2020. JD Sports Says It Will Investigate ‘Worse Than Prison’ Working Conditions. [online] The Independent. Available at: <https://www.independent.co.uk/news/business/news/jd-sports-working-conditions-channel-4-minimum-wage-sports-direct-a7476366.html> [Accessed 8 November 2020].

Kollewe, J., 2020. JD Sports Sales Race Ahead Despite High Street Slowdown. [online] the Guardian. Available at: <https://www.theguardian.com/business/2019/jan/14/jd-sports-sales-finish-line-us> [Accessed 8 November 2020].

Nadkar, T. and Khan, S., 2019. JD Sports Counters Retail Gloom With Global Expansion, Gym Style Push. [online] reuters.com. Available at: <https://in.reuters.com/article/us-jd-sports-outlook/jd-sports-counters-retail-gloom-with-global-expansion-gym-style-push-idUSKCN1TY0OV> [Accessed 8 November 2020].

retailtechnology, 2020. Retail Technology | JD Sports Delivers Display Impact. [online] Retail Technology News. Available at: <https://www.retailtechnology.co.uk/news/3852/jd-sports-delivers-display-impact/> [Accessed 8 November 2020].

ryortho, 2020. Orthopedic Industry Consolidation? Really? | Orthopedics This Week. [online] Ryortho.com. Available at: <https://ryortho.com/2011/01/orthopedic-industry-consolidation-really/> [Accessed 8 November 2020].

Smergers.com, 2019. Indian Gym / Fitness Industry 2015 – SMERGERS Industry Watch. [online] Available at: <https://www.smergers.com/industry-watch/india-gym-fitness-industry/#:~:text=Fitness%20industry%20in%20India%20is,7%2C000%20crore%20by%202017.&text=The%20organized%20or%20modern%20fitness,%2D27%25%20yearly%20growth%20rate.> [Accessed 8 November 2020].

statista, 2020. India – Sports Industry Market Size 2017-2019 | Statista. [online] Statista. Available at: <https://www.statista.com/statistics/1029883/india-sports-industry-market-size/> [Accessed 8 November 2020].