Strategic Analysis Of John Lewis Partnership Limited Marketing Essay

Strategic Analysis Of potty Lewis Partnership Limited merchandise EssayThe following report will provide a detailed depth psychology of privy Lewis Partnership. The retailer has been very successful in the UK and has performed extremely sound in spite of more negative financial issues and opposite dynamics regarding upon the retail sector at large, predominantly in light of declining consumer income, technological advances much(prenominal) as the internet and increased competition. The reason the go with was able to achieve these was because of their commitment towards their clients in providing innovative solutions as easily as improved sensory faculty of client needs and the signifi rout outce of creating a reliable node base which ensures positive word-of-mouth and the club has achieved this due to its commitment to providing innovative solutions to clients as well up as a heightened aw atomic number 18ness of customer needs and further recommendations to increase wise revenue streams with an abstract CRM system in place. Therefore, the reports provides an rating of the companys occurrent marketing environment assessing how the external factors impact the retail sector largely and specific everyy on the strategies that butt Lewis chooses to adopt. The report will in fitition evaluate the strengths and weaknesses as well as the threats and opport unit of measurementies that the company is presented with and how best it can achieve a match with its own internal capabilities to the dynamics at play.The report will too look at how the buns Lewis brand and customer proposition is placed in the UK market in comparison to early(a) competitors, with an attempt to provide reason in to how the company gains advantage done differentiation from other competitors, essentially upliftedlighting how the company implements a differentiated strategy which allows it to maintain advantage. At the equal(p) time, the depth psychology has drawn atte ntion to how the uncertainty which prevails and the continuous rate of transfer in the external market highlights the implications of continuous observation and continuous re-evaluation of the strategicalal options employ. Ultimately, the engineer is to provide recommendations as to how the company can increase the prob world power of its advantage over the longer term.The John Lewis Partnerships 81,000 Partners own the leading UK retail businesses John Lewis and Waitrose. Our founders batch of a successful business powered by its people and its principles situates our unique company today. The mesh and benefits urinated by our success be shared by all our Partners (John Lewis, 2012).Write the report as if you were working for an external worry consultancy firm, reporting to the Board of Directors of your chosen company. The report should contain sections that address ALL of the main aspects of the faculty syllabus that is the report should cover both strategic analysi s (internal and external) and strategy formulation. It is essential that in undertaking your research and writing your report you make get use of the strategic management jibes and models to conduct internal and external strategic analysis and strategy formulation that you move over encountered in this module. Credit will be given for analysis, evaluation and synthesis, and the appropriate selection and use of strategic management tools and models.2.0 IntroductionThis report will discuss the strategic management tools demonstrating skills of analysis evaluation and synthesis of John Lewis. The report accommodates strategic analysis and an External Environmental analysis. The report also covers the strategy formulation in which the SWOT analysis and BCG matrix will be discussed. John Lewis Partnership plc is one of the UKs top ten retail businesses. They operate amongst 2 sectors known as John Lewis and Waitrose. The company offers fare as well as household products i.e. baked foods, fresh fruit veg, wines, household items, furniture, electronic items etc.The company functions in a chain of 287 Waitrose supermarkets, 39 John Lewis shops that include 30 plane sectional stores and 8 of them at home John Lewis stores. The company operates throughout the UK and is headquartered in London, they sell their products through retail stores, catalogues, and websites. The companys strategic focus is to accomplish its non-core business strategies through partnership with other firms. There are around 81,000 employees working in John Lewis stores who are partners in the business, they pay off a share in the companys profits and are given the opportunity to participate in the companys progress and growth. This is their unique source of competitive advantage as it encourages stave loyalty through being business partners (John Lewis 2012)3.0 Strategic analysis3.1 Mission statementThe missionary work of an organisation highlights the broad directions they need to foll ow and provides a brief summary of the values and reasons that lie behind it (Lynch 2012). Like other organisations John Lewis also have a mission statement, it highlights their reputation established through their willpower structure as it is unique and they are very successful in being a profitable business. John Lewis aim to keep their staff satisfied so that their business can be a success. Their strategy is based on three key elements partners, customers and profit. (Refer to extension 1) to see their full mission statement.4.0 External Environmental analysis4.1 PESTEL AnalysisThe PESTEL analysis examines the macro-environment in which the business exists in. It is a helpful tool for understanding market growth or reject as well as the position, potential and the direction for business. It is also used for evaluating the Political, Economic, Social technical, Environmental and profound factors that a business operates in. The Political factors discuss organization regulati ons such as employment laws, environmental regulations, tax policy and political stability. The Economic factors affect the cost of capital and purchasing power of an organisation. These factors also include economic growth, interest rates and inflation. The Social factors impact customers needs, potential market size such as John Lewiss goods and services, population growth and age demographics. proficient factors of John Lewis will discuss barriers to entry, making or buying decisions, investment and innovation and the technological change. Environmental factors include weather, climate and climate change. Climate change affects how John Lewis operates and the products they offer. Lastly Legal Factors include discrimination law, employment law and health and safety law. These factors can affect the way John Lewis operate their cost and the demand for their products.4.2 Macro- environmental FactorsIt is commonly known, that those prevailing in the external environment of any firm shall have a significant influence in foothold of decision making in the strategic options. Such analysis is known as PESTEL analysis and usually suggested as the first stage in the strategic planning process (Lynch, 2006). As Johnson et al (2008, pg.56) rightly declared, The key drivers for change are environmental factors that are likely to have a high impact on the success or failure of strategy. (Refer to appendix 2) to see the PESTEL analysis for John Lewis.It can be concluded that each factor of the PESTEL has had an effect on John Lewiss actions, whatsoever of them are now stated in their mission statement. Previous factors are used to analyse different factors, furthermore, these factors can give a prediction for the future, so can be quiet effective if they are applied correctly. There are also some restrictions in this model, e.g. when the procedure of the checklist is applied to John Lewis it may be tough.The emergent corporate strategies may well comment that the futu re is so uncertain that prediction is useless (Lynch 2012 page 84), however, some may still give words of caution exclusively still predict the future. The PESTEL analysis isnt the only framework that John Lewis take into consideration, their organisation has galore(postnominal) other internal and external factors that also have an effect on the strategy formulation, this is why Porters five Forces framework is applied. The PESTEL analysis has a lot of learning but yet doesnt offer a detailed analysis of the business. Porters Five Forces (1985) observes factors that have an impact on competition in the organisation.4.3 Strategic OptionsThe external analysis undertaken has underlined how the focus and the landscape of the UK retail sector has changed dramatically over the last decade or so. Such developments clearly present both threats, primarily from new entrants and modes of dispersal, as well as opportunities such as the increasing utilisation of technology within the curren t oblation to customers. As Johnson et al (2008, pg.3) highlights, strategy is close exploiting the strategic capability of an organisation, in terms of its resources and competences, to provide competitive advantage and/or yield new opportunities.However, umteen competitors in the retail sector at large have managed to expand into other range of products as well as expanding internationally, John Lewis seems to have adopted a more thoughtful rise and stayed loyal to its customers as well as confident in terms of its offering to the market. At the same time it has also developed a commodious range of products as a lower price range to attract more customers across a wider range of segments in society. In times of economic uncertainty this also appears to be a sensible strategy in terms of situations where its loyal customer base may be experiencing declines in usable income, thus enabling John Lewis to maintain their business through customers trading down to less expensive ra nges in store. The recent introduction for its Essential Waitrose put in 2009 was both a reaction to external events including activities of competitors but was viewed as an effective strategy highlighting the companys attention to external research as well as its innovative approach to dealing with such negative events.Furthermore, Porter put forward the idea that there were three generic strategies cost leading strategy, differentiation strategy and the focus strategy, which companies follow. It is clear that John Lewis has embraced a combination of these, but essentially, differentiation has remained key to its business model which positions more favourably when compared to other competitors, particularly given the range and extent of the goods and services it provides as well as its highly effective branding and promotional events which appeal directly to customers and incite purchase. Its decision to introduce its Essentials range within its Waitrose stores may have been con sidered by some as an indication it was lowering its standards, but on the contrary, despite offering a cheaper alternative, quality remained key which ultimately implied that its position in the market would not be negotiated.4.4 Porters Five ForcesPorters Five Forces framework highlights that the environment John Lewis is competing in is constantly changing, (refer to appendix 5). In this model it is believed that customers dont have more splendour than any other aspect, however Aker, bread maker and Harvey Jones argue that customers are more grand than any other aspect of strategy development (Lynch 2012).Porters Five Forces of competition (1985) is a common tool often applied within the strategic management process to firms across several sectors. It is similar to the PESTLE analysis as it takes a predominantly external perspective of the firm within its given constancy looking at how it is positioned against other competitors in the same sector. Recently many have criticised the ensuring importance of the framework given the changes that have risen, particularly with regard to the variegation of business which has ultimately created blurring across many previously distinct sectors.This is emphasized by the supermarkets entering into the clothing and electronics sector for example, as well as retailers including John Lewis expanding into financial services through insurance and credit facilities to customers. Barney (1995) and Henry (2008) underlined how Porters model is more helpful when it is applied at a strategic business unit level rather than at higher levels of industry analysis such as the sector at large as it cannot be expected that all competitors will be competing against one other. This tool is also believed to be effective in terms of assessing a companys strengths and weaknesses in light of how it stacks up against competition. As Barney (1995, pg.49) highlights, A complete understanding ofsources of competitive advantage requires the a nalysis of a firms internal strengths and weaknesses as well. The importance of integrating internal with environmental analyses can be seen when evaluating the sources of competitive advantage of many firms.Looking at Porters five forces of competition, it is clear that John Lewis has attempted to not to just react to the external dynamics and actions of competitors, but actively be a step forrad. It has constantly adapted its business model, such as the introduction of store cards, its online offering and the Waitrose Essentials range in inn to provide its business with a more appropriate fit to the market in line with Mintzbergs (1994) theory. A major element of its strategy however, is its reputation, branding and succeeding positioning in the market and how consumers view the business in its entirety. It has remained rather committed to its original proposition and further enhanced its appeal through appropriate branding and its reputation for quality and enhanced service to customers.5.0 Internal Resource analysis5.1 take account analysis chainStratISTh3Source Porter, Competitive Advantage, 1985The term Value Chain was used by Michael Porter (1985), the purpose of the value chain is to analyse the activities that are performed by the business, linking them to the competitive position. It also evaluates the particular activities to see which add value to the businesses products or services (quickmba 1999-2010) trance many critics and leading authorities dispute the validity of Porters earlier theories, many of his ideas do still appear useful from the perspective of strategic analysis, particularly the notion of the value chain. Ultimately, it is within the value chain which John Lewis has created that it has succeeded in terms of sustaining advantage in its market sector. It has created efficiencies and synergies through the interrelationships within (Mintzberg and Ghoshal, 2003). Value Chain Analysis which is often compared to the RBV of the firm as it looks to both internal and external dynamics impacting an organisation.In recent years importance has also been given to joint ventures, collaborations and relationships which add value to the companys positioning. Elements of the chain such as HR which were previously considered as supporting elements are now viewed as core and this is demonstrated by John Lewis in terms of its commitment to and investment in staff. By enhancing the quality of its internal resources it can achieve typical competencies which are difficult to emulate by other competitors (Teece et al, 1997 Terwiesch and Ulrich, 2009). As Porter (1985, pg.36) emphasises, the way it performs individual activities are a reflection of its history, its strategy, its approach to implementing its strategy, and the underlying political economy of the activities themselves.6.0 dodging formulation6.1 SWOT Analysis John Lewis PartnershipA SWOT analysis is a useful tool for understanding and decision-making, businesses suc h as John Lewis use this tool in all sorts of situations, a SWOT summarizes the Strengths, Weaknesses, Opportunities and Threats. This framework covers a crucial part of the strategic planning process a scan of the internal and external environment. Strength, Weaknesses are considered to be internal to the business whereas, Opportunities and Threats are part of the external environment.Looking at the SWOT analysis (refer to appendix 6) it can be concluded that John Lewis take this tool into consideration when making business decisions based on their customers. However, John Lewis need to expand their target audience because at the moment they are only targeting an older audience need to improve the diagnostic power of a SWOT analysis is to define the elements from a customer perspective rather than the organizational point of view. (Baker 2007, pg.267). By doing this they will generate a higher profit margin. If john Lewis wants to stay ahead of their competition they need focus on their weaknesses such as they need to ensure their prices are similar to their competitors. Also John Lewis need to focus on threats the business may have to face but they can avoid such matters by acting upon the threat before it occurs.Although the SWOT analysis tool is useful to businesses when making decisions, it has been criticized due to its simplicity and possible misleading approach to strategic analysis. This is because companies have failed to follow a few aboveboard procedures. The SWOT analysis is a focused methodology (Baker 2007), therefore, when John Lewis the development this tool they need to ensure they are able to follow correct procedures of this tool to ensure they are able to achieve success.6.2 BCG Growth-share MatrixThe capital of Massachusetts Consulting Group (BCG) growth-share matrix was developed by Bruce Henderson, founder of BCG, in the late 1960s (Baker 2007, pg.125). The BCG Matrix is a simple tool used to assess a companys position in terms of its product range. It simplifies how a companys thinks about the products and services and makes decisions about which it should keep and let go and which products to invest in further. It provides a useful way of seeing the opportunities that are open to the company and also helps to consider how the company can maximise the profits in the future. Below is the BCG Matrix for John Lewis, highlighting where in the market the different departments of John Lewis are positioned.John Lewis was voted Britains best retailer in 2009 and have won awards House Beautiful Awards 2008 Online Home Retailer of the Year Gold Award (washerhelp 2012), making them leaders in departments such as House and Garden, galvanizing Appliances, Fashion, Gifts and Toys. They now have a high growth and a high market share in this segment, thus putting them in the star home. Further, technology and baby departments are between the star and question mark category this could be due to high growth and market share or high growth and low market share as they are faced with high demands but have low returns. Moving on to the sport department as it is in the cash cow category, as a markets it isnt growing but yet the market share for the products is high. Looking at the final category it can be said that John Lewis are safe as there isnt any products in the dog category.The BCG Growth-Share Matrix7.0 conclusionOverall, the company has responded commendable to the changing dynamics impacting upon its market and customers, it is also clear that going forward, more challenges and threats shall be presented to it, particularly given persistent uncertainty relating to the global economy as consumer confidence within the UK. It would appear that in addition to a thorough and consistent approach to its markets in relation to external analysis of those factors deemed to impact approximately significantly the company also adopts an internal approach, evaluating its inherent resources and competencies wit hin the business. In line with the resource based view of the firm (Barney, 1991) and subsequent research by other authors such as Grant (2005), this analysis is often viewed as a more appropriate approach to the task of strategic management as ultimately, organisations have much more control over their internal resources than external market variables. Such an approach enables companies to incite the innovation process and thus create change in the wider environment as well as improvements to its value chain. This appears to be exactly what John Lewis has done to date through its expansion into other areas, as well as extending its range to customers through on-line facilities as well as credit, insurance etc.ReferencesArnold, G. (2012). Corporate financial management. 3d. ed.Essex Prentice Hall.Baker M (2007). Marketing strategy and management. 4th ed. Basingstoke Palgrave Macmillan.Barney, J. and Hesterly, W.S., 2008. Strategic Management and Competitive Advantage Concepts and Ca ses International Edition. London Prentice Hall.Barney, J.B., 1991. Firm Resources and Sustained Competitive Advantage. ledger of Management 17, (1)Chloe. (2012). ANALYSIS Waitrose and John Lewis move closer together, offline as well as online. accessible http//internetretail.net/2012/11/analysis-waitrose-and-john-lewis-move-closer-together-offline-as-well-as-online/. Last accessed 20th Nov 2012.Davey, J and Laurance, B (2008). John Lewis under fire how the City turned against Rose. 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Last accessed 20th Nov 2012.Reynolds, A., 2012. John Lewis Partnership on Target to come forth Emissions. Supply Management, 17 October, available at http//www.supplymanagement.com/news/2012/john-lewis-partnership-on-target-to-cut-emissions/, accessed 12/11/12Teece,D.J., Pisano, G. And Shuen, A., 1997. Dynamic Capabilities and Strategic Management. Strategic Management Journal, Vol.18, No.7, pp.509-533.Terwiesch, C. and Ulrich, K., 2009. Innovation Tournaments Creating and Selecting Exceptional Opportunities. Boston Harvard Business Press.Washerhelp. (2 012). John Lewis. Available http//www.washerhelp.co.uk/Retailers/John-Lewis.html. Last accessed 20th Nov 2012.Appendix 1John Lewis mission statementThe John Lewis Partnerships reputation is founded on the uniqueness of our ownership structure and our commercial success. Our purpose is the happiness of all our members, through their worthwhile, satisfying employment in a successful business, with success measured on our ability to sustain and enhance our position both as an outstanding retailer and as a thriving example of employee ownership. With this in mind, our strategy is based on three interdependent objectives Partners, customers and profit.Appendix 2PESTEL Analysis for John LewisPolitical FactorsJohn Lewis operates within the UK market and therefore changes in the policy related to the organisation of UK business, as well as advanced policies in the context of the UK, have an impact on the business. The laws and codes of conduct relating to ethical business practices and CSR initiatives particularly impact John Lewis. Subsequently, there has been conscious effort on the role of the retailers to combine relevant Codes of Conduct concerning the supply chain as well as giving a guarantee to customers that have been sourced in an ethical manner. It is likely that changes such as this will continue to impact going ahead but at the same time as this, pricing will be raised as a concern for the retailers as margins will certainly be eroded as prices are put higher, epically where the products may be obtained from developing markets.Economic factorsIt is obvious that economic factors have a major effect on the strategy apply by John Lewis such factors have had a negative impact on the UK. However, when the government took the decision to decrease the VAT rate temporarily in 2008 due to financial crisis, this had a direct positive impact on the retail sector. The company faced major setbacks in relation to its revenue and achievement in 2001. The company was successful in reversing its fortunes through a complete re-evaluation of its supply chain practices they improved the company model so that it met the needs of customers. The company is still conscious that the confidence levels of customers are slightly unstable, this is highlighted in its current financial results, (refer to appendix 3). Such uncertainty has an obvious impact on which strategies companies can follow and directly influences which marketing strategy John Lewis decide to apply in relation to pricing, advertising and other variables of the mix. Increased global uncertainty also influences their operations which are mainly UK based. This is especially true regarding the price of raw materials that has been changed considerably over the past few months, with products such as cotton, coffee and crude oil being a great concern. Such fluctuations put pressures on retailers as well as customers whereby margins shall be reduced and costs passed on to consumers who may in fa ct seek cheaper alternatives as their own incomes may decline. A full appraisal of all elements of the supply and distribution chain is needed to ensure that efficiencies are being formed and improvements are made to the overall value chain (Porter, 1980 1985). This may also clarify the companys latest challenges in integrating its business with Waitrose, John Lewis are becoming much more aligned over the past months (refer to appendix 4) Events overseas such as Spain and Greece could also have more implications for the sourcing policies the company accepts as well as its foreign currency payment methods etc. to suppliers given the weakening Euro currency.Social FactorsSocial factors for John Lewis are very burning(prenominal) across the business as they are considered to have a direct effect on how successful the customer behaviour is and the preference towards the items or brands. While many have pointed out that overtime as consumers we have slowly become more similar across cou ntry borders (Ohmae, 1989 Levitt, 1983), latest indications actually highlight much divergence in consumer buying habits. Much of this might also be attributed to progress in internet trading whereby consumers have further plectron as well as getting updated and having more association about the alternatives available in the market. This has increased the competition which has therefore, put pressure on prices, more often than not in the case of stores as there are much higher fixed costs involved.Another major progress relating to the retail sector in the UK has been the success of the supermarket chains in growing into non-food items with shares of the clothing market increasing every year from competitors such as Asda, Tesco, and Sainsburys. a report from Keynote in 2009 outlined how supermarkets share of the clothing market increased from around 10% in 2000 10 23% in 2008, and this expansion is likely to continue as the major multiples devote increasing amounts of floor space to non-food items such as clothes such growth has completely changed the retail space in the UK and certainly, many have attributed the demise of many High Street incumbents directly to the strategies pursued by supermarkets. At the same time, it is also clear that John Lewis has followed somewhat of a different method and thus located itself apart from these competitors and is seen being more exclusive, of higher quality as well as providing higher levels of service to customers.Technological FactorsIt is impossible to ignore the progress that occurred in technology over the decade or so. Such advances have completely changed and improved all features of the supply and distribution chain particular with regard to online shopping. Over the past few months John Lewis have become more of this and adapted its business model appropriately so that they are capable of understanding customer expectations, with regards to convince and availability. Another major development has been the in creasing use of media and subsequent positive word-of-mouth recommendations. Such tools are viewed by companies as an important ingredient to their overall strategy, not just in terms of communicating with customers but also in gaining further knowledge through customer feedback which can assist them in gaining further knowledge through customer feedback which can assist them in engaging more with their customer base and addressing any potential problems or other threats. Technology is considered as providing more choice to customers but increasingly is being embraced within the overall customer management strategy and is likely that this will intensify going forward and further facilitated by new developments such as improvements in text analytics and the enchant of real-time data (Gartner, 2011)Environmental FactorsMaking the right long term decision is one of John Lewiss founding principle, environmental sustainability is key to this approach. There are programmes, processes and targets in place to ensure that environmental commitments are delivered (John Lewis 2009)John Lewis recently revealed new plans where their key aim is to cast their CO2 emissions to 15% by 2020 (Reynolds, 2012)Legal FactorsJohn Lewis is also impacted by changes to employment regulations as well as procedures guarding trading standards. Over the recent years many retail competitors such as Primark and Gap have been negatively criticised due to concerns on the unethical sourcing and manufacturing of products. Primark, a leading High-street label attracted unpleasant headlines in the media in response to claims they were using child labour, consequently affecting their position in the market. Other changes in the economic framework of overseas markets on which John Lewis depends on depend on