Analysis of Macro and Micro Environment of JD Sports

This report analyzes the macro and micro environment of JD Sports, a British sports-fashion company in the retail sector. It also includes an internal analysis of the company and identifies competitive strategies and strategic directions.

Individual Strategic
Management

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Analysis of macro and micro environment of JD Sports.......................................................3
Internal analysis of the JD Sports...........................................................................................7
Identification of Competitive Strategies.................................................................................9
Strategic Directions..............................................................................................................11
CONCLUSION..............................................................................................................................13
REFERNCES:................................................................................................................................14
Books and Journals:..............................................................................................................14

INTRODUCTION
The term Business Environment refers to an aggregation of all internal and external
factors that affect the business in a direct or indirect way. These can be employees, clients,
customers, suppliers, social trends, economical changes, advanced technologies, government
influences and many more. Sum of these factors influences the business companies situation and
environment. The report is based on the JD Sports Organisation which is a British sports-fashion
company in retail sector (Akao, Watson and Mazur, 2020). It has a world-wide operations in UK,
USA, Australia, New Zealand and Asia as well. In 1981, the company was began by John and
David, that is why is more generally recognized as JD. The headquarter of the brand is in Bury,
Greater Manchester, UK. It is mainly known for fashionable branded, casual and sports-wear. As
the JD Company looks forward to expand its business in the Asia countries, it is very essential to
assess both internal and external environment of the business that affects the day to day
operations of business. It will also find market expansion methods for the JD Sports so that can
make an impactful decisions for the business. Overall, the report is based on different
frameworks and models or approaches that will assist the brand in its strategic decisions.
TASK
Analysis of macro and micro environment of JD Sports.
PESTLE Analysis:
The pestle analysis of the JD Sports is a useful tool to analyse the macro environment
factors of the company. These factors include political, economic, social, technological, legal
and environmental that influences the business operations of JD Sports. Moreover, the changes
in these factors will not only affect the JD Sports but also other players in the retail sectors. The
pestle analysis of the JD Sports is discussed underneath: Political factors: Political factors plays a very important role in determining the variables
that can affect the company's long term profitability in specific country or market. JD
Sports has world-wide operations in more than dozen markets and expose itself to several
political environment and risks related with it (Burak, 2020). High stability in political
factors can serve stable business environment with predictable trends of market. JD
Sports exists in various countries and each market is having their own political stress.
These instabilities and stress in the political environment can limit the growth

opportunities available to the company. It is beneficial for the brand to enter in such a
market which have low taxation rates so the more profit can be generated. Hence, the
political factors is one of the big challenges that is faced by the HD Sports as these
factors are fluctuating in nature. Economic factors: It is necessary for the organisation to understand economic variables
such as interest rates, foreign exchange rates, inflation rate, labour market conditions and
many more. The GDP growth rate will regulate the brand's ability to pursue the long term
tactics. High GDP also signs the ability of consumer to invest more on the JD sports
products. High unemployment rate signifies the availability of supererogatory labour at
relatively lower wages (Danish and et.al., 2020). Operating in such countries can lower
the cost of production of JD Sports. Hence, by understanding and predicting the labour
market conditions can help the company how it can attract talented employees and
leverage their skills to enhance the organisational performance. Social factors: Workplace culture derives strong influence from the societal trends,
values and norms. Studying the demographic trends, consumer's spending patterns, power
structure and shared beliefs can support the JD Sports to make effective content related
with marketing and satisfying their business objectives through informed pestle
framework. Understanding demographic features can support the JD Sports in selecting
the right market segments which has high growth potential. As the company expands
business in the Asian countries, it is very essential to know the common attitude towards
migration as it can affect the business's ability to bring global managers to host country.
Also, considering online shopping behaviour customers is also important that
distinguishes that young customers are more attract to purchase online than old
consumers. Technological factors: It is one of the challenging factors from producing until
supplying the good and services, JD Sports has to consider the technological factors. This
can be done by analysing how new technologies can support the brand to increasing the
customer satisfaction and its long term profitability and how much it will impact on the
fund of business. In case of JD Sports, it could help the company by getting a good
insight into what other players in the retail sector are thinking and where retail business
model future is.

 Environmental factors: In the past decades, the environmental factors and sustainability
are becoming critical to any business. Government asking businesses to adhere to
environmental standards. It consists safe, disposal of hazardous material, limiting carbon
footprints, laws regulating pollution, climatic change, increasing focus on the
sustainability and many more. In case of JD Sports, the company has to spend more in
making supply chain more negotiable due to extreme weather conditions which results in
high cost of production (Ferris and et.al., 2018). Moreover, in order to expand business in
Asian countries, the customers assess that the brand JD sports to fit not only the legal
standards but also to become a responsible stakeholder in the society. Legal factors: Legal factors plays a fundamental role in the development of business in
any country. It is essential for the JD Sports company to consider all legal factors before
expanding business into any economy. It consists data protection laws, discrimination
laws, time taken to deliver justice, IPR protection, biasedness towards home players and
many more. Expanding business in Asian countries is necessitate to understand all the
legal factors of that particular nation, which will help to conduct business without any
legal hindrance.
Porter's five forces model:
This is a strategic management tool that helps the business to understand the industry.
The managers of the JD Sports can use the porter's five forces model to study the five
competitive forces that affects the profitability and produce a strategy for improving the
competitive position and long term profitability in the market.

 Threat of substitutes: The availability of the alternatives make the competitive
environment more challenging. The customers will shift to other brands if there is a
availability of substitute products which can fulfil the demand and also they are budget
friendly for them. The threat of the substitute product or services is low to moderate for
the JD Sports because they are more emphasises on their services rather than product, by
positioning in such a manner customers may have to spend more if they go for the
alternative options. Threat of new entrants: This represents that how new entrants will impose threats to the
present market leaders. If the industry will be profitable then barriers related to this will
be minimum and will attract more players (Freund, Al-Majeed and Millard, 2021). In
case of JD Sports, the company will low threat of new entrants as it requires huge capital
and resource investment. Also, the existing players may discourage the new players by
imposing time-consuming regulatory demands or other specific challenges. Bargaining power of buyers/ customers: It shows the pressure that are exerted by the
customers on the business to get affordable products with high quality, with excellent
services. This bargaining power of customers is high in the industry which influences the
business and its profitability while making industry more competitive. A more
concentrated consumer base boosts the power of customers to bargain against the
respective firm. Bargaining power of suppliers: The suppliers are the ones who supplies raw materials to
the organisations. They plays an essential role if they come to realise that the firm is
dependent on them then they can negotiate their price demands. The suppliers can put the
pressure on company by reducing the quality of product, reducing the product availability
or rising the prices. In case of JD Sports, the company has high bargaining power of
suppliers if they have high concentrated into a particular region and the suppliers are few
or limited and the demand for the raw materials is high then it boosts the power of
suppliers.
 Competitive rivalry: Competition among the companies often results in the reduction of
revenue. High rivalries represents the strong pressure on JD Sports, which can limit the
growth potential of the company. Also, competitiveness influences aggressive targeting

and pricing tactics. The competition is high for the JD Sports as there are many brands in
the market that can be opted by customers very easily. For example, Sports Direct,
Decathlon and many more.
Internal analysis of the JD Sports.
SWOT Analysis:
SWOT analysis refers to strategic tool that helps company to do a situational analysis.
This is a fundamental technique to assess the company's current strengths, weaknesses,
opportunities and threats (Gómez‐Solórzano, Tortoriello and Soda, 2019). JD Sports holds a
dominant position in the marketplace by carefully examining and reviewing its internal and
external factors. The SWOT analysis of the JD Sports is discussed below:
Strengths: High level of customer satisfaction: JD Sports is having an excellent customer
management team that has able to attain a high level of consumer satisfaction and great
brand equity among current customers. Excellent performance in the new markets: The respective brand has developed its
expertise at entering into new economies and attain success of them (Zerfass and et.al.,
2018). Such expansion has supported the company to produce more revenue and alter the
economic cycle risks in the markets that operated in. Reliable suppliers: The company has a strong base of suppliers that enables to overcome
the supply chain bottlenecks.
Weaknesses: Limited success outside core business: Undoubtedly, JD sports is one of the leading
brand in the industry but somehow it faces challenges dealing in the product
diversification with its current culture. Old Technology: Since the JD Sports has expanded its business in more than dozen of
countries, but it had to focus a lot on its technologies. The brand exploited old and
outdated technology for its business. Obsolete work culture: JD Sports still adopt the old organisational culture. Acquiring
new workplace culture creates lots of struggles to the brand.
Opportunities:

 New markets: There is a bigger opportunity for the brand to expand its business in
developing countries such as in Asian markets. It can expand the business in India, Japan,
Taiwan and many more. Lower inflation rate: The low inflation rate will bring stable situation in the marketplace,
enable credit at low rate of interests to the buyers of JD Sports and many more. Transportation: JD Sports can diminish the transportation cost by wisely opting lower
shipping costs (Kouamé and Langley, 2018). It will decline the overall cost of
transportation which either can be shown by its profitability or by increasing market
share.
Threats: Raw material costs: There is a rise in the raw material costs which affects the long term
profitability of the business. In order to cope with the situation, the brand has to trade-off
between the revenue and the consumer benefits. Different markets different laws: The developing countries have different laws such as
labour law, minimum wage rates and many more. The company might face challenges
related with such laws and face different claims from several economies. Seasonal demand: The goods or services through which a company can generate high
revenue are often seasonal. Any alter in the trends in any season can restraint the revenue
of business.
VRIO Analysis:
VRIO is a business analytical tool that helps business its competitive benefits. It is an
acronym of value, rarity, inimitable and organisation. This analysis falls to evaluate the internal
business environment of the JD Sports. The VRIO analysis of the company is mentioned
underneath:
Valuable:
 The financial resources of the JD Sports are highly valuable as it supports the brand to
invest into external opportunities.
 The local food products are also a valuable to the firm. JD Sports smartly differentiated
their products so that their customers can easily perceive.
 R&D department of the JD Sports is not a valuable resource. All this is because it costs
higher then it serves benefits in the sort of innovation.

 Employees are valuable resource to the organisation. A huge portion of the employees is
highly skilled and trained which leads increased productivity for the JD Sports.
Rarity:
 The financial resources are found to be rare for the JD Sports because it possesses a
strong financial position which can be tackled by very few companies in the market.
 The local food are not rare for the JD Sports as customers can find it from other
competitors of the JD Sports (Kumar, 2018). Employees are rare to the company as they are highly skilled and trained which is not
found in other companies. Also, the better work environment and compensation ensures
the workers do not leave the firm.
Imitable:
 The financial resources are costly to simulate as found in the VRIO analysis. These
resources can be earned through prolonged revenue over the years.
 The local foods are not that expensive to imitate as many other brands can be acquired
such products through research and development. Employees are not costly to imitate because other organisations can also train and
develop their staff to make them productive for their business.
Organisation:
 The financial resources are organized by the JD Sports (Tuncdogan and et.al., 2019). The
firm use such resources in a strategic way in order to invest in the right places, making
utilization of opportunities and overcoming threats.
 R&D department of the JD Sports is not organized. The company is using old technology
in its business which affects the production and growth.
From the VRIO analysis, it is found that financial resources serves a sustainable
competitive benefits. Employees are the temporary competitive advantages. The local foods are
competitive parity and R&D is a competitive disadvantage that affects the business.
Identification of Competitive Strategies.
Bowman's strategy clock:
The model Bowman's strategy clock was found by Cliff Bowman and David Faulkner.
The key purpose of this model is to make the organisations aware of their competitive position in

the market as compared to their rivalries (Kwon, Ryu and Park, 2018). In case of JD Sports, the
following is the discussion of eight position of the bowman's strategy clock:
1. Low price and low added value: This method suggest that keeping low price is only
way of the gaining competitive position in the market. The price of the goods and
services providing low prices is very low and the good or service is not varying and
customer realizes low value. It is not the most effective strategy in the model.
2. Low price: In this strategy, the firm manufactures huge quantity of the goods and the
goods are valued with low prices in the market. Also, the price war is taken place
between the competitors in such position.
3. Hybrid: This strategy is very effective in the Bowman's clock if the added value of
the goods is consistent and well applied by the company on regular basis. Also, the
tactic position consists the firm focusing on the aspect of product differentiation
which makes their goods highly valued by the customers in the market. The main
aim is on low price of the goods (Lee, 2021). So, the customer is convinced that the
firm is offering high value product at low prices that benefits them in a veritable
manner.
4. Differentiation: The main purpose of this strategy is to offer highest level of
perceived value to the customer. By differentiation, the company is offering
something unique to the customer (Pérez-Luño, Alegre and Valle-Cabrera, 2019). It

can be similar to the value proposition of another good but there is some aspect that
offers high proposition of value. Nevertheless, the branding and product quality
plays a sensitive role in this method. Robust brand awareness and high quality
products can lead to increased prices with added value. Customers are willing to
spend extra for such products as they are sensitive to the high valued products.
5. Focused Differentiation: This strategy is mainly suitable to the brands are focus on
the exclusive and luxury products that are top on quality while sold on high prices.
The higher profit margins are acquired by such firms as they exploit segmentation
strategies, targeted promotions and many more.
6. Risky High Margins: It is the most riskiest tactic and most likely to fail in the longer
period of time (Leonel and Fabian, 2019). The high prices are charged for the
products that are sensed as ordinary.
7. Monopoly pricing: In this position, the firm position itself as the monopoly leader in
the market. There is no stress of competition and they are the only one who
determines the prices.
8. Loss of market share: This tactical position is not desirable for any firm as the
company is unable to serve the goods that are valued by the customers. The firms in
such position are go for the standard prices in order stay relevant and competitive in
the marketplace.
From the above positions, it is found that Hybrid and Differentiation position can be
opted by the JD sports. These are such positions which delivers high value and uniqueness to the
customers. Customers always demand the quality products with minimum prices. They also go
for some uniqueness so that can be satisfied and happy with the services or products.
Strategic Directions
Ansoff Matrix:
Ansoff Matrix is known as the product/market expansion grid. This is an important tool
utilized by the company to analyse and plan their tactics for the growth and expansion methods.
It includes four strategies that can help JD Sports to grow and examining the risks linked with
each strategy.

 Product Development: In this method, the company is develop new products for the
present markets (Minyang and Amponstira, 2019). The success of the product
development strategy is dependent on the firm being able to conduct an effective research
on the market demands or what is expected by the customer. The internal capabilities or
competencies will allow the success of this strategy. Market Penetration: This is the most lowest risk strategy that allow organisation to sell
its current products into the existing markets as they know the demands and expectations
of the customer (Nathan, 2019). This is suitable only where the market is still developing
and where the firm is likely to use other components of the marketing mix such as
additional promotional activity or price discounting. Market Development Strategy: It relates to taking present products and services into the
new markets. This is kind of riskier strategy than market penetration because it can be
complicated to understand the complexities of new markets. Key changes in the
marketing mix are place and promotion to target new markets.

 Diversification: This is the final strategy in the Ansoff Matrix which signifies developing
new products for the new markets. This is the most riskiest strategic among all as firm is
shifting into an unfamiliar and new market. Still, the risk can be quenched by undertaking
“related” diversification (Parfinenko and et.al., 2019). It could also have the potential to
get high returns on investment.
From the above strategies, JD Sports can focus on the diversification and market
development strategies. Both strategies can be beneficial for the business expansion. By
analysing the risks related to them, the firm can gain high profits and revenue for the business.
CONCLUSION
From the above report, it has been concluded that a business is consist with several
internal and external factors that influences the operations and activities of business. Pestle
analysis involved with various macro environmental factors which must be studied by the
company. Micro environment can be assessed by porter's five forces model. In order to analyse
the internal environment SWOT is used for the JD Sports. VRIO is helpful to know the internal
capabilities of the firm and helps to achieve competitive position in the market. Bowman's
strategy clock is consist with eight positions which helps a firm how it can position itself in the
market based on the two dimensions. Ansoff Matrix will suggest the company how it can expand
itself in the market.

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