Internal and External Analysis of JD Sports: Opportunities and Threats

This report analyzes the internal and external environment of JD Sports using PESTLE and Porter's model. It identifies the opportunities and threats facing the company in terms of political, economic, social, technological, legal, and environmental factors. The report also evaluates the company's internal competencies and resources using VRIO analysis. The external environment poses a threat to the company in terms of changes in legal regulations and economic conditions. On the other hand, the company has opportunities to expand its business in growing economies and use of technology. The internal analysis shows that the company has valuable and rare resources such as global presence, premium quality products, and well-qualified employees.

Identify the
internal and
external
opportunities
and threats
facing the
organisation

given the jd case
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Executive Summary
Business environment is highly dynamic which put a tremendous impact on functioning
of a business entity. The main purpose of the present study is to analyze the internal and external
environment of JD sports. It is found that company is highly affected with the external
environment which has been assessed with the implication of PESTLE and porters model. This
analysis allows the company to know their strengths and weaknesses to further prepare effective
strategies to overcome with those weaknesses.

Table of Contents
Introduction.................................................................................................................................................4
External Environment:.............................................................................................................................4
Internal environment analysis:.................................................................................................................8
Strategic Options...................................................................................................................................10
Strategic Direction.................................................................................................................................11
Recommendations.................................................................................................................................12
Conclusion.................................................................................................................................................13
References.................................................................................................................................................14

Introduction
Business environment is highly dynamic which put a tremendous impact on functioning
of a business entity. It comprises several internal as well as external elements such as employees,
demand, supply, competitive environment and more. The main aim of the present study is to
analyze the internal and external environment of business entity (Cao and Chen, 2019). The
present study is based on JD Sports that is a well-known fashion brand based on UK. It offers
fashionable and sports wears and was established in 1983 by John Wardle and David Makin.
Now, it has expended business in ample of countries and has nearly 56 stores globally. In 2020,
nearly 34,885 employees were working within the company (Flynn, 2020). The organization
reached at nearly 6.17 billion British Pounds. The report will cover detailed internal and external
analysis of the entity with implication of suitable tools such as SWOT analysis, PESTLE and
Porter’s model and more. Further, necessary strategic options and direction will be also covered
in the report in order to ensure future growth and success of the entity. Moreover, the study is
based on detailed internal as well as external analysis to assess the current performance of the
business entity.
External Environment:
To conduct external analysis is important for a company as it helps in collecting
information regarding the macro as well as micro factors which have a major influence on the
business. Further, it allows a business manager to assess the outside environment in order to
prepare suitable and effective strategies in order to ensure the future growth and success. In
context of JD sports, they are working at the global level and looking forward to expand business
in more countries. In this context, they will implement PESTLE as well as Porter’s framework in
order to evaluate the external environment.
PESTLE Analysis:
It is a tool that is implemented to evaluate macro environmental factors which profoundly
influence a business entity. It is related with assessment of several external elements which are
present in the outside environment but put a significant impact on the overall functions of the
business entity (Shmatko, Yanovskiy and Shamina, 2018). In reference of JD sports, various
factors of PESTLE analysis are mentioned below:

Political Factors: It is associated with political environment, government policies, rules
and regulations which are imposed on the individuals as well as the business entities of country.
In the present scenario, JD sports is going to expand business. In this context, UK is a which is a
political stable country. However, the president cannot elect for more than two consecutive five
years. In addition to this good trade relation of the country also create an opportunity for JD
sports to maintain international trade in an efficient manner. Apart from this, the government
supports to international companies which will help in growth and development of the company
in a new environment. However, the changes in the existing rules for the real estate market might
affect the operations of the respective entity at some extend.
Economical Factors: Under this, economical conditions of a country such as demand,
supply, cost, interest rate, exchange rate and more are taken into consideration. The real estate
market of UK is the second largest IN Europe. There is a forecasting of growth of nearly 3 % in
the real estate market of UK in future. The sector generated turnover of nearly 68.1 billion
British pounds in 2020 (Statista, 2021). Here, JD sports can avail the opportunity of working in
such a growing and large economy. It will allow the entity to earn high amount of profit margin
in order to ensure future development. On other side, lockdown has affected the purchasing
power of the customers as they are likely to invest less in real estate sector. It might create threat
for future growth of the organization. However, company can easily face this threat by preparing
effective strategies and plans.
Social Factors: It is related with personality, attitude, perception, thoughts of the
individuals within society. UK has diversity in terms of religion, culture, values and more. The
Literacy rate in the country is nearly 99% and also government spends huge amount on
education and health care system (Yu, Mao and Chen, 2020). Also, the people of country are
growing in terms of financial position that will create opportunities for JD sports to grow in
future period of time. On other side, there are ample of social challenges such as human rights
violation and more are present in the country that will create threat for future development.
Technological Factors: In current time, use of technology is enhancing thus it is
imperative for the business entities to implement new and advance techniques in order to ensure
the future betterment. The people of the country are really advanced in terms of technology, they
are highly active on Twitter and other social media platforms. Apart from this, the industries of

the country are also growing in terms of technological development and advancements
(Hestiningrum and Prawiraatmadja, 2021). Use of technology is enhancing the growth
opportunities of the country in an efficient manner. Here, the technical advancement will create
opportunities of JD sports as the company can use social media platforms in order to make a
significant presence within the country in an efficient manner. On other side, increasing cyber
crimes, lack of skilled labor will create threat for the organization that can be easily mitigate by
taking necessary steps.
Legal Factors: These elements are associated with presence of legal rules and
regulations in order to ensure smooth functioning of the business entity. There are pre-defined
rule, norms are present in real estate market which need to follow by each and every company
that is operating within the country. Here, the changes in such acts might create threat for JD
sports. In this context, the respective entity needs to assess the change in the legal environment
and alter their policies accordingly. It will help them in order to ensure long-term survival and
growth within the country in an efficient manner.
Environmental Factors: Currently, protecting the environment has become highly
important for the business entities. It is important to maintain a positive image in the society..
Here, ample of people visit to the country each and every year (Capers, 2018). To protect the
environment, there are certain laws and regulations which need to fulfill by every organization.
In this context, there is opportunity for JD sports to work within such a pure environment.
Further, they also have to face threats in terms of modifications in the existing environmental
norms in future.
Porter’s five forces:
It is an effective strategic framework that makes a company enable to evaluate the level
of competition prevailing with an industry. It helps in taking suitable decisions whether to enter
into a particular industry or not. In addition to this, it is possible to assess necessary opportunities
and threats with the help of respective tool (Hoareau and et. al., 2017). In context of JD sports,
the respective framework will help them to understand the various elements of industry before
expanding business in other industry. Five major forces in respect to JD sports are briefly
explained below:

Threat of new entrants: In real estate industry, new firms are likely to come with high
amount of investment, capital that might create pressure on the existing company. Here, entrance
of new firms might affect the existing position of a company in market. Here, threat of new and
trends is moderate as the new firms can easily entered in the industry with limited amount of
funds and resources. However, presence of new entity will not likely to affect such a well
established company like JD sports. Nevertheless, the organization is required embark
innovation and creativity to protect their position in the industry.
Threat of substitute: It refers the presence of such products or services which can be
used in replacement of the existing product and services being offered by the company. Threat of
substitute is moderate. However, there is requirement to introduce innovative and unique
services to maintain differentiation. In this situation, JD sports is required to maintain
differentiation and uniqueness in product so that they can retain customers for longer run. This
threat can be handled by the entity by adopting product differentiation in terms of high quality
and management services.
Bargaining power of suppliers: Suppliers are person who provide raw material and
necessary resources in order to accomplish the pre-defined business objectives. In business,
suppliers are the important stakeholders of business as they provide necessary resources and
equipments so that the business operations can be maintained consistently ( Lim, 2018). In real
estate industry, the bargaining power of suppliers is low as there are several suppliers present in
the market. Hence, the company has advantage to barging with the suppliers. With this, the
organization can reduce down the margin of suppliers and enhance the overall profit of the
entity. To constantly earn higher amount of profit, it is imperative for the company to maintain
healthy relations with vendors so that they supply necessary resources in timely manner.
Competitive Rivalry: In industries, there are several companies present which compete
with each other in order to ensure long-term survival. In this context, competitive rivalry is
really high due to the presence of intensive competition in the industry. To ensure long-term
sustainability, it is important to develop sustainable differentiation and uniqueness in the product
or service. In addition to this, they also need to focus on fulfillment on the needs and
requirements of the customers.

Bargaining power of buyers: Buyers seek to get land and housing facilities at affordable
price. In this respect, bargaining power of buyers is high as they have options to switch over one
brand to another. In addition to this, switching cost of the buyers is also low as they can easily
switch the brands. To deal with such threat the organization is required to include innovative and
unique features in their services an efficient manner.
With the analysis of above-mentioned information, it is analyzed that real estate industry
has high competition and demand of affordable services. JD sports can be survived in the
industry successfully by incorporating innovative and unique attributes in their existing services.
Internal environment analysis:
Internal analysis refers to evaluating the internal conditions of a company. It helps to
identify the strengths and weakness of the organization. There are various tools which can be
used to assess the internal competencies and resources of the business entity. VRIO framework
of JD sports is given below:
VRIO analysis:
The main purpose to design such framework is to evaluate the competitive position of the
business entity. It helps in assessing various factors to understand the core competence of the
organization. Core competence can be identified through the respective framework (Paes, Leat
and Stewart, 2019). In addition to this, it helps in preparing suitable strategies for future growth
and enhancement.
VRIO analysis:
Resources Valuable Rare Inimitability Organized
Employees YES YES NO YES
Global Presence YES NO NO YES
Premium
category
YES YES NO YES
Quality YES YES YES YES

Valuable: It is about offering such products which provide value to the customers so that
they remain with company for longer period of time. For this purpose, managers need to evaluate
the available resources of the company (Inshakova, 2018). In context of JD Sports, it has strong
global presence which differentiate them from competitors. They have presents within different
countries like UK, US, South Asia and more which makes them enable to fulfill the requirement
of global audience significantly. Additionally, their products are perceived as a quality product
by the customers. In addition to this, well qualified employees and quality of the products of the
respective entity is also valuable.
Reality: According to this element, product of the organization needs to be rare which
cannot be copied by the rival firms. Employees of the organization are rare and play a crucial
role in future growth and development (Du and et. al., 2021). In addition to this premium
category and quality of the product is also considered as rare. These attributes makes a distinct
presence of the company in competitive marketplace that will aid in future enlargement of
business.
Inimitability: This is a crucial factor of VRIO analysis which shows that the products of
the entity need to be unique in order to avoid the duplication. Inimitability feature provides
sustainable competitive edge to the company over rival firms. In context of JD sports, global
presence of the company is something which can be easily imitate by other competitors.
Additionally, the competitors also list their product in premium category and appoint well
qualified and efficient employees. Here, quality is an important and unique feature of the
respective entity which is irreplaceable and contributes in setting a unique image of the company
with an industry.
Organized: This is the last and most important element of VRIO framework. It
demonstrates that resources of the organization need to be organized in a systematic and
appropriate way to attain the future goals in an efficient manner (Sinthupundaja, Chiadamrong
and Kohda, 2019). In JD sports, they ensure to organize all the resources in a proper way to
ensure long term sustainability and growth.

From the above analysis, it is found that quality is one of the major aspect that is
differentiating JD sports from rival firms. Through having the quality product, they can easily
add value in customer experience that will contribute and their future growth and sustainability.,
for this purpose, they conduct quality assessment at each and every stage of production in order
to produce better quality products.
Strategic Options
Nowadays, the business entities are likely to work in a highly competitive environment.
Thus, it is important to identify necessary strategic options in order to ensure success. For this
purpose, several model and tools can be applied. Here, Porter’s generic strategy is a tool that is
implemented in order to develop necessary competitive advantage in the market place. In context
of JD sports, different Porter’s generic strategies are given below:
Cost strategy: Here, the main focus is on cost as it is an important element of
production. If a company is able to control the cost, it helps in earning sufficient amount of profit
margin in an efficient manner. Customer also get easily attracted towards such products which
are available at affordable price. Additionally, it helps the company in enlarging the existing
customer base by offering products at lower price (Jeon, 2017). In JD sports, they can ensure to
get competitive edge by reducing down the overall cost of production. With this, they can easily
expand the target audience by offering products to medium and lower income group people as
well. It will enlarge the sales and revenue of the entity that will lead them towards higher
profitability. For this purpose, the company is required to identify suitable ways to control the
cost. By this way, they can make a unique identity in the industry.
Differentiation strategy: Differentiation refers to include innovative and unique features
in the products or service. In other words, it is about making such different and creative products
which also contributes in long term sustainability & growth. In this context, there is requirement
to perform detailed and extensive market research to identify the suitable ways to make further
improvement in the product or service. In case of JD sports, they also need to add some different
and innovative elements in their existing product to make a positive brand image in market. They
can also greet differentiation by providing better shopping experience to the customers. It will
help the company to attract more and more buyers and minimize the probability of brand
switching.

Focus strategy: In this strategy, the organization is likely to focus on specific niche and
produce products or services accordingly. In this contest, organization follows both
differentiation as well as pricing strategies so that they can fulfill the needs and requirements of
particular niche segment. In reference to JD sports, their main focus is on differentiation by
producing fashionable sportswear. In this context, they are working on value oriented approach
wherein they offer different and unique product to the customers. Trough this strategy, the
company is able to ensure long term sustainability and growth in the industry.
Strategic Direction
JD sports company is well known fashion company which is operating across different
countries globally. In this context, the managers are looking forward to expand business in more
countries. For this purpose, they are required to formulate some strategies which will provide
direction for future growth and enhancement. In this contest, and solve matrix it’s given below:
Market Penetration: In this, the organization works in the existing market with existing
product or service. Here, the companies required to provide necessary discounts and offer to
maintain a distinct image in the market.
Product development: It is related with development of a new product or service in the
existing market. There is requirement to conduct significant amount of research to develop a new
product or service (Mamabolo, 2020).
Market development: Here, company is likely to enter into an entirely new market with
existing product. It is not easy to sustain in a new market environment hence the organization is
required to carry out detailed research before entering into a new market.
Diversification: It is considered as the most risky strategy as here, the product or market
both is new. However, there are huge opportunities to and potential amount of profit.
For JD sports, market development is the most suitable approach as it will help in
enhancing the presence of company in different market segment. It will make the company able
to target huge segment of customers in an efficient manner. For this purpose, they need to carry
out a detailed and in-depth market research to take suitable decision related to expansion.

Through this expansion in real estate industry, the company can enhance its existing business
which will also accelerate the existing revenue and profit margin.
Methods of expansion:
Joint venture: In joint venture, two or more companies associated with each other to
attain a common goal. It has a commonly used way to expand business internationally. In this,
resources of both the companies are combined together to enlarge the presence of business in
significant manner.
Merger and acquisition: Here, two or more companies are merged together to generate
synergy. Different organization combined their resources together to strengthen their market
position in an efficient manner. It helps in enhancing the overall productivity and profitability
and generate the opportunities of business enlargement (Xue and et. al., 2021).
From the above mentioned point, joint venture is the most suitable option for JD sports to
expand business in different industry. It will influence the position of company in a positive way
and allow them opportunity to accelerate business in international market.
Recommendations
After going through with the above mentioned information, it is monitored that JD Sports
is required to undertake some effective recommendations to make further improvement in the
business. These recommendations are given below.
 It is suggested that managers of JD sports are required to undertake take proper planning
in order to understand the dynamics of business environment. It will help the company to
get information regarding the business opportunities and threats which will make them
enable to formulate proper plans to ensure consistent and effective functioning of
business.
 It is suggested that the company needs to focus on strengthening its internal competencies
and resources to maintain a significant competitive position in the fashion industry. It will
make a strong brand position of the company in the competitive market and also
accelerate the growth rate.

 JD sports is required to include innovative and creative features in their service to set
themselves apart from rivalries. Including unique and different features is important to
attract large number of audience towards the company.
Conclusion
In terms of concluding note, it can be said that internal and external business environment
has the potential to affect the execution of different activities in business. In current time,
business environment is dynamic and cover ample of aspect which can be changed over the
period of time. The above report is based on JD sport that is looking for further expansion in real
estate industry. It is analyzed that the company is highly affected with the external environment
which has been assessed but the implication of PESTLE and porters model. Additionally, there is
discussion regarding internal environment of the organization. This analysis allows the company
to know their strengths and weaknesses to further prepare effective strategies to overcome with
those weaknesses. Moreover, the company implements competitive strategies in terms of
Porter’s generic model to further strengthen the competitive position in market.

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