Strategic Management: Analysis, Recommendations, and Models

This assignment provides an analysis of strategic management models and strategies for Sports Direct, a British sports retail organization. It covers SWOT analysis, PESTLE analysis, Porter's Five Forces, and the Ansoff Matrix.

STRATEGIC
MANAGEMENT
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN ANALYSIS..........................................................................................................................1
Background..................................................................................................................................1
SWOT..........................................................................................................................................1
PESTLE.......................................................................................................................................3
Porter’s five force........................................................................................................................4
Ansoff matrix...............................................................................................................................6
RECOMMENDATIONS.................................................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
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INTRODUCTION
Strategic management can be defined as management process with the help of which
organizations set their objectives, analyse competitive market in which they deal, analyse all
macro and micro factors that can affect an organization (Ansoff and et.al., 2018). It is quite
important to work on strategic management process as t helps them to evaluate their vision,
mission, goals as well as their future plans. Retail sector is a sector which is evolving
continuously. So, it is important for all the organization within this sector to continuously bring
changes within their current strategies, products, services etc. in order to attain sustainability.
This assignment will lay emphasis on strategic management models, process or strategies that
can be used by organizations to evaluate the industry in which they operate and strategies that
can be used by them to expand or grow in the industry they operate. This assignment will focus
on Sports Direct British Sports Retail organization.
MAIN ANALYSIS
Background
Sports Direct International Plc is a British Retail Organization which was established by
Mike Ashley in 1982 with its main headquarter in England. It is UK’s largest Sports Goods
retailer that have approximately 670 stores present all over the world. They majorly deal in
Sports goods and sell all sports products such as clothes, shoes etc. They have various sports
brands that mainly trade under the name of Sports Direct. They have employed approximately
17,500 employees working with them. Their overall £3,359.5 million. They have huge list of
renowned subsidiaries such as USC, Slazenger, Lilywhites and many more.
SWOT
SWOT analysis is a strategic tool that can be used for Situational analysis in order to detect
strengths, opportunities, threats and weakness of an organization (David and David, 2019)(Hitt
and Duane, 2017). With the help of this analysis Sports Direct can focus on their internal
operations in order to focus on their progress and come up with new ideas. SWOT analysis of
Sports Direct is as follows:
Strengths: One of the main strength of Sports Direct is their global network of stores
worldwide. They are UK’s number one sports retailers with more than 470 stores. They also
have tie-up with top brands such as Adidas, Nike and many more. They also have built their
expertise in entering successfully into new market. They also have strong online presence with
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24*7 home delivery which gives their customers a chance to get their products delivered to their
home. Another one of their main strength is that their employee turnover is quite low as they pay
high amount of bonus to their employees and other managers other than this, they also provide
various other benefits to their customers. They also have a huge list of renowned subsidiaries
such as USC, Slazenger, Lilywhites and many more. Sports direct have their own variety of
range of intellectual property including various patents and trademark. This helps them in
protecting their products and increases their exclusivity of their products. This also helps them in
making sure that their products are not being copied by any of their competitors.
Weakness: One of the top most, most prominent weakness of Sports Direct is their slow
growth in market share. They have always been working with low profit margin from many
years that can affect future probability of the company (Lasserre, 2017). Their employees also
lack skills that are required to deal with the customers due to which organization can face huge
loss in terms of competitive advantage and profitability. Another one of their weakness is that
they have not been able to tackle their current challenges that they have been facing because of
new entrants in this segment and because of this reason they have lost a small amount of market
share in niche category. They also need to invest more on new technology in order to integrate
their process all across the board. There is huge gap within the product range of the company that
are sold by them due to these gaps their competitors can get a hold of their market. Their
investment in research and development is quite low as compared to the fastest growing players
within this industry.
Opportunities: the company is focusing on acquiring various brands present across
Europe. It is one of the great opportunities for them in order to expand their customer base.
Due to continuous growing economic problems in Europe, has increased growth opportunities
for Sports Direct to expand their business in Eastern and Western Europe as well. New
environmental policies have increased opportunities for Sports Direct to bring innovation and
improvement within their products or introduce new product category to their customers. This
will help the company to gain competitive advantage as compared to their competitors. Stability
of free cash flow has also provided Sports direct with an opportunity invest in other product
categories as well. This free cash flow can also increase opportunity for the company to invest
more in new technologies.
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Threats: Due to fluctuating policies within Europe, overall functioning of the company
can be affected in a drastic manner. Continuous advancement in technology is another threat for
the company as competitors of Sports Direct are continuously bringing changes within their
current technology which is one of the main threats for Sports Direct. Change in consumer’s
buying behavior and their diversion towards online shopping channels is another threat to
companies existing physical infrastructure (Noe and et.al., 2017). As Sports Direct operate in
numerous countries so fluctuation in currency is another threat for organizations various stores
all across the world.
PESTLE
PESTLE analysis helps in providing an insight of operating challenges for an organization
in any industry that they might face (Hill, 2017). PESTLE analysis of Sports direct is as follows:
Political Factors: Legal and political stability of the country is affecting the overall
profitability of the company. Brexit is one of the major factors that has affected sports direct.
Because of this company’s coast of buying goods from abroad has increased by almost 20%.
Increase in taxation has also demotivated Sports Direct and has affected their overall profit.
Decrease in minimum wages has helped the company to increase their profit by increasing
survival chances for sports direct. Work week regulations has also affected Sports Direct and
their working policy.
Economic factor: Fluctuating GDP rate of the country has also affected the growth of
Sports direct and its expectations of growth to grow in future. Gradual fall in UK consumer’s
disposable income is decreasing Sports Direct sales and is also affecting their sales demand
prediction as due to less disposable income of customers, they fail to purchase products at their
initial rates without any discount which has affected organization’s overall profit. Due to
increasing number of unemployment in the country, demand for jobs is increasing, which is a
bigger advantage for Sports Direct as people are ready to work at lower salaries as well.
Social factor: these factors also affect sports direct as change in different region people
have different opinion and requirements and because of which Sports Direct need to pay more
attention to their demographic population and their needs and requirements. Most of their
targeted customers are middle class people so because of which Sports Direct will be unable to
promote their premium products for general public (Meyer, Neck and Meeks, 2017). Sports
Direct need to be completely aware of their health standards, environment awareness among
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people and accordingly bring changes within their policies and products quality they will be
delivering to their customers.
Technological factor: Adaptation of new technology by Sports Direct is gaining
popularity within the industry they operate in. they need to focus on increasing market
competition and level of popularity that technology is gaining. This would help them to identify
urgent requirements and innovation they need to bring within their technology. They also need to
focus on protection of their new technology and its process because other firms in this industry
might copy their process or features which would be directly harmful for Sports Direct.
Environmental Factor: Climatic condition and weather changes can affect Sports Directs
ability to transport their products and raw material from one location to another. As today most
of the countries are focusing on becoming environment friendly and because of which various
environment related laws has been developed. This can work as a barrier for Sports Direct and
need to focus on engaging themselves within environment friendly activities. They can also
focus on using renewable energy for product development as use of these renewable sources are
supported by both customers and government. Many customers willing pay the premium price of
the product if those products are environment friendly and are made from renewable energy.
Legal Factor: Sports Direct need to focus on their Intellectual property laws and data
protection laws because not doing so can affect Sports Direct and can make them lose their
competitive advantage and chances of failure for them can also increase. Nowadays employment
laws, health and safety laws, discrimination laws have become stricter and all the organizations
need to focus on these laws and failing to do so can result legal actions against them.
Porter’s five force
Porters five force model is a strategic management tool that helps an organization to
understand their industry’s competitive landscape (Michael, Storey and Thomas, 2017). All the
five force helps the organization in understanding effects of these forces on their overall
business. Five forces that will help Sports Direct to understand their industry competitive
landscape are:
Threat of new entrant: It is a weak force for Sports Direct as it is quite difficult to
achieve economies of Scale in this industry because of which production cost for new entrants
increases. As a result, it becomes quite difficult for new entrants to enter in this industry. Product
differentiation in this industry is also quite strong as most of the customers search for
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differentiated products and because of which firms in this industry focus on selling differentiated
products rather than standardized products. Due to this organizations focus more on marketing
and advertising more. All of these forces together make it difficult for new entrants to enter into
this market. Other that this capital investment in this industry is also high which increases
difficulties for new entrants to set up their business. There is another factor which weakness the
new entrant force for Sports Direct which is high investment in research and development.
Bargaining power of Suppliers: This force is also quite weak as there are many suppliers
present in this industry because of which suppliers’ control over prices decreases (Morschett,
Schramm-Klein and Zentes, 2015). Products provided by suppliers in this industry are quite
standard rather than differentiated due to which switching cost for buyers like Sports Direct
decreases. Sports Direct purchase raw materials from their suppliers and if the do not like the
product or raw material then they can easily switch from one supplier to another. They can also
have as many suppliers as they want within their supply chain as switching cost is quite low.
Bargaining power of Buyers: This force is moderate as there are only few firms
producing such firms because of which buyers have less options to choose from but all the
competitors of Sports Direct offer substitute products of Sports Direct as quite a competitive
price because of which switching cost for buyers decreases. In this industry buyers focus more
on quality of the product rather than price and if quality of product is good then buyers get more
attracted towards the company. Because of these factors bargaining power of buyers within this
industry is quite moderate.
Threat of substitute services or products: This force is quite moderate as there are quite
a smaller number of substitute available in this industry but the product margin within this
industry is quite low. Sports Direct focus more on quality of products and offer quality products
at lowers price in order to attract more customers (Trigeorgis and Reuer, 2017). Whereas
Substitute organizations produce quality products at high price which provides Sports Direct an
opportunity to increase their customer base. They also focus on product differentiation and
ensures that their buyers see their product’s uniqueness and do not shift to other brand products
easily.
Rivalry Among existing firms: Rivalry within this industry in existing firms is quite high
as existing and established firms in this industry continuously bring changes within their pricing
strategies in order to attract more customers which strengthen this force. Other than this it has
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also been observed that competition in this industry for Sports Direct is also increasing and
because of this it is becoming quite difficult for Sports Direct to gain competitive advantage
which further strengthen this force (Steiss, 2019). Many of Sports Direct Competitors are also
focusing on using advance technologies in order to gain competitive advantage and attract more
customers because of which competition for Sports Direct increases.
Ansoff matrix
Ansoff matrix is a strategic planning tool that helps organizations in providing organizations
to device strategies for future growth. It provides four different growth strategies that can be used
by organizations to increase their market share.
Market penetration Strategy: this strategy focuses on current product and current market i.e.
selling of more established products into the established existing market (Ethiraj, Gambardella
and Helfat, 2016). This is mostly done by increasing promotion or reducing prices or by focusing
on other better routes to reach the market. Sports Direct can uses market penetration strategy to
maintain their existing customers or to attract other customers who prefer to buy similar products
or have clearly defined needs and requirements. It is one of the best and safest strategy that can
be used by Sports Direct.
Product development Strategy: This strategy focuses on new product and current market.
Using this strategy organizations can focus on selling new products on existing market. For this
Sports Direct need to carry out research and development so that they can come up with new
product ideas. But it is quite a risky strategy as organizations does not know whether the product
will be successful or not. This strategy can also be used by Sports Direct to replace their existing
product and launch new product or to sell the products that are desired b y the customers in order
to leverage organization’s relationship with their customers or to add more convenience for their
customers. In order to use this organizations do not require to focus on completely new
development in fact they can use existing supplier business within their existing market.
Market development Strategy: this strategy focuses on their current product and new market.
Using this strategy Organizations can focus on selling their existing products into new market.
This strategy can be used by organizations to expand their business by entering into new market
segment or into global market by expanding their business nationally or internationally (Aguinis,
Edwards and Bradley, 2017). This might require an organization to acquire new capabilities,
understand different culture or new skills. Organizations can also use this strategy foe new
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market or distribution channel as well like making their product available on internet so that it
becomes much easier and simpler for customers to enter into the new market. Sports Direct can
use this strategy to enter into a new market segment or expand their business into new country.
Diversification: this strategy focuses on new product or new market. Using this strategy
Organizations can focus on selling new products into new market. This strategy can be used by
organizations to expand their business by entering into new market segment or into global
market by expanding their business nationally or internationally and launching new products
within that market. It is one of the riskiest strategies that can be used by organizations as they
have no experience or knowledge about the new market segment and also have no idea whether
that product will be a success or a failure.
RECOMMENDATIONS
Here are few recommendations that can be used by Sports Direct are:
 Sports Direct can use market development strategy to expand their business were they can
focus on making their existing product available to new market segment as well like
expanding buying options for customers and expanding their online distribution channel.
This will help Sports Direct to increase their overall sales and attract more customers. Online
sales can help Sports Direct to increase their overall sales profitability as well.
 Sports Direct can use market development strategy to expand their business outside UK as
well in a better manner. They can focus on extending their business in emerging market
economies or developing countries by launching or introducing their existing products into
new market segment. This will also help them to increase their overall market share and
increase growth of their business development and market share.
 They can also focus on using new and advanced technology for production of their products.
This will help Sports Direct to gain competitive advantage and increase their product sales as
well as will help them in attracting new customers.
 Sports Direct need to work on organizing training and development program for their
employees so that they can enhance their employee’s current skills of dealing with their
customers. This will help them to attract more customers and drive their overall sales and
profitability.
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CONCLUSION
From the above assignment it has been summarized that there are various threats and
weaknesses of Sports Direct that are required to be focused by them. Sports Direct can focus on
Strengthen their Strengths and opportunities in order minimize their threats and opportunities. It
has also been analysed that there are various macro environment factors that can affect Sports
Direct both positively and negatively. It has also been analysed that there are various forces that
can help Sports Direct to understand them understand their industry’s competitive landscape.
Evaluation of these forces Can help Sports Direct to understand what are the main forces that can
affect their business drastically and which forces cannot not. There are various other strategies
that can be used by Sports Direct to expand their business either in existing market or in new
market segment.
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REFERENCES
Books and Journals
Aguinis, H., Edwards, J.R. and Bradley, K.J., 2017. Improving our understanding of moderation
and mediation in strategic management research. Organizational Research
Methods. 20(4). pp.665-685.
Ansoff, H.I., and et.al., 2018. Implanting strategic management. Springer.
David, F.R. and David, F.R., 2019. Strategic management: A competitive advantage approach,
concepts and cases. Pearson.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2016. Replication in strategic
management. Strategic Management Journal. 37(11). pp.2191-2192.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function.
Macmillan International Higher Education.
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship. pp.45-63.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship‐strategic management
interface. Strategic entrepreneurship: Creating a new mindset. pp.17-44.
Michael, S., Storey, D. and Thomas, H., 2017. Discovery and coordination in strategic
management and entrepreneurship. Strategic entrepreneurship: Creating a new mindset.
pp.45-65.
Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management (pp.
978-3658078836). Springer.
Noe, R.A., and et.al., 2017. Human resource management: Gaining a competitive advantage.
New York, NY: McGraw-Hill Education.
Steiss, A.W., 2019. Strategic management for public and nonprofit organizations. Routledge.
Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic
Management Journal. 38(1). pp.42-63.
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