Strategic Management Plan for John Lewis Ltd: Analyzing Macro and Micro Environments

This report examines the impact of the macro and micro environments on John Lewis Ltd, a prominent UK retail company. It utilizes PESTLE and SWOT analyses to assess external and internal factors influencing the organization's strategies. The report further analyzes the competitive landscape using Porter's Five Forces model and recommends appropriate growth platforms and strategies for John Lewis to navigate the challenging retail environment.

Business Strategy
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Table of Contents
Introduction................................................................................................................................3
LO1 Analyse the impact and influence which the macro environment has on an organisation.
....................................................................................................................................................4
LO2 Assess an organisation’s internal environment and capabilities........................................6
Assignment 2..............................................................................................................................8
Evaluation of the different types of strategic directions available to the organization..............8
Justify and recommend the most appropriate growth platform and strategies...........................9
Produce a strategic management plan with strategies, objectives and tactics..........................10
Conclusion................................................................................................................................11
List of References....................................................................................................................12
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Introduction
The success of a business depends on the business environment surrounding it. The business
environment includes components such as producers, suppliers, the relationship between the
employees and the organization, availability of raw materials and resources, socio-cultural
and technological changes, market trends and so on. This strategic management plan report
aims to study how macro environment and micro environment factors affect the organization,
with reference to John Lewis Ltd, a UK based retail company with several departmental
chains in the country. This report attempts to evaluate the current environment impacting the
company, and suitable strategic decisions that can be implemented by management.
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LO1 Analyse the impact and influence which the macro environment has on an
organisation.
P1 Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies.
The macro environment factors of an organization can be categorized under demographic,
socio-cultural, economic, political, technological and environmental factors (Babatunde and
Adebisi, 2012).
Demographic- Demographic factors include change in consumer population, age group,
consumers of different ethnicity, geographical distribution of consumers and income
background
Socio-cultural- As the social norms change, new customer trends emerge. An organization’s
marketing processes are dependent on socio-cultural forces.
Economic- A flourishing economy means that consumers have more purchasing power. The
income and purchasing power of a consumer affects the pricing decisions and the sales of an
organization (Yüksel, 2012).
Political- Times of conflict, war and uncertainty affect the way a company functions, as the
consumers, producers, labour force and other factors are also affected.
Technological- Technological innovation brings about new products and affects consumer
demand as well. The organization has to keep up with the new technology to perform
competitively.
Environmental- The availability of raw material is often dependent on environmental
resources. Environmental concern is a trend organizations have to be aware of.
In order to analyse the impact of the macro environment on John Lewis Ltd and the relevant
industry, the PESTLE analysis tool will be used here.
Political factor- Politically, UK is not in a stable position, as its separation from the
European Union has led to several negative consequences. The changes include new, stricter
trade and travel regulations, and the liquidation of several big UK businesses (Dhingra and
Sampson, 2016). Loss of employment, and reduced purchasing power have affected John
Lewis Ltd adversely- the consumers can no longer spend as much as they previously did.
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John Lewis has stated that profits will continue to fall in 2018 as well, and that they had to
reduce employee bonus for 2017 from 10% to 6%, in order to absorb the effects of inflation
(theguardian.com, 2017).
Economic factor- The retail sector has had to consider repricing, due to the recession
prevailing in UK economy, and the low income of the consumers. John Lewis is putting in its
best efforts to keep prices of essential products such as vegetables and produce, as low as
possible. However, it is unable to negate the effects of inflation on products like butter. John
Lewis is hoping to perform better next year, if the Pound Sterling’s value goes up again.
Social factor- Social factors determine not only evolving customer trends and demands; they
are also connected with the reputation of the company, particularly important in the retail
sector. John Lewis has established a highly favourable reputation in UK due to the quality of
both low end and luxury goods sold. John Lewis’s Oxford Street location was granted the
Royal Warrant by the Queen, and their iconic Christmas advertisement has become part of
UK’s culture. Despite the current recession and negative effects of Brexit, John Lewis will
benefit to some extent from customer loyalty.
Technological factor- Online retail has become a popular option worldwide, and in UK, the
beginning of 2017 saw e-retail sales comprise as much as 15.2% of total retail sale in the
country. John Lewis recognized that many of their customers may prefer to shop online, and
thus enhanced their website to suit consumer needs. Their website offers custom delivery
options, free returns and even shopping guides to help and entertain online shoppers.
Legal factor- Laws regarding customer rights and protection have evolved over the years.
The Trade Descriptions Act states that retailers and manufacturers cannot make misleading
claims about the offered products, and all advertising must be truthful. John Lewis has taken
care to state terms and conditions clearly where applicable, and must promote and advertise
as truthfully as possible.
Environmental factor- With the rise of global warming, pollution and scarcity of raw
material, consumers as well as intermediaries have become aware of the need to protect the
environment. Sustainability is an important concern, and the retail industry has had to adapt
its practises accordingly. John Lewis has taken measures to reduce carbon emission, maintain
renewable power sources, and find more ecological balance in their processes (Jones et al,
2014).
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LO2 Assess an organisation’s internal environment and capabilities
P2 Analyse the internal environment and capabilities of a given organisation using
appropriate frameworks.
The internal environment of an organization includes all those who work within the
organization, such as the employees, managerial staff, directors, etc (Voegtlin et al, 2012).
The internal environment and capabilities of John Lewis Ltd can be assessed using the
SWOT analysis tool.
Strengths- John Lewis has the reputation of being one of the best departmental store brands
in UK. The availability of diverse products is a major advantage for John Lewis. Another key
strength is that the company has understood consumer trends to shop online and has
developed their website accordingly. Additionally, John Lewis offers sufficient job stability,
benefits and a good work culture, making it one of the best UK retail employers.
Weaknesses- John Lewis has suffered heavy reduction in profit due to the current recession.
Pricing is a problem for the company, as inflation has raised the production and cost prices of
several commodities. Another weakness is that John Lewis is viewed as a company catering
more to high end consumers. This can lower the company’s sales, as UK citizens do not have
much purchasing power in the current economy (Breinlich et al, 2016).
Opportunities- John Lewis, as a big retailer, has several opportunities for growth in the
future. Despite the losses, which occurred due to inflation, John Lewis may see profits again
by collaborating with other retailers. The company has already tied up with e-commerce giant
Amazon to supply groceries and related products. This can also help John Lewis expand their
reach and find new target audiences.
Threats- The slump of the UK economy is a major threat to John Lewis’s sales and profits. If
the problems of low income and unemployment persist in UK, the company will have to
change its product pricing entirely, and will have to invest heavily in a new marketing
strategy. John Lewis also faces threat from the comparative success of worldwide
competitors in the retail industry.
Competitive analysis of John Lewis’s business environment
An effective competitive environment analysis of John Lewis Ltd can be performed using
Porter’s Five Forces model.
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Competitive rivalry (High)
John Lewis sells a wide range of products from branded clothes to household goods to
grocery supplies. Thus, the company faces competition from other top-level retailers like
Tesco and Sainsbury’s, who sell diverse goods (Fernie, 2014). John Lewis is known for high
quality, comparatively high cost products, but the company must now lower the prices to
match those of competitor brands.
Bargaining power of buyers (High)
Many other department stores can provide consumers with the types of products John Lewis
sells. Although John Lewis enjoys benefits of high customer loyalty, switching from that
brand to another is still a cost-effective option for buyers. Buyers can easily shift to other
supermarkets like Tesco. John Lewis must price its products attractively and offer discounts
to keep the customers.
Bargaining power of suppliers (Low)
Unlike customers, suppliers do not enjoy high bargaining power. This is because there are
many suppliers who are keen to gain a wider base of customers by tying up with a big retailer
like John Lewis. The suppliers have to depend on the company for sales and recognition.
Threat of Substitutes (Low)
The threat of substitute goods is low for the retail sector, as industries other than retail are not
likely to engage in selling supermarket products as well as clothing, footwear, grooming
supplies etc (Suwardy and Ratnatunga, 2014). A buyer can substitute John Lewis for
Sainsbury’s, but is not likely to switch to a store specializing in one particular type of
product, as the cost of switching is high.
Threat of New Entrants (Low)
Although the retail sector has low entry and exit barriers, making a breakthrough in the
industry requires innovation, a high amount of capital, and strategic planning. Even if a new
store manages to enter the industry, it will not be likely to reach the status John Lewis enjoys
in the industry.
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Assignment 2
Evaluation of the different types of strategic directions available to the organization
In order to leverage into the highly competitive market, it is very essential for the
organisations to develop their strategies accordingly. The strategies play an effective role in
the development of the organisation so that they can grow and sustain the high competition
that is prevailing within the market (Armstrong et al., 2015). In this case, it can be stated that
the organizations must involve trained and skill individuals for developing the strategies of
the organisation. Before developing the strategies, it is very important for the Corporate
Strategy Manager of John Lewis Ltd in the UK to analyze the different mission, vision,
objectives and core competencies of the organization prevailing within the organization. In
this case, it can be examined here that an organization has different types of strategies that
must be considered by the corporate strategy manager which are mentioned below:
Business strategy
The business strategy is the foremost priority of the Manager to be considered while outlining
the strategies. The business strategy helps in identifying the entire environment based on
which suitable decisions can be undertaken by the manager. This includes the strategies that
mostly involve the process, technology and the people. These factors are considered to be the
most important part of the organization and hence require high focus while strategies are
formulated. The process of John Lewis Ltd is followed by the technology and the people.
People are the employees of the organization who again plays an effective role for the
development of the organization in the highly competitive market.
Operational strategy
Next to the business strategy comes the operational strategy. In this case, it can be stated that
the operational strategy mostly involves the different processes that helps an organization to
operate in an effective manner. The strategies must involve the ways in which the operation
of the organization can be developed in an effective manner so that the organization can
sustain its competitive advantage in the market in an effective manner (Elgevies, 2014).
Transformational strategy
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This is mainly the process that refers to the wholesale transformation of the business. In this
type of business process it needs high radical changes in the process and disruptive
innovation so that the organization can be effective enough to make their productions in an
effective manner. The transformational strategy is considered to be the domain of the HR,
consultants and the organizational development.
Justify and recommend the most appropriate growth platform and strategies.
As the world now has become digitalized in every aspect, it is very important for the
organizations to incorporate the same within their operations so that it can reach out to the
customers in an effective manner. In this case, it can be mentioned that John Lewis has
effective incorporated the online sale to its customers. With the use of online shopping tool,
the organization has been able to attract a huge mass from the market. Online shopping has
become one of the best crave amongst the young generations and tem mid aged people as
well. From the sources, it has been observed that John Lewis has been able to increase its
sales level of around 44% in the market (Kerzner and Kerzner, 2017). Therefore, it is quite
clear from the discussion that the organization has been able to attract a huge mass in towards
them just by incorporating the online shopping tool in the market. Moreover, the discounts
and he offers that the company offers the customers also attracts most of the customers and
with the help of these aspects the organization has been able to attract more new customers
thereby retaining the exiting customers in an effective manner. While recommending
strategies for the organization it must be stated that as the organization has been able to
attract the traffic towards their website, it must be considered the following factors are kept in
mind:
Develop the pages of their website: In this case it can be stated that the organization must
design the web pages in such a way that it helps them to attract the attention of the customers
in an effective manner. Proper images must be designed so that it can attract the attention of
the customers and keep them engaged to their website.
Simple checkout: here, it must be considered that the organization must develop the
purchasing process an effective one so that the customers are able to make their purchasing in
an easier manner. In this case, it can be stated that the checkout process must be kept simple
so that it does not create any confusion among the customers regarding how to pay their bill
through their credit cards or debit cards.
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Produce a strategic management plan with strategies, objectives and tactics.
While developing the strategic it is very essential to identify the company’s objectives, core
competences and the goals of the organization. Based on the same suitable decisions must be
developed by the manager. The strategic management plan has been discussed below:
John Lewis and partnership strategy
The Manager of John Lewis has decided to design the strategies for the partnership of their
organization with that of Ocado online services. This organization has been working with
Waitrose. Therefore, the Ocado can effectively help John Lewis to enhance its websites
thereby boosting the traffic to their website. This objective of developing their organization
in the market will be leveraged with this opportunity. Moreover, the tactics deals with the
process in which both the companies can work in partnership (Porter and Kramer, 2015).
John Lewis and international strategy
The directors have also decided to expand its business all over the world. This would help the
organization to reach out to more customers and based on their taste and preferences the
organization would be able to bring about changes within their products and services. This
will also lead to the innovation within the products of the organization which will offer the
organization with a new phase. The objectives of operating in the world wide will be
accomplished thereby enhancing the level of customer base (Rothaermel, 2015).
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Conclusion
This report has studied the impact of macro environment factors on John Lewis Ltd, by using
the PESTLE analysis tool. The analysis shows that Brexit has brought about negative changes
in the political situation of UK, and John Lewis has suffered losses because of the
deteriorating economy. A SWOT analysis was performed to assess the internal environment
of John Lewis, and the strengths and weaknesses of the company were noted, along with
upcoming opportunities and threats from competitor brands. Finally, the report performed a
competitive analysis of John Lewis, using Porter’s Five Forces model, which evaluated the
factors shaping the company’s business environment.
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Yüksel, İ., 2012. Developing a multi-criteria decision making model for PESTEL
analysis. International Journal of Business and Management, 7(24), p.52.
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