Strategic Management: Analysis and Value Chain

This document provides an overview of strategic management, including external environment analysis, value chain analysis, and Porter's 5 Forces model. It explores how JD Sports can expand in South Korea and gain a competitive edge. The document also discusses the challenges faced by JD Sports and provides recommendations for success.

Strategic Management
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
External environment analysis ...................................................................................................3
Value Chain Analysis .................................................................................................................7
Porter Generic Model .................................................................................................................8
Strategic Direction and methods of expansion..........................................................................10
CONCLUSION AND RECOMMENDATION ...........................................................................10
REFERENCES..............................................................................................................................13
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INTRODUCTION
Strategic management is planning, organizing and controlling the future plans of the
company and managing the resources to achieve the objectives. It involves analyses of the
market, the competitiveness and it is a set of decisions that the company takes for successful
implementation of the strategy framed by the company. By strategic management JD sports can
identify their current resources, frame out strategy and making provision for deploying the same.
JD sports PLC is a UK based sports and fashion retail company which was founded in 1983 and
has now expanded across many parts of the world. Also, the company has expanded in Asian
market starting with Malaysia and covering Lumpur and Cheras. Now it is planning to expand in
South Korea. JD sports plc is considered very innovative and visual merchandiser of sportswear
which are stylish. Retail industry has changed over the years it is not only limited to selling the
products from the manufacturer to the consumer but also involves various activities such as
advertising, inventory management and data processing. The retail industry has not become well
establishes and mature. Due to the pandemic hit, the company is facing challenges of reduces
sales and profits. Also, the growth rate and expansion are less as compared to its competitors.
Increasing competition threat is also a challenge for JD sports plc.
MAIN BODY
External environment analysis
External environment analysis is done to formulate strategy, make decisions and to
identify various opportunities which are present in the market and also identifying the threats. It
is assessing of the market in which the company is planning to deploy its resources.
Pestle Analysis
South Korea comes in the list of developed countries of the world and JD sports is
planning to expand in this country therefore Pestle analysis of South Korea is as follows:
Political factors
Factors which indicate the level of government intervention and the political situation of
the country and which can impact the working of JD sports such as tax policies, stability, trade
tariffs etc. South Korea is one of the developed countries of the world and also it is fully
democratic country (Perera, 2017). There is political stability in the country therefore JD sports
plc can expand into this market as also South Korea has good relations with other countries.
South Korea has a free- floating exchange rate (a rate ascertained by supply and demand). There
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have been various restrictions and regulations which have been imposed on foreign exchange
operations. These government-imposed measures were planned to assure the accessibility of
international currencies to South Korean enterprises and to keep the flight of assets from South
Korea. Under foreign pressure, the South Korean government began to modify the foreign
exchange market which saved package required by the country to give itself to changing all
facets of the foreign-exchange method.
The system has yet to become amply liberalized as the South Korean government has
introduced many new direct and indirect regulations in various forms, including limitations on
tax rules, monitoring regulations and certain transactions to assure its power over the fiscal
system. The impact of currency transfer has thus greatly impacted the South Korea people and
the government.
Economic factors
The factors which determine the performance of the economy and these factors can impact the
functioning of JD sports plc. Factors relating to inflation rate, interest rates etc. comes under this
category. South Korea has made great economic progress in some years and also it provides
funds to banks that supports poor countries. The country manufactures powerhouse and relies on
exports. The country has also done free trade agreements with many countries which will give
certain advantage to JD sports as well. These factors impacts the purchasing power of the
consumers and also changes the demand and supply model of JD sports plc.
Social factors
Social factors consist of the environment of the society such as the culture,
demographics, customs and values of the society of South Korea in which JD sports plc will be
operating. Food, sports and clothing are trends of South Korea society therefore it is profitable
for JD sports plc to expand into the markets of South Korea. The company should consider one
challenge which the country is facing, there is huge disparity between rich and poor which could
impact the sales and profits of the company.
Technological factors
Technological factors are the level of innovation done in the country which could impact
the working of JD sports plc. The research and development and the awareness of technology in
the South Korea impacts JD sports plc. As South Korea is digitally advanced country, and they
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have made great progress in robotics and artificial intelligence. JD sports can benefit by
investing into this market.
Legal factors
The legal factors are the laws that impact the functioning of JD sports plc as it has to
follow certain rules of the country when operating there. The legal system of South Korea are
wholly and solely free from interference but have certain laws which needs to followed when
operating there (Policy, 2018). The judicial system is fairly independent therefore JD sports plc
when expanding into the markets of South Korea has to abide by the rules and regulations which
are required to be followed to operate.
Environmental factors
Environment factors such as the whether, climate, resources of South Korea do impact
the working of JD sports plc. As the pollution level of South Korea is much therefore JD sports
when operating there have to do corporate social responsibility to a greater extent if they have to
operate in South Korea. Also, the country offers various seasons, natural beauty, advanced
architecture which attract many people and also through this the company can get advantage as
many people visit the country and also the sales of JD sports can increase through this. As the
environment is deteriorating therefore the company have to adopt many friendly products and
packaging.
Porter's 5 Forces model
Porter five forces model is a tool that determine the competitive atmosphere in the
market for the company (Bruijl, 2018). JD sports plc analyse the competition in the industry by
undertaking Porter's five forces model which is as follows:
Threat of New Entrants
The threat of new entrants is moderate as building such a big company need huge
investment and also to get success in the fashion and retail industry it needs good brand
awareness and image. The new entrants put pressure on the existing firms and to overcome the
competition various tactics are needed to be implemented. JD sports plc to overcome the threat
of new entrants and gain market share applies various strategy such as innovating, putting
pressure by lowering the prices and many more tactics to safeguard their competitive edge.
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Threat of Substitutes
The threat of substitutes is high as there are many firms which are indulged in producing
sportswear and fashion wear (Goyal, 2020). And due to high demand of the fashion apparels and
sportswear is increasing as people are more conscious about their healthy lifestyle and are going
towards fitness. Therefore, many firms are coming up with variety of options for the customers
and also with variety of substituents for the products which are being preferred more by the
customers. The more popularity a products gains the more substitutes come up for that product.
JD sports plc can reduce this threat by focusing on service more important as compared to
product which will increase the bran loyalty on the part of customers as they feel satisfied.
Bargaining power of Buyer
The bargaining power of buyer is high. There is high availability of sports clothing and
accessories for the customers. They have wide range of choices while making a purchase for
their favourite sport. This increases the bargaining power of customers as they can easily switch
to another brand that caters to their needs in a better way. Therefore, J D Sports will have to
focus on creating price competitive products that ensure in keeping their customers loyal to
them. The bargaining power of buyer gives ability to the buyers to pay less. To tackle the
bargaining power of buyers JD sports plc can build larger customer base as it provides an
opportunity to JD sports plc to streamline its sale and production process.
Bargaining power of Supplier
The bargaining power of supplier is low as JD sports plc is a big brand and have the
ability of purchasing power if the South Korea suppliers deal does not favourable then JD sports
plc can shift to another supplier which are present in some other country. The company can use
their brand image and finance to make the suppliers do per their guidelines. The suppliers of
sportswear and fashion apparels have less control and can be anytime swapped by JD sports as
there are many more suppliers in the market which are ready to produce. To handle the
bargaining power of suppliers JD sports plc make efforts to build efficient supply chain and also
they try to experiment with new materials as in case the prices for one material increases the
company can shift to another. JD sports plc can also develop third party suppliers whose
business wholly and solely depends upon them.
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Rivalry in the industry
The rivalry in the industry is high as there are many competitors JD sports plc. There are
large number of firms that are ready to offer unique apparels and sportswear which are of good
quality and also serves comfort. Some competitors of JD sports plc are Foot Locker, Under
Armour, Zumiez, Hibbett Sports Inc etc. JD sports plc can tackle the intense competition in the
industry by maintaining better customer relationship. Also, the company can collaborate with the
competitors to increase the market size.
By analysing these five forces JD sports plc can exploit resources which are yet
undiscovered and can get competitive edge in South Korea.
Value Chain Analysis
Value Chain Analysis is a way by which the organization can analyse their internal
operating systems and can identify the advantage which the company can get through their value
chain (Fernandez-Stark. and Gereffi, 2019). It is the process by which JD sports plc divides their
activities into primary and support activities by keeping in mind their contribution towards the
creation of value in the final product.
Value chain analysis helps JD sports plc in making effective decisions and determining the
importance of each activity as per the role of products and services in the company. It starts
transforming the raw material till the final products or service is delivered to the end consumer.
The main for JD sports plc in performing the value chain analysis is to maximize the value
creation by minimizing the cost. The value chain of JD sports to identify the strengths and
weaknesses, consists of the following:
Primary activities – The activities which are concerned with adding value directly to
production process and delivery of products. It involves the activities related to converting the
inputs into outputs. The primary activities consist of:
 Inbound logistics – The activities concerned with keeping the stocks received from the
suppliers and managing, storing and distributing the stocks for further processing to
transform the raw material into finished products (Simpson. and et.al., 2020). Proper
analyses of inbound logistics helps JD sports plc to remove challenges that occurs in
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product development phase and also it helps in maintaining good relations with the
suppliers.
 Operations – The activities concerning with transforming the raw material into the
finished goods making it ready for sale comes under operations. Machining, assembling
and packaging the processed products of JD sports are the part of operations.
 Outbound logistics – The activities concerned with delivering the products of JD sports
plc to the end consumers are a part of outbound logistics.
 Marketing and sales – The activities related to make the consumer aware about JD sports
products and aims to create demand by promotion and advertising.
 Service – The services consist of creating valuer for the customers and increasing their
satisfaction level by providing them good after sales service, financing services etc.
Support activities – The support activities assist the primary activities so that JD sports
can achieve competitive advantage. The main areas of support activities are as follows:
 Firm infrastructure – The infrastructure of JD sports plc such as legal structure,
management system, quality control systems consist of the support system as these
impacts the primary activities of JD sports plc. Effective firm infrastructure allows JD
sports plc in optimizing the value of their value chain.
 Human resource management – Human resource are the main support system of JD
sports plc as they perform all the activities which helps JD sports in achieving the goals
and primary activities. JD sports plc must analyse their human resource management by
keeping a check on the recruitment and selection process, training and development
techniques, appraisal methods (Yun. and Yigitcanlar, 2017). By properly analysing these
methods and techniques JD sports plc can identify the loopholes and make efforts to
reduce the cost incurred in the unnecessary activities.
 Technology development – Another support activity of JD sports plc is technological
development as advanced technology will help in the success of primary activities and
ultimately acts as an advantage for JD sports plc. For technological development JD
sports must conduct good research and development. JD sports divides their
technological advancement into product and process technology development and the
research and development department of the company is classified into product design
research and data analytics.
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JD sports plc can get competitive advantage by not just for improvement but also for getting cost
advantage and advantage of differentiation.
Both the activities that is Primary and support activities for JD sports contribute to the
organizations benefits along with its growth and development aspects. The primary activities
consisting of inbound logistics, organizations operations, outbound logistics, marketing and sales
and providing services to the customers adding to this the support activities constituting firm's
infrastructure, HRM, technology and development of JD sports has helped in assessing the
overall organization position in various departments and the functions which takes place within
different departments. Primary and support activities have assessed in determining the structure
of JD sports overall and the products and services which are made available to the customers has
also made them available successfully.
Porter Generic Model
Porter generic model describes the way in which the company can get competitive
advantage (Omsa, Abdullah. and Jamali, 2017). It is determining the strategy by which JD
sports plc can acquire the market share or can get advantage. JD sports plc can adopt one or
combination of strategies to handle competitive pressure and get ahead of competitors by
applying the following strategies:
Cost leadership strategy
It is the strategy to gain competitive advantage by lowering the cost of the products
therefore JD sports plc adopts this strategy to gain the market share in South Korea as reasonable
cost attracts more customers. The company can attain this by creating economies of scale or by
lowering the overheads (Kharub, Mor. and Sharma, 2019). JD sports plc can also apply this cost
leadership strategy by controlling their value chain but also it can reduce the amount of profit
ratio. To achieve the economies of scale JD sports need to invest capital in technology and
should try to make their logistics effective. By applying the cost leadership strategy JD sports plc
can increase the brand awareness and brand visibility as they mainly focus on affordability and
accessibility. JD sports can achieve this by maximizing the efficiency of their supply chain.
Also, the company offers discounts to increase the popularity of the brand. By applying these
strategies for cost leadership they will be able to gain customer base.
Differentiation Strategy
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It is the strategy by which competitive advantage can be gained by making the products
different and unique from the competitors. JD sports plc tries to cater some specific needs and
make differentiated products to acquire the market share and increase the competitiveness.
Differentiation strategy increases the chances of brand loyalty on the part of customers and
increase in profitability on the part of JD sports (Semuel, Siagian. and Octavia, 2017). To
operate in South Korea JD sports plc has to bring something new to the market so that they can
tap customer base. JD sports plc to differentiate their products from that of the competitors need
good research and development. Also they must concentrate in the quality of products and try to
deliver high quality in South Korea. The company uses marketing and advertising to get the
differentiation advantage and also they tend to create differentiation in context to their
manufacturing process, product features, size, style etc (Islami, Mustafa. and Latkovikj, 2020).
These factors highly impact the success and failure with regard to competitive advantage the
company can get.
Focus strategy
As per this strategy to gain the competitive advantage, JD sports plc can concentrate on
some particular set of customers by offering the products at low prices and with greater value.
The company also focuses on their products by innovating them or by making improvement in
the existing one for the existing customers or for the some specific segment of customers. JD
sports by applying the focus strategy can build a strong relationship which helps the company in
creating loyal customers. The company can also get the benefit of expertise. By narrowing the
target audience and the specifying the customer they want to serve the company can get an
advantage of loyalty on the part of customers. JD sports plc can determine the area of focus
which can be in terms of geographic locations, narrow demographics, the focus can be on a
particular industry or may be on the single product line. Also, by adopting the focus strategy JD
sports can also demand price as per the consumer paying capacity. Due to the focus strategy the
customers can also incur high switching cost therefore this strategy is difficult for the consumer
and gives advantage to JD sports plc
JD sports to succeed in South Korean market should build good relations with its
government by maintaining frequent contacts.
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The Differentiation Strategy has highly impacted the success and failure with regard to
competitive advantage JD Sports achieves. The unique and different products which are
produced by other competitor company's has impacted JD Sports on large basis. This has made
difficult the process of competing with them which may result to risk and failure. The success
factors of producing unique products in the market by rivalries or competitors has created threat
for JD Sports. This also increases the chances of being thrown out from the business if not made
efforts similar to rivalries. For this, JD Sports must ensure that they produce unique products to
make their position stable in the external marketplace.
Strategic Direction and methods of expansion.
Strategic directions are road map or plans which are required to be fulfilled to achieve the
vision and mission of the company. In order to expand into new markets JD sports ,must conduct
market research. JD sports have indulged in market penetration by selling its products at low
prices at different fields and to existing customers to enhance the market share. JD sports plc
have acquired various brands which helped the company in improving their growth and market
development. To grab numerous customers the company has invested into e-commerce strategy
with its existing products. As the company have acquired big brands which helped them in
product development and also it helped the company in getting an edge over other competitors.
JD sports have introduced new skull candy in which the customers will be able to listen to music
while playing sports and have used diversification strategy by selling it in new markets. The
methods of expansion used by JD sports plc is acquisition as JD sports plc have taken control
over Black Leisure, Chau sports, Sprinster, champion sports (Góis, 2018). There is good amount
of growth through acquisition as it is cheaper, less risky than the other methods of expansion. By
acquiring various brands JD sports plc can seek economies of scale and it also educe the entry
barrier for the company. The retail market of South Korea is in the growth stage and is
increasing therefore it is a good opportunity for JD sports plc to enter into the retail South
Korean market for the profitability. It comes under one of the largest markets in retail segment
among Asian countries.
Also the retailers present in the markets of South Korea have come upon digital
technologies to provide their customers a better shopping experience. Some retailers have also
launched unique shopping service which allows customers to shop by scanning the bar codes of
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the products with a handheld scanner. As JD sports is planning to enter into the markets of South
Korea therefore the company must first analyse the current trends which are being adopted by
various retailers and fashion apparel stores to attract customers and increase their engagement.
The market for fashion apparels in South Korea is hiking in the coming years therefore it is a
great opportunity for JD sports plc to invest into markets of South Korea.
But in case of Sportswear the market is decreasing therefore JD sports can launch its fashion
apparels for the people in the age group of 11 to 40. Apart from e-commerce stores,
departmental stores still remains a major part of retail and fashion store. Therefore, JD sports
have an opportunity to invest into the markets of South Korea.
The products that JD sports plc can launch into markets of South Korea are women wear
as it is one of the most lucrative segment and can help the company in generating good amount
of revenue.
The service that JD sports plc can provide in the markets of South Korea consist of better
after sales services to the customers. For smoother customer shopping and better experience, JD
sports plc puts mobile point of sale for effective check out process in South Korea.
CONCLUSION AND RECOMMENDATION
It can be concluded that JD sports Plc faces various challenges due to Covid-19, in terms
of profitability and revenue to deal with these challenges JD sports plc analyse their external
environment to identify opportunities and threats. JD sports conducts Pestle analysis and five
forces model in South Korea. Through analysing these factors JD sports plc can get competitive
edge over its competitors. Also JD sports plc analyse its internal environment to identify the
strengths and weaknesses by conducting value chain analysis. The primary and supportive
activities are analysed and loopholes if any are determined and corrective actions are taken to
improve the same. The competitive strategies used by JD sports plc is also identified through
Porter's Generic model. Lastly the strategic directions and methods of expansions used by JD
sports plc were determined.
Some strategy recommendations:
 JD sports plc before entering into South Korea market should analyse the demand
of the customers present there. If the products offered and the demand by the customers
present in South Korea matches, then it is beneficial for JD sports plc.
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 As South Korea is advanced in digital technology therefore JD sports plc can use
these technologies to make their operations more efficient and can create economies of
scale. Also JD sports can use digital platforms for marketing of their products to reach
out to the people of South Korea.
 JD sports should also collaborate with South Korean company to gain the trust
and confidence of the people. They can also hire people from South Korea into their
stores to overcome the cultural barrier.
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REFERENCES
Books and journals
Bruijl, G.H.T., 2018. The relevance of Porter's five forces in today's innovative and changing
business environment. Available at SSRN 3192207.
Fernandez-Stark, K. and Gereffi, G., 2019. Global value chain analysis: a primer. In Handbook
on Global Value Chains. Edward Elgar Publishing.
Góis, C.L.S., 2018. DIA: growth and innovation through acquisition strategy (Doctoral
dissertation).
Goyal, A., 2020. A Critical Analysis of Porter’s 5 Forces Model of Competitive Advantage.
Islami, X., Mustafa, N. and Latkovikj, M.T., 2020. Linking Porter’s generic strategies to firm
performance. Future Business Journal. 6(1). pp.1-15.
Kharub, M., Mor, R.S. and Sharma, R., 2019. The relationship between cost leadership
competitive strategy and firm performance. Journal of Manufacturing Technology
Management.
Omsa, S., Abdullah, I.H. and Jamali, H., 2017. Five competitive forces model and the
implementation of Porter’s generic strategies to gain firm performances.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Policy, P., 2018. What is pestle analysis.
Semuel, H., Siagian, H. and Octavia, S., 2017. The effect of leadership and innovation on
differentiation strategy and company performance. Procedia-Social and Behavioral
Sciences. 237. pp.1152-1159.
Simpson, J. and et.al., 2020. 4.5 Value Chain. Strategic Management.
Yun, J.J. and Yigitcanlar, T., 2017. Open innovation in value chain for sustainability of firms.
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