Impact of Macro Environment on JD Sports: A Business Strategy Analysis

This report analyzes the impact of macro environment on JD Sports and its strategies. It includes a PESTEL analysis, evaluation of internal capabilities using McKinsey 7S model, and strategic recommendations using TOWS matrix.

BUSINESS
STRATEGY
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INTRODUCTION...........................................................................................................................4
SECTION 1.....................................................................................................................................4
Impact and influence of macro environment on a given organization and its strategies.............4
SECTION 2.....................................................................................................................................8
Internal environment and capabilities of a given organisation using appropriate frameworks...8
SECTION 3...................................................................................................................................10
Porter Five Force model to evaluate..........................................................................................10
Strategic planning......................................................................................................................14
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................18
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INTRODUCTION
Business strategy is defined as a long term plan of competitive action that assist business
organizations to fulfill corporate goals in a well define manner. In order to develop formative
business strategy it is essential for an entity to evaluate different type of measures and techniques
as to fulfill business objectives and goals (Burlton, 2015). Present report has been made on JD
Sports; entity was founded in the year 1981 and conducts their operations in retail industry. With
having it’s headquartered in United Kingdom this company offer sportswear and clothing
accessories. In this report discussion has been conducted on pestle evaluation. With the help of
this entity can effectively able to evaluate factors that can affect organization operation and can
further develop strategies and measure against it. Along with this report include, McKinsey 7s
framework, TOWS matrix, and Porter’s five Force model and porter generic strategies. All these
models and strategic frameworks allow entity to develop successful measures to gain maximum
opportunity in order to accomplish business objectives. Lastly this report include, business
strategy plan.
SECTION 1
Impact and influence of macro environment on a given organization and its strategies
It has been identified that a business operates its functioning in a business environment that
involve different type of factors and have capability to affect internal and external operations. JD
sports in order to analyze macro environmental factors that can affect business functioning is
required to undertake use of pestle analysis (Teh and Corbitt, 2015). This will benefit company
to gain critical overview of different aspects of pestle like political, social, economical,
environmental, technical and legal in a well-defined manner and develop strong strategies in
order to ensure competitive edge in respective industrial sector.
Mission: Having a mission statement to, be United Kingdom best known sports fashion
retailer this company aim into towards offering consumers with wide range of products in order
to enhance the shopping experience by offering them high quality of product and services.
Vision: Company conduct their business operations with having an ultimate vision which
is to deliver long term sustainable earning growth as to maximize shareholders total return
through share price performance and evidence.
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It has been evaluated from company Vision and Mission statement that by providing high
quality of services and product to consumer this company effectively set a standard for online
shopping by offering authenticity, quality and vast product commitment to fulfill need of
maximum number of individuals. This company is one of the most trusted company around the
globe and value gratitude, integrity, consumer first, collaboration, team sprit to enhance their
business performance efficiency. Company values innovation, fair play in order to ensure their
continuous development as to conduct their business operations in strong work ethic. Company
is having one of the most important visions which is become a leading Sports Company in
respective industrial sector by offering more and more product and services range with the use of
high technology in order to serve their customers at best.
Ilustration 1: PESTEL Analysis
(Source: PESTEL Analysis, 2019)
Political Factors:
This factor demonstrates the influence of politics upon business organization. It mainly
includes elements like foreign trade policy, political stability, regulations, governmental policies,
taxation rules and labor laws (Schaltegger, Hansen and Lüdeke-Freund, 2016). JD sports operate
their functioning in retail sector and conduct business in Sports segment which is largely affected
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by political decisions. This makes entity essential to conduct their operations by staying aligned
with present ruling government.
Positive: In United Kingdom there are different type of policies and taxation reliefs that
are being offered by government to industries in retailing sector. Along with this organization
those who conduct their business functioning in sports sector are provided with more tariff
relaxes. With the advantage of this opportunity JD sports can increase their profitability at great
extent.
Negative: Due to brexit retail Industry in UK get severely affected, as it decreases
purchasing power of buyers (Hart, Sharma and Halme, 2016). This political instability can
critically impact upon profit earning capability of JD Sports. In order to overcome this entity is
required to develop strategies through which they can attract customers towards that products
and services by offering them in affordable price range.
Economic Factors:
This factor of pestle analysis include elements that are related to extent of unemployment,
inflation rate, disposable income, economic growth, exchange rate and per capita income of
individual in a country (Scholes, 2015). It is important for JD sports to have understanding of all
the economic factors as to take advantage of economic opportunities that are prevailing in United
Kingdom.
Positive: UK is economically developed nation which is having excellent infrastructure
facilities and offer different type of economic opportunities to entities retailing sector. Retail
industry is most important aspect in United Kingdom as it remarkably contributes in overall GDP
of country. Thus, by taking advantage of economic opportunities that is prevailing within UK,
JD sports can maximize their existing share price in a well define manner.
Negative: This has been identify that brexit increases unemployment rate in United
Kingdom which is acknowledged to be 3.8% as of the quarter July - Sept 2019 (Why is UK
unemployment still low? We are working longer hours, 2019). This can affect JD sports
workforce requirement that makes entity to offer higher wages in order to attract skilled and
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potential workers. In this JD Sports is required to take use of cost effective measures through of
selection and recruitment.
Social Factors:
Social factor involve elements like age distribution, health consciousness, population,
growth rate, career attitude, consumer lifestyle, safety emphasis, community beliefs etc. It is
essential for an organization to evaluate beliefs and perceptions of individuals in a society in
which they operate their functioning. This factor can largely affect business operations of JD
sports. In this by evaluating emerging trends and patterns of consumers company can satisfy
them with best.
Positive: It has been evaluated that mind set of individuals in United Kingdom is largely
tend towards sports and sporting events. This creates number of opportunities for JD Sports. In
this company by expanding their product range can attract customers with all age groups and can
enhance their consumer base.
Negative: There is stiff competition in United Kingdom in sports segment, along with this
UK population is hyper aware and easily shift their perception towards new trends. Thus, this
adverse shaft in lifestyle and purchasing pattern of customers can impact upon overall sales of
JD sports. In this it is essential for company to constantly conduct marketing research and offer
their products and services as per according to latest trends.
Technological Factors:
This aspect of pestle analysis has elements that are related to technological innovation,
awareness, automation, R&D etc. By taking advantage of this factor company can increase their
competitive edge comparatively to other rivals in marketplace. This is essential for
administration of JD Sports to ensure that organizational structure of company implement latest
technological trends in time effective manner us to ensure high profitability advancements.
Positive: JD sports conduct their functioning in sports sector and operate their
functioning in retail industrial segment which is constantly evolving according to new
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technological innovation. In order to ensure superiority in marketplace JD Sports by maximizing
business platform in online segment can effectively able to influence large base of customers
from different geographical location. This helps them to increase their overall profitability at
great extent.
Negative: There are other top-notch organizations like Nike that can affect business
profitability of JD Sports. Along with this in order to implement emerging technological trend
there is a need of more capital investments. In this respective entity is requiring undertaking cost-
effective strategies and formulating effective budget in order to fulfill their objectives.
Environmental Factors:
This factor includes elements like environmental, weather, climate policies etc. It is
essential for entity in any industrial segment to evaluate and determine that their business
activities does not affect environment in any way. Being a sports fashion retailer it is essential
for JD Sports to take use of waste management practices in their organizational units. As this has
been evaluated, that many countries placed strict norms in order to protect environment.
Positive: By increasing investment in renewable technology JD can effectively ensure its
long-term sustainability in respective industrial sector and can increase their brand image in
marketplace.
Negative: Negligence of environment aspect can affect profitability and goodwill of JD
sports in adverse manner. Thus, it is essential for entity to take steps as to encourage
environmental friendly initiative in their organizational workplace.
Legal Factors:
This is most important factor of pestle evaluation, it include factors like consumer
protection law, copyright and health and safety law, discrimination and employment legislation,
etc. It is essential for JD sports to comply with all the essential legislations that are being
imposed by UK Government.
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Positive: JD Sports management is required to ensure that they abide all the essential
legislation and laws like employee protection law, Consumer Protection law, and intellectual
property laws in a well defined manner as to take advantage of Government supporting measures
for retail industry.
Negative: Non compliance any legislation and law can adversely affect JD Sports and
further company may face legal compliances and heavy penalty.
SECTION 2
Internal environment and capabilities of a given organisation using appropriate frameworks
It is essential for an entity to evaluate it’s the internal capabilities in order to increase their
performance and undertake advantage of significant opportunity and more competitive edge. In
this JD sports by taking advantage of McKinsey 7s model can effectively able to demonstrate
expertise, capacity and competence of organization:
McKinsey 7S Model
This model tends to show the link between seven separate elements of an organisation to
enhance its overall effectiveness. These elements are explained in context of JD below
Shared Value: This factor mainly state towards believes and values that company share.
JD sports are having beliefs in maximizing their sophisticated management techniques from
simple production entity in order to increase efficiency of their set standards.
Strategy: This element tends towards methods that organization undertake as an element
of strategic planning in order to fulfill their goals (Pisano, 2015). JD sports take advantage of
different strategy undertaking use of Balanced Scoreboard (BSC) method in order to fulfill
corporate goals.
Structure: This factor describes hierarchy that entity follow. JD Sports believes that
entity just not need a soul leader, instead it is essential for company to have whole group of
employees who effectively work together in a top to down direction in order to fulfill
organizational objectives according to JD strategies.
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System: This factor significantly demonstrates the procedure and manner upon which
company relies as to perform their daily basis operation. JD sports day use of reform steering
wheel performance appraisal system that only involves six measures through which company
fulfill their pre-determined strategies in order to encourage employee’s performance towards
organizational objectives.
Staff: This factor state towards overall number of Employees Company is having. JD
sports are a leading organization in retail industrial sector and satisfy customers with having
more than 32,125 more than employees.
Style: It is defined as a manner in which company conducts its operation as to fulfill long
as well as short term objectives. By taking advantage of steering wheel system JD sports
accomplish their corporate goals. It mainly have 90 degree Arc in which entity mainly focus on
four main areas that include examined, operations, financial and performance
Skill: The element defines capability of entity or workforce as to fulfill task for project. JD
Sports encourage employees with different training session at periodical time frame in order to
impart efficient knowledge among them as to fulfill company objectives according to set
standards.
VRIN
Valuable – According to vrin, analysis it has been identified that JD sports inventory
management system along with e-commerce operations one of their own sustainable. In addition
it has been evaluated that company consumer data analytics, data and data mining are cannot get
easily match with other competitors.
Rare – It has been evaluated that research and development is JD sports competitive
advantage, however this is not hard for competitions to copy.
Inimitable – It has been evaluated that company partnership and alliances is only a
competitive similarity, as company is having their partnership with different companies that help
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them to be a leading brand in respective industrial sector, however these relationship can further
turn can turn to be sour this further make this capability turn into valueless.
Non-substitutable - According to this it has been evaluated that JD sports manufacturing
is only there temporary competitive advantage.
TOWS
SO –
 JD Sports falls under financially strong brand and this company is having great capability
to make their investment in product innovation and digitalization, it further aid them to
expand that E-Commerce business in other countries.
 Company is having excellent marketing strategy through which they can assure their
faster growth.
 As company is a financially strong brand thus, it allows them to expand the product and
service range with high quality in order to serve their customers better.
ST –
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 Since this company is having strong financial position it allows them to keep investing in
HR management marketing and R&D.
 JD Sports is required to take use of innovation and marketing capabilities in order to
overcome aggressive pressure of competition.
 Entity is required to emphasize more upon compliance by taking use of internal
complaints teams in order to have control on regulatory as well as legal pressure.
WO –
 Company can make expansion in a faster rate in international market segment by making
investment in them; it will reduce their dependency on United Kingdom market segment
and further ate them to open new revenue generation.
 With having controlling operational cost allow entity to make them spent on innovation
and digitalization.
WT –
 Having strong control upon operational cost can allow entity to invest more in growth
and marketing of their brand.
 With having efficient control on the dependency on United Kingdom market and
expanding their business services in new market segment allow entity to cut down their
other operational cost.
SECTION 3
Porter Five Force model to evaluate
In order to formulate effective strategies it is essential for an organization to efficiently
consider competitive forces that are prevailing in marketplace. In context with JD sports
administration, by taking use of Porter five forces analysis company can gain proper insight
about the extension of rivalry and influence of factors in retailing industry upon organizational
business functions:
Threat of New Entrants – Low:
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In retail industry there is low rate of new entrants, as in order to initiate business venture
huge amount of capital is required. In addition to this there is high competition prevailing in
existing sporting sector. This also acts as major barrier for new entrants. Along with this
customers in this industry get influence with high quality and affordable products and services.
Thus, it is difficult for a new company to become player in this segment and formulate positive
image by offering high product quality at low range. Thus, JD sports is having opportunity to
satisfy customers with new emerging trends and increase their products and service quality level
at great extent.
Threat of Substitutes – High:
Threat of substitute is high in respective industry sector as in this there are existing
leading entities like Nike, Adidas, Decathlon that pose threat in front of JD Sports. These entities
attract customers with high quality product and services at competitive price range. Thus, in
order to overcome negative impact of this factor it is essential for JD sports to increase their
products and services range and attract consumers with new innovative offerings at low price.
Bargaining Power of Buyers - High:
Bargaining power of buyers is high in this sector as there are different type of
organizations those who quite similar and wide range product and services in marketplace in low
price base. Thus in order to encourage consumer attention towards company offering, JD Sports
is required to attract attention of consumers by diversifying their product range and by analyzing
actual need of customers. This effectively helps them to increase loyalty of consumers towards
entity.
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Illustration 2: Porter Five Force Analysis Model
Bargaining Power of Suppliers – Low:
Bargaining power of suppliers is low in this sector, as suppliers want to conduct their
operations with leading entities in retail sector. JD sports a leading UK specialist retailer of
sports, fashionable and casual brand. This make suppliers to stick with leading organizations like
JD in order to ensure high profitable advantages. By taking advantage of, low bargaining power
of suppliers. JD can increase their production with cost effective raw material and can serve
more customers with online and offline method.
Competitive rivalry – High:
Competitive rivalry is high in retail segment of sports sector, as there are already leading
entities like sports direct, Adidas, Hibbett, Nike, Decathlon who offer different type of products
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and services with high quality and low price range. This makes JD Sports to capture consumer
attention with more diversify product and services range of high quality. In this company by
taking advantage of innovation and cost effective strategies can increase their competitive edge.
According to the evaluation it has been identified that JD sports is facing future
competitive threats. In this company is required to make investments in innovation and
technology in order to influence customers with high quality product and services. This can
increase market share of entity in respect of industrial sector.
Porter Generic Strategies
Cost leadership:
In this JD sports, strives to maintain lowest cost and offer their product and services to
wider market in competitive prices. Cost leadership strategy is mainly based upon JD sports
ability to have formative control on their operating cost. This will allow entity to generate high
profitable advantages while having more market share holding.
Differentiation:
In this, JD sports by offering their services and products with innovative and unique
feature can influence attention of customers in best effective. This will benefit of entity to
generate brand loyalty and create price inelasticity on the part of buyers.
Focus:
Focus of entity can either be upon differentiation or cost. By taking use of Cost Focus,
JD Sports emphasize to developed internal efficiencies which provides assistance in
withstanding the external pressures. While Differentiation focus aid company to fully emphasize
upon differentiating services and products from competitors in order to increase market share
holding.
According to the above micro and macro environmental analysis JD sports is suggested
to take use of following business level strategies:
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Cost Leadership: JD Sports mainly focus upon reducing cost and generating more
profitable advantages. In this entity is required to make heavy investment in hiring and recruiting
skilled and competitive candidates in order to use their efficiency towards organizational goals
(Eaton and Kilby, 2015). Along with this by taking use of effective production technology JD
sports can offer their product and services at lower price range comparatively to their
competitors like Nike, Adidas and Decathlon. With the help of cost leadership strategy JD sports
can generate high consumer base through which they can enhance their profitability at
simultaneous manner.
Differentiation: By constantly taking use of initiatives like differentiating organization
product and services from major competitors in terms of product range, delivery, sales channel
and loyalty schemes JD sports can retain loyalty of the customers for long period of time. In this
entity is also required to ensure that performance of their employees is simultaneously aligned
with innovative measures in order to offer customers according to their need and demands.
Differentiation will prove to be best strategy for JD sports as it will benefit and today to increase
their profitability and sales ratio in a well defined manner.
Bowman
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Low Price and Low Value:
In terms JD sports low price as well as low value is there partial strategy it is mainly due
to the fact that entity only make application of low price of product but maximize value of their
commodities in order to gain more competitive advantage. With having low margin company is
having maximum expectancy of high volume returns. This strategy allows entity to have their
main emphasize upon consumer interest that allow customers to purchase their products.
Hybrid Position of JD Sports:
Company undertakes use of their returns by making more investing in retail market
segment. In addition to this, company has also expanded their business operations in sports
fashion centre in order to diversify their base by assuring maximum return. Investing Strategy
Company maximizes their sales volume that contributed in their success.
Differentiation Position of JD Sports
Differentiation strategy of JD allows them to have access toward uniqueness in their
business activities. With the help of the strategy entity make significant increase in competition
level with the use of innovative technology. Company has formulated their operation method in
which they perform their business operations in different retail platforms.
It been evaluated JD sports is having their unique corporate strategy in which they can take
their business decisions and activity by evaluating competitive strategy in their operations of
invention and innovation that further allows them to gain more competitive edge. With the
assistance of entity corporate strategy they take use of technological approaches in order to offer
their product and services in marketplace within expectancy of higher return. In addition to this
differentiation is one of the great strategies of JD sports as it allows them to differentiate them
from other rivals in respective market segment and attract consumers towards their low
commodity product and services. According to bowman strategic analysis it has been identified
that JD ports main emphasize upon consumers as they offer low commodity prices to them that
improve their standard of living, in addition to this the also emphasize upon enhancing consumer
shopping experience.
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Strategic planning
Ansoff matrix is defined as a strategic planning tool that aid organization to develop
efficient strategies as to facilitate business growth in an effective manner. Four strategy of ansoff
matrix is defined in context with JD Sports:
Market Penetration:
Market penetration mainly focuses upon aspect of existing products in current market of
company. JD Sports can attract those customers who are not willing to switch to other substitute
products. In this entity by enhancing quality of their already existing products can offer the same
in existing market in order to serve customers with best and ensure their maximum loyalty.
Market expansion:
This strategy is also define as market development as it aim towards providing already
existing product and services of organization in new market segment. This strategy will aid JD
sports to maximize their market area and attract new consumers in order to increase overall sales
of entity.
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Product expansion:
The strategy of ansoff matrix emphasize upon new product in existing market place.
Product expansion strategy will aid JD Sports to satisfy their customers need with new product
and services. With the help of this company can ensure the long-term sustainability while
increasing overall sales ratio. By taking advantage of the strategy JD can access into smart sports
products like sweat control sportswear. This significantly increase consumer base of entity in
United Kingdom.
Diversification
This strategy states towards offering new product in new market place. This strategy of
ansoff matrix is somehow riskier strategy, as this may lead entity towards failure (Chang, 2016).
Diversification strategy can prove to be expensive for JD sports as in this entity is required to
develop a whole new marketing campaign and plans in order to promote and launch new product
in a new market segment.
According to the evaluation it has been identified that product expansion strategy
significantly benefit JD sports as to ensure long term sustainable growth. As entity is already
having loyal consumer thus, by taking use of the strategy entity can attract new customers while
satisfying abrading existing one in a well defined way.
Strategic management plan
Strategic management plan of JD sports is define below in order to communicate new
business strategy growth which shareholders:
Aim: To increase overall business operation of JD sports in domestic market.
Vision: To ensure company number one positioning in global Retail Industry for long time
period.
Mission statement: To satisfy consumers with high quality services and products and further add
more value and innovation in organizational offerings.
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Goals and Objectives: Short term goal of JD sport is to consider low operating cost and high
quality products along with having increase in revenue by 5% in next 5 years. While long term
goal of entity is to increase International position in emerging market place.
Strategies: By taking use of product expansion JD sports is looking forward to enhance sales
ratio and profitability in domestic market segment.
Tactics: Main tactic of JD sport is to launch new product with value added feature with
affordable price ask to serve customers of all income groups.
By taking assistance of strategic alliances JD sports can effectively able to accomplish their
goals and missions. With the help of this market entry mode respective organization can make
arrangement between two entities to take advantage of mutual benefits of project. It has been
identified that, joint ventures allow entity to perform their operations with less complexity.
 Strategic alliance or joint venture allow JD sports to take advantage of pool of resources
 Respective entity can also combine their core competencies, capabilities as well as
resources for mutual interest.
 One of the most important advantages that can be undertaken by JD sports of Strategic
alliance is that it helps entity to expand their business operations in other geographical
location with having political cooperation with foreign organization; this will benefit JD
sports to gain local favor.
CONCLUSION
According to the report this has been concluded that business strategy is a set of actions
through which entity can develop effective business plan and can ensure more competitive
advancements. It is a route map through which company can fulfill their corporate goals in time
effective manner. In this entity is required to evaluate micro and macro environmental factor. By
taking use of pestle, porter five forces, Ansoff matrix and McKinsey 7S entity can take
advantage of opportunities that are prevailing in marketplace and can increase overall
profitability and productivity of organization.
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Online
Why is UK unemployment still low? We are working longer hours. 2019. [Online]. Available
Through<https://www.theguardian.com/business/2019/nov/17/why-is-uk-
unemployment-still-low-we-are-working-longer-hours>
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