Strategic Development Proposal: David Jones Analysis Report

This report proposes a strategic development plan for David Jones, an Australian department store. It begins with an executive summary and table of contents, followed by an introduction that highlights the importance of strategic planning. The report assesses David Jones' market status and ap...Read More

Running head: STRATEGIC DEVELOPMENT
David Jones
Strategic Development Proposal
10/12/2019

STRATEGIC DEVELOPMENT 1
Executive Summary
The aim of this report is to propose a strategy for the strategic development of David Jones.
The report has applied the porter five force model over the departmental store industry in
order to identify the challenges that is impacting the performance of David Jones and which
strategy that can best suit for the development of the company. From the analysis, it has been
identified that company is dealing with intense competitive from the discount retailers and
other retailers which can be overcome by adopting cost leadership strategy. Under this
strategy the company has to reduce its production cost and manage the quality of the product.
Besides this, this strategy is justified for the company as it will help in increasing the capital
resources and increase market share.

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Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Market Status of David Jones................................................................................................3
Porter Five Force Model........................................................................................................4
Threat of Substitute Products.............................................................................................4
Competition among Existing Players.................................................................................5
Power of Supplier...............................................................................................................5
Threat of New Entrant........................................................................................................6
Power of Buyer..................................................................................................................6
Proposed Strategy for David Jones........................................................................................6
Justifications of the choice of strategy...................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................11

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Introduction
Strategy development also called as strategic planning is important in creating and operating
a business. It is also considered as the game plan that works in setting the objectives and
goals and is capable of getting change depending on the market dynamics. Strategic
development procedure and services are created to support senior teams and executives of the
business functions to develop strategies that can evaluate the business to the new level of
active business actions and planning (Wirtz, Schilke and Ullrich, 2010). The intent of this
study is to present the strategic development report for David Jones by analysing the
competitive forces that are impacting its performance and accordingly framing strategies that
can help in eliminating barriers and can support in growing in the market. In the end, the
study is providing the justification for the selection of the specific strategy.
Market Status of David Jones
David Jones is one of the well-known upmarket department stores of Australia, owned and
managed by the Woolworths Holdings Limited one of the famous South African group since
2014. In the year 1838, David Jones was founded by David Jones, who is a Welsh merchant
and future politician after he shifted to Australia (David Jones, 2019). David Jones is the
oldest department store operating across the world and still being traded under the same
original name. In the year 1980, the Adelaide Steamship Company got the considerable
interest in David Jones. Presently, David Jones Limited has around 45 stores in almost every
states and territories of Australia. The key competitor of David Jones is Myer. Headquarter of
the company is established by the parent company in Sydney. In the year 2016, the company
launched its first store in New Zealand. The profit of the company plunged 50% in the year
2018, underlining tough situations in the sector of department store, but a bounce in the sales

STRATEGIC DEVELOPMENT 4
of the same-store suggests the worst can be overcome from the retailer and its parent
company (Mitchell, 2018).
Porter Five Force Model
Porter five forces is the model that is used by the business to recognize and evaluate the five
competitive forces that has the capability to share every industry and support in defining the
weakness and strength of the industry. This model is mostly used to recognize the structure if
the industry to define corporate strategy (E. Dobbs, 2014). Porter Five force model can be
applied to every economy segment for searching for the attractiveness and profitability. In
addition to this, Porter five force models is the business analysis tool that support in
explaining why diverse industries are capable to sustain diverse profitability level. This
model was introduced by the Michael E. Porter in the year 1980 in his book with the title
“Competitive Strategy: Techniques for Analysing Industries and Competitors". The five force
model is broadly utilized to evaluate the structure of the industry in which company operates
and its corporate strategy (Azadi and Rahimzadeh, 2012). Porter recognized five indisputable
forces that perform a major part in creating every industry and market across the world, with
some cautions. The forces are mostly utilized to evaluate the competition intensity,
attractiveness, as well as profitability of a market or an industry. These five forces are as
follows: power of suppliers, competition in the industry or market, power of customers, threat
of substitute products, and threat of new entrant. All these forces are explained in detail in
consideration to the department store industry of Australia and David Jones an up-market
departmental store of Australia.
Threat of Substitute Products
Substitute services or products that could be utilized in place of the service or product of the
company raise a threat. Businesses that are involved in the production of the services or
goods with no close substitutes hold higher power to increase the prices of the products and

STRATEGIC DEVELOPMENT 5
lock in favourable terms (Alrawashdeh, 2013). The department store experience low
substitute product threat, as they are involved in the storage of number of branded
manufactured products in different product categories. As David Jones is the up-market retail
industry’s departmental store, it has number of assortment of products, and hence does not
deal with the substitute product threat outside of the industry.
Competition among Existing Players
This force talks about the competitor’s number and their capability to undercut a company.
The larger the competitor’s number, along with the equivalent product and services number
they provide, the lesser the company’s power (Rasouli and Malabad, 2014). Customers as
well as suppliers search for the competitors of the company to get better deal and lower
prices. The departmental store industry of Australia is highly competitive with the presence
of Myer who is firmly increasing its retail presence in the Australian market. Myer has
worked on decreasing the number of fashion apparel brands, as its main transformation
strategy. But, the retail industry of Australia is at its maturing phase where there is increasing
competition from the international brand and e-commerce.
Power of Supplier
The bargaining power of supplier force talks about how easily suppliers can increase the cost
of the inputs. It is influenced by the supplier’s number of key inputs of a service, how
exclusive the inputs are, and how much it will cost a business to switch from one to another
supplier. The fewer the suppliers number, and the more business based on a supplier, the
higher power a supplier gains to increase the cost of input. The power of supplier do not pose
higher threat to David Jones and other retailers in the industry because company offer variety
of products with same benefits but different brand for which the business has to contact with
number of suppliers. This results in diminishing the power of Suppliers in the industry for
David Jones.

STRATEGIC DEVELOPMENT 6
Threat of New Entrant
The power of a company is also influenced by the new entrant force into the industry. The
less money and time is invested by the rival to take entry in the market of the company and
be an operational competitor, the more position of the company may be majorly weakened.
Industry with higher entry barriers is one of the enticing features for the business that enable
them to charge higher prices and negotiate better terms (Tavitiyaman, Qu and Zhang, 2011).
The new entrant threat in the Australian retail industry is low due to presence of higher entry
barriers such as requirement of higher capital. Besides this, the existing players like David
Jones and Myer has covered the maximum share in the market and raising competitive threat
for the small retailers and other retailers.
Power of Buyer
The bargaining power of buyer particularly deals with the capability that customers hold to
drag the prices of the product or service down. It is influenced by how many customers a
business has, how much important every customer is, and how must it cost a business to
search for the new markets or customers for its output (Rachapila and Jansirisak, 2013). The
bargaining power of the customers in the Australian retail industry is high and therefore they
avoid purchasing a product if they get a better deal at any other place. This reflects that the
switching cost for the buyers is low in this industry.
Proposed Strategy for David Jones
Cost leadership is considered to be the strategy that is adopted by the businesses to increase
their efficiencies and decrease the cost of production below the average of the industry or
their closest rivals. It is the method to decrease the costs and produce the inexpensive
products in order to gain increased market share (Wang, Hong, Kafouros and Boateng, 2012).
The modern environment of the business is complex and cultured one with customers getting
aware of the available choices in the market. The way this can be adopted by the business to

STRATEGIC DEVELOPMENT 7
differentiate themselves is by following the competitive pricing. Businesses that are able to
produce products at low cost can also provide high quality in comparison to their rivals.
Customers are regularly searching to augment their power of purchasing and if this could not
be attained by an income increment, then purchasing more at the low prices is the next best
alternative (Hilman and Kaliappen, 2014). Companies who desire to be the cost leaders tap
into this opportunity to provide the average consumers best products at competitive prices.
As per the market analysis of the department industry, it has been identified that David Jones
are presently dealing with the decreasing sales and revenue due to increasing competition
from low cost retailers and online businesses. Due to decreasing disposable income of the
customers in the Australian market people are trying to invest fewer amounts on the luxury
products and services hence switching to low cost products. In addition to this, the changing
customer purchasing behaviour is also impacting David Jones performance in the market.
The customers today like to purchase products through online medium as they are convenient
and cost effective. In order to reduce the negative impact of online shopping applications
David Jones has introduced its online medium to allow customers to purchase different range
of products. However, in order to compete with the discount retailers and other low cost
retailers, David Jones is proposed to adopt cost leadership strategy under which it can focus
on reducing the cost of production and offering products to the customers at low prices in
comparison to the competitors. For reducing the production cost, the company is
recommended to hire cheap labour and reduce investment in the promotion activities. Further,
the company can also offer its private label products which will not just help in increasing the
revenue but also reduce the cost of the company. Offering private label products to the
customer will itself increase the promotion intensity of the business among target audience.
Hence, adopting cost leadership strategy is possible for the company to adopt and again get
into the competition and give strong competition to the rivals like Myer and other players.

STRATEGIC DEVELOPMENT 8
Justifications of the choice of strategy
In consideration to the above selection, cost leadership strategy is very well justified choice
for David Jones because presently the company is dealing with intense competition from the
discount retailers and low cost retailers due to which the sales and revenue of the company is
declining and in order to come out from this, the company has to work on reducing its
production cost. Adopting cost leadership strategy will help company in not just giving
competition to the competitors but it will help in attracting increased number of customers
and retaining the existing ones (Block, Kohn, Miller and Ullrich, 2015). As David Jones is
one of the well-known department stores of Australia, it knows the importance of offering
higher quality products which will be considered by it while producing low cost products.
Further, adding private label products in the product portfolio will help giving the
competition to other brands within the store, where customers can compare the prices of the
private labelled products of David Jones with the other products prices. By adopting cost
leadership strategy the company can expand its business in the Asian market as most the
customers of this market belongs from the middle class who always demand for high quality
products at low prices. Some of the other benefits that can be gained by the David Jones after
adopting cost leadership strategy are:
It offers better profits for the team as well as organization – Cost leadership style is focused
on designing low-cost operations in their industry and market (Hemmatfar, Salehi and Bayat,
2010).
It can help in increasing the market share of the team – Customers who try to balance their
budget they search for the products at low prices with high quality which results in increasing
the market share of the company.

STRATEGIC DEVELOPMENT 9
Enhances the business sustainability – The time cost for the business is low, there are less
financial threats that can increases the chances for the business to move out of the market.
This sustainability becomes a great advantage when economic conditions take a turn towards
the worst (Santos-Vijande, López-Sánchez and Trespalacios, 2012).
Creates more capital for the business for the growth – Cost leadership strategy promotes the
accessibility of increased capital resources.
Decreases competitions from the market – Businesses that are capable to execute their cost
leadership strategies successfully offer themselves a future benefit. This is because they are
capable to provide a superior pricing model to the customer, new rivalry in the market is
limited because rivals may struggle to attain the same price (Gao, Murray, Kotabe and Lu,
2010).
Conclusion
The above study is presenting the strategic development report of David Jones which has
identified that the company is presenting doing through tough times due to decreasing sales
and revenue. This is happening because company is experiencing intense competition from
the discount retailers and other retailers who are involved in offering products at low prices.
Besides this, the company is experiencing losses due to quick switch of customers towards e-
commerce websites for shopping. All these challenges are identified with the application of
Porter Five Force model on the departmental store industry. In order to overcome the
specified challenges, the report has proposed cost leadership strategy for David Jones. David
Jones is an up-market departmental store that can adopt this strategy and successfully operate
in the industry. The cost leadership strategy will help company in attracting increased number
of customers and retaining the existing ones. The successfully adoption of this strategy can be

STRATEGIC DEVELOPMENT 10
done by hiring cheap labours, cutting the advertisement expenses, and offering increased
number of private labelled products. This strategy is justified for the company as it will help
company in offering low cost products to the customer with high quality which can help in
attaining competitive advantage against its nearer competitors like Myer. In the end, it can be
said that company can again gain its leading position in the up-market department segment of
Australia. Further, increasing the private labelled products will help company in establishing
its lead in this segment too and giving competition to the local brands.

STRATEGIC DEVELOPMENT 11
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