MS60043E Strategic Analysis: JD Sports' UAE Market Expansion Strategy

This report provides a strategic analysis of JD Sports' market expansion plan in the UAE. It begins with an introduction to the company, highlighting its current position as a leading UK-based retailer of sportswear and casual wear. The report then delves into an external analysis of the UAE market, utilizing PESTEL and Porter's Five Forces frameworks to assess the political, economic, social, technological, environmental, and legal factors influencing the business environment. The internal analysis, employing Porter's value chain, examines the primary and secondary activities of JD Sports. The report concludes by discussing competitive strategies and strategic directions for the company to achieve success in the UAE market, emphasizing the importance of adapting product, pricing, and competitive policies to the specific market conditions.

MS60043E – Strategic Management
1

Executive Summary
The assignment mainly highlights the strategic directions of an organisation and JD Sports has
been selected for making the assignment. For having better revenue generation rate, the
leadership and management department of the organisation decides to expand its market in UAE.
Business environment of UAE has been highlighted in the report and it has found that the market
is quite beneficial to expand market. Additionally, either product differentiation or cost
leadership strategy may help the company to achieve its sustainable advantages. Lastly, the
organisation has to improve its product, pricing and competitive policies and procedures for
having required success in the UAE market.
2

3

Introduction
In the competitive scenario, every company needs some proper strategic directions to thrive and
to generate revenue from their primary investments. Different processes of strategic management
may involve objective setting, competitive environment analysis, strategic evaluation and
ensuring management success. For conducting the project about strategic management, JD
Sports PLC, which is the UK based retailer selling fashionable casual and branded sportswear
has been selected. Initially, the organisation established back at 1983 and currently it is the
largest sports and casual wear brand of the UK. Initially the organisation opened as a single shop
and by 1996, it was able to open almost 56 different stores across different regions of the UK.
Recently, the management and leadership department of the organisation decided to expand its
market in Asian region and it selects UAE (United Arab Emirates) for making the expansion
process.
Retailing of sports goods and services has immersive presence in the apparel market of UK and
the industry is expected to rise even more in coming generation. Two biggest brands of UK retail
sector belong from the sports fashion industry including Sports Direct and JD Sports. It is
forecasted that the sportswear market of UK will grow by almost 20.9% by the end of 2023
while reaching €6.7 billion. The organisation is quite successful even after the recent pandemic
hit where most of the organisations are not being able to generate as much revenue as they would
like. However, the organisation is facing some challenges due to supply chain disruption and low
employee satisfaction rate. In the assignment, internal and external analysis of the company will
be represented from the perspective of their market expansion plan at UAE. Lastly, competitive
strategies and strategic direction available for the company will be explained.
4

External analysis
From analysing different instances, it has known that the company is intending to make higher
revenue generation rate by expanding its market in Asian countries. External analysis of UAE
will be greatly helpful for the company in terms of gathering knowledge and information about
the existing market. For analysing and explaining the external macro environment, PESTEL
analysis has been done and Porter’s five forces analysis has been done for external
microenvironment analysis.
PESTEL analysis (Macro Environment)
Political- Political factors are quite important for the business expansion purpose of JD Sports,
as the importing and exporting related decisions are made from the political level. According to
the political stability index, the country is currently having 0.7 points. It states that the country
holds a stable economic situation and there is not much political confliction. Stable political
condition is required for expanding business in cross-country markets and UAE is perfect for the
purpose. A level of flexible management system can be seen throughout the country, which can
help JD Sports to conduct its business operations in the country. However, some political
confliction may see between the existing political groups of the organisation, which is common
and can be seen in any country. UAE is famous of maintaining strong and healthy relationship
with ranges of other countries across the planet, which can be beneficial for the organisation
while supporting them to enhance revenue generation stream. All of the seven different emirates
that make UAE have their respective government organisations, which help to remove the
political barrier while dealing with higher level of confliction in decision-making attribute.
Economical- Among most of the recent Asian countries, the yearly GDP generation rate of UAE
is rising very fast and it has expected that the yearly GDP will grow even higher in near future.
Therefore, investing on the UAE market can be hugely beneficial for JD Sports. UAE is the third
richest country in the entire globe just after Qatar and Luxembourg. From different instances, it
has seen that the country is experiencing higher economic growth due to a range of different
factors. In 2019, the country was able to made total $421.14 billion, which was low compared to
the GDP value of 2018 ($422.22 billion). After expanding its market over the country, it may be
possible for JD Sports to include premium-pricing strategy since the residents do not mind to
5

spend an extensive amount of money for buying premium and comfortable fashion-sportswear.
Per capita GDP of the country belong in the highest range, which can help the company to make
several profit numbers from doing business in the country. In 2019, the per capita GDP of the
country has calculated as €43,103.
Social- The country is culturally enriched and a number of different people from different social
and ethnic background can be seen in the country. Therefore, diversification is present within the
social context of UAE and JD Sports can effectively utilise the diversification for attaining some
target market. In 2020, it has estimated that the country has 9.9 million inhabitants and it provide
working facilities to the residents of a number of different countries in recent context. Therefore,
the sports and fashion retailer does not need to be worried about selecting a target market. Since
different residents belonging from the country has higher than usual spending capability, it may
be possible for the organisation to have required success even after making high pricing policies.
According to a 2015 statistics, literacy rate of the country was almost 93.23%. This statistic state
that the company will be faces much problem while trying to include employees from the
residents of the country. It will save time as well as resources for the organisation.
Technological- Technology related factors matter for the success rate of different organisation,
as different aspects related with marketing, selling, distribution and supply chains are highly
impacted by the technological factors. Other than that, the success rate of recent organisations
depends on a number of different technological factors and therefore conducting business in the
UAE can be hugely beneficial for the success rate of JD Sports. Residents of the country are
quite tech-savvy and a huge percentage of population is using internet and social media websites
in daily basis. For such reasons, JD Sports can get enormous level of success in the country
while facilitating business related procedures. Wealth of the country allows its residents to spend
enormous amount of wealth to buy fashion and fashion related products. Therefore, the company
will be able to make as much profit as it intending to make after making the market expansion.
There are almost 9.73 million daily internet users in the country, which states that the company
will beneficial from making internet and social media related activities.
Environmental- The environmental condition of the country will surely make impact over the
product designing and product selling related aspects of JD Sports. Unlike UK, UAE has a very
hot and dry climate where the level of water is quite low compared to ranges of different
6

business organisations. Therefore, the products offered by JD Sports should offer products that
comfortable and can help the residents of UAE to withstand heat at a certain level. However,
some parts of the country are located at the coastal areas, which helps in trading and other related
aspects. JD Sports must convey the different rules and regulations made for protecting the
environment of the country.
Legal- It may seem to be useless while talking about the legal aspects of the country. The
country does not inherit any clear legal directions and the residents do not even need to follow or
maintain different legal aspects. Instead of having a clear legal structure, it has seen that the
country uses international repercussions that are resulted from malpractice. Since the country
does not have any clear rules and regulations, it may not be possible for the company to follow a
set of different rules and regulations. This can be both advantageous and disadvantageous. Not
having clear set of rules and regulatory guidance may restrict the company from conducting
ranges of different business process. Not having any clear import and export related rules and
guidance may affect the company negatively in terms of enhancing its success possibility.
Porter’s Five Force analyses (Micro Environment)
Threat from new market entrants- Entry cost to fashion and sports retailing sector is not quite
high compared to many other industries and therefore a number of different new market entrants
can be seen the market who have new strategic insights and way of doing different things.
Therefore, the company is facing steep competition from the new market entrants and the new
companies are making it very hard for the organisation to make up revenue generation rate. Since
new entrants of the current market may have new levels of value propositions, JD Sports may
face high threat from the new market entrants.
Supplier’s bargaining power- All of the different companies belonging from fashion retail
sector buy their raw materials from a number of different suppliers and they usually do not rely
on one supplier. In general context, the small-scale suppliers do not have much bargaining power
over the large-scale companies like JD Sports. However, some of the large-scale competitors
may have higher negotiating power in respect of the large-scale companies like JD Sports. For
these facts and reasons, it can be delivered that the company is having moderate level of threat
from the bargaining power of the suppliers.
7

Buyer’s bargaining power- Individually, buyers do not have much bargaining power over the
pricing and other strategies made by large-scale organisations like JD Sports. However, a group
of different consumers may have higher bargaining power compared with most of the other
factors. Due to the increased competition rate, it has seen that the company may want to retain
their existing consumer base even having consistent demand for different types of discounts and
offers.
Threat from substitute products and/or services- If a certain product can act like the substitute
of another product, then the industry of the other product may suffer in immersive way and may
loss expected profit generation rate. Luckily, there are not any common and available substitutes
of fashion-sports retailing and therefore the company faces low amount of threat from substitute
products and services.
Rivalry level between the existing competitors- The existing rivalry rate in the industry is quite
high and the company is facing ranges of different problems and threats due to the increased
competitive aspects. As the numbers of organisations belonging from the sport-fashion industry
are quite high, the organisation is facing higher level of threat from the competitors. The
company may need to improve the existing policies and procedures for having required
competitive advantage. The company can also change its pricing policies while providing
attractive offers and discounts to the consumer base, since these policies can make loyal
consumer base. Without having loyal consumers, it may not be possible to sustain any type of
business in the competitive market.
8

Internal analysis
Porter’s value chain analysis is one of the most popular models of conducting internal analysis
and it is divided in two different parts, which include primary activities and secondary activities.
Primary activities
Primary value chain related activities of the company are directly involved into the production
and sales related factors for being popular to the targeted and existing consumer base. Proper
analysis of different primary activities conducted by JD Sports will be helpful for improving its
performance in UAE.
Inbound logistics- Inbound logistics of the case study company is associated with different
aspects like retrieving of raw materials, storing finished materials, internal distribution of the raw
materials and making availability of necessary components for production related aspects. The
company may face ranges of problems in its production related aspects and they may face
different problems associated with storing and sorting of available products.
Operations- Importance making strategic analysis on the operational aspects rises while the raw
materials are available to be used. The current operational processes done by JD Sports are quite
effective and it does not face any further challenge while transforming raw materials into
finished products. Operation processes also include different things like packaging, testing,
assembling of the finished products so that those can be sold to the consumer base and the
company is very popular in terms of managing the operational aspects.
Outbound logistics- Outbound logistics can be referred as the activities required for transferring
the finished products to the consumer base. Similar to inbound logistics, the company may face
some problems at the time of managing outbound logistics. As of the current situational context,
the company is doing effective work in warehouse handling, order processing, scheduling,
transporting as well as delivering and shipping of different products across various regions of the
globe. The organisation is able to manage timely its outbound logistics activities and therefore its
consumers do not have much to complain about the packaging and delivery related aspects. Due
to the success in their outbound logistics, the company is able to stay at the top of market
competition. It will also be successful in the UAE market if continue similar activities.
9

Marketing and sales- Marketing department of the organisation spend an extensive amount of
yearly budget in marketing related activities. Because of the different marketing activities, the
organisation is able to attract consumers from different social, ethical or financial background.
However, it has not fully utilised either internet or social media marketing activities. Therefore,
the company has larger scope to be more even more effective in terms conducting marketing
activities and having many loyal consumers.
Services- Consumer loyalty level depends on the pre and post-sale services and it seems JD
Sports has done some effective work at maintaining its service levels. In modern era of business,
responsibilities of organisations do not stop just after selling the products, as consumers are
opting to have post-sale service so that they can have broader idea about the features and
qualities of bought products.
Secondary activities
The support activities of secondary activities of the firm can be helpful at the time of facilitating
and coordinating primary value chain activities. Different secondary activities inherited by the
firm are explained below:
Firm infrastructure- The organisation has an excellent infrastructure that is helpful in context
of conducting different activities including quality management of products, handling the legal
affairs, strategic management and planning, financing, accounting and other similar types of
work. Due to the effective firm infrastructure, JD Sports is able to maintain its top position in the
fashion-sports industry.
Human resource department- Human resource management of any department is responsible
for a number of different important activities including training and development of existing
employees, selection and recruitment of new employees, providing strategic direction for the
company and some others. Internal talent management and employee motivation level also
depends on the capability of HR department. It seems that the company has a good and effective
HR department; however, it still fails to provide adequate training facilities for the new
recruitments.
10

Technological aspects- Almost of the various value chain activities depend on technological
aspects and every company must put their resources to improve internal technological aspects.
Technological aspects are important for production, distribution, marketing, supply chain and
every other activity. JD Sports is successful in their technological aspects, which is the main
reason behind their high success rate.
Procurement- Procurement in value chain refers to different activities involved in the purchase
point of raw materials from transforming into finished materials. The procurement strategies
inherited by the corporation is able to have significant amount of competitive advantage.
Identification of Competitive Strategies
The competitive strategies of organisations like JD Sports depends on a number of different
factors and it has seen that the company is currently making ranges of different activities at the
time of managing its competitive aspects. From different theories and models, Porter’s Generic
Strategy is one of the most effective and efficient strategy that an organisation can use for having
required competitive advantage. Application of the strategy in context of JD Sports is highlighted
below:
Cost leadership strategy
Primary aspects of cost leadership strategy are associated with gaining proper level of
competitive advantage. In addition to that, cost leadership strategy is associated with lowering
the cost level of different products so that the consumers can have products with low pricing
policies. Cost leadership strategy is very helpful for the company in terms of achieving greater
completive advantage. For a range of different profit making organisation, the cost leadership
strategy can proven to be quite effective and efficient in terms of achieving required competitive
advantage. Lowering the overall cost of offered products, providing adequate benefits and
different offers to the consumer base can be done for conducting cost leadership strategy. The
overall market share of different organisations like JD Sports can be increased in countries like
UAE while considering cost leadership marketing strategy. However, initially the organisation
may not be able to generate as much revenue as they have previously intended while taking the
cost leadership strategy.
11

Since the company may lose some of its revenue generation capacity due to the cost leadership
strategy, it needs to maintain a proper balance sheet so that the company is able deliver low cost
products.
Differentiation strategy
Similar to the cost leadership strategy, the differentiation strategy will also be helpful for
companies like JD Sports to improve competitive advantage. Applying the differentiation
strategy may help the company to differentiate its products and/or services from the major
competitors. The company can make different types of attractive products for the consumers so
that they can become the loyal consumers of the company. However, implementation of product
differentiation strategy is not very easy and many strategic directions are associated with making
product differentiation strategy. For making differentiation strategy, it is important for the
company to make good research, development and innovation process. Effective sales and
marketing process is also included in the product differentiation strategy. Brand value and brand
extension rate of different organisations can be improved while considering the product
differentiation strategy.
Focus strategy
Focus strategy depends on a range of different factors and it is concentrated towards penetrating
a niche target market. Focus strategy can be created while understanding the nature and
dynamics of a target market. Organisations have to manage different unique needs of the
consumer base while trying to be successful after applying focus strategy. Focus strategy can be
of two types, which include cost focus and differentiation focus strategy.
From all of the different generic strategies, JD Sports may want to consider differentiation
strategy. Inclusion of product differentiation strategy will surely help the organisation to improve
its service providing facility in new nations like UAE. Application of the strategy will contribute
at the time of gaining market share in the industry segment of UAE.
Strategic directions
Before entering into the market of UAE, the organisation must do a number of different things.
For an instance, market research is one of the most important parts before starting business in
12

any country. Besides that, the production department of the organisation must make sure that the
qualities of offered products are able to meet up with the consumer expectations. Furthermore,
cost leadership strategy can be used by the organisation, which will not only increase the market
penetration rate, but also improve the brand extension rate. Proper customer service facilities
have to be included in the service level so that the company can gain success after expanding its
market. Segmentation of target market consumers can be done for having primary idea about the
available consumer group and to understand the intentions made by a group of different
consumers.
Besides that, there are lots of different techniques and ways for expanding the current market.
Joint venture, partnership, licensing, FDI are some of the expansion techniques to be used for
expanding the current market levels. From all of the available strategic direction, it will be
profitable for the organisation to select FDI (Foreign Direct Investment) as the market entry
option. While considering FDI as the market expansion model, the organisation does not need to
take help from other companies and make its own strategies and decisions. Higher level of
confliction can be avoided while considering FDI as market entry strategy.
13

Conclusion and Recommendations
Strategic directions are useful for ranges of different organisations since those can provide
required competitive advantages to any organisation. JD Sports is one of the famous UK based
sports and fashion wear manufacturer and the company can have significant profit while
considering market expansion in Asian countries. Most of the Asian countries are known for its
high business potential and therefore the company can get desired and expected success rate after
expanding in an Asian country. Due to balanced economical and political position of UAE, JD
Sports selects the country to expand its business. It can be recommended for the organisation to
make proper market research and select FDI as a market entry research to get success in the
competitive market of UAE.
14

Reference List
15