International Business Management: JD Sports PLC Strategy Report

This report offers a comprehensive strategic management analysis of JD Sports PLC, a leading sports fashion retailer. It begins with an executive summary and company background, highlighting JD's establishment and expansion. The report identifies key challenges such as increased competition, market expansion issues, and changing customer preferences. A detailed PESTEL analysis examines the political, economic, social, technological, environmental, and legal factors affecting JD's international operations. Porter's Five Forces are then applied to assess the competitive landscape, including the rivalry among existing competitors, the threat of new entrants and substitutes, and the bargaining power of suppliers and customers. An internal environment analysis, focusing on value chain analysis, assesses JD's primary and supporting activities to identify opportunities for competitive advantage. The report provides a thorough examination of JD Sports PLC's strategic position, challenges, and potential strategies for success in the competitive global market.

STRATEGIC MANAGEMENT ASSIGNMENT
By Patricia Abad
International Business Management
University of West London
London, UK
Washington Machokoto
29th January 2021

Executive summary
For the company to operate properly, it is necessary to understand the
environment. JD Sports PLC (“JD”) is one of the companies that has several
competitors, therefore, it needs to understand the way they operate to maintain the
competitive advantage. This report provides a background and the key challenges of the
company. The external environment: macro (PESTEL) and micro (Porters' five forces),
whereas the internal analysis examines the strengths and the weaknesses of the
company, considering the various strategies that can be used to help in creating a better
competitive advantage.

Introduction
Company background
JD Sports is the leading trainer & sports fashion retailer in the UK. It was
established in 1981 by John Wardle and David Makin with its first store in Bury. As the
organization kept on developing, the founders opened several stores in the UK.
Nowadays, there are stores all around the UK and Europe, where dominate most of the
retailers of sports, fashion and outdoor brands.
The company’s continued growth made it to be listed on the London Stock
Exchange in 1996 (www.jdplc.com).
Progressively, the JD fascia is drawing a similar reputation internationally with
considerable expansion in Europe. In 2016, JD officially inaugurated its first store in
Asia, while in 2018 opened the first stores in United States. Now, JD Group has over
2,600 stores in 20 countries (www.jdplc.com).
Currently, JD is planning a gradual development in the Asian markets, where its
positioning is starting to gain momentum.
Key challenges
Just like other companies in the market, there are several challenges which JD
Sports is facing that require management to critically investigate. The first problem is
the increased competition. The more JD Sports expands into new areas of operations,
the more it gets exposed to new competitors. Managing the competition is quite
difficult, and for the company to improve on their operations, there is a need to come up
with an action plan. Another key challenge that JD faces is the problems related to the
expansion into new markets, which affect it in several ways, and need to be
investigated. Another problem that is facing JD is the dynamics that are taking place in
the operating environment which involves the changes in customer’s preferences and
the fluctuations in pricings, as some competitors give extreme low prices
(www.jdplc.com).

Analysis of the situation
JD Sports operates in various international markets, and it is to identify the
circumstances, developments and trends within it that the macro-environment where it
resides is analysed, understood as the external forces that affect the company's
environment and are not controllable by it.
A PESTEL analysis is carried out to evaluate this environment.
Political factors
The international scope of the sportswear sector requires an exhaustive study of
the social and fiscal policies in different countries. The result may incentivize
investment or pose a barrier to entry, as well as highlight potential conflicts that may
affect the sector.
Given that the UK has been a member of the European Union until December
2020 and JD operates within it, international relations between these countries directly
affect its sector, with Brexit being one of the main factors affecting the European
market, since although it has not yet had a significant impact, it could have a major
impact on trade policies.
The policies that political systems enact regarding how a company should
operate differ significantly from country to country, so much so that for JD to be
successful it must be flexible enough to keep up with the policies of those countries.
Some of the opportunities for JD to enter the Asian market are the existence of
political stability, which is directly proportional to business performance and allows the
company to operate efficiently, as well as low levels of corruption, which permits it to
operate without risk. However, there are several threats that the political systems in Asia
can cause, such as price regulation by governments, as in most cases only the
production of local companies is subsidized, without favoring new multinationals.
Economic factors
The macroeconomic situation and consumer purchasing power are among the
most important economic factors affecting JD's results.

The global economic and financial crisis, and the upcoming Covid-19 crisis, will
have a major impact on the sector. However, throughout these years of crisis in JD's UK
operations, sales volumes have barely declined, as the company has been able to adapt
to the environment and meet consumer demands. Thanks to its leadership strategy of
keeping prices low, it has benefited from the global economy of scale in sports fashion
retailing, raising its margins and achieving good positive profitability.
Indirectly, JD's revenues are affected by the inflation rate of the countries in
which it operates, such as the operation of its shops in Asian markets.
Considering that interest rates and inflation rates in these markets grow at a
standard rate, their economic factors are a great opportunity for the development of the
industry.
The only threat that the company can consider is the Asian government's
interference in the free market and the cost of labour, which can greatly affect the
company's operations.
Social factors
In the sports fashion industry, aspects related to the culture or customs that
govern different societies are relevant factors, as knowledge of the population's standard
of living and consumer habits helps to define the demands of target customers.
In recent years, within the sports market, new consumer segments have been
consolidating. JD offers a wide range of segmented offers of its different brands,
according to the different tastes and purchasing power, with which it satisfies the
expectations of its consumers.
It is worth highlighting the role played by Asian consumers, who are
increasingly demanding and have smaller wallets, are less brand loyal and are only
looking for the best quality/price. By taking advantage of this, JD can market to such a
sporty audience.
Technological factors
The main technological factors affecting the company are industry-specific
technological advances and innovations in its operations and marketing strategies.

JD keeps abreast of the latest developments in the sector and relies on e-
commerce on its online sales website to increase the sale of its products, based on its
multi-channel strategy. Because its online reputation, especially in times of Covid-19,
has become even more important as a new form of marketing and customer loyalty.
On the other hand, the constant use of technology can have the opposite effect,
as new competing global sales platforms emerge. Faced with these new entrants,
differentiation is essential for the company, which is why JD invests in its technology
centre to offer added value to its products, and thus differentiate itself from its
competitors' offerings.
Environmental factors
JD's results are indirectly affected by environmental factors. The attitude of
customers towards the purchase of "green" products means that the company must adapt
and create new products that care for the planet.
Therefore, in order not to affect its brand image, JD adapts to environmental
policies, behaving in a socially responsible way and showing its commitment to the
environment.
Legal factors
Considering the international market expansion strategy that JD is pursuing, the
business regulations of the new markets in which the multinational operates play an
important role in the future success of the company.
JD studies the taxes that apply in each country where it operates, labour
legislation when hiring, workers' rights and data protection laws, and is up to date with
government regulations in order to comply with them.
In addition to understand the micro-environment in which JD Sports operates,
Porter's five forces are an important analytical management tool.
PORTER analysis:
The study of the five forces allows us to understand the existing competition in
each sector in order to develop competitive strategies.

According to this analysis, the most important force is the competition in the
industry, which increases the greater the number of competitors and the more equal they
are in size and capacity, this direct competition being that of those offering the same or
similar services and products.
In the sportswear industry, the growth rate is highly variable, which further intensifies
JD's rivalry with its competitors. In addition to its own local competitors, it faces stiff
competition from giant online marketers such as Amazon and Alibaba.
In the face of the Covid-19 crisis, the sportswear industry, like all other sectors,
is expected to decline, which will lead to lower growth and create more rivalry in sales
among current competitors in the market.
The high concentration of competitors in key geographic areas and the high level
of competition in the sector makes the threat of new entrants in the sportswear industry
significant.
However, the threat of new entrants to JD's cost leadership strategy in the market
is negligible, due to the important role of economies of scale.
Nevertheless, in the face of minimal legal barriers and new border closures
caused by Covid-19 to enter the industry within the Asian territory, JD has to adopt new
measures and improvements to stay in its retail sector.
It is also necessary to consider the constant substitution of the same products for
others with similar characteristics.
The threat of direct substitute products to JD's market offering is high, there are
too many products available to meet the demand for sports fashion, and the increase of
online apps and products driven by Covid-19, pose an indirect threat to JD's products by
offering similar features at lower prices.
However, the company has a competitive pricing and service strategy, offering
quality service at multiple affordable price ranges.
Customers are the most relevant part of the industry and, as such, exert pressure
by negotiating prices, and demanding higher quality products and more services.
In recent years, the bargaining power of customers has increased, due in part to
the growth of online sales. The capacity and scope of the online reputation of sports

companies on the various web portals has increased the importance of providing quality
service to get a satisfied customer.
The bargaining power of JD's customers is enormous, as its customers are
demanding and price-sensitive and, in addition, they are increasingly informed about the
list of competitors in the industry and the advantages and disadvantages associated with
each brand, which intensifies their demand. JD plans to offer a broad portfolio of
products in a wide range of price points to give its buyers more purchasing options.
Suppliers can exert significant influence on industries, either by changing
delivery times, the quality of their products or altering their prices.
The bargaining power of suppliers is not high in JD, as it does not require a
single product and has a wide range of supply. The lack of differentiation among the
products provided by suppliers increases JD's bargaining power, since there are many
suppliers for whom the company is its main or only customer. In addition, JD imposes
its CSR programs on them, and only contracts the services that cover its interests
objectively and offer the best conditions, managing to establish and maintain stable
relationships with them.
Internal Environment Analysis
Value Chain Analysis
When conducting internal analysis of JD Sports, it is important to use value
chain analysis, which is a way of visually analysing the business activities of any
company to determine how it can create a competitive advantage over its rivals in the
market.
Value chain analysis will help the company to know how to improve the value
of its brands or products.
The value chain analysis was introduced by Porter, who said that the
organisation is divided into primary activities and supporting activities (Michael, 2021).
Both are important for JD, as they allow the company to improve its operations and its
performance in the market.
Primary activities

Inbound logistics
They are perceived as the materials or goods that the company purchases from
its suppliers and that are going to be used in the manufacturing of the final product
(Michael, 2021). Thus, JD is a retailer, so it mainly sources different products from
manufacturers and suppliers such as Nike or Adidas. Likewise, it sources products from
other more affordable brands, therefore, it manages to meet all the demands of its
customers. Currently, the company has positive and mutual relationships with its
suppliers. In addition, it manages its stock efficiently, keeping a tight stock of its
products.
Operations
Michael (2021) suggested that operations involve the activities carried out in the
manufacturing or branding of goods into final products, whereby adding value to them
on the production line.
Since JD is primarily a retail business, it largely involves packaging and
branding of fashion sport. In addition, the company is experiencing positive economic
growth and increased profit margins thanks to the branding and apparel printing
activities.
Outbound Logistics
Refers to the distribution of the company's products to both internal and external
markets. JD operates retail shops selling sports and casual wear. Its shops are spread
over 20 countries. In these stores, JD is responsible for organising the transport
activities related to the goods and managing their outbound logistics in time and form,
delivering its stock on time, which ensures the availability of its products for its
customers, thus increasing their satisfaction.
Marketing and sales activities
JD sells branded sports and casual wear that suits most customers in every space
or market. In its sales it uses a promotional mix as a multi-channel marketing strategy.
JD has invested in marketing and sales activities, including advertising, fair pricing and
promotional activities, which underpins the quality of its brand and strengthens its
competitive advantage.

Services
These are the support services that the company provides to customers for the
purchase of its products. They include after-sales services, provided to increase
customer satisfaction. By offering good service to its customers, JD has built up a good
reputation and a high level of brand loyalty.
Secondary or support activities.
Firm Infrastructure
These are the legal, financial and management structures that should support the
company in achieving its objectives. JD has excellent planning and financial
management, which achieves efficiency and effectiveness in its operations.
Human resource management
Focus on recruiting, training and motivating skilled employees who contribute to
the success of the company. They are part of the competitive advantage a company can
have. JD has a human resources team that manages the recruitment and rewarding of its
employees, who are highly trained in its operations, thus enhancing its value chain
support activity.
Technology development
The retail industry is also driven by technology through e-commerce, value
addition and production and research enhancement. JD relies heavily on advanced
technology to manage most of its operations. It has a technology development centre in
Hyderabad (PTI, 2018), where it helps provide its customers with a multi-channel
experience by developing, testing and supporting new automated software to support its
digital marketing and e-commerce teams in business operations.
Procurement
Refers to the way in which the company sources the raw materials, machinery
and equipment or goods it sells at the best market price. JD optimises its purchasing,
which enables it to maintain the best standards for its products.

All these processes make up its entire value chain, enabling JD to establish
itself as one of the UK's leading global sportswear retailers.
All the different activities in its value chain are aligned towards its competitive
advantage of cost leadership. It is through all of these that it is able to add value to its
brand by offering a wider range of products at the lowest prices, affordable to all
customers, and maintain its high profitability in the market.
Competitive strategies
To identify the company's strategies, it is important to consider competitive
advantage based on the results of external and internal analysis. "Competitive
Advantage: Creating and sustaining Superior Performance" (Porter, 1985). The three
generic competitive strategies to be analysed in JD are: cost leadership, differentiation
and focus.
JD Sports PLC's competitive advantage is its differentiated position in the cost
leadership market.
Cost leadership strategy
JD is one of the industry's leading low-cost retailers of fashion branded sports.
The company can achieve this because it benefits from economies of scale, good
sourcing, excellent investment in the latest technology and great inbound and outbound
logistics. Consequently, it reduces the cost of operations and can thus gain a cost
advantage. JD increases its market share by lowering the prices of its goods, and
continues to make good profits from sales.
Differentiation strategy
This strategy focuses on features, durability or brand image that add value to the
products. JD fulfils its main strategy with this. It stands out in the uniqueness of its
products thanks to the good development and innovation in printing and branding of its
products. In addition, JD offers high quality products through effective sales and
marketing approaches and teams.
Focus strategy

Is the strategy to focus on a specific market niche by understanding the
dynamics of the market and the customers. JD has developed in the niche market of
sports fashion, where it offers unique products at affordable prices and high quality to
its customers, thus gaining strong brand loyalty.
Strategic Direction
According to the Ansoff Matrix (product-market matrix), there are four growth
strategies that JD can use to expand its business: market development, market
penetration, new product development and diversification. The first strategy is the one
that best suits JD, as it supports its business objective of growth and expansion, in line
with its progressive development plan in Asian markets.
In addition, there are some other international strategies that JD can apply in its
growth and expansion activities. These strategies are mergers and acquisitions and
franchising. The first is the one JD uses, with which it gains rapid access to the industry
using existing workflows, assets and equipment, thus creating more value in its products
and even for its stakeholders. This is how JD has increased its market share and
profitability in business management, thanks to the pricing power of the supply chain.
Franchising is a crucial business growth and expansion strategy for companies
entering new foreign markets. JD does not follow this strategy, but it would be ideal to
consider in its international expansion strategy. The inherent benefit of this type of
business is brand recognition, as JD would use its well-known brand name already
known to its consumers, saving a significant amount of time and money in advertising
and marketing.
Recommendations
Today's world is immersed in innovation and new technologies, changes are
continuous. Consumers are looking for and demanding all kinds of offers and products,
which creates new opportunities for companies in order to keep improving for their
customers.
In this framework of the digital age, amplified by the Covid-19 crisis, JD's
objective would be to continue increasing the number of its online clients, enhancing its
multichannel capacity and its customised web services according to its different

markets, to meet the new needs and integrate new technologies that increase its added
value in their shopping experiences.
In this line and to further enhance its competitive advantage of cost leadership,
JD must continue to invest in their technological development within their value chain
that directly supports marketing and customer service activities, which could translate
into an increase in new online clients and buyer loyalty.
As a complementary strategy to further increase its brand value, JD should
continue its expansion in Asian markets and enter the large Chinese market. JD would
integrate horizontally, through its franchises. With which it would allow its franchisees
to market its products and sell in its shops. Franchises that it would divest in its
operations, or that it would establish in shopping centres in China, as they do not have
much experience in Asian markets and whose culture is different from the western one.
This would help them to have a better positioning, because it would increase market
power and reduce the costs of international trade to continue to grow.
Conclusion
From the results, several constraints and gaps are identified. For example, the
company faces fierce competition, there are more companies likely to enter the market
that can increase customer choice. It is also important to note that the company has not
explored other markets in the world that it needs to reach before competitors take over.
Therefore, continuing to expand in the Asian market, through franchising in
China, is one of the best strategic decisions JD can make. However, there are some
performance-based considerations to contemplate. First, the company must consider the
rules and regulations that are used in this Asian country and ensure that it understands
the level of government involvement in the business. Secondly, the company should
consider the use of technology to explore the market extensively, focusing on its
primary activities of marketing and customer service to maintain and enhance its
competitive advantage of cost leadership. It would have a good margin to maintain its
offer of quality sportswear at low prices.
Thus, concluding with the feasibility of these proposed strategies. JD Sports'
strategic business management could work on the implementation of this strategy

focused on the expansion of its business, as it has sufficient resources and capabilities to
carry it out, backed by its long and successful track record within the sportswear
industry.
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