Introduction
JD Sports Fashion PLC is a British sport-fashion retail company based in Greater Manchester, Bury, England. The company was established in 1981 by John Wardle and David Makin. JD Sports Fashion company engages with the distribution of sport and athletic fashions, apparel, accessories, and footwear. The company involves in the sourcing, designing, and wholesale of rugby accessories, footwear, and apparel. JD Sports Fashion PLC has its operations in the United Kingdom, France, Australia, United States, Hong Kong, the Republic of Ireland, New Zealand, and Asia. The company is the sponsor and official supplier of different association football teams such as AFC Bournemouth, Charlton Athletic, and Luton Town. JD Sports Fashion company has an annual turnover of 6110.8 million British pounds. As of 2020, the company had an operating income of 516.9 million and a net income of 250.7 million pounds. JD Sports Fashion company has 34,885 employees working in different subsidiaries.
JD Sports Fashion Company SWOT Analysis
Strengths of JD Sorts Fashion Company
For many years, JD Sports Fashion has ventured into different businesses in the service sector. The company has developed diverse revenue streams besides the retail and service sector. The company has opened different branches across the world which brings huge revenue and a high investment portfolio. The company has an extensive network of dealers that does not only help in delivering efficient services but also help in overcoming the threat of competition. JD Sports Fashion has a strong array of products that have enabled the company to penetrate various customer segments. The investment portfolio has captured the interests of many customers such as football clubs (Wirtz, 2016). Although most JD Sports Fashion competitors strive to innovate new products, the company has managed to record consumer-driven innovation that has enabled to company to expand its market share. The company has provided an exhaustive mix of products to its customers that have to help it meet the different needs of the customers.
Weaknesses for JD Sports Fashion Company
The company has limited access to core business. With its present culture, the company has failed to move to other product segments. Due to high competition, JD Sports company has not invested well in new technology. The organizational structure has been compatible with the present investment model, which has limited the expansion of the product segment (Schivinski and Dabrowski, 2014. The high turnover of the employees in the company is currently at the lowest level. The company spends a huge budget to maintain and attract highly talented employees.
Opportunities for JD Sports Fashion
The company has a great opportunity to harvest huge profits due to changing customer preferences. The company is driven by disposable income, fast access to information, and the development of technological products segments, that will ensure the company opens new products in the large market. The rapid expansion of the economy offers a stable base for the expansion of the company. In many destinations, where JD Sports Fashion has opened branches, the economy has been expanding providing the company with the opportunity of opening other new markets. Local collaboration with small players in the market can offer a growth opportunity for the JD Sports Company (Thompson and Martin, 2010). However, the accelerated innovations and technological advances will improve industrial growth that will allow suppliers to a robust array of services and products. This will help the company to venture into different adjacent products.
Threats to JD Sports Fashion PLC
One of the biggest challenge that JD Sports Fashion face is the increased commoditization of the services and products in the fashion and clothing industry. The changing political environment such as China and US trade wars, the United Kingdom exit from European Union, and overall political instability in the Middle East has impacted the effectiveness and market expansion. The company is facing an acute shortage of skilled and talented employees. However, given the high employees turnover, and overdependence of the innovation breakthrough. Although the company remains a leader in product development, it faces high competition from local and international competitors. The evident product launch cycles have provided additional pressure to the effectiveness of the JD Sports Fashion PLC. Given the fact that the company has a robust customer base, JD Sports Fashion has failed to respond appropriately to the changing customer needs. Further, the trade war between the United States and China is likely to impact the performance of the company. The war will further hamper the potential expansion and operations in China market.
PESTLE Analysis for JD Sports Fashion Company
Political Factors
The performance of JD sports company has been largely affected by the UK exit from European Union. The interest rates changes due to market vulnerability and government relationships with other countries will further hurt the market for the company. This means that JD sports company will find it difficult to operate in other countries such as Belgium or France due to trade regulations between the United Kingdom and other trade partners. After, the Brexit, the clothing industry has been taxed heavily by the UK government—meaning that JD sports will keep recording low-profit margins due to high taxation rates. The contract laws that govern the operation of JD Sports company, as well as other clothing industries, keep prohibiting the company from extracting raw materials and exports. For example, the UK’s exist from the EU has changed trade policies and regulations, making it difficult for external investors wishing to invest with JD Sports company hard to form a trading partnership (Haron, 2016). Exporting cloths from the United Kingdom to other countries has become difficult since the UK government is taxing exports highly compared to imports. This explains why JD Sports Company has failed to secure contract signing with big clubs outside the United Kingdom.
Economic Factors
Despite United Kingdom’s economic stability, JD Sports company has continued to record low-profit margins due to inflation rates and foreign exchange policies. Since the outbreak of the COVID-19 pandemic, the clothing market has been declining. The aggregate demand for sports clothes in the United Kingdom has declined. The UK government ordered the closure of big leagues, forcing JD sports company to look for the alternative market for footwear, and accessories. During the COVID-19 pandemic, JD Sports recorded low profits than in previous years. The inflation rate has gone high thus affecting the market price for the JD Sports company. The cost of JD Sports company has risen sharply focusing on suppliers and customers to look for alternative products (Parkinson, 2018). The demand and supply for the JD Sports company have largely been affected by a change in price and high taxation rates. Further, the stability of the currency in the United Kingdom has been declining since the outbreak of the COVID-19 pandemic forcing JD Sports to rely on overseas investments.
Social Factors
JD Sports company has faced social factors such as culture, customer beliefs and attitudes, and the value of the UK population. The customer teste and preference have been changing, with many customers changing their altitude towards cheap and reliable commodities. Since the outbreak of the COVID-19 pandemic, customer spending habit has changed. This has forced JD Sports company to reduce the price of clothes and rugby accessories. JD Sports company has been targeting upper-class customers and clubs. Since the closure of the major league, clubs such as AFC Bournemouth and Luton Town had stopped ordering jerseys from the company. This forced JD Sports company to shift their customer targets to low and middle-class customers (Eisenberg, 2019). Shifting the customer targets from the upper class, where the company sells the products at a high price to a low and middle class, where customers demand products at relatively low prices. The COVID-19 pandemic has forced JD Sports company to start attracting employees with a low education background. This means that designing and quality of the products are likely to change in the distant future.
Technological Factors
Technology has significantly dismantled the price structure for the clothes and the competitive landscape for the JD Sports Company. The use of social media platforms such as Facebook and company website has been key in improving sales since the economy was re-opened. The company is heavily relying on skilled employees to innovate and consistently lead in the clothing market. The new technologies and the rate of innovation in the JD Sports company as well as multichannel technological strategy have helped the company gain a competitive advantage over its competitors. The apparent shift in online selling through technological apps has further increased the sales and the profit margins for the JD sports company. The use of technology in cloth designing has benefited the retail group since the customers have shifted towards sportswear and casual wear. JS Sports Company can effectively leverage new opportunities such as the use of social media in marketing and campaigns. The investment eye on the technology for the JD Sports Fashion company should be on the 5G network that will be key in improving marketing performance and online user experience among the customers who shop online. Given the level of competition, JD Sports Fashion company should heavily invest in disruptive technology in order to overcome the high level of competition and maximize its profit (Branch et al., 2017). The adoption of new technologies in JD Sports company has effectively shortened the lifecycle of the new products. At JD sports company, products are quickly and the supply chain partners have as well gained power. The company needs to rely on new technology to develop new sportswear, increase the diversity of the products, and integrate flexibility in the supply and value chains.
Legal Factors
JD Sports company must always follow employee, health, safety, and labor laws. The UK government has ensured that all the companies in the clothing industry provide secure working surrounding for all employees. The ethical and moral employee’s obligations of the JD Sports company favor the employees’ productivity. The company has effectively integrated anti-discrimination laws to ensure all the rights of employees are protected and that all employees get equal employment opportunities. Since the company is relying on online selling, it needs to study consumer protection laws such as consumer security and privacy concerns. The company must strictly ensure quality standards and protect all customers from any marketing fraudulent activities. Simply, JD Sports Fashion company must comply with all consumer protection laws to ensure the smooth running of production and marketing activities. The company must also be aware of intellectual property laws that protect the innovative ideas of employees and any valuable ideas.
JD Sports Fashion PLC Porters Five Forces
Bargaining Power of Suppliers
JD Sports company offers a variety of products ranging from rugby accessories and sportswear. The company has established a strong relationship with suppliers. However, this is represented well by the fact that JD Sports company has strong supply chains and uses its retail stores to supply a variety of highly competitive priced sports, footwear, accessories, and leisure clothing under various brands (Condric and Tomic, 2012). The use of a wide range of suppliers has made JD Sports company remain competitive in the clothing market. Since the company relies on multiple suppliers, it means that the power of suppliers has been diminished since the company can choose any channel depending on the price effectiveness. The company uses different suppliers at different locations and acquires products at relatively low prices.
Bargaining Power of Buyers
The product differentiation within JD Sports Company is very high, which means that buyers are able to acquire alternative products from the retail stores. The company has a distributive customer segment through which the company relies on low and middle-class customers. The company has mainly focused on innovation and product differentiation to attract more customers. The company is producing footwear and accessories in different colors and sizes to attract more customers (Bushell and Whyte, 2021). To effectively build a strong customer base, the company has increased its marketing efforts by aiming at strengthening brand loyalty. JD Sports company has taken the advantage of economies of scale to lower prices for footwear and accessories to win more customers in the market.
The Threat of Substitute Products and Services
The threat of substitute products and services for JD Sports Fashion company is very high. The competitors of the clothing industry are producing products at a low price and with high quality. To effectively overcome the threat of the substitutes products, JD Sports company needs to provide a greater and more diversified quality product. As a result, the customer will shift towards quality products. JD Sports company needs to lower the price of its products while maintaining quality. Alternatively, JD Sports company needs to focus on differentiating its products (Thompson and Martin, 2010). This implies that the customers will be able to purchase unique products and not shift towards substitute products. Further, JD Sports company needs to invest in market research in order to understand the customers’ needs and preferences.
Rivalry Among Existing Firms
The rivalry for the JD Sports company is very high. Most of its competitors such as Foot Lucker and Zumier are large in size. Among those competitors, Lucker has a large market share. This means that JD Sports company faces high competition in terms of production, distribution, price, employees, and market expansion. The products in the clothing industry are highly differentiated. This means that JD Sports faces difficulties in penetrating new markets. To overcome the high rivalry in the clothing industry, JD Sports company needs to differentiate its products in order to minimize the actions of the competitors (Bushell and Whyte, 2021). In fact, JD sports companies need to focus on acquiring new customers, instead of winning customers from existing companies. The company needs to conduct market research to effectively understand the supply and demand.
Threats of New Entrants
JD Sports company has found it difficult to achieve economies of scale in the industry. The number of new players entering the industry is very high. However, some of the new entrants have high technology than JD Sports Fashion company. Those new entrants are producing products of high quality and selling at lower prices. To overcome the threat of new entrants, the company needs to fight new companies by lowering the cost of the products, while maintaining high-quality standards. The company must focus on innovation to ensure the customers receive a high-quality product with the best designs.
Internal Analysis
Firm Infrastructure
The JD Sports company has a strong support infrastructure and departments such as marketing, legal team, management, finance, and communication and transportation which helps the company to run its operations. In every department, JD Sports has employed experienced and high talented experts to help in running the company activities.
Human Resource Management
The company has acquired a trained and highly competent workforce that plays a key role in the growth and development of the JD Sports company. The company also offers training and mentorship programs to the employees to help them develop their talents and also remain competitive in the market (Bushell and Whyte, 2021). The JD Sports company employees are highly motivated, trained, and work collaboratively to achieve the company goals and mission.
Technology Development
JD Sports company is highly celebrated for the use of technology in production, marketing, and security. House production has been made effective by the use of technology. The company relies on online and websites for marketing new customers. Technology is highly used for communication. Communication channels used include emails, Facebook pages, and company websites.
Procurement
For the JD Sports company, procurement starts with the acquisition of the raw materials till the production of the final product. The company has employed many agents in different regions to source the best raw materials.
Inbound Logistics
The inbound logistics for the JD Sports company includes producers in different designated regions. The company is committed to selecting high-quality products and signing third-party contractors. All the products are transported to the warehouse using the company vehicles.
Operations
The JD Sports company operates internally and externally. The company has established offshore stores, shops, and stocks in different countries.
Outbound Logistics
The company has established offshore stores and shops and sites to ensure proper management and selling of the products. All the products are sold directly to licensed sellers and other shops located in different countries.
Marketing and Sales
The company produces and markets its products through online, direct selling, and promotions. The company has established strong servicing and marketing of the product. The company has heavily invested in customer service to help in building strong customer loyalty and strong relationship with clients. The company has established a strong communication team that understands the needs of customers by collecting customer views and solving customer queries.
Porter’s Generic Strategies for JD Sports Company
Porter’s generic strategies include the cost leadership, focus, and differentiation strategy employed by companies to achieve a competitive advantage in the market.
Cost Leadership Strategy
JD Sports company offers products at lower prices compared to its competitors. The cost leadership strategy employed by the company includes increasing the sales and profits by focusing on offering low costs while maintaining industry average prices. The company has managed to increase its market share by lowering the price of products. The company works by engaging customers and improving service delivery to all customers (Bushell and Whyte, 2021). To continue achieving the cost differentiation, the company needs to invest heavily in technology and innovation that will help in cutting down the expenses. Again, the company needs to minimize the effort base such as material and offices as a method of cutting down the expenses.
Differentiation Strategy
JD sports company has made use of differentiation strategy to gain a competitive advantage over its competitors. The company has maintained a broad product portfolio. The company offers high-quality, useful, and durable products to millions of customers. The company has employed qualified staff who help in building customer loyalty and the brand image. The company has developed a distinct brand image that helps in attracting new customers (Bushell and Whyte, 2021). JD Sports company has advertised, marketed, and promotes its products and services more than its competitors.
Focus Strategy
JD Sports company focuses on quality and premium consumer taste. The company serves high-quality products at relatively low prices. At each stage of production, the company has put forth measures that guarantee that the product will ultimately fulfill the quality and standard of product. The value is added at each step of the value chain. The accounting of the product does not only focus on the quality of the raw material used but also meets the required size and quality.
Strategic Directions for JD Sports Fashion Company
Mergers /Partnership
JD Sports company need to diversify through establishing partnerships and merger with other companies. Diversification is the right strategy for the company to achieve a competitive advantage. Merging will ensure that the company uses available resources and strength to increase the customer. Merging with small firms in the industry will help JD Sports company increase its market share through forming a strong association with other firms in the industry. For example, JD Sports Fashion plc need to partner with real retailers in the market to improve its dispersion
Conclusion
In summary, for many years, JD Sports Fashion has ventured into different businesses in the service sector. The company has developed diverse revenue streams besides the retail and service sector. The company has limited access to core business. With its present culture, the company has failed to move to other product segments. The company has a great opportunity to harvest huge profits due to changing customer preferences. One of the biggest challenge that JD Sports Fashion face is the increased commoditization of the services and products in the fashion and clothing industry. The performance of JD sports company has been largely affected by the UK exit from European Union. The interest rates changes due to market vulnerability and government relationships with other countries will further hurt the market for the company. Despite United Kingdom’s economic stability, JD Sports company has continued to record low-profit margins due to inflation rates and foreign exchange policies. Since the outbreak of the COVID-19 pandemic, the clothing market has been declining. JD Sports company has faced social factors such as culture, customer beliefs and attitudes, and the value of the UK population. The customer teste and preference have been changing, with many customers changing their altitude towards cheap and reliable commodities.
Recommendation
- JD Sports company need to diversify through establishing partnerships and merger with other companies.
- The company needs to establish offshore stores and shops and sites to ensure proper management and selling of the products.
- The company needs to develop a distinct brand image that helps in attracting new customers.
- The company needs to invest heavily in technology and innovation that will help in cutting down the expenses.
- JD sports companies need to focus on acquiring new customers, instead of winning customers from existing companies.
References
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Condric, T. And Tomic, K., 2012. Pension Benefits of Executive Directors: A Comparative Study of General Retailers Between 2006-2010.
Eisenberg, P., 2019. Financial Analysis of Primark Stores Ltd. With Regard to A Stock Exchange Floatation (IPO). International Journal of Management, 7(1), Pp.91-112.
Haron, A., 2016. Standardized Versus Localized Strategy: The Role of Cultural Patterns in Society On Consumption and Market Research. Journal of Accounting and Marketing, 5(1).
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Schivinski , B. & Dabrowski , D., 2014. The Effect of Social Media Communication On Consumer Perceptions of Brands. Journal of Marketing Communications, Volume 12, Pp. 1-26.
Thompson, J. & Martin, F., 2010. Strategic Management: Awareness & Change. Hampshire: Cengage Learning EMEA.
Wirtz, J., 2016. Winning in Service Markets: Success Through People, Technology and Strategy. Singapore: World Scientific.
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