Introduction
Stating out as a local sports merchandise vendor in 1982, Sports Direct PLC was founded by Mike Ashley as a subsidiary of Frasers Group PLC (Frasers Group, 2021). The chain outlet has since grown into a reputable international multi-retailer of a wide range of sporting goods. It is UK’s largest sports vendor by revenue and boasts of a highly diversified portfolio including department stores and retail outlets that sell fitness and sportswear such as shoes, clothes and accessories (Tighe, 2021). Sports Direct has also ventured into other unrelated areas like computer games, fashion and lifestyle or wellness through its subsidiaries such as No Fear, Rangers, Heatons, Gilesports PLC, Lillywhites, Ashley, Hargraves and Dunlop (Frasers Group, 2021). According to Ashley (2017), the company has about 22.9% market share in sports merchandise. Sports Direct’s main competitors are JD Sports, Elite Fitness, Foot Locker, Big 5 Sporting Goods and Uniforms Express (Sports Direct, 2022), but JD sports its division of Frasers Group PLC, Sports Direct’s parent company. Sports Direct PLC’s mission is to grow into a leading international multi-retailer of a wide range of sporting and lifestyle goods to deliver sustainable growth for its shareholder both in the midterm and long-term (Frasers Group, 2021). It aligns with its vision to become the stop shop for all sportswear and fitness accessories. Therefore, this report explores how various factors in Sports Direct’s macro, micro and marketing environment influence its operations management.
Macro Environment
Economic Factors: The impact of economic factors cannot be overlooked since they influence the spending habits of existing and potential customers and the influence the demand for some type of products in a given market segment: In this case, influencing the expenditure on Sports Direct’s sportswear and fitness or fashion accessories (Davies, 2021). Some of the measurable economic factors include interest rate, tax tariffs, exchange rate, employment rate, inflation and the general efficiency of the financial markets. For instance, the general economic performance is directly correlated to key sales determinants such as customers’ purchasing power, circulation of money, and income (Chavan, 2018). While most sports enthusiasts may sacrifice a portion of their income to spend on sportswear and fitness accessories, the general market may view sporting goods as a luxury (Nam et al., 2017). Sportswear and fitness accessories are not basic needs that people are compelled to buy. However, if the economy is performing well and the financial markets are efficient, the general market has some disposable income to spend on sporting goods which may be aspirational to them (Chavan, 2018). In other words, economic factors also influence the demand for Sports Direct’s sportswear and fitness and fashion accessories. But economic factors are intertwined with many other socio-political issues, like in the case of BREXIT (Davies, 2021). The economic factors have been favourable to Sports Direct since the UK and Europe as its domestic markets have enjoyed relative economic stability; not even BREXIT was able to significantly shake the region’s economic stability.
Social Factors: Spots Direct trades in an area that is influenced by cultural undertones that determine how the customer and target market consumes sporting goods. According to Nam et al. (2017), sports and sporting activities are subjective to lifestyle and socio-cultural preferences. While Sports Direct has also ventured into other unrelated areas like computer games, fashion and lifestyle or wellness through its subsidiaries, its core area is still sportswear and sports accessories (Frasers Group, 2021). Thus, in this case, the focus is more on how the customer and target market consumes sporting goods. Jayarathne (2019) observes that the preference for sports and the purchase of sportswear and sports accessories vary across demographics. Some of the most observable social determinants include the general sporting culture, gender perceptions, leisure interests and attitudes towards sporting products. For instance, there is a common perception that men may have a higher preference for sports, sportswear and fitness activities. The brand is also a determinant when one is purchasing sportswear (Jayarathne, 2019). On the other hand, more educated people with a higher level of income have the surplus to participate in sports, take up fitness activities and indulge in activities related to sports; which includes buying sportswear, sports regalia and fitness accessories. They are equally brand sensitive. Besides, it has been observed above that sportswear and fitness accessories are not basic needs that people are compelled to buy and the general market may view sporting goods as a luxury (Nam et al., 2017). Consequently, Sports Direct has built a reputable brand that has earned it a loyal customer base.
Environmental Factors: Sustainability concerns have become a critical business driver amidst the need to limit the impact of business processes and operations on the environment. Enterprises, regardless of sector or size, are expected to demonstrate a commitment to preserving the environment (Newman et al., 2020); at least show that their activities have a minimal environmental impact. Sports Direct recognizes the responsibility levied upon businesses and the need to adhere to the call for environmental conservation. Apart from acknowledging, taking part and sponsoring some of the environmental sustainability events and forums such as Earth Day and Global Environmental Conferences, Sports Direct is making active operational adjustments to observe the need for sustainability in a business (Sports Direct, 2022). For instance, the company opts to use bio-degradable fabric such as organic cotton and woollen material to manufacture its sports and fitness wear. Sports Direct offers various eco-friendly tips that customers can use during laundry in addition to other solutions such as recycling and garment repair (Sports Direct, 2022). Apart from enlightening the market about various ways they can prolong fabric life, Sports Direct is keen on showing the market that it is compliant with sustainable business processes. The company understands the implications of sustainability in business as an emerging issue. Customers are now taking an active role in holding companies accountable for sustainability (Newman et al., 2020). It has become a non-negotiable for all commercial entities.
Micro Environment
Bargaining Power of Buyers: Buyers want to have the best product available at the least possible price, thereby putting pressure on any retailer to increase offers and discounts without losing profitability. A retailer like Sports Direct relies on sales to generate income, which gives buyers high significance in the business (Ashley, 2017). Furthermore, sportswear and fitness accessories are not basic needs that people are compelled to buy. Therefore, while most sports enthusiasts may sacrifice a portion of their income to spend on sportswear and fitness accessories, the general market may view sporting goods as a luxury (Nam et al., 2017). However, owing to the differentiation of Sports Direct’s sportswear and fitness accessories, it is not easy to find an alternative. The differentiation somewhat tames the otherwise high bargaining power of sportswear buyers. As much as the typical Sports Direct customer has a higher level of income and the surplus to buy sportswear, sports regalia and fitness accessories, they are equally brand sensitive (Chavan, 2018). The quality of the product is also important to the sportswear buyer, and Sports Direct offers the promise of quality. Therefore, while the buyers may have options from other competing brands, they are equally subdued by the brand superiority of Sports Direct. The above observations give the sportswear buyers moderate bargaining power.
Rivalry among Existing Firms: Since Sports, Directs operates within the highly competitive retail industry; it automatically accedes to the high rivalry amongst existing firms. As much as the chain outlet has grown into a reputable international multi-retailer of a wide range of sporting goods, sportswear remains a highly contested market segment (Ashley, 2017: Frasers Group, 2021). Still, it remains UK’s largest sports vendor by revenue and boasts of a highly diversified portfolio including department stores and retail outlets that sell fitness and sportswear such as shoes, clothes and accessories (Tighe, 2021). However, the retailer faces robust competition from JD Sports, Elite Fitness, Foot Locker, Big 5 Sporting Goods and Uniforms Express (Sports Direct, 2022). For instance, Ashley (2017) observes, “While Sports Direct’s 2017 market share is forecast as 22.9 per cent, this is just 3.5 percentage points ahead of its biggest rival JD Sports” (p. 5). Amidst the high competition in the sector, Sports Direct has retained the top spot over the years through sustainable differentiation offering a wide range of sporting and lifestyle goods. The high rivalry among existing firms requires Sports Direct to pursue comprehensive business level strategies to cultivate a long term competitive edge (Ashley, 2017). As the market continues to grow, the retailer should focus on acquiring new customers instead of scrambling for existing ones.
Marketing Environment
Pricing: With pricing as a key determinant of spending habits that influence purchase decisions, the retailer has no choice but to improve its price offers and discounts without losing profitability. As such, Sports Direct pursues competitive pricing strategies. The company is big on discounts in particular (Frasers Group, 2021). While the typical Sports Direct customers may have the purchasing power to buy sportswear and fitness accessories of choice, they still prefer to make a bargain out of their purchase (Nam et al., 2017). As already noted above, buyers always seek the best available product at the least possible price; and the Sports Direct customer is no different. For example, there is a noticeable price difference between the same sportswear and fitness accessories by Sports Direct and other competitors such as Foot Locker or JD Sports (Ashley, 2017). In other words, Sports Direct products are cheaper than its direct and immediate competitor JD sports (Ashley, 2017); despite both offering nearly the same premium quality. The competitive pricing strategies are complemented by the retailer’s great brand promise and quality. While pricing is a determining factor for the purchase decisions, the quality of the product is also important to the sportswear buyer (Sports Direct, 2022); and Sports Direct offers the promise of quality at a better price compared to competitors.
Promotion: Sports Direct’s promotional activities are centred on creating awareness about its products, deals, discounts, new arrivals, involvement in relevant social events and new development. It plays a big role in its positioning as the UK leading sports retailer (Frasers Group, 2021). The company already positions itself as a chain outlet offering a wide range of sporting goods. According to Shearsmith (2021), most of its promotions aim to inspire the customer to do something active and have a Sports Direct’s accession while at it. Creating a reputable brand value is part of its grand promotional activities. Sports Direct has seasonal campaigns publicised via radio, television, digital and out-of-home (OOH) media outlets. For example, the retailer is known for “Go All Out”, a Christmas campaign that includes sports icons and celebrities. The promotions align with its vision to become the stop shop for all sportswear and fitness accessories (Shearsmith, 2021). With the emergence of digital as a reliable and cost effective alternative marketing platform, the retailer replicates its campaigns on social media (Siguencia et al., 2017). However, for a company of its calibre, the numbers could be more (Siguencia et al., 2017: Syvertsen et al., 2020). The retailer was also heavily criticised for remaining actively open throughout the COVID-19 pandemic despite widespread public health concerns (France, 2020). However, it is important to note that the retailer is predominantly brick and mortar and hence had to rely on keeping stores open for sales.
Conclusions
Sports Direct’s case analysis exposes how macro, micro and marketing environment influences its operations management. Sports Direct PLC’s mission is to grow into a leading international multi-retailer of a wide range of sporting and lifestyle goods to deliver sustainable growth for its shareholder both in the midterm and long-term. By being UK’s largest sports vendor by revenue, the retailer has become the stop shop for all sportswear and fitness accessories. However, the company has to be mindful of various factors in both its immediate and external environment and how they affect its operations. For instance, economic factors influence the demand for Sports Direct’s sportswear and fitness and fashion accessories while social determinants such as the general sporting culture, and gender perceptions affect leisure interests and attitudes towards sporting products. Sustainability concerns have also become a critical business driver amidst the need to limit the impact of business processes and operations on the environment. Thus apart from enlightening the market about various ways they can prolong the fabric life, Sports Direct is keen on showing the market that it is compliant with sustainable business processes. In its immediate environment, Sports Direct has to contend with the highly competitive rivalry in the retail industry through sustainable differentiation that equally tames the otherwise high bargaining power of sportswear buyers. Sports Direct pursues competitive pricing which is complemented by the retailer’s great brand promise and quality as part of its marketing strategy. Its promotional activities are centred on creating awareness about its products, deals, discounts, new arrivals and developments.
Recommendations
While Sports Direct has demonstrated some best operational practices to become UK’s leading sports retailer, there is room for improvement. For instance, with sustainability being a critical business driver, the retailer has a bondless opportunity to showcase its commitment to eco-friendliness in some ways. Some of the areas that offer Sports Direct an opportunity to take sustainability compliance a notch higher include adapting completely organic packaging, issuance of paperless receipts and lean supply chain activities (Park et al., 2022). The retailer should amplify publicity about its green activities to create more awareness since customers are now taking an active role in holding companies accountable for sustainability (Newman et al., 2020). Also, while the retailer replicates its campaigns on social media which has become a widely accepted tool of promotion, for a company of its calibre, the numbers could be more (Siguencia et al., 2017). The company should consider expanding its social media presence across major platforms. Another recommendation for sport direct is to integrate e-commerce into its core business operations. The recommendation to delve into e-commerce stems from the above observation that the retailer was also heavily criticised for remaining actively open throughout the COVID-19 pandemic despite the widespread public health concerns (France, 2020). Embarking on e-commerce would not only have been an alternative at the time, but the pandemic has also induced online retailing as the new shopping culture.
References
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