Detailed Analysis Of John Lewis Partnership Commerce Essay Example

for an external management consultancy firm, reporting to the Board of Directors of your chosen company.

The study should include subdivisions that cover all aspects of the faculty course: strategic analysis (both internal and external) and strategy planning. It is important that you utilize the strategic management tools and models that you have learned in this course to conduct internal and external strategic analysis and strategy planning. You will be rewarded for your analysis, evaluation, synthesis, and the appropriate selection and use of strategic management tools and models.

Introduction

This report will discuss John Lewis's skills in presenting strategic management tools for analysis, evaluation, and synthesis. The report will cover both strategic analysis and an analysis of the external environment.

The study covers various aspects of John Lewis Partnership plc, a leading retail business in the UK. It discusses scheme preparation, SWOT analysis, and BCG Matrix. The company operates in two sectors - John Lewis and Waitrose - and is ranked among the top 10 retail businesses in the country. Their product range includes food, baked goods, fresh fruits and vegetables, wines, household items, furniture, and electronics. With a total of 287 Waitrose supermarkets and 39 John Lewis stores (including 30 department stores and 8 home stores), they have established a strong presence in the market.

The company, headquartered in London, operates throughout the UK and sells their merchandise through retail shops, catalogues, and web sites. Their strategic focus is to achieve non-core business goals by partnering with other companies. John Lewis has about 81,000 employees working in their shops who are partners in the business. These employees have a share in the company's profits and are given

opportunities to participate in its growth and development. This unique approach encourages staff loyalty as they are considered business partners (John Lewis 2012).

Strategic analysis

Mission statement - The mission of an administration sets out the broad directions they need to follow and provides a brief summary of the values and reasons behind it (Lynch 2012). Like other organizations, John Lewis also has a mission statement that highlights their reputation established through their unique ownership structure and their success as a profitable business. John Lewis aims to keep their staff satisfied to ensure the success of their business.

Their scheme is based on three cardinal elements - spouses, clients, and net income. (Refer to appendix 1) to see their full mission statement.

External Environmental analysis

PESTEL Analysis

The PESTEL analysis examines the macro-environment in which the concern exists in. It is a helpful tool for understanding market growth or decline as well as the position, potential, and the direction for concern. It is also used for evaluating the Political, Economic, Social Technological, Environmental and Legal factors that a concern operates in.

The Political factors involve government regulations such as employment laws, environmental regulations, tax policy, and political stability. The Economic factors influence the cost of capital and purchasing power of a company. These factors also include economic growth, interest rates, and inflation. The Social factors affect customer demands, potential market size for John Lewis's goods and services, population growth, and age demographics. Technological factors of John Lewis will address barriers to entry, decision-making or purchasing decisions, investment and innovation, and technological change.

Environmental factors, including conditions, climate, and climate change, influence John Lewis' operations and product offerings. Similarly, Last Legal Factors such as

discrimination law, employment law, and health and safety law impact how the company manages costs and the demand for their products. These macro-environmental factors play a crucial role in decision-making for strategic options.

The first step in the strategic planning process, called PESTEL analysis, is recommended by Lynch (2006). According to Johnson et al (2008, pg.56), environmental factors that are likely to greatly affect the outcome of a strategy are the main catalysts for change. Please refer to appendix 2 to view John Lewis' PESTEL analysis. Each factor of the PESTEL has influenced John Lewis' decisions, and some of them are now included in their mission statement.

The previous factors used for analyzing different factors can provide effective anticipation if applied correctly. However, there are limitations in this model, such as difficulties when applying the checklist process to John Lewis. Some may argue that the future is too uncertain for anticipation to be useful, as noted by Lynch (2012, p. 84). Nevertheless, others still offer cautionary words but continue to make predictions about the future.

The PESTEL analysis is not the only model that John Lewis takes into consideration. Their administration also considers many other internal and external factors that also have an impact on strategy preparation. This is why Porter's five forces model is applied. The PESTEL analysis provides a lot of information but doesn't offer a detailed analysis of the business. Porter's Five Forces (1985) examines factors that affect competition in the administration.

Strategic Options

The external analysis performed has highlighted how the focus and landscape of the UK retail sector have significantly changed over the past decade or so.

Such advancements present both threats, particularly from new competitors

and methods of distribution, as well as opportunities such as the increasing use of technology in the current customer offerings. According to Johnson et al. (2008, pg.3), strategy involves "utilizing the strategic capability of an organization, in terms of its resources and competencies, to provide competitive advantage and/or yield new opportunities." However, many competitors in the retail industry have successfully expanded into other product ranges and international markets. In contrast, John Lewis has taken a more thoughtful approach by remaining loyal to its customers and confident in its market offerings. Simultaneously, the company has also expanded its product range to include a lower-priced range to attract customers from a wider range of society segments.

In times of economic uncertainty, John Lewis has implemented a reasonable strategy to maintain their business. This strategy is particularly useful when their loyal customer base faces decreases in disposable income. By offering less expensive products in their stores, John Lewis enables their customers to continue shopping with them.

The introduction of the Essential Waitrose Range in 2009 was a response to external events and competition. This strategy demonstrates the company's focus on external research and their innovative approach to dealing with negative events.

According to Porter, there are three generic strategies that companies can follow: cost leadership, differentiation, and focus. John Lewis has embraced a combination of these strategies. However, differentiation remains central to their business model. This sets them apart from competitors, especially considering the wide range of goods and services they offer. Their effective branding and promotional events directly appeal to customers and encourage purchases.The decision to introduce the Essentials range in Waitrose stores may have been seen by some as

a sign of compromising standards. However, despite providing a more affordable option, quality remained important. This ultimately suggests that John Lewis's position in the market would not be compromised. According to Porter's Five Forces model, the competitive environment for John Lewis is constantly evolving (refer to appendix 5).

This theoretical account suggests that customers are not more important than any other aspect. However, Aker, Baker, and Harvey Jones argue that customers are the most important aspect of strategy development (Lynch 2012). Porters Five Forces of competition (1985) is a commonly used tool in strategic management across various sectors. It is similar to the PESTLE analysis as it looks at how a firm is positioned against its competitors in the industry. Critics argue that the model's importance has been questioned due to changes such as business diversification, leading to blurring boundaries in previously distinct sectors. For example, supermarkets entering the clothing and electronics sector, and retailers like John Lewis expanding into financial services through insurance and credit facilities for customers.

Barney (1995) and Henry (2008) argue that Porter's theoretical model is more useful at the strategic business unit level rather than at higher levels of industry analysis, such as the overall sector. This is because it cannot be assumed that all competitors will directly compete against each other. Additionally, this tool is valuable for evaluating a company's strengths and weaknesses in comparison to its competition. As Barney (1995, pg.49) points out, "A comprehensive understanding of competitive advantage requires analyzing a company's internal strengths and weaknesses as well." The integration of internal and environmental analyses is essential when assessing the sources of competitive advantage for many companies.

''In examining Porter's

five forces of competition, it is evident that John Lewis has not only responded to the actions of competitors, but has actively positioned itself ahead. The company has consistently adjusted its business model, such as introducing store cards, expanding its online presence, and offering the Waitrose Essentials range, to better meet market demands according to Mintzberg's theory (1994). However, a significant aspect of its strategy lies in its reputation, branding, and overall perception by consumers. John Lewis has remained committed to its original proposition and has further enhanced its appeal through effective branding and a reputation for quality and exceptional customer service. An analysis of internal resources reveals the value chain as conceptualized by Michael Porter (1985) - a method of examining the activities performed by a business and evaluating their contribution to competitive advantage. Despite some critics challenging Porter's theories, the notion of the value chain remains useful in strategic analysis."

Ultimately, John Lewis has successfully sustained an advantage in its market sector by creating value through the interrelationships within its value chain. This has been achieved through efficiencies and synergies identified through both the Value Chain Analysis and the RBV of the house, which consider internal and external dynamics impacting an organization. In recent years, there has been a growing focus on the importance of joint ventures, collaborations, and relationships that add value to a company's positioning. Previously, elements such as HR were seen as supporting elements but are now recognized as core components, as demonstrated by John Lewis' commitment to and investment in its staff. By improving the quality of its internal resources, the company can develop unique competences that are difficult for

competitors to replicate.

According to Porter (1985, pg.36), the way in which a company conducts its activities reflects its history, strategy, approach to implementing that strategy, and the underlying economics of those activities.

Strategy Preparation

SWOT Analysis: John Lewis Partnership

John Lewis Partnership and other companies utilize a SWOT analysis as a valuable tool for understanding and decision-making. This analysis effectively summarizes the Strengths, Weaknesses, Opportunities, and Threats faced by the company. It is an essential component of strategic planning as it examines both internal and external factors. The strengths and weaknesses are internal factors while opportunities and threats are external factors.

Looking at the SWOT analysis (mentioned in Appendix 6), it can be concluded that John Lewis takes this tool into consideration when making business decisions based on their clients. However, John Lewis needs to expand their target audience because they are currently only aiming at an older audience. "The key to improving the diagnostic power of a SWOT analysis is to define the elements from a customer perspective rather than the organizational point of view" (Baker, 2007, pg.267). By doing this, they will generate a higher profit margin. If John Lewis wants to stay ahead of their competition, they need to focus on their weaknesses, such as ensuring their prices are comparable to their competitors. Additionally, John Lewis needs to address potential threats the business may face, but they can avoid such issues by taking action before they occur.

Although the SWOT analysis tool is useful to businesses when making decisions, it has been criticized for its simplicity and potential for misleading strategic analysis. This is because companies have failed to follow proper procedures. The SWOT analysis is a

focused methodology (Baker 2007), so when John Lewis uses this tool, they need to ensure they follow the correct procedures to achieve success.

BCG Growth-share Matrix

The Boston Consulting Group (BCG) growth-share matrix was developed by Bruce Henderson, founder of BCG, in the late 1960s'' (Baker 2007, pg.125). The BCG Matrix is a simple tool used to evaluate a company's position in terms of its product range. It simplifies how a company thinks about its products and services and makes decisions about which ones to keep and let go, as well as which products to invest in further.

It offers a useful way of assessing the opportunities available to the company and also helps determine how the company can maximize profits in the future. The following BCG Matrix for John Lewis highlights the market position of different segments within the company. In 2009, John Lewis was voted Britain's best retailer and has received awards such as "House Beautiful Awards 2008: Online Home Retailer of the Year Gold Award" (washerhelp 2012), establishing them as leaders in segments like House and Garden, Electrical Appliances, Fashion, Gifts, and Toys. These segments now have a high growth rate and market share, placing them in the star category. Additionally, the technology and baby sections fall between the star and question mark categories. This may be due to their high growth rate and market share or high growth rate and low market share, as they face high demand but yield low returns. Moving on to the sports section, it falls into the cash cow category. While the market for these products is not growing, their market share remains high.

Looking at the final class, it

can be stated that John Lewis is safe as there are no products in the Canis familiaris category.

decision

Overall, the company has responded commendably to the changing dynamics affecting its market and customers. It is also evident that going forward, more challenges and threats will be presented, particularly due to the ongoing uncertainty relating to the global economy and consumer confidence within the UK. It appears that in addition to a thorough and consistent approach to its markets in relation to external analysis of those factors deemed most significant, the company also takes an internal approach, assessing its inherent resources and capabilities within the business. In accordance with the resource-based view of the firm (Barney, 1991) and subsequent research by other authors such as Grant (2005), this analysis is often seen as a more appropriate approach to the task of strategic management as ultimately, organizations have much more control over their internal resources than external market variables.

The attack used by companies like John Lewis allows them to drive innovation and improve their value chain, leading to changes in the wider environment. John Lewis has successfully expanded into other countries and improved its offerings to customers through online platforms, credit services, insurance, etc. This expansion was considered a relatively small risk for John Lewis considering the initial capital investment and market regulations. However, the presence of discount retailers and supermarkets offering similar products at lower prices poses a challenge, which may explain why John Lewis now offers online services in addition to its physical stores. Despite the increasing competition and concerns about diminished customer service in the online space, John Lewis has an advantage due to its

trusted reputation in the market.

The risk of substitutions is low in terms of merchandise, but high in terms of suppliers. This is evident from the success of supermarket chains in their clothing lines, as well as the competitive landscape in the online space and the continued popularity of price comparison websites and similar forums. In the long run, online retailers could put pressure on retailers like John Lewis, particularly in terms of pricing and sourcing of product ranges. This is considered to be very high due to the wide range of suppliers available and the fact that customers have unprecedented choice. Price is clearly a key advantage for retailers, but at the same time, for John Lewis specifically, factors such as location, quality, customer service, and the unique benefits of the in-store experience are significant.

Such variables also help differentiate the store from other competitors in the High Street. Although it was only a few years ago that retailers were seen to have a major influence over suppliers, this is now changing, especially due to supply limitations of certain materials and concerns in the global supply chain, which may give suppliers a more favorable position and increase their bargaining power. Competition is intense, primarily due to the wide range of options available and the increasing pressure from online retailers. As a result, competitors are constantly striving for position (Porter, 1979) and retailers are challenging themselves to distinguish through offering expanded product ranges and complementary goods and services. The success of John Lewis' Christmas promotional campaigns in recent years demonstrates the company's efforts to differentiate itself, particularly by focusing on factors that influence customer motivation to make

a purchase.