This case report is written at the request of the John Lewis Partnership to provide them with the market information concerning the business environment within which they operate.
The Board of Directors are concerned about the impact of changes in he business environment and the implications for future growth and success ad therefore I will analysis and inform opinions on factors that influence their prospects.ObjectiveThe objective of this case report is to analysis the business environment and the implication for the future growth and success. The information that I get are mainly from the textbook, internet web site, newspapers and the company’s brochure.IntroductionWith reference to the John Lewis(2003a)1, John Lewis is one of the largest retail businesses in the U.
K. is famous for offering high quality goods on a variety choice of products. In 1834, the first department store was opened in the Oxford Street. In 1937, it joined Waitrose.
And finally in the year 2003, there are already 27 department stores all through the U.K.Although John Lewis has established a well – known reputation for over a hundred years, there are still a number of competitors in the market. Due to the high degree of the competitors, the market framework is changing from year to year.
This report is to evaluate the impact of changes in the business environment and the implications for future growth and success.It will begin on what John Lewis’ market structure is, followed by the business analysis on different economic approach namely the S-C-P model, Porter’s Five- Force Model, PEST analysis and a SWOT analysis. Finally, this case report will be ended up in a conclusion and relevant recommendations.The Market StructureWith reference to the Worthington and Britton (2003)2, ‘Market Structure’ refers to the amount of competition that exists in a market between producers.
There are traditionally four type of market structure in the market namely perfect competition, monopoly, oligopoly and monopolistic competition.Oligopoly means the firms have a great deal of market power; there is a stable price level and prices are set by price leadership, Also, much advertising and branding, non-price competition is common, Lastly, abnormal profits can exist.The John Lewis Partnership is one of the examples of the ‘Oligopoly’, it is one of the largest retail department stores in the United Kingdom, and it has a well known reputation for more than a hundred year already. In the market, there are some similar department stores like Marks and Spencer, The House of Fraser, Debenhams etc.
They together have most of the market share and therefore it’s hard for another department store to enter the market at the moment, they have the ability to control the market.Secondly, they can’t vary the price since if one firm set the price to a higher level, it certainly lost its customers. John Lewis, together with the other leading department stores, are having a stable price level , that means the price of the goods selling in John Lewis are more or less the same when compared to other leading department stores since nobody want to lose its market shareThirdly, John Lewis is having the non- pricing competition, for example, John Lewis has it own brand products like bed linens and glass wares in order to compete with other competitors, and it also has a free extended guarantee for all electronic products in order to retain its customers.Lastly, abnormal profit can be attained since they have a well – known reputation and effective strategies in order to be competitive in the market.
The Structure-conduct – performance modelFor the structural factors of the John Lewis, the structure of the market that John Lewis operates is in a few big firms, the main competitors are Marks and Spencer, Debenhams and the House of Fraser etc. Since there already a few large department stores in the U.K, new entries are quite hard to compete in the market. The cost conditions for John Lewis are mainly the salaries for the staff, the operating cost and the cost to carry out the research in order to know the customers’ taste.
For the demand condition, I think it is not that high for the buyers because there are so many substitutions in the market.For the conduct factors, with reference to the John Lewis (2003b)3, John Lewis is using the ‘Never Knowingly Undersold’, if customers can buy the product more cheaply that you have just bought, they will refund the difference. John Lewis also has a high degree on product differentiation; they also manufacture their own brand name products too. However, John Lewis doesn’t put much emphasis on advertisement, since they believe the ‘word of mouth’ is more important.
According to the John Lewis (2003i)4, when talking about the performance factors, the profitability remains high in John Lewis since it has established a well – known reputation, it has a great amount of supporters already so although there are a no, of similar firms in the market, John Lewis can still maintain the profitability. Moreover, on the technological innovation, there are the price checkers for the customers to check the price of the product, buyers can just scan the bar code to the machine and the price will be displayed on the screen. Moreover, the online shopping is also a type of technological innovation too.Porter’s Five- Forces ModelAccording to the Porter’s model5, the structure of an industry and the ability of firms in that industry to act strategically depend upon the strengths of five forces, they are the current competition, potential competition, the threat of substitute products, the power of buyers and the power of suppliers.
For the current competitions, according to the Q ; A with the Merchandise Manager in the John Lewis (Kingston branch), the biggest competitors for the John Lewis Company is Marks and Spencer, followed by the Debenhams and the House of Fraser respectively.For the potential customers, since John Lewis has launched the online shopping website6 last year, so the other department stores may do the same in order to be competitive and gain profit, the online shopping will be the potential competition in the future.For the threat of the substitute products, since John Lewis produce their own brand products like bed linens, glass wares etc., other retail stores may try to lower the price or upgrade their products in order to let the customers look for other substitution.
The power of buyers means visitors, buyers and potential visitors to your company. Since there are a high degree of buyers in the market, so the John Lewis has less power in the marketLastly, the power of suppliers means those companies that supply you with the products (or parts if you are a manufacturer). Since there are a part of the products are manufactured by the John Lewis itself, it is easier for the firm to apply the ‘Just-in-time’ Method in order to save costs.PEST analysisAccording to the PEST analysis7, this term focus on changes in political, economic, socio- cultural and technological factors and seeks to predict the extent to which change is likely to occur and its possible consequences for the organization.
For the political factors, it includes government regulations and legal issues, some examples are the political stability, tax policy, environmental regulations etc. The political is very stable at the moment so it doesn’t affect the firm much. As the government is promoting the environmental- friendly policy, the John Lewis Company therefore has sold the recycling shopping bags in all of its Waitrose stores.For the economic factors, it affects the purchasing powers of the potential’s customers and the firm’s capital; they are the inflation rate, interest rate and the economic growth.
According to the Bank of England8, the interest rate unchanged at their level of 3.75%, so the salary will not have any changes, and therefore people are still willing to buy the goods. For the inflation rate, since the inflation rate has grown in the year 2003 according to the Bank of England, that means the economic is growing and the people have increased their purchasing power.,For the social factors, it includes the demographic and the cultural aspects; we can look at the population, the age gender etc in order to estimate the demand for the products.
If John Lewis needs to screen out the other competitors, it must produce what the customers want on all age groups.There are more women go to work nowadays, John Lewis can therefore update their fashion clothing as well as sell more cosmetic products in order to attract the females.The last of all is the technological factor, this factor can affect the production levels, and examples are automation and the rate of technological change. As there are more and more people serving the internet at home, the John Lewis Company has launched an online shopping last year to catch up with the highly technological improvement in the U.
K.By weighing all these factors, it can reflect the importance of the different factors to the final decisions, and can therefore, reduce the degree of risk.The SWOT AnalysisThis analysis is to review an organisation’s strengths, weakness, external opportunities and threats.
The SWOT analysis for the John Lewis Company:Strengths:
- Well establish reputation
- Well motivated employees( partners)* The company made its own products – cheaper price
- ‘Never Knowingly Undersold’, if customers can buy the product more cheaply that you have just bought, they will refund the difference.
- All staff will provide honest information on the product, no ‘ hard sell’
- Excellent shopping environment and customer services
- Free extended guarantees on electronic appliances
- Online shopping web site www.johnlewis.comWeaknesses:
- Short opening hours* Problem in fashion retailing ( especially for the youngsters)
- Insufficient supply of electronic goods
- Not enough advertisementExternal Opportunities:
- Concentrate on producing or improving the quality of the high selling product e.g. bed linens, glass wares
- Put a wider range of products for the customers to choose on the online shopping website www.johnlewis.com
- Improve the customers services e.g.refund policy,
- Expand and set up more department stores
- Prolong the opening hoursExternal Threats:
- A high degree of competitors like Marks and Spencer, The House of Fraser etc
- Ever changing customers’ taste, hard to follow
- The fashion are rather out-dated when compared to other fashion retail storesConclusion and SuggestionsAccording to my analysis of strategic behaviour to the John Lewis Company,its well-motivated employees( since all the full – time workers are the stakeholders of the company), they are the one who contributed to the success of the company by providing excellent customer services .
Moreover , the ‘Never Knowingly Undersold policy can also boost the customers’ satisfaction towards the company.
Lastly, the excellent shopping environment makes John Lewis still be competitive in the market.However, due to the high degree of competitors entering market, John Lewis should therefore upgrade their products as well as the services provided to their customer in order to maintain its market share to compete with other competitors.
According to the SWOT analysis, short opening hours is one of John Lewis’ external threats since all other department stores open for a longer time than John Lewis, therefore first of all, the John Lewis should prolong the opening hours in order to be competitive. Secondly, upgrade the standard of the fashion retailing since the clothes are rather outdated when compared to other retail stores. In addition, the John Lewis can also diversify its product lines to server all levels of age group and to catch up with the ever changing customer tastes.Nevertheless, there isn’t enough advertisement where comparing to other similar department stores like John Lewis and Debenhams, these companies have a wide range of channels to the mass media such as the TV, radio as well as distributing the leaflets on the street in order to boost the sales; John Lewis should therefore put more advertisement in order to catch the customers’ attention or retain the existing customers.