John Lewis - Strategic and Operational Issues - Essay Example

? John Lewis Executive Summary John Lewis is a departmental store that caters to a wide market segment. It is a multi brand departmental store that sells a wide range of products, from electrical appliances to beauty products. The research report analyses the strategic and operational aspect of the departmental store. For strategic analysis the report investigates the market and customers served by John Lewis. The analysis indicates that the company is facing issues of positioning itself among the standard customers. The analysis also investigates the factors chosen in the construction of the market qualifiers and the market winners. Through analysis it is found that there are only three to four factors that distinguish the market winners from the market qualifiers. Whereas in case of market qualifiers there are eight to nine factors. The market qualifiers and the market winners are also analysed with the different types of customer segments. The analysis indicates that customers who are considered as premium class are found to favour more the factors which are related to aspects aesthetic of the products, their quality, reliability and other factors like durability and serviceability. The analyses of the operational aspects indicate other processing time of the requests, there are as no other issues. Due to significantly long processing time the company is losing the loyal customers. This is the same reason for which the company is incurring significantly high cost per lead in the case of standard customers. Table of Contents Introduction 4 Analysis of the strategic and operational issues 6 Analysis of the strategic issues 6 Analysis of the operational issues 10 Service delivery system used by John Lewis 10 Infrastructure used 11 Support to the market 12 Findings and conclusions 13 Reference List 14 Introduction John Lewis is a departmental store situated in London. It is a multi brand store which deals with various products for home and garden, electrical products, beauty products and products for baby care and child support, and sport products. It offers a wide range of services like home services, floor services, curtains, specialist blinds, blinds and shutters, disposal and recycling and financial services. The market share of the company is denoted by comparing the market capitalization of the company with competitors. Table 1: Market capitalization AEON Stores (Hong Kong) 3.82B Allied Consolidated Ltd 1.44M Alon Blue Square Israel Ltd 261.18M Arcandor AG 2.52M Arunjyoti Enterprises Ltd. 48.01M Ashley (Laura) Holdings PLC 18.13B Ashley (Laura) Holdings PLC NA Beale PLC 236.04M Belk Inc. 2.03B Bombay Swadeshi Stores Ltd. 99.16M Bon-Ton Stores Inc. 408.91M Briscoe Group Limited 519.58M C.P. Lotus Corporation 4.22B Century Ginwa Retail 2.23B China Resources NA China Seven Star Shopping Ltd. 175.87M China Seven Star Shopping Ltd. NA Convenience Retail Asia Ltd. NA David Jones Limited 1.31B David Jones Limited NA John Lewis 2.5B Source: (Chrol, 2011) The above table indicates that these are the major competitors of John Lewis. The major competitors are chosen on the basis of the size of the competitors. The competitors denoted above have more or less the same size in terms of asset. John Lewis serves to wide range of customers. The different types of customers and their respective percentages are represented in the graph below. The types of customers are denoted by the types of products and types of services. Fig 2: Division of customer segment Source: (Bajaj, 2001) The customer segment is denoted with 7 different segments. The highest number of factors is found across the electrical appliances sector due the fact that the data are taken from the quarterly sales. Due to non-availability of the sales figures for the different types of products and services on an annual basis, only the quarterly sales figures are considered. Analysis of the strategic and operational issues The strategic issues of the operations of John Lewis are analysed by identifying the customers and the market supplied by the operation, the products and services supplied to them. Analysis of the strategic issues First, the type of the customers and the market served are identified on the basis of transaction and loyalty (Bonaccorsi and Daraio, 2009). There are mainly 4 types of customers. They are: passive customer, collaborative customer, future customer and venting customer. The issues faced in the management of the above mentioned types of customers are described as below. The direct marketing techniques received different and varied responses, which are indicated below. Fig 3: Response index Source: (Clark and Mathur, 2011) The issue pertaining to the management of the collaborative customers indicates that the gold customers have responded more than the platinum and other standard customers. Although the number of gold customers is considerably less than other types of customers, still the response rate is most from these types of customers. Another cause of concern is the type of model that cannot be accounted for, i.e. the un-standardised type of customers. The analysis also indicates that the costs per lead of the standard customers are significantly more (Das, Quelch and Swartz, 2000). The reason is that John Lewis is not able to position itself effectively in the standard customer segment. The venting customers usually consisted of those who displayed least brand loyalty and the reason for brand hoping is psychological uneasiness associated with any single brand (Flint, Woodruff and Gardial, 2002). John Lewis efforts to rope in these customers by forming effective CRM did not yield any significant result as depicted in the diagram above, with cost per lead being significantly high. The discussion so far pertained to the description of the customers and markets served by John Lewis. The next stage of discussion is related to the identification of the market order winners and the market qualifiers. The order winner and qualifier matrix presented below is prepared by factoring in the different features that distinguishe each product and services for different types of customers. Fig 4: Market qualifiers and market winners Source: (Garrick, 2011) As indicated by the matrix structure, the market qualifiers are identified by factors like quality, cost, lead time and service level, while the market winners are distinguished by service level and cost. The next part of the analysis indicates the features on the basis of which the market winners are identified across different customer segments. The importances of the factors are denoted by its relative importance. Table 2: Relative importance of the factors of market winners across different market segments Gold Type of customer Platinum type of customer Standard type of customers Less frequent customers Price 5% 7% 45% 25% Aesthetical attitude 6% 3% 5% 25% Quality conformance 24% 36% 24% 25% Perceived Quality 65% 44% 26% 25% Source: (Ger, 2000) The above table indicates an elaborate analysis of the relative importance of the factors of market winners within the alternative customer groups. The value marked in yellow displays the highest preference of that particular feature for that particular customer segment. Table 3: Determinants of the market qualifier   Gold Type of customer Platinum type of customer Standard type of customers Less frequent customers Performance high medium low low Features high medium low low Reliability very high High medium low Quality conformance high medium low low Durability high medium low low Serviceability medium low low low Ethical attitude very high high medium low Perceived quality medium medium low low Price low low low low Manufacturability low low low low Long term relationships very high high medium low Environmentally friendly materials and suppliers low low low low Deliver ability very high high medium low Deliver precision very high high medium low Deliver reliability very high high medium low Source: (Gina, 2013) The above table denotes the determinants of the market qualifier. Analysis of the operational issues John Lewis sources the products from 5 different suppliers. The suppliers operate on a weekly basis. The suppliers contact the distribution centre. The distribution centre then despatches the goods for the respective locations where the outlets and shops are located. Fig 5: Supply and distribution system Source: (Gummesson, 2010) Service delivery system used by John Lewis The service delivery system used by John Lewis involves 4 different phases. In the first phase the service request is generated. The initial request comes from the order taking department and the inventory management department of John Lewis. The order is despatched to the delivery centre through the use of interdepartmental communication technology. Upon receiving the request, the system checks the possibility of fulfilling it using the present inventory level (Hastings, 2005). Any short fall is tried to be covered by placing orders to the suppliers. The suppliers check if the products are available with them. If the products are not available, then the orders are placed with the manufacturers. The whole system is a closed loop system with constant monitoring and feedback. Fig 6: Service delivery system Source: (Hamel and Prahalad, 2005) Infrastructure used The infrastructures used mainly are six distribution centres. There are altogether 12 distribution centres, which have automatic temperature controlling ability. Apart from that, the warehouses are fitted with automatic fire extinguish system. The shops and outlets are mainly multi-stored (Levitt, 2003). Each one of the shops and outlets is associated with individual storage houses or storage rooms. The rooms and houses serve as the final storage and warehouse of the shops. The average inventory turnover for the shops and outlets is as low as 14 days, while the average inventory of the distribution centre is 30 days (Johnson, 2009). They are computerised and crane operated. Almost 80% of the work is done with the help of computer operated artificial intelligence system. There goods are transported from the manufacturers to the suppliers, from there to the distribution centres and finally to the retail shops and outlets (Mintzberg and Waters, 2009). The outlets are connected to the distribution centres via satellite channels and the distribution centres are connected to the suppliers through dedicated communication channels. The suppliers are in constant touch with the manufacturers (Louis and Ronald, 2005). The manufacturers and the suppliers are connected to each other through dedicated business to business websites. Support to the market The market consists of 4 main types of customers, as explained above. The service requests of the premium type of customers are processed first followed by other type of customers. The time taken to process the requests of the premium customers is usually completed within 5 business days (Mallon and Webb, 2006), while with other type of customers the service completion time is as long as 7 days. This indicates that operations are kept running in the background 24 hours a day and throughout the year. The customers place the order at the front desk as well as through the online system. The system tracks the total number of orders placed for that particular product category to check if the inventory level for that particular product needs to be replenished or not (Mascarenhas, Baveja and Jamil, 2011). The need to replenish or not depends upon the demand of that product for the next week and the ability of the inventory to suffice the demand. Any short coming is despatched to the inventory centre. The data base of the inventory system is updated on a 12 hour basis. The need to replenish the stock of the distribution centre is done on 24 hours basis (Meyer, 2011). Unless and until a job order is processed and completed, it is marked as a high priority if the job order is pertaining to a premium type of customer. Findings and conclusions The analysis indicates that at present the issues at the strategic level are a matter of more concern than the issues at the operational level. The analysis shows that the customers and the market John Lewis is serving for is facing problems to position the products and services in the right way. The analysis also discovers that the costs per lead for the standard customers are higher than the cost per lead than the cost per lead for the gold customers. The response rates of the standard customers are significantly less than the gold customers. This indicates that the company is not able to position in the standard customer segment, so despite incurring high cost of production and high cost of distribution the response rate from this particular segment is significantly low. In the operational issue segment John Lewis does not have any serious problems, other than the significantly long time taken to process the request of the customers. 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