John Lewis in Management Policy - Research Paper Example

John Lewis Executive summary The research paper is aimed to conduct a strategic analysis of John Lewis which isone of the top retailing companies in UK. The study encompasses the analysis of the environment in which John Lewis operates, scrutinizes the competitiveness and other significant factors in the UK retail market. The study uses different theoretical frameworks to understand and evaluate the corporate strategies, management system, competitiveness factors, industry analysis and the strategies incorporated by John Lewis. The paper also includes major strategic recommendations that John Lewis can incorporate in their business to ensure sustainable competitive advantage in future. Brief case history John Lewis is one of the largest retailers in the United Kingdom which specializes in selling a varied range of products like clothes, food and drink, household goods etc. The brand of John Lewis has become a leading brand of departmental stores established in different parts of the UnitedKingdom. Recently, the company has diversified its business into the domain of financial services like credit cards and insurance. John Lewis had faced much financial crisis in the early 2000s due to major problems in its product offerings and supply chain management. But the company turned around within a short span of time as a financially strong organization. The fast recovery of the company from the financial crunch can be credited to the efficient strategic management policies applied to the business from 2001 to the present day functioning of the retail giant (John Lewis, 2012). John Lewis has been showing remarkable growth in its profit levels in the last few years of its operation indicating the strong position of the company ion the UK retail segment. The company has been termed as ‘bell weather’ in the UK market which indicates that if John Lewis staggers as a company, the whole retail market of UK may experience serious downturn. Data and methods The research methodology consists of both qualitative research methodology and quantitative research methodology to ensure accuracy and relevance of the data collection as well as data interpretation. The nature of the study is exploratory because of the descriptive requirements for the study. The qualitative research methodology involves studying the relevant secondary sources to understand the UK retail market, the trends of retail in the global market as well as their implications on the chosen company. The qualitative research process also includes studying the past strategies and management objectives and processes pertinent to John Lewis and its competitor companies. The process of data collection is a critical part of the researchconducted. The research involves the use of primary as well as secondary data collection methods. The primary research is done through interviewing a sample of respondents. The sample includes the employees of John Lewis, the customers of John Lewis, few customers in the UK retail market and the store managers of some John Lewis stores. The sample size is around 60 people of whom 60% are the employees of John Lewis and the rest 40% belong to the customer group. A semi structured form of interview including a combination of open ended and closed ended questions is conducted to note the responses of the sample. The semi structured interview is carried out to understand the qualitative aspects of the study. The observation method of primary data collection is extensively followed in which the researcher directly observes the members of the sample and assesses their reaction, attitude and behavior by studying how their react. The secondary data collection is done through an analysis of the strategic and financial performances of the company in the last few years. The annual reports of the company are studied carefully to understand the strategies adapted by the company as well as the future strategies that may be taken up by the company in the changing global scenario of retail businesses. The secondary data collection process involves studying the previous relevant works on the operations of John Lewis in the UK market. Also, academic resources like journals, books and articles are refereed to for understanding the retail market and its evolutions in UK. The data collected is later used to analyze the strategic management and the market position of John Lewis as well as the future scope of the company in the market. Strategic analysis Industry Analysis The strategic analysis process necessarily involves the industry analysis for the company. John Lewis has its stores in major regions in UK. Therefore, the UK retail industry is considered for the research purpose. To analyze the macro environmental factors of the UK retail segment, the Porter’s five forces model is applied with respect to the UK retail industry and John Lewis. Competitive rivalry: The level of competition in the UK retail industry is extremely high with major market shares being captured by the top retail companies. Most of these companies are diversifying their businesses into ancillary domains which have resulted in the creation of a high degree of competition between the companies for market share (Pffefer 314-316). Threat of substitutes: The threat of substitutes is low in the retail industry because no goods can be considered as specific substitutes. The major threat of substitutes in the food products business is posed by Waitrose. The apparels business of John Lewis faces threat from the low priced affordable garments marketed by Marks and Spencer and Peter Jones. Threat of new entrants: The threat of new entrants in the UK retail market is comparatively low. This is because the retail industry in UK is a highly concentrated and mature industry where the major market shares are taken up by the large retailing companies. The existing companies have their own base of loyal customers and knowledge of the trends and practices in the market both of which may act as key barriers to entry for any foreign company or a new company in the retail segment of UK (Friedman 228). Bargaining power of buyers: The bargaining power of buyers is relatively high in the UK retail market. Since the concentration of the buyers is more, therefore, it gives them the advantage of influencing the policies and trends in the retail market which the retail companies have to follow. The consumers have a number of alternatives and the switching cost is much low. Bargaining power of suppliers: The bargaining power of suppliers is much low in the UK retail industry. This is because the retail companies operating in this industry have a high turnover and therefore the suppliers have a major interest in supplying the products to the companies (Doyle 46). The Resource Based View The company has been able to emerge from a high level financial crunch to being established as a strong brand in terms of financial and economic perspectives. This has been possible due to the change in the management policies and strategies involving high cost cutting activities, aggressive marketing and promotional activities and refurbishments across all the stores of the company. The company has sufficient resources and capabilities to expand its operations as well as sustain its operations in the future. John Lewis is resource rich company with an extensive base of physical as well as people assets. The Dynamics of Competition The UK retail market is highly concentrated with competition from the major brands like John Lewis, Marks and Spencer, Tesco, ASDA group, Sainsburys etc. Since John Lewis is into the business of a varied range of goods like food and drinks to apparels, the company faces major competition form core retail companies like Tesco, Sainsbury’s, Primark and ASDA and also from the garments retailers like Marks and Spencer, Zara, Top shop, Next etc. These players compete with each other by applying different strategies like international expansion, differentiation and diversification into related businesses. Network Competition Network competition in the UK retail industry is high. There are a number of suppliers but there is tough competition between the key retail companies to appoint the most resourceful and cost effective suppliers. John Lewis has its own in house brand which it sells along with the third party goods in their departmental stores and supermarkets. Therefore, John Lewis is a major buyer of raw materials rather than finished products. This makes the business less dependent on the suppliers. Analysis of Competitive Advantage The competitive advantage of John Lewis lies in a remarkably efficient management team, a unique structure of the organization and excellent customer service on the part of the company. John Lewis has a high reputation that has been built on the basis of strong customer service. The creation of value for the customers has resulted in a segment of retail customers in the UK market becoming loyal to the company. Though the company faces a high degree of competition from companies like ASDA, Tesco, Sainsbury’s and Marks and Spencer, yet John Lewis has carved a unique market position for itself in which it follows specific differentiation strategies, maintains a high share in the market and has a wide customer base. Organization structure and management systems John Lewis has a unique organizational and corporate structure in which it empowers the employees and the partners to participate in the decision making processes, share profits and relevant information (Ireland 56). The John Lewis business model is based on employee empowerment and has been replicated by many retail companies across the world. The permanent employees of John Lewis are considered as partners and ultimately are co-owners of the departmental stores and supermarkets of the business. John Lewis follows a structure in which the profits and benefits of the business are shred with the employees and partners of the business. The management system ensures that a power structure is formed to take feedback from the board membersas well as employees and ensure employee satisfaction. Corporate Strategy John Lewis has a strong brand reputation and their share of loyal customers. The company y is financially strong withtheir profits and cash position increasing steadily since 2001. The company is renowned for the quality and value for money factors embedded in its business (Lumpkin 99). The corporate strategies include aggressive promotion activities which add to the visibility and awareness of the brand. The corporate governance strategies of John Lewis are not strong as contradictory to its financial performances. The company is criticized for the lack of transparency and weak corporate governance practices which has had a negative effect on the shareholders of the business. John Lewis has been unable to establish its operations in other foreign countries due to low adaptability to the cultural factors which vary for different regions of the world. The company has started selling low priced garments in order to compete effectively in the market which may devalue the brand of John Lewis. The company also implements the strategy of tapping in the trend of e-commerce sales by opening up its online store. The online store of the company has become hugely popular. John Lewis has effectively capitalized on the boom of e-commerce sales in the UK as well as the global markets with an objective to increase its market share and profitability. Strategic recommendations for the future The companies operating in a dynamic environment like the UK retail sector need to focus on one of the three key generic strategies including cost leadership, differentiation or a hybrid strategy (Porter 182). From its inception in 1964, John Lewis has distinguished itself from the other retail companies operating in UK by adopting the differentiation strategy. The company y has positioned itself as a brand which provides high quality goods and customer service while marinating the value for money factor within the product and service delivery. But, the trends in the global retail market are fast evolving. John Lewis should focus on international expansion as a key strategy to ensure co0mpetitiveness and increase the business. As the power of the customers increase with time, John Lewis should also concentrate on understanding the needs and preferences of the consumers and adapt to these changing needs and demands quickly and efficiently. Even though, the business has established itself as a strong player in the UK retail sector, it should focus on taking up the arising opportunities, take steps to mitigate its weaknesses and maintain a positive brand image to ensure sustainability and competitiveness in the market in future as well (Ansoff 192). Focusing on the evolving trends like e-commerce and foreign expansion should be considered by the management of the company. The management of the company should also concentrate on maintaining transparent investor relations and implement sound corporate governance practices to make the company fundamentally strong and sustainable. Work cited Ansoff, Igor. StrategicManagement. Basingstoke: Palgrave Macmillan. 2007. Print. Doyle, Peter. Marketing Management and Strategy 3d ed. Boston: Pearson Education. 2012. Print. Friedman, Thomas. World is flat: the globalized World in the Twenty first century. New York: Penguin Books. 2006. Print. Ireland, Duen. Strategic Management: Competitiveness and Globalization, Concepts. Oxford: Blackwell. 2008. Print. John Lewis Corporate website. Inspiration and advice. 2012. Web. 7 March 2014. . Lumpkin, Gregory Thomas. 2004. Strategic Management: Creating Competitive Advantages. New York: McGraw Hill Professional. 2004. Print. Pfeffer, Jeffrey. Competitive Advantage through People: Unleashing the Power of the Work Force. 2001. Print. Porter, Michael. Competitive advantage: creating and sustaining superior performance. New York: Free Press. 1985. Print. Read More