Strategic Analysis and Recommendation - David Jones Limited - Case Study Example

Running head: Strategic Analysis and Recommendation, David Jones Limited. Student name: Student number: Course title: Lecturer: Date: Cover Letter Your Address Paul Zahra, Chief Executive Officer, David Jones Limited, Castlereagh St, Sydney, Australia Dear Mr. Zahra, The reason for writing the report is to provide an objective analysis of the market environment of the company in order to arrive at unbiased strategic recommendations. The report was assigned on 30th August, 2010 and it is the titled “Strategic Analysis and Recommendation, David Jones Limited. The report employs diverse determination metrics such as SWOT analysis as well as Michael Porter’s Competitive 5-Forces model. The report provides an analysis of the organization within the context, and its purposed to offer impartial critique of the business environment, and give strategic recommendations which assist the company attains its mission. The report recommends internationalization, market positioning and computerization and automation as the core strategies. In conclusion, the report is informative, since the recommended strategic as suitable in overcoming the challenges, while moving the organization ahead. The strategies should therefore be implemented. Sincerely, Your Signature Your typed name Your title Introduction The objective of the report is to examine and evaluate the business operating environment by performing in depth analysis and recommend new strategies that can be adopted by David Jones to achieve and maintain strategic competitive advantage. The company’s Current situation is that David Jones is contemporary  premium  branded department store in Australia, appearing in the ASX top hundred Australian company, with Market capitalization of A$2.6 billion and revenue surpassing AUD$ 2.0 billion, the company made profit after Tax of A$156.5 million in the 2009 financial year signaling incremental growth. Founded on the principle of offering exclusive products to embrace mankind needs, the company’s vision is to be a purposeful organisation capitalize on shareholder return from core department store business, this agrees with its mission of being full line, differentiated department store, there are however various challenges and strengths to the realization of the vision. Strategic Review Introduction The company has various strategic outcomes in intends to achieve in the future such as raised earnings guidance, having a clear sustainable strategy, intellectual shift to centre on cost efficiencies, Sustainable core business growth margin, and utilizing efficient manners to provide strong excess cash flows to shareholders as well as understanding and delivering on the client needs. There are various strategies that can be adopted by the company to realize growth, these includes but not limited to implementation of automation and computerisation of operations, strategic management, change in positioning, creating value and venturing beyond territorial boundaries to other countries. Market Positioning The company has dynamically shifted its positioning over recent years. Whereas it was viewed as premium quality, prestigious store differentiated from the competitors, within the past decade arguably triggered by financial crises, it is intentionally glided down-market to offer prices offered by the bottom end of the market stores including Kmart and Target, this has created market confusion and in terms of customer loyalty and perception as well as entertaining the wrath of new competitors specialised in the bottom end segment. This is also related with concentrating on the core products of and core objective as a departmental store retailing cosmetics, home-wares, fashion products, electronics as well as other products without diversifying to other ventures such as Foodchain business which has failed to achieve the intentioned objective of surmounting the cyclical nature of department-store retailing and to achieve David Jones’ growth ambitions. Why the strategy is recommended The operations and survival of David Jones has been edged in the perception of a premium quality store, where it has glided on competitive advantage based on executive customer service, reputable product quality, its history, the quality brands it stocks, fashion parades and personalities. It is also considering location, different merchandising methods and point-of-sale techniques. It is therefore of paramount importance that David Jones clearly establishes and addresses its market position, so as to target a specific clientele and establish customer loyalty whether it is the prestige customers with above average disposable incomes or customers on the average bracket, this can also be attained by segmentation of stores to suit the different market demands. Significance to the mission With increasing competition, it is complex for bunch marketing approach to succeed according to Kotler and Armstrong, (2010), since the customers are continuously evolving and becoming more diversified, positioning David Jones to suit a specific market segment ensures that the company's marketing and operations suits the needs of the specified group. In this case, the company shall focus its resources more efficiently with better consequences. Moreover, this ensures that the customers understand the organization well while the organization concentrating on the products demanded by their customers. Internationalisation Since its inception more than one hundred and seventy years ago, David Jones has never substantially invested beyond Australian territorial boundaries. Considering that its main competitor Myer, is owned by United States private equity group Newbridge Capital, which is component of the Texas Pacific group, which has investments in United States premium retailer Neiman Marcus and UK department store Debenhams means that David Jones is racing against a competitor protected against any financial crises in the Australian economy. Why it is recommended Diversification of the business beyond Australian boundaries is recommended while distinguishing that internationalization can be subject to risk and failure; however it is important that David Jones adopts optimum level of internationalization so benefits exceed costs. It is also recommended that David Jones internationalizes since in essence it is present in every large Australian City, hence cannot immensely invest in the same market. Significance to the mission David Jones stands to benefit from of internationalization as proposed and illustrated by the primary theory streams, theory of the multinational firm and the theory of foreign direct investment. The Foreign Direct Investment is centered on factors located in the organization’s exterior environment where it is envisioned that David Jones shall benefit from deficiency in global product, factor, and economic markets, Alkhafaji,(2003). Furthermore, the organization shall benefit from economies of scale and scope; this is in addition to portfolio diversification and reduction in the company’s risk-return performance. Moreover, David Jones shall benefit from managerial perspective, in terns of positive induction and exhaustion of intra-firm comparative advantages. In this case, the company shall benefit from international resource transfer as well as the incorporation potential of international corporate structures, systems, and processes, moreover internationalization of David Jones shall benefit the organization in terns of enhancing of organizational learning and knowledge acquisition and augmentation, furthermore, the company shall profit from arbitrage and leverage opportunities. Finally internationalization of David Jones shall enable the company to easily source for products it retails in its Australian stores via the international branches, to gain competitive advantage therefore; internationalization is an important strategic direction. Computerisation and online trading Sustainable cost-efficiency culture being envisioned by the mission of the company demands utilization of the latest cost saving measures, while increasing customer base and sales. Whereas David Jones has internet presence in terms of website, the full potential of electronic commerce have not been realized since the closure of David Jones Online web-based business, moreover the organization should adopt a strategic decision to automate and computerise its operations while fostering collaboration with customers and suppliers by using internet based systems. Moreover, it is recommended that David Jones adopts computerisation in terms of collaboration systems, Enterprise Resource Planning, and Customer Relationship Management and Supply Chain Management systems. Why the strategy is recommended The strategy is recommended considering the global dynamic shift towards web based business, in addition, David Jones main competitor has an advantage over the firm in terms of internet presence, and it is important to catch up before Myers, exclusively coalescence internet based customers. Considering that Myers has an Online Shopping gift store, including electronic goods, perfumes, miss shop clothing and gift cards launched in 2007, which has been gaining substantial popularity, it is then vital that David Jones considers having an online shopping complete with customer collaboration and interaction systems. Significance to the mission The David Myers Online Shopping shall offer several benefits such as increased customer base, and convenience to the customers while, The Enterprise Resource Planning shall offer several benefits such as reducing operating costs, where the several department stores are viewed as a single information system hence improved coordination and efficiencies, furthermore Enterprise Resource Planning shall facilitate day-to-day management in terms of availing accurate information for decision making as and when needed as well as support for strategic planning hence gaining competitive advantage as argued by Laudon and Laudon, (2002) . Supply Chain management and Customer Relationship Management shall offer collaborative environment for business while promoting customer loyalty, this strategy is momentous to the attainment of the mission. Conclusion David Jones is in a precarious and competitive market position, where market dynamics are always changing, the company continuously faces new challenges everyday which is threats to the attainment of its vision and mission. It is therefore of paramount importance that the company adopts several strategies, which includes defined market positioning, where it should clearly define its target market to enable it attain its mission of being a premium service provider, moreover, the company should embrace internationalization, where it should venture across Australian boundaries, so as to mitigate against risks present in depending on one economy, while increasing customer base and improving skills and knowledge in line with embracing mankind needs. Furthermore, the company should strategically enhance the application of Information Communication Technology in its operations including reopening the online shop, this is in line with the social dynamics where transactions are becoming more web based, while benefiting from advantages of ERPs. Customer Relationship Management and Supply chain management. To attain planned objectives and competitive advantage therefore, it is of fundamental importance that these strategies are adopted by the company. Attachment 1 SWOT analysis: David Jones' Limited David Jones' Limited has achieved exponential growth over the past, having nearly ceased existing in the early 1990,s to portraying strong financial performance and market position calls for an in depth analysis of the Strengths, Weaknesses Opportunities and Threats, perceived to affect the future performance of the firm. Strengths There exist various strengths exhibited by the company which offers the firm competitive advantage to outperform its competitors in accordance with Davidson et al (2009), these includes differentiation, wide range of services, Branding, historical background and several strategically located stores. The company has long historical background dating to 1838 in offering Superior Efficiency products to the upmarket clientele and introduction of community contribution. Branding: David Jones' Limited has maintained a brand of black-on-white houndstooth pattern which has gained recognition in Australia as a corporate identity. Consumers have over the years relating the pattern with the store, hence reducing the need to market the brand while maintaining customer royalty regardless of the town the customer resides. Moreover, in the recent times the company has utilised celebrities in its marketing strategies, hence resulting to associating of the brand with celebrity status. Several strategically located stores are also strength to the company. With basically a department store in all Australian capital cities excluding Hobart and Darwin, fostered by the approach of strategically locating the stores in major retail precincts and shopping malls. The company also offers a wide range of goods, which ensures customers get their entire shopping under one roof. Weakness The company however has some weakness, The closure of David Jones Online web-based business when the world is becoming web driven, and the diversification in terms of deviating from the business of department-store retailing to food chain is a weakness, coupled with alteration in positioning, where the store has drifted from the reputation it has earned over the past as high-quality, prestigious store to inclusion of down-market customers. Opportunities Several opportunities exists for the company such as down-market customer needs, utilization of new technology such as Customer Relationship Management, Supply Chain management and Enterprise Resource Planning as well as expanding beyond Australia and sale of its competitor Myer to private equity. Threats Since the firm targets high income customers, financial crisis as well as shifts in consumer tests is a threat as well as strategic realignment of competitors such as Myer. The company should therefore adopt strategies to focus on its strengths, exploiting the opportunities, mitigating against potential impacts of the threats while working to reduce the weaknesses. Attachment 2: Competitive 5-Forces David Jones Limited. The Five Forces of Competitive Position model offers a cushy perception for evaluating and analysing the competitive strength and position of David Jones' Limited. To provide an informed analytical approach, the tool is used in congruence with other tools such as the PEST and SWOT analysis. Threat of new entrants There exists several barriers which may bar new entrants to compete with David Jones' Limited, whereas the government polices encourage business investments, new entrants are limited by the fact that the company has occupied several strategic positions in all major cities, the strategies adopted by the company discourages new investors while limited competitive advantage strategies can be offered by the entrants, furthermore David Jones has exclusive relationships with crucial desired brands. Nature of competitive Rivalry Whereas major competitors exists such as Myer, David Jones' has upper hand advantage due to having widespread stores in all major cities, having a wide product/service ranges while implementing differentiation strategies. Threat of substitute products This is more delineated as a threat due to the company’s focus on upmarket clientele, where other stores can offer the same products at relatively competitive rates, moreover, products and technology developments enables more affordable internet based firms to deliver products to the same customers at the click of a mouse. Power of buyers The fact that the targeted customers of the firm are high earners means that the buyers have a realistic backward integration threat therefore the change cost/frequency, buyer’s choice, and product importance dictate the direction of the firm. Power of suppliers David Jones' Limited sources its products from diverse international sources, it does not therefore face significant threat in terms of credible forward integration threat posed by suppliers, while it has liberty to source any product from diversified supplier base, moreover, the company partially produces its own products. Reference list Alkhafaji,A., 2003. Strategic management: formulation, implementation, and control in a dynamic environment.London : Routledge Press. Davidson, P et al., 2009. Management. 4th ed. Australia:John Wiley and sons. Kotler, P. and Armstrong, G., 2010. Principles of marketing. New York: Pearson. Laudon, K. and Laudon, J.,2002. Managing Information Systems: Managing the digital firm, 7th Ed. New Delhi: Prentice Hall of India. Read More