Executive Summary
JD Sports is a rapidly growing company realizing sportswear of popular manufacturers as well as its own brands. It is based in the UK and operates in nineteen countries, including not only Europe but also Australia, South Korea, Malaysia, and others. The situation for the business seems to be stable despite the recent economic recession. However, in order to ensure its further growth, the continuation of expansion to India is needed.
This paper presents a thorough analysis of JD’s current situation in terms of external threats and opportunities in the global arena and the company’s strengths and weaknesses. The former demonstrates the dependence of the retailer on COVID-19 crisis conditions and emphasizes the need to ensure the legality of the actions from the perspective of varying anti-corruption and tax regulations. In turn, the latter indicates the capability to use the emerging opportunities for development due to the availability of significant funds guaranteeing the overall favorable position in the current markets.
The analyses conducted with the help of such frameworks as PEST, Porter’s five forces, VRIO, and Porter’s generic strategies of competition allowed making conclusions on the circumstances of JD. As a result, a row of strategic recommendations and suitable methods for the initiative was drafted. First, for a successful market entry in India, JD should diversify its products in accordance with the potential customers’ varying needs. Second, it should create accompanying services corresponding to the new environment after additional research. Third, finding partners in India should be a priority for accelerating the progress in terms of e-commerce, and it should be complemented by affiliate programs. In this way, it was concluded that there are no significant threats to the company’s expansion implied by the implementation of the proposed plan, and following the recommendations will ensure the profitability in the market.
Introduction
The company under consideration, JD Sports PLC, is one of the leaders in the sportswear market. It mostly operates in the UK as well as in other European countries, South Korea, Thailand, Malaysia, Singapore, and Australia (JD Sports Fashion PLC, 2020). JD was founded in 1981 in Bury, Great Manchester, by John Wardle and David Makin, and since then rapidly grew into an international merchandiser (JD Sports Fashion PLC, 2020).
Its progress was not always smooth as the company faced many challenges on the way. They included the changes in the political environment resulting from Brexit and the recent COVID-19 economic crisis (JD Sports Fashion PLC, 2020). Nevertheless, the barriers to successful operations were overcome by appropriate management, and the retailer remains one of the largest enterprises in the home country as well as abroad while continuing the business expansion.
The development of the sportswear industry in the UK as a whole was characterized by the drastic increase in demand for the products. It started with the emergence of such trends as healthy and active lifestyles, and it allowed JD to become a strong player in partnership with other manufacturers (“The European market potential for fashion sportswear,” 2019). At present, the further progress of the company depends on its expansion to the Asian countries. Therefore, this paper aims to critically evaluate the external and internal environments of JD in detail and provide strategic recommendations regarding India’s market entry related to realized products and services to create competitive advantage.
External Environmental Analysis
External Macro Environment: PEST Analysis
The proposed expansion implies a thorough analysis of the current markets to reveal the external factors, which affect JD Sports PLC. They will allow considering similar conditions in India, assessing the risks of entering the market in the future, and predicting the outcomes of their business activity. For the company, the most important political factors are related to its global progress since it operates in nineteen countries and has over 2400 stores at the moment (JD Sports Fashion PLC, 2020, p. 26). Hence, any shifts in political environments and accompanying systematic risks present the principal challenge for the business.
According to the recent report, the political aspect of the matter is primarily connected to anti-corruption and tax regulations (JD Sports Fashion PLC, 2020). These risks are mitigated through the retailer’s own policies against corruption and bribery and the commitment to pay the right amount of taxes depending on a country (JD Sports Fashion PLC, 2020). Therefore, the possible problems in this respect are properly addressed.
Essential economic factors affecting JD are added to the considerations mentioned above. They include the existing solid partnerships with key suppliers on a global scale, the rapid growth of the industry, and the stability of the markets (Clark, 2019). These circumstances are complemented by the capability of the business to survive at difficult times and previous successes in the expansion (Crux, 2020). However, there is a threat of financial losses resulting from Brexit and the accompanying changes in tariffs and duties (JD Sports Fashion PLC, 2020). Nevertheless, the economy of most countries of operation currently does not hinder the company’s progress but should be regularly monitored to ensure timely readjustments of efforts.
Social factors influencing the activity of JD are essential for business promotion. They include the need to respect human rights and labor standards and pay attention to varying operating rules in other countries, which are adequately addressed in its policies and, therefore, present no threat (JD Sports Fashion PLC, 2020). In this regard, the regulations include monitoring the supply chain to reveal potential breaches of the provisions and the commitment to the Ethical Code of Practice (JD Sports Fashion PLC, 2020). As for opportunities, they are ensured by high adaptability and timely measures improving the company’s image.
Even though it is clear that the recent crisis caused by COVID-19 had a negative impact on all retailers, JD still maintains the leading position. It is partially conditional upon the technological capacity of the business connected to the existing IT systems and networks (JD Sports Fashion PLC, 2020). In this case, a threat comes from the possibility of cyber attacks, but these risks are mitigated by investments in protection and improvements in data handling (JD Sports Fashion PLC, 2020). In this way, the favorable position of JD can be explained by the creation of competitive advantage ensured by the described actions, but the mentioned threats should be considered in expansion.
External Micro Environment: Porter’s Five Forces Analysis
The external micro environment of JD can be assessed with the use of Porter’s five forces model. The company’s profitability is significantly conditional upon the principal components of this framework. The first consideration is the threats of new entrants, which is high since the retail industry attracts numerous entrepreneurs. However, JD addresses the risks connected to newcomers by changing their services depending on demand and continuously introducing new products (JD Sports Fashion PLC, 2020). Hence, the appropriate distribution of resources is the key to the company’s success.
The second component is the bargaining power of suppliers, and it is essential due to the need to come to an agreement regarding the prices for materials. In the case of JD, this indicator is low as they have many partners instead of focusing on a limited number of manufacturers (JD Sports Fashion PLC, 2020). This position contributes to the restricted capability of suppliers to bargain for their benefit due to insignificant levels of JD’s dependency.
The third factor, the bargaining power of buyers, is low and belongs to one of the main advantages of JD. This situation is explained by the size of the business and its geographic division (Howard, 2018). Even though this indicator is typically moderate for an extended customer base, JD manages to compensate for it by entering various segments of the market at the same time (JD Sports Fashion PLC, 2020). They introduce a variety of products, which are new and in-demand, thereby addressing these issues.
The fourth consideration, threats of substitute products, is vital for the overall profitability of JD. Nevertheless, the company successfully copes with this problem by focusing not only on the goods but the way they are distributed to the customers and strives to improve corresponding services (JD Sports Fashion PLC, 2020). This strategy increases its attractiveness since similar options become less desirable when the comfort of buyers is not evaluated.
The fifth factor, competitive rivalry, is important as it can slow down the progress of JD in the long run. Since there are many other retailers in the field, this circumstance presents the main threat for the company. There are such strong competitors as Footasylum PLC, which occupy a significant share of the market (Howard, 2018). Thus, JD should take into consideration other players in the industry in order to remain a leader.
Internal Environmental Analysis: VRIO Analysis
Valuable
The competitive advantage of JD is directly connected to the value inherent in its various resources. As follows from the recent report, the finances of the company allow it not only to produce and sell the products but also conduct required market research to invest in emerging opportunities (JD Sports Fashion PLC, 2020). These strengths are complemented by a variety of offers resulting from the ongoing differentiation. Human resources of the company are valuable as well, and the particular focus on them is clearly seen from the policies intended to train the staff and increase their satisfaction through benefits (“JD opportunities,” no date).
Moreover, since JD operates in different countries, its extended distribution network adds value to the business (JD Sports Fashion PLC, 2020). In this respect, the only problem the company is facing is high costs on research and production compared to other players in the market (Howard, 2018). In this way, it can be concluded that the value of human and financial resources is contrasted by the potential ineffectiveness of funds distribution.
Rare
Another characteristic allowing to assess the reasonability of internal decisions is rarity, and it reflects the possibility of changes, which should be made in order to increase the profitability of JD. According to the official data, the company’s products are not unique, and they do not seem to be more attractive for customers than the offers of other retailers (JD Sports Fashion PLC, 2020). As for rare resources, they include JD’s staff, finances, and the distribution network.
The employees are specifically trained by the company, and the possession of strong finances is also a distinguishing feature of the business (“JD opportunities,” no date). In turn, the distribution network’s rarity is explained by the fact that only a few firms can compete with JD in this regard as they have such strong partners as Datalytyx (“JD Sports: Optimising warehouse processes to help drive business growth,” 2020). Thus, the mentioned elements ensure a sustained competitive advantage for JD.
Inimitable
The possible obstacle on the way to expansion is the imitability of the company’s resources, and its evaluation demonstrates the strengths and weaknesses of JD. On the one hand, the financial and distribution resources of the retailer are easy to imitate, but it is unlikely to happen due to the costs of such an initiative. The former represents the results of JD’s activity over many years, whereas the latter implies the investment of funds at the amounts unaffordable for smaller businesses (Johnston, 2018). From this perspective, the incapability of other firms to achieve similar outcomes within a short period of time serves as a guarantee for JD’s competitiveness in the future. However, the disadvantages in terms of imitability are connected to the company’s employees and products.
In contrast to the financial aspect of the matter, training of new workers does not require much time. This circumstance means that competitors can easily copy the successful schemes of JD (“JD opportunities,” no date). The same applies to manufacturing, and this fact makes the offers comparable to the ones of other firms. Therefore, the company should focus on the distribution of its funds and products, which are valuable, rare, and cannot be imitated.
Organized
The last criterion reflecting the effectiveness of JD’s internal operations is the organization of the available resources. As it can be seen from the official report, the finances of the company are well-organized in order to meet various goals through investment and readjusted accordingly at regular intervals (JD Sports Fashion PLC, 2020). In turn, the products are effectively distributed with the use of the network and the assistance of JD’s partners (“JD Sports: Optimising warehouse processes to help drive business growth,” 2020). The essential needs of the personnel are considered for higher productivity resulting from their satisfaction (JD Sports Fashion PLC, 2020). Thus, the organization of resources is one of the principal strengths of JD ensuring its competitiveness by paying attention to all factors affecting the business outcomes.
Competitive Strategies: Porter’s Generic Strategies of Competition
Pursuing competitive advantage when entering a new market is a challenging task, and the selection of the right strategy for JD to address it can be performed with the use of Porter’s generic strategies framework. Thus, the first way to take a leading position while expanding the business to India is to offer an attractive price for the products. However, as can be seen from the analysis above, JD spends significant funds on innovation and manufacturing new goods, and lowering costs to maintain leadership may adversely affect its profitability. Therefore, this option is not the best decision under the specified circumstances.
Another alternative is to use the focus strategy, implying the concentration of JD on narrow segments of the market for their further expansion. Nevertheless, in the context of India, this approach might not be as efficient as it is required for a successful entry. This situation can be explained by the fact that the country’s market is characterized by the customers’ varying preferences depending on their regional differences, cultural specificities, and other factors (“Market entry strategy,” 2020). Therefore, the orientation on particular segments might not bring profits in the case if the products will be in demand only by a small share of the population.
The third option is the use of the existing strategy of JD in the current markets, which is the differentiation of goods. It seems more beneficial for the mentioned purpose as it would allow mitigating the risks faced by Puma when performing a similar initiative. This company was focused on the provision of similar products both in online and physical stores, which led to the customers’ dissatisfaction from the varying prices (Srivastava, 2018). In contrast to this policy, the differentiation used by JD will be useful in explaining this difference by the characteristics of its products.
Strategic Directions
Since the current strategic management approach is not only advantageous but also suitable for India’s retail market of sportswear, it would be optimal to keep it. In this case, the directions will address the necessary measures ensuring the alignment of the company’s products and services with the market’s conditions. According to the official information provided by the International Trade Administration, they include slow paces of development, the emphasis on customers’ loyalty to brands, and a diversified demand (“Market entry strategy,” 2020). Considering these circumstances, it is vital for JD to provide the sportswear, which corresponds to the perception of quality and value of different categories of potential buyers while being patient with its promotion. In this way, the company will become profitable in this market if it manages to reorientate the realization process paying attention to these factors instead of expecting rapid growth typical for it in other countries.
As for the accompanying services, some of the most beneficial practices of JD would be applicable to the specified market. Thus, the initiatives of the company intended to increase the level of comfort for buyers are the best methods allowing to enhance its development in India. The in-depth analysis conducted among them should be based on the consideration of essential characteristics such as their age, gender, lifestyle, an acceptable distance to the stores, and the interrelation of the mentioned factors (“Using market research to support decision making,” 2019). This measure would allow offering the best suitable products to various categories of citizens in such a diversified market. The services proposed in accordance with the outcomes of the research will be an excellent complement to the value of the goods realized by JD in India.
Methods of Expansion
The success of the expansion of JD by entering India’s retail market of sportswear is significantly conditional upon the methods used for this goal. As can be seen from the analysis above, the beginning of the process includes the initiatives for differentiating products following the demands of different categories of citizens alongside the improvement of services. Further actions in this direction should be the development of e-retailing and finding new partners in India.
The first method is essential for the business since selling goods through the Internet is one of the principal segments of customer demand in the country (“India market expansion strategy,” 2019). It would help mitigate the risks deriving from the possibility of inaccessible locations of physical stores revealed by the surveys among the customers as a part of the market entry.
Another opportunity for JD to create competitive advantage while expanding the business in India is to adopt the experience of other companies in the area. Since the primary focus is online sales, it is easier to boost them in a partnership with Indian retail chains. Thus, for example, Amazon managed to expand the reach by entering into an agreement with Future Retail, one of the largest e-commerce entrepreneurs in India (Singh, 2020). The positive outcomes of their cooperation allow to consider this method useful for other companies, and JD is no exception to the rule. In this way, it will create more competitive advantage through the exploitation of global opportunities accompanying the entry in India’s retail market and facilitate the process of brand recognition in the country.
Strategic Recommendations
The progress of JD in the context of the proposed expansion would be faster in the case of following specific strategic recommendations. They are related to the need to mitigate risks stemming from the company’s key issues, as follows from the analysis above, and the creation of an affiliate program to attract more buyers. The first solution implies the development of methods for coping with problems revealed through the business’ consideration with the use of a number of frameworks. They include the possibility of providing similar products with no distinctive features, the lack of qualified personnel in the early stages of the market entry, and the need to improve funds distribution related to research. In other words, JD should put more effort into the training of staff in India and explore other retailers’ offers to strengthen its position and avoid significant financial losses.
The achievement of strategic objectives connected to becoming a strong player in the market after the expansion depends on the effectiveness of a plan engaging more individuals and entities in the activity of JD. For this, it is critical to develop an affiliate program for Indian entrepreneurs corresponding to their needs. Such initiatives of the company already exist in the UK, and they provide opportunities to potential partners to benefit from the increase in the retailer’s sales (“Join the JD Sports affiliate program,” 2021). Therefore, the promotion of this aspect of the business improving outcomes in India would facilitate the process of entering the retail market and accelerate the slow change in brand loyalty typical for the country.
Conclusion
To summarize, the plan for expansion of JD’s activity by entering India’s sportswear market seems to be a profitable endeavor. The company possesses all the necessary financial and other resources for this objective, and their appropriate distribution will lead to success in this area. The proposed initiative will consist of the preparation of the offer of diversified products corresponding to the country’s demand while elaborating affiliate programs for local entrepreneurs and addressing the current issues.
They include ensuring the correspondence with anti-corruption and tax regulations of India, conducting market research intended to reveal the need for services, and assessing social factors affecting the business. These actions should be complemented by finding new partnerships fostering the overall progress of JD, especially in online sales. As a result, the company will become a leader in another location, thereby increasing profitability and mitigating potential risks stemming from emerging political or economic conditions.
Reference List
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