Strategic Management for JD Sports Fashion PLC
Strategic Management CMDA
Executive Summary
The prevailing strategic management report aims to determine the internal and external threats and opportunities present in China for the expansion of JD Sports PLC. The report covers suitable frameworks that inform the strategic option development and present recommendation for the cited firm to ensure success and growth. It has been evidenced that with several initiatives as well as trends supporting the development of sports market of China, the future looks very promising. In addition to this, government authorities are also laying foundation for enduring increase in sports activities as well as current demographics are also a powerful fit for fashion and sportswear merchandise. By considering this aspect, JD sports can effectively exploit the market through taking into account the sound strategies of using popular Chinese apps and websites (WeChat, Weibo, Baidu), engage KOL, ensuring sustainable and ethical production, investing largely in R&D to accelerate technological innovation, considering new lines of products and services, along with offering the options of customization.
Table of Contents
TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc91006410 \h 2
Introduction PAGEREF _Toc91006411 \h 4
External Environmental Analysis PAGEREF _Toc91006412 \h 4
Macro environment PAGEREF _Toc91006413 \h 4
PESTLE analysis PAGEREF _Toc91006414 \h 4
Micro Environment PAGEREF _Toc91006415 \h 6
Porter Five Forces PAGEREF _Toc91006416 \h 6
Competition nature PAGEREF _Toc91006417 \h 7
Internal Environmental analysis PAGEREF _Toc91006418 \h 8
VRIO analysis PAGEREF _Toc91006419 \h 8
Determination of competitive strategies PAGEREF _Toc91006420 \h 9
Bowman’s Clock PAGEREF _Toc91006421 \h 9
Strategic directions PAGEREF _Toc91006422 \h 10
Ansoff matrix PAGEREF _Toc91006423 \h 10
Conclusion PAGEREF _Toc91006424 \h 11
Recommendations PAGEREF _Toc91006425 \h 12
References PAGEREF _Toc91006426 \h 13
Introduction
JD Sports Fashion PLC is one of the leading retailers as well as distributors of fashionable casual wear and sportswear in UK (JD Sports, 2021). The company is willing to expand and looking forward to a progressive development in Asia in the forthcoming time. By considering this aspect, China is one of the best countries for fashion retail company to expand due to its steady and rapid growth. The present study aims to assess and evaluate the best strategic direction for the cited company to grow globally and intents to establish key strategies that would assist the company in creating a competitive edge. Since, the company is willing to expand in China, the study would focus on evaluating the opportunities and threats present in the market, both internal as well as external environment would be scanned by considering PESTLE analysis, VRIO analysis and Porter Five Forces. At present the company has been facing challenges due to the pandemic; which has resulted into global supply chain issues, broader strain over global logistics and materially lower football levels (RetailWeek, 2021). The company has been also facing increasing competitive threat from big rivals like Frasers Group, Foot Locker etc. In addition to this, another challenge comes in form of dynamics that emerges in the operating environment which includes changing consumer preferences, pricing fluctuations due to low price offering by competitors. However, regardless of the myriad of challenges faced by the company, it has continued to deliver impressive growth and consist earnings (Rigby, 2021).
External Environmental Analysis
Macro environment
PESTLE analysis
Political factors: It has been evidenced that the government of China is also promoting populace to engage in athletic activities, aiming to improvise the sport economy of country to $850B by the year 2025. By considering this aspect, government has been placed favourable initiatives and is positively making investment in sportswear industry. Along with this, the government of China is also promoting sports as well as active lifestyles amid the population for driving the economic advantages that sports participation generates (Xing, Zhang and Taks, 2020).
Economic factors: The fact cannot be denied that China has the largest population and with the changing fashion trends it is one of the excellent markets for the sportswear and fashion clothing (JAWOREK and KARASZEWSKI, 2020) With the populace of 415M, increasing income of consumer, rising participation of people in leisure activities inclusive of sports, growing young worker demographics with higher disposable income is offering a large market for the cited company. It is also noted that the fashion industry of China is likely to maintain its momentum and foresee growth at approx. 11% annual rate in the 5-year time period through 2022.
Figure SEQ Figure \* ARABIC 1: estimated market size of fashion shoes in China
(Source: GMA, 2021)
Social factors: Chinese fashion trends are making sportswear popular to wear through fitness as well as social context. The athleisure rise, yoga culture, increasing health awareness among people are the major aspects that contributing towards steady rise in Chinese sportswear market. There has been increasing popularity of Pilates as well as Yoga, alongside pandemic has also boosted the inclination of the already increasing athleisure trends in the sportswear industry, and this trend is earning popularity among the youth (Yip and Lando, 2020). People have been more focused on fitness and prefer a casual, fit and comfortable lifestyle; therefore, escalating demand for sportswear as a whole.
Technological factors: The trend of customization as well as smart clothing is accelerating in China. Consumers are more appealed towards sports brands that offer personalization as well as use of nanotechnology as well as microfibers in their apparels (GMA, 2021). Now, sports and fashion companies are striving towards improvising consumer experience via digitalization, also use of advanced A-WEB 3.0 technology has been embraced by companies in this industry.
Legal factors: However, the company can experience certain challenges due to legal forces, there is higher dependency for intellectual property rights for authenticity as well as companies also required to adhere to strict laws and regulations, and make use of administrative measures for regulating product quality, non-compliance can result into imposition of huge penalties and fines. It is to be noted that JD needs to ensure legal compliance towards product quality, local standards, data privacy, employment, labelling, pricing and advertising, therefore the company needs to modify its strategies accordingly.
Environmental factors: There is increased demand for sustainably sources products and apparels in China, consumer tend to purchase products that consider aspects such as low impact on environment, recycled polyester as well as non-toxic dyes (Jiang, 2019). It can be stated that, Chinese consumer get to attracted more towards a brand that pledges to make use of low energy, reduce carbon footprint and conduct their operational activities sustainably.
Micro Environment
Porter Five Forces
Bargaining power of buyers: It can be asserted that retailers have little or less power in identifying the price as well as design of the product, on the other hand, the consumer namely the industry’s end users have unlimited power. In this highly competitive industry, companies are striving to gain end user’s loyalty via making continuous innovation as well as brand management (Zhang et al 2018). On the other hand, in a situation where the end user is not satisfied, they can easily do brand switching and is highly applicable to Chinese audience, as they are very easy to lose if they are disappointed. By considering this aspect, buyer power can be taken into account as high due to lower switching costs to several alternative brands.
Bargaining power of suppliers: The JD suppliers generate exclusive products for the company due to their marketing know-how and buying power. The company operate with international suppliers for delivering their individual brand products. For example, Training PT range of footwear as well as Forest Hills are developed by Adidas exclusively for JD Group and are not found elsewhere in any of the other retail businesses which makes them stand ahead from the rest. Therefore, they have their own line of global suppliers and have better power over them.
Threat of substitutes: For the products of JD Sports, there are several substitutes available, in the sports industry, other apparel types can be considered as substitute in context with establishing style as well as image. In addition to the, in the similar category of product, other shows types also have substitutes, such as flip flops, boots and so on. To this, note, there are several product categories and numerous offer identical quality at reduced retail price (Sparks and Letham, 2018). On the other hand, JD sport’s huge range of branded products such as the Puma, Nike and Adidas under one roof with special discounts and coupons make them differentiated and convenient among consumers.
Threat of new entrants: Due to the omnipresent fitness trend in China, several new players make entry in the sportwear market, however there is huge requirement of capital, although they can be retainer rather small as a company can do a small start-up and establish with available distribution channels such as online sales. There is huge significance of product differentiation in this sector, particularly materials, marketing, quality and design. Moreover, a huge difference is also made by economies of scale in context with production of sports apparel, production costs and sourcing costs likely to reduce with scale therefore encouraging big firms to make market entry (Zong and Zhang, 2020).
Rivalry in the industry: The Chinese sports and fashion industry has a strong competition level, and some of the big players are Li-Ning as well as Anta Sports, on the other hand there are also smaller player such as Gap Athleta and Net-a-Sporter making invasion in the market (Niu, 2021,). The. The rivals are participating in fierce competition and are making increasing investment in technology and marketing to retain as much as market share as possible, thereby having a high power.
Competition nature
The sportswear market of China is seen as the 2nd largest in the world and is currently leaded by huge global brands. Even if the athleisure market’s fashion trend within China in context with technological innovation and design creativity is dominated by such big sports corporations as well as the local brands such as Li Ning as well as Anta Sports (Duan, Lu and Wang, 2021) For instance, in
