Strategic Management & Change
Assignment Questions
Background
Business sectors are undergoing profound transformations. Making investment choices has never been so challenging. With increased volatility and intensifying skills shortages, companies can no longer win across an ever-broadening spectrum of operating environments.
Corporates are reshaping their growth strategies for a world of muted macro growth and powerful competitive disruption.
Whilst some firms serve local/regional markets globalization has meant that all firms are presented with the opportunity to access international markets & resources as sources of competitive advantage.
With increased competition firms need to explore international opportunities to create markets & competitive advantage.
Therefore, companies need to focus on strategic planning that will allow them to outcompete their peers.
Assignment Task:
You have been appointed to a senior management position with a major firm, within your chosen sector/industry. You are aware that the firm lacks focused strategic management & planning. Therefore, for this project your task is to write a report to the board on what opportunities lie for the firm, internationally, that will allow them to create a competitive advantage.
For your firm, you are to:
- Provide company background on your chosen firm, e.g., its market, customers, position relating to the market/competition, profits/sales. (Max 1page – not included in the word count).
- Section 1: Undertake a critically evaluated strategic audit, using appropriate models & frameworks, of the firm’s existing strategy in relation to its ability to exploit new global opportunities to create a more competitive advantage.
- Section 2: Present your findings via a SWOT analysis.
- Section 3: Finally, make recommendations with justification, for a 3-year strategic plan & investment to grow the company internationally.
- Section 4: Using Kurt Lewin’s change management model, discuss how change can be best managed & delivered.
Executive Summary
John Lewis is a prominent departmental chain in the United Kingdom. The company has operated in this market successfully. However, in contemporary business, the firm has to utilise some international business opportunities to enable business growth and gain a competitive advantage. The management of the company has used a strategic audit of the company, which includes some essential framework and models. Analysing both the internal and external business environment is the right approach to obtain the current position of the company. After elaborating the strategic audit, the current business strategy of the company is discussed while highlighting the potential to gain a competitive advantage. After the description of the existing strategy, some important strategic recommendations are suggested for the business when operating in international markets. Market development is a key growth strategy to use its current product range and target new customer segments. The company can gain a competitive advantage by adopting integrated cost leadership and differentiation strategies in global markets. John Lewis has to conduct the change management process by adopting Lewis change model. Unfreezing, changing, and refreezing are three critical phases or steps to bring change in the company. The strategic management process is associated with the change, and the management of John Lewis is quite aware of it.
Introduction
In the competitive landscape, organisations intend to enter new markets to increase sales and profitability. Initially, the firm may target regional or domestic areas and get an advantage over the other rivals. However, by using its current resources and capabilities, it seems pertinent to expand the business in different markets, which are undone by the company. A robust strategic management process is needed to meet these objectives in the competitive global market. This study revolves around a strategic analysis of John Lewis to derive several insights and make effective international business decisions. The strategic audit will include some key frameworks or models to assess the current company’s conditions in the business environment. Some strategic recommendations will be provided along with some change traits.
Company Background (John Lewis)
John Lewis is a chain of departmental stores in the United Kingdom. John Lewis founded the company in 1864. This company offers an immense range of products and services for customers. The primary product line includes home and garden, cooking accessories, dining, furnishing, furniture, lighting, cleaning, storage, consumer electronics, home appliances, sports, beauty, baby, travel, and many other craft products. According to financial reports, the revenue of the company is £3.78 billion (Demery, 2013). The firm expanded successfully in the United Kingdom. However, a strategic plan is needed to reach global markets and emerge as a prominent competitor. Main competitors of the company are Marks and Spencer Group plc, ASDA Group Limited, and Tesco PLC.
Section 1: Critical Evaluation of Strategic Audit
The critical evaluation of strategic audit is needed to derive several insights and create a space for the company to expand the business in different international markets. It is worthy to examine the external environment, industry analysis, and internal environment to get more insights and make the final decision at the end.
Pestle Analysis (External Environment)
Political
In the United Kingdom, political stability has helped the company to sustain the business. The United Kingdom is a part of the European Union, and different companies enter in this region without any complex business limitations. However, support for retail business in this region is in the limelight. The government has decreased corporate tax (28% from 30%), which can help strengthen the financial position in the domestic market (Strauss, 2019).
Economical
The UK economy depicts some spikes, which create an impact on customer’s buying behaviours. The retail industry has contributed to economic growth, as many retail giants are operating effectively. Even with this developed economy, retail giants are triggered by price wars. Thus, the firm keeps its prices low to be relevant.
Social
Apart from the United Kingdom, people in different regions have become materialistic. Social diversity has created an impact on business operations. For Instance, people have also become tech-savvy, and the firm introduced a related product with time. Thus, social factors are associated with business output.
Technological
Technological aspects have also shaped business intentions. For Instance, the trend of online shopping is in the limelight, and John Lewis took related initiatives. Interestingly, technological transformations have been demonstrated in the internal business process to bring efficiency and effectiveness.
Legal
Health and safety acts in the United Kingdom and many other countries are to be integrated with John Lewis’s business. Integration with business regulation is the right approach to be relevant and sustainable in the competitive market.
Environmental
Reducing carbon footprints and contributing to sustainable development have become one of the main strategic priorities when operating in the United Kingdom. The United Kingdom and many other western countries have regulated companies to streamline renewable energy resources. These environmental initiatives can help the company to sustain its brand image (Imeche.org, 2018).
Five Forces (Industry Analysis)
Power of Buyers
The bargaining power of the buyer is high, and it is due to the availability of different substitutes. It has been revealed that switching cost is low in the UK and the global retail market. A low price of products and services to meet customer needs is a counter strategy.
Power of Suppliers
The bargaining power of suppliers in the market seems low due to the company’s image and reputation. Suppliers want to work with this company for the long run, as the company depicts more sales and revenues compared to other companies (Bbc.com, 2013).
Threats of Substitutes
The threat of substitutes is high due to the emergence of new and existing firms. Firms contain differentiation and imitating capabilities, which makes the switching costs low. Thus, it seems a considerable threat to the company.
Threats of New Entrants
The threat of new entrants is low due to substantial capital investments. Despite containing adequate financial resources, new arrivals have to go extra miles to create and sustain the brand image. The market share of existing firms is high, and it will be tough for a new entrant to achieve business objectives.
Competitive Rivalry
The market depicts fierce competition among rivals. Companies like Peter Jones, Marks and Spencer, and Tesco have drawn an immense range of customers, a broad range of products, and differentiated traits to win the market (Bevan, 2013). The company is still reliable for customers in the market. However, some competitive strategies are to are needed to make a difference.
VRIO Analysis
VRIO analysis is also a part of the strategic audit, as it indicates the level of resources and capabilities in the internal business environment
| Resources and Capabilities | V
Valu able |
R
Rare |
I
Inimit able |
O
Organ ised |
Competitive Advantage |
| Customer Base | Yes | No | No | Yes | Competitive Parity |
| Human Capital | Yes | No | No | Yes | Unused Competitive advantage |
| Broad Product Line | Yes | No | Yes | Yes | Competitive Parity |
| Supplier Relationship | Yes | Yes | No | Yes | Sustainable Competitive Advantage |
| Brand Image | Yes | Yes | Yes | Yes | Sustainable Competitive Advantage |
| Research and Development | Yes | Yes | Yes | Yes | Short-term Competitive Advantage |
| Operational Efficiency | Yes | No | Yes | Yes | Sustainable Competitive Advantage |
Table 1 VRIO Table
Valuable: All resources and capabilities are valuable. John Lewis can go with the same resources and capabilities along with some new resources to create value and get an edge.
Rare: Supplier relationship, research and development, and brand image seem rare. Not every department store, including domestic and global, contains product and service innovation, sustainable brand image, and supplier relationship.
Inimitable: Apart from brand image and supplier relations, the broad product line is incomparable.
Organised: All resources and capabilities have been arranged to exploit opportunities in both domestic and international markets. All these resources and capabilities need to be further organised or developed to get a sustainable competitive advantage.
Existing Strategy (Cost Leadership & Product Development)
The current strategy of the company can be examined regarding business and growth. For Instance, currently, the company is implementing the cost leadership business strategy in the market. As mentioned in VIRO analysis, operational efficiency has become a main priority of the company to keep the cost low. The company comes up with low prices for its products and services to an immense range of customers. High-quality products at low prices keep customers loyal and satisfied. However, with the company, the firm has to evolve due to increasing competition in global markets. The company wants to regain profit, as due to low prices, profitability is quite low. This business strategy has worked well, as it increases sales and revenues. Now, the firm has to read the market or business situation to depict some changes. On the other hand, the current growth strategy of the company is product development. The firm is operating in the United Kingdom and wants to increase its profitability through product and service innovation (Singh, 2018). Research and development and operational efficiency are key capabilities of the company, which can help to streamline product and service innovation. Currently, the firm wants to increase its profitability by implementing these business and growth strategies (Accaglobal.com, 2015).
Exploitation of New Global Opportunities to Gain Competitive advantage
The current business strategy, which is associated with profitability, can help the company expand its business in global markets. For Instance, in the global market, firms are competing regarding the cost structure and competitive pricing.If the company retains this business strategy, it can help to operate in the global market. The company can alter its pricing strategy to be competitive. The cost leadership may help the company increase revenues, and it can provide an adequate financial resource to make a successful entry into a new market. Conversely, product development (Product and Service Innovation) is an entirely relevant strategy in the new market. Firms gain and sustain their competitive advantage through differentiation. Accordingly, it seems a right move to be different in a new global market and get an edge over other rivals (Accaglobal.com, 2015).
Section 2: SWOT Analysis
A SWOT analysis is also a strategic tool to obtain both internal and external insights. By using this effective too, effective strategic decisions can be made by the company management, as far as international expansion is concerned.
| Strengths
Strong Brand Image Adequate Financial Resources Broad Product Line Research & Development |
Weakness
Lacking Advertisement & Promotion Decreasing Value and Profitability Low Price Earnings Ratio Traditional management Approaches
|
| Opportunities
Market Development Integration with new Trends Dominance in Global Markets Product development and service Innovation |
Threats
Ageing Customers New arrivals Poor Corporate Governance Decline in Returns Sluggish Economic Conditions
|
Table 2 SWOT
Findings
Strengths: Strong brand image of the company is a crucial source of business survival in the United Kingdom. Due to high quality and reliable products at low prices, the image has been sustained. For many years, John Lewis is financially stable due to rapid sales and prominent customer response. Adequate financial resources can help in the business expansion process as well. A broad range of products, mentioned above, is one of the key strengths. Accordingly, John Lewis has made different customer segments and increased sales. It can also help in the global markets, as the firm can target new segments effectively. The research and development process has become a key strength, as it supports the broad product and service range. It also promotes operational efficiency and innovation (Ghobadian, 2013).
Weakness: Due to limited operations in the United Kingdom, profitability has been declined. Due to the emergence of global retailers and fashion brands, the firm observed a decline in market share as well. Youth or Millennials have not been attracted through advertisement and promotion. Due to the limited budget, promotional activities are also limited. The low-price earnings ratio is also a fundamental weakness, which has dissatisfied investors, as far as the domestic or international expansion is concerned (Simply Wall St, 2018). Several corporate governance issues are also visible in the internal business process. It is due to traditional management practice, which depicts poor management operations.
Opportunities: International business expansion is always a key opportunity for the company, which can help to increase sales and profitability and gain a competitive advantage in the long run. Apart from the United Kingdom, the firm has to find potential markets to target customers. Despite experiencing profitability constraints, the firm is still able to integrate with new trends in each product category. By adopting new technology and management change, the company can dominate the competitive markets. For Instance, operations are to be improved, which can support product innovation (Postandparcel.info, 2017).
Threats: Retail chains or department stores are hitting millennial. Unfortunately, the firm contains a range of gaining customers. Thus, any new trend integration or technological change can be rejected or opposed by these customers, and it seems a considerable threat. New arrivals or department stores with the renewable business model and differentiation can hit the business even in the home country. Spikes in the economy in a different country are always a threat, as it can shape or change buying decisions.
Section 3: Recommendations & Justifications for 3 Years
Being a strategic stakeholder of the firm, I have to suggest some strategies which are associated with business and growth in global markets. So far, the firm has dominated the United Kingdom’s market. Now, it seems a perfect time to move forward and make the difference. Based on the strategic audit, I would like to suggest strategies which can lead to a competitive advantage in the global market.
Market Development
In the competitive global landscape, I suggest market development as a critical business strategy. As mentioned above, the firm contains an immense range of products in the home country. However, the firm has to find a potential market, which reflects the demand for its existing product segments. For Instance, if the company wants to expand or enter the Asian region, it can make several customer segments. India and China are potential markets because the firm can find millennial customer segments. Market development is in the best interest of the firm, as it can reduce the business risk and cost in the new market (Kuntonbutr and Kulken, 2017).
Integrated Cost leadership & Differentiation
Regarding the business of the company, I recommend integrated cost leadership and differentiation when entering in the new market. A combination of cost leadership and differentiation can help to grow swiftly in global markets. Expanding in western countries such as the United States is also a good idea. Firms in these regions intend to get an edge over other companies through producing unique products at low cost. John Lewis should keep investing in the product and service innovation process, and ultimately, it can make it different in new markets.
The primary objective of these strategic recommendations is to increase the competitive position for the next three years. During the next three years, the firm has to double the research and development investment to improve product uniqueness and operational efficiency (Yoo et al., 2006).
Section 4: Kurt Lewin’s Change Management Model
Implementing these strategies to create hype in global markets is a big challenge. The strategic analysis of the company has streamlined the potential, and therefore, an immediate change is required to get some expected results. The management will use Kurt Lewin’s Change Management Model, which consists of three change phases.
Unfreezing: In this phase, John Lewis must assess the need for change. For Instance, the company is going to expand the new markets with existing products. Thus, employee training, cultural integration, or modifications of the corporate culture are some possible vital changes. On the other hand, Integration cost leadership and differentiation can be done through an operational transformation, the adaptation of technology, and employee training.
Change: In this phase, John Lewis has to develop some actions plans along with some effective implementation strategies. It is an execution phase, which needs communication and empowerment of activities.
Refreezing: The last phase of this change process is refreezing. It is a process of anchoring the change into the culture of the company. John Lewis is capable of developing ways to sustain the change and celebrate it with critical stakeholders (Connelly, 2016).
Conclusion
In the end, it is to conclude that John Lewis must integrate or utilise international business opportunities. A comprehensive strategic audit, including strategic frameworks and models, has helped to assess the firm’s capability to utilize these opportunities. When expanding into international markets, the firm must change its existing strategy (Business & Growth) to put itself in a position to gain and sustain the competitive advantage. Market development and integrated cost leadership and differentiation are two recommendations to expand the business successfully. Based on the strategic capability of the firm, it may choose the market entry strategy as well. The firm should depict the change and successful business journey.
References
Accaglobal.com (2015) John Lewis: competitive advantage in a tough retail market, 1March, [Online], Available: https://www.accaglobal.com/pk/en/member/discover/cpd-articles/business-management/john-lewis.html [12 March 2019].
Bbc.com (2013) John Lewis defends supplier rebate demand, 15March, [Online], Available: https://www.bbc.com/news/business-21797580 [12 March 2019].
Bevan, J. (2013) Which is best. John Lewis or Marks & Spencer?, 14September, [Online], Available: https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10309202/Which-is-best.-John-Lewis-or-Marks-and-Spencer.html [12 March 2019].
Connelly, M. (2016) The Kurt Lewin Change Management Model, 15November, [Online], Available: https://www.change-management-coach.com/kurt_lewin.html [12 March 2019].
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Simply Wall St (2018) What Does John Lewis of Hungerford plc’s (LON:JLH) PE Ratio Tell You?, 17July, [Online], Available: https://simplywall.st/stocks/gb/retail/aim-jlh/john-lewis-of-hungerford-shares/news/what-does-john-lewis-of-hungerford-plcs-lonjlh-pe-ratio-tell-you/ [12 March 2019].
Singh, P. (2018) John Lewis announces growth strategy as it warns on zero first half profit, 27June, [Online], Available: https://fashionunited.uk/news/business/john-lewis-announces-growth-strategy-as-it-warns-on-zero-first-half-profit/2018062730444 [12 March 2019].
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