Competitive analysis- John Lewis Partnership, Plc
In this assignment, John Lewis partnership was chosen because of its heritage, reputation and geographical spread. John Lewis is a chain of upmarket departmental stores that operate all around the United Kingdom and now in other areas such as Australia, Austria, Canada, South Africa, and Italy among others. It’s fully owned by the John Lewis Partnership, a mid-1800 outfit which opened its first store in 1864 in London’s Oxford Street. It boasts of at least 46 stores throughout England, Wales, and Scotland in addition to 12 online stores in Exeter and York cities. Because it’s a partnership business, it’s owned in trust for its member partners, and therefore unlike a company, there is shared responsibility for the running of the business as well as losses and rewards. According to the business annual report, its ultimate purpose is to ensure happiness for its members through employment in a successful business enterprise. Currently, John Lewis partnership is the British premier and largest department stores group, with product offering ranging from home, kitchen, electronic, garden, hardware, IT among others.
One of its much-anticipated deals in 2016 is the partnership with Myer, the local departmental store in Australia and customers are already excited about this prospect. This paper details the business strategy for John Lewis with specific emphasis on its anticipated partnership in Australia. The business environment in which the business operates and the success of the strategy will be discussed in details
What’s the firm’s strategy?
The strategy employed by John Lewis revolves around three fundamental areas; stronger brands and new grown, better jobs, better-performing partners and better pay, and finally financial stability and sustainability. These are explained hereinunder;
Stronger brands and new growth- John Lewis is all about ensuring a better brand than its competition. This is made possible through guaranteeing a great customer service experience and building new businesses in high growth areas while growing the market share of existing businesses. To do this, the business has inculcated a culture of excellence in customer service, ensuring that customers’ needs are addressed in the best and timely manner. To this end, customer complaints are taken very seriously, with the managing partners taking charge to ensure that all customer complaints are duly addressed. Investment in high growth areas such as the ongoing discussions of partnership with the local Australian retailer Myer has been an integral part of John Lewis growth strategy that has ensured that the company manages investment risks for highest returns.
Focus on better jobs, better-performing partners and better pay- As previously stated, the ultimate purpose of the John Lewis partnership business is happiness for its members through employment in a successful business enterprise. To ensure that this is achieved, John Lewis focuses on improving productivity, increased sales and profitability and ultimately better pay and job satisfaction for all partners and employees.
Financial sustainability- The business focuses on financial stability and sustainability which enables them to invest in more partners and customers thereby building financial strength, brand resilience and ultimately take advantage of commercial opportunities aimed at increasing market share. According to the latest financial report, the partnerships profit before sharing amounted to 306m pounds, a significant amount given the challenging operating environment. Some of the difficulties experienced include:
Increased market volatility driven by lower property profits and un-holding market assumptions were some of the challenges that faced the business in this period. Challenging market conditions such as depressed grocery prices and reduced demand for non-food items are some of the problems that the business had to confront in this financial year.
Lastly, competition is a constant challenge that the business has to deal with year in year out. Its product innovation, quality service, and guarantee of value were some of the competitive areas where the business took advantage of.
What’s the strategy trying to achieve?
Superior products and services-The business strategy focus mostly on product and service scope. For products, bringing quality to Life is approach of John Lewis to ensuring that sustainability is embedded across every aspect. Online shopping and quality guarantee offering also the make positive choices for customers. For service, John Lewis in store services range from personal styling and nursery advice to appliance installation and technical support, and for selected services can be booked an appointment online (John Lewis, 2016).
Risk Management- to ensure that risk management is guaranteed, the business adopts a partnership model where there is the low cost of entry, existing customers and reduced investment risk.
Market share- The above strategy is ultimately geared towards increasing the business market share. Being the premier convenience store in the UK, the business is now spreading to other parts of the world through physical shops as well as availing products online.
Sustainability- By partnering with other businesses, John Lewis ensures that its brand is sustainable for the coming generations. Geographical spread and market diversifications are elements that ensure a brand is sustainable in the long run.
Better jobs and happiness for partners- Being the ultimate goal for its business, John Lewis strategy intends to ensure that all partners are receiving good returns for their investments and employees are satisfied with their jobs and pay.
Financial stability- John Lewis recognizes that financial stability is the backbone of any business. To this end, the strategy designed ensures that the business continues to return positive results which enhance value for all stakeholders and partners.
Who are the firm’s shareholders?
John Lewis business model is comprised of many shareholders and various stakeholders. The main shareholders are the partners who have put in their investment in the business either through direct shares or business partnerships just as is the case with the upcoming partnership in Australia. These are people who have partnered with John Lewis to use its name in their business and employ a similar business model and operations as John Lewis. The business performance is then aggregated, and each partner gets their share of the business profits. Currently, the business has approximately 91,500 partners (John Lewis Partnership, annual report 2016). All partners expect that John Lewis Partnership will honor all existing agreements concerning profit sharing and that such payments would be made promptly. Other stakeholders in the John Lewis business include;
Employees- These form an integral part of the business as they run the day to day operations of the business. They expect to be compensated in a fair and timely manner. They also expect that the business would provide other benefits such as paid leave, medical cover among others in appreciation of their contribution to the success of the business.
Suppliers- John Lewis obtains their supplies from various suppliers without whom the business would be non-existent. Regarding this, these suppliers expect to be paid for their supplies promptly.
Customers- They are the backbone against which the business exists in the first place and are therefore important stakeholders in the business. They expect that the business will offer quality products and great customer service and that they would get value for money in every purchase.
Financiers- These provide the necessary financial support to the business which enables it to meet all its obligations as they fall due. To this end, the financiers would expect the business to repay any advanced credit as it falls due, and to fairly present their financial information to aid in decision-making.
What’s the firm’s environment?
John Lewis operates within a given business environment with various actors who make specific demands of the business. These actors in the business environment m must properly manage their business environment in the most beneficial way if the business is to succeed. In this context, we shall analyze the business environment of John Lewis in two categories; Internal and external environment.
Internal environment- According to Osmani, & Kraja, (2015), internal business environment are those events or issues that happen within the organization and can affect the success of the business. These can predict and manage, and in this case, include the management structure of the business, organizational culture, employee morale and changes in the financial capacity of the business.
John Lewis must carefully manage these internal environmental factors to sustain their business standing. For instance, the business must ensure that it makes the best financial decisions to ensure it has sufficient financial capacity to run their business. It has to ensure that the business leaders have a great managerial experience to steer its operations in the right direction while ensuring that the issues affecting employees are properly addressed to increase their morale.
External environment- These are issues or events that are outside the organization, are harder to predict and control and generally prove to be more dangerous to the operations or survival of the business. They include economic changes, competition, changes in the regulatory framework and industry factors. In the case of John Lewis, noting that it has cross-border operations, external environmental factors are even more serious. Changes in key economic variables such as interest rates, inflation, and exchange rates are likely to significantly impact on its operations. Competitive forces from other like businesses such as Debenhams, House of Fraser, and Marks & Spencer must also be well managed if the business is to stay afloat especially in overseas operations. The business must also address all regulatory and legal requirements concerning business operations, competition, mergers, and acquisitions to avoid legal suits that may cripple their business prospects.
What competitive advantage did the strategy achieve?
Over the years, John Lewis strategy has resulted in some key competitive advantage areas.
Fundamental among them is customer service- By inculcating a culture of excellence in customer experience, through innovative products and services such as convenience in online shopping, the business boasts of significant brand awareness and loyalty in all areas where it operates. This has led to wining of coveted awards such as the Queens Royal warrant award for some stores.
Geographical spread- One of the key competitive edges for the business is the geographical spread. Being the largest premier stores in the United States of England, Scotland, and Wales, as well as presence in over 60 countries, John Lewis prides itself as one of the largest convenience stores in Europe. The emergence of e-commerce and online purchasing now opens doors for the business to spread its market all over the world.
Better management- As a partnership business with shared responsibility for all business operations, John Lewis prides itself as one of the best-managed enterprises in Europe. The partnership model ensures that each partner is responsible for the business profitability and therefore this enhances the quality of decisions made.
Better brand awareness and reputation- By spreading its wings in many parts of Europe and the rest of the world, John Lewis has attained significant brand awareness and a good reputation as a one-stop shop for most of the household and office requirements.
Market share and financial stability- a preceding discussion notes that the business has the largest share in its market segment in the UK, with profitability in the millions of pounds. This is an indicator of the business ability to take advantage of commercial opportunities to further cement their place in the market. It’s also an indicator of the business ability to drive value to shareholders and the various stakeholders.
Was the strategy successful?
According to the 2016 annual report, John Lewis partnership business delivered a healthy trading performance with increased market share despite the challenging operating environment. Even with a slightly reduced profitability, the business reported good performance from partners who controlled costs.
Reportedly, the business attracted much more customers by rewarding them through the hugely popular initiatives such as myWaitrose which now boasts of approximately six million subscribers. Additionally, the business recorded increased sales in fashion, electrical and home segments and home technology. There was also increased online activity with a 17% growth in this segment. The above strategies turned in 306 million pounds in profits and about 3.1% increase in sales. Gross sales amounted to 11 billion pounds, cash flow from operations amounted to 917 million pounds.
Aside from the financial indicators, the business recorded mixed results in non- financial measures. Job satisfaction averaged 71%, customer shopping across all the brands increased by 4.7%, female partners increased by 0.4%, energy consumption reduced by 5.1% while corporate social responsibility spending was down by 17.5%.
On the operations front, the business had a more online presence and is in the course of signing partnership deals with dealers in other parts of the world such as Myer in Australia.
Measures/success criteria employed to measure this success
The criteria for measuring the success of the above strategies can broadly be divided into financial and non-financial indicators of performance.
Financial measures of performance include
Gross sales- This is the total amount in pounds turned in by the entire John Lewis partnership. It’s a parameter that indicates the grown in customer numbers and is perhaps the most important indicator of business performance. Increased sales are a direct impact of successful business strategies in marketing and investment.
Assets- growth in assets portfolio of a business is an indicator of proper investment decisions, assets management, and business growth.
Profitability- both gross and net profit values are critical success factors that indicate the value for shareholders since profits are shared from net profits realized by the business.
Ratio analysis- Financial ratios computed from the financial statements indicate the business performance compared to previous periods. They are important parameters that can also be utilized to determine business performance compared to other industry players.
Market share- Increased market share indicates a business’ standing in relation to customer preference amongst its peers. The higher the market share, the larger the profitability of a business holding all other factors constant and therefore increasing and maintaining the market share is a key consideration for John Lewis strategies.
Non- financial measures
John Lewis emphasizes on ensuring a positive contribution to the lives of its partners, employees, customers and the society at large. To this end, there are a number of non-financial measures that it uses to measure the success of its business strategies. According to the partnership’s annual report, they include job satisfaction, the composition of partners regarding gender, experience and turnover, energy consumption, and corporate social responsibility. These are discussed below
Job satisfaction- the year 2015/16 recording a slightly reduced job satisfaction index at 71%, compared to 72% recorded in the previous period. This shows a constant trend in employee satisfaction, which is high at 71%. John Lewis takes employee satisfaction very seriously and therefore utilizes it as a measure of success.
Partnership composition- Whether its composition regarding gender, turnover, ethnicity and years of experience, John Lewis ensures that what gets measured gets done and therefore the composition of its partnership business is an important aspect of the success of its business strategies.
Corporate social responsibility- investment in communities whether concerning management, time, in-kind and cash, John Lewis Partnership uses its corporate social responsibility activities as an indicator of its business strategy success. This means that as the business enhances its financial performance, the surrounding communities who form an integral part of its operating environment also benefit in one way or another.
The above discussion details the business strategies employed by John Lewis to maintain and increase its profit share, profitability, and performance within the challenges posed by both internal and external business environments. The successful implementation of these strategies has seen the business continue to remain the top convenience store in the United Kingdom, with partners spread across the region and other parts of the world.
It is obvious that a more cost-effective and less risky mode of entry into a new market such as the Australian market would benefit from establishing local partnerships such as with Myer who can piggyback Australian local market knowledge. Besides, for John Lewis, which already has a very successful online business, the establishment of offline physical stores in Australia could be extended beyond home wares; the mutual benefits expected from such partnership include the possibility that the John Lewis brand can bring fresh customers into Myer. In fact, John Lewis is far less known to the average Australian, but John Lewis – and in particular its homewares – is very popular in its home market and can cause brand effect from British expatriates and Australians that have lived in the UK. Also, the participation of John Lewis can facelift Myer’s home-wares offer.
All in all, the tie-up between John Lewis and Myer can make up their deficiencies, if the test can be true and successful, this strategic alliance can help them overcome the market cold winter.
John Lewis Partnership, Plc. Annual report (2016). Retrieved from: http://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/financials/annual-reports/jlp-annual-report-and-accounts-2016.pdf
Osmani,E & Kraja, B.Y (2015). Importance of external and internal environment in creation of competitive advantage to Smes. (Case of Smes, in the northern region of Albania) European Scientific Journal May 2015 Edition Vol.11, No.13 ISSN: 1857 – 7881 (Print) E – ISSN 1857- 7431