Based on various researches at Oak Spring University , JD Sports Fashion is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, there is backlash against globalization, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of JD Sports Fashion
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that JD Sports Fashion can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the JD Sports Fashion, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which JD Sports Fashion operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of JD Sports Fashion can be done for the following purposes –
1. Strategic planning of JD Sports Fashion
2. Improving business portfolio management of JD Sports Fashion
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Retail (Specialty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of JD Sports Fashion
Strengths of JD Sports Fashion | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of JD Sports Fashion are -
Strong track record of project management in the Retail (Specialty) industry
– JD Sports Fashion is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– JD Sports Fashion has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – JD Sports Fashion staying ahead in the Retail (Specialty) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– JD Sports Fashion has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled JD Sports Fashion to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of JD Sports Fashion
– The covid-19 pandemic has put organizational resilience at the centre of everthing JD Sports Fashion does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– JD Sports Fashion is present in almost all the verticals within the Retail (Specialty) industry. This has provided JD Sports Fashion a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Retail (Specialty) industry
– JD Sports Fashion has clearly differentiated products in the market place. This has enabled JD Sports Fashion to fetch slight price premium compare to the competitors in the Retail (Specialty) industry. The sustainable margins have also helped JD Sports Fashion to invest into research and development (R&D) and innovation.
Learning organization
- JD Sports Fashion is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at JD Sports Fashion is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at JD Sports Fashion emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– JD Sports Fashion has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. JD Sports Fashion has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Operational resilience
– The operational resilience strategy of JD Sports Fashion comprises – understanding the underlying the factors in the Retail (Specialty) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to lead change in Retail (Specialty)
– JD Sports Fashion is one of the leading players in the Retail (Specialty) industry in United Kingdom. Over the years it has not only transformed the business landscape in the Retail (Specialty) industry in United Kingdom but also across the existing markets. The ability to lead change has enabled JD Sports Fashion in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the JD Sports Fashion are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Retail (Specialty) industry
- digital transformation varies from industry to industry. For JD Sports Fashion digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. JD Sports Fashion has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Weaknesses of JD Sports Fashion | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of JD Sports Fashion are -
Workers concerns about automation
– As automation is fast increasing in the Retail (Specialty) industry, JD Sports Fashion needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to strategic competitive environment developments
– As JD Sports Fashion is one of the leading players in the Retail (Specialty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Specialty) industry in last five years.
Interest costs
– Compare to the competition, JD Sports Fashion has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High operating costs
– Compare to the competitors, JD Sports Fashion has high operating costs in the Retail (Specialty) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract JD Sports Fashion lucrative customers.
Skills based hiring in Retail (Specialty) industry
– The stress on hiring functional specialists at JD Sports Fashion has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High bargaining power of channel partners in Retail (Specialty) industry
– because of the regulatory requirements in United Kingdom, JD Sports Fashion is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Retail (Specialty) industry.
High cash cycle compare to competitors
JD Sports Fashion has a high cash cycle compare to other players in the Retail (Specialty) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, JD Sports Fashion has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Retail (Specialty) industry using digital technology.
No frontier risks strategy
– From the 10K / annual statement of JD Sports Fashion, it seems that company is thinking out the frontier risks that can impact Retail (Specialty) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative at JD Sports Fashion, in the dynamic environment of Retail (Specialty) industry it has struggled to respond to the nimble upstart competition. JD Sports Fashion has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of JD Sports Fashion supply chain. Even after few cautionary changes, JD Sports Fashion is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left JD Sports Fashion vulnerable to further global disruptions in South East Asia.
JD Sports Fashion Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of JD Sports Fashion are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help JD Sports Fashion to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Low interest rates
– Even though inflation is raising its head in most developed economies, JD Sports Fashion can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Building a culture of innovation
– managers at JD Sports Fashion can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Specialty) industry.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. JD Sports Fashion can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– JD Sports Fashion has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Specialty) sector. This continuous investment in analytics has enabled JD Sports Fashion to build a competitive advantage using analytics. The analytics driven competitive advantage can help JD Sports Fashion to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for JD Sports Fashion in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Specialty) industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects JD Sports Fashion can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, JD Sports Fashion can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help JD Sports Fashion to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– JD Sports Fashion can improve the customer journey of consumers in the Retail (Specialty) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Creating value in data economy
– The success of analytics program of JD Sports Fashion has opened avenues for new revenue streams for the organization in Retail (Specialty) industry. This can help JD Sports Fashion to build a more holistic ecosystem for JD Sports Fashion products in the Retail (Specialty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– JD Sports Fashion can use the latest technology developments to improve its manufacturing and designing process in Retail (Specialty) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Leveraging digital technologies
– JD Sports Fashion can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Loyalty marketing
– JD Sports Fashion has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats JD Sports Fashion External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of JD Sports Fashion are -
Increasing wage structure of JD Sports Fashion
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of JD Sports Fashion.
Shortening product life cycle
– it is one of the major threat that JD Sports Fashion is facing in Retail (Specialty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. JD Sports Fashion will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Environmental challenges
– JD Sports Fashion needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. JD Sports Fashion can take advantage of this fund but it will also bring new competitors in the Retail (Specialty) industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, JD Sports Fashion can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate JD Sports Fashion prominent markets.
Consumer confidence and its impact on JD Sports Fashion demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Specialty) industry and other sectors.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for JD Sports Fashion in the Retail (Specialty) sector and impact the bottomline of the organization.
Regulatory challenges
– JD Sports Fashion needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Retail (Specialty) industry regulations.
High dependence on third party suppliers
– JD Sports Fashion high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, JD Sports Fashion may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Specialty) sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Easy access to finance
– Easy access to finance in Retail (Specialty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. JD Sports Fashion can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of JD Sports Fashion business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of JD Sports Fashion Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at JD Sports Fashion needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of JD Sports Fashion is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of JD Sports Fashion is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of JD Sports Fashion to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that JD Sports Fashion needs to make to build a sustainable competitive advantage.