Strategic Analysis of the John Lewis Partnership plc


Research Paper (postgraduate), 2015
29 Pages, Grade: 1.0

Excerpt

Table of Contents

Table of Figures

Glossary

1. Introduction

2. Performance Evaluation

3. Success Factors

4. Strategic Capabilities
4.1. Value Chain
4.1.1. Primary Activities
4.1.2. Supporting Activities
4.2. VRIN Framework

5. Leadership

6. Internationalisation
6.1. Drivers and Strategy
6.2. Market Entry

7. Future Outlook

Reference List

Bibliography

Table of Figures

Figure 2-1 Number of Locations by Segments for Selected UK Retailers (2010-2015)

Figure 2-2 Sales and Profitability Development of Selected UK Retailers (2010-2014)

Figure 2-3 Market Share in the UK Food Retail Industry (2005 – 2015)

Figure 2-4 Brand Reputation of Selected Retail Firms in the UK (2010-2013)

Figure 2-5 Customer Satisfaction and Trust Index (2014 -2015)

Figure 4-1 Value Chain Analysis for JLP

Figure 4-2 JLP’s Multi-Channel Approach and How Customers Make Use of It

Figure 4-3 VRIN Analysis of JLP’s Capabilities

Figure 5-1 Success Factors for Multi-Dimensional Employee Empowerment at JLP

Figure 6-1 Global Market Selection and Mode of Entry at JLP

Figure 7-1 External Threats for JLP

Glossary

illustration not visible in this excerpt

1. Introduction

London-based John Lewis Partnership plc (JLP or ‘the company’) is a leading UK retail chain, operating through the business divisions Waitrose and John Lewis. JLP’s retail services cover a wide range of products, including clothing, furniture and home technology on the department store side and upmarket food on the grocery side (Bloomberg, 2015a). Whereas most competing supermarkets, such as Tesco, and traditional department stores, such as Debenhams, are stock-listed companies, JLP is owned by its 93,800 employees who operate 43 John Lewis, respectively 337 Waitrose stores dominantly in the UK (JLP, 2015; MarketLine, 2015a).

2. Performance Evaluation

According to Eccles (1990), success is not only measurable in financial figures but in fact also with softer measures. Since non-financial indicators are expected to ultimately affect a firm’s profitability (Ittner & Larcker, 2003), the aim of the following section is to evaluate JLP’s accounting-driven performance as well as the perceptions of different stakeholders.

Business Size and Growth

illustration not visible in this excerpt

Figure 2-1 Number of Locations by Segments for Selected UK Retailers (2010-2015)

Source: Figure created by the author, Data from Bloomberg (2015c)

The number of Waitrose, respectively John Lewis department stores (JLD) has grown steadily since 2010 and with managing director Andy Street expecting the company to double in size by 2023 (Ruddick, 2014a) the future strategy seems to be based on further expansion. However, competitor Marks and Spencer (M&S) still outperforms the company in terms of size with almost twice the amount of stores in the UK (Ruddick, 2014c).

Revenues and Profitability

illustration not visible in this excerpt

Figure 2-2 Sales and Profitability Development of Selected UK Retailers (2010-2014)

Source: Figure created by the author, Data from Bloomberg (2015d)

JLP has reported steadily growing revenues and slightly outperformed its major competitors in terms of sales growth in recent years. However, despite rising profits in the JLD-unit, fierce price competition has adversely impacted Waitrose’s returns (Kollewe & Butler, 2015). With overall profit margins of just above one percent, JLP continuously reveals a below-the-market profitability.

Market Share

illustration not visible in this excerpt

Figure 2-3 Market Share in the UK Food Retail Industry (2005 – 2015)

Source: Figure created by the author, Data from Bloomberg (2015b)

The food retail sector is considered one of the most competitive markets in the UK (KPMG, 2014). Even though it is still dominated by large supermarkets, such as Tesco and Sainsbury’s, Waitrose has been able to gain share at the high-end spectrum of the market (BBC News, 2015a; KPMG, 2014). In the department store sector JLP maintains a strong position and continuously closes the gap with market leader M&S, who controls more than a quarter of the market (Davey, 2013; Ormrod, 2014).

Brand Reputation

illustration not visible in this excerpt

Figure 2-4 Brand Reputation of Selected Retail Firms in the UK (2010-2013)

Source: Figure created by the author, Data from Reputation Institute (2013)

According to a recent Interbrand (2014) study, Waitrose, valued at $566m, and John Lewis, valued $427m, are amongst the most precious retail brands in Europe. In the home market, only M&S seems to have a stronger reputation among customers than the JLP brands (Figure 2-4).

Customer Perception and Employee Satisfaction

illustration not visible in this excerpt

Figure 2-5 Customer Satisfaction and Trust Index (2014 -2015)

Sources: Figure created by the author, Data from Institute of Customer Service (2014a, 2014b, 2015)

According to recent surveys both JLP branches outperformed their UK rivals in terms of customer satisfaction and trust (Institute of Customer Service, 2014a, 2014b, 2015). From an employee perspective, a glassdoor.com survey named JLP the second best place to work in the country (Anderson, 2014).

After all, JLP can be considered widely successful despite significantly lower profit margins and a lack of market leadership. In particular the considerable confidence in the brand and reputation for customer and employee satisfaction in the UK have helped the company to successfully compete in a fierce retail environment.

3. Success Factors

The following section is going to shed light on six dominant business reasons behind JLP’s success.

1. Ownership Structure

Unlike most UK retail firms, JLP is owned by its employees, called partners, which effectively eases the pressure for the company to report and comply with external shareholders (Felsted, 2011). According to Attwood (2007), this not only gives opportunity for long-term and rather visionary investments, but also results in high staff motivation and retention. In fact, the partnership structure is the basis for some of the following business reasons as customers benefit from a more dedicated and committed workforce (The Telegraph, 2013).

2. Customer Experience

JLP addresses a focused customer-base that prefers service and quality over low-cost (Attwood, 2007). The shopping experience, including high-end locations and products as well as dedicated support and warranty policies, both in-store and online, is essential for the firm, ultimately resulting in high overall customer satisfaction (Aronowitz, 2013).

3. Exploiting Online Opportunities

The UK online retail sector has experienced a strong upswing in recent years and consumers’ ever-growing desire for convenience is expected to drive future growth (MarketLine, 2015b). Unlike most high-street competitors, both JLP branches seem to have adapted this trend exceptionally well and benefit from well designed and customer-friendly web presences (Moth, 2013) that have ultimately resulted in above industry-average online sales growth (MarketLine, 2015a).

4. Multi-Channel Approach

Multi-channelling effectively gives consumers the choice of where and when to shop and aims to increase sales across various customer touch-points (Schoenbachler & Gordon, 2002). With a reengineered and innovative supply chain, including barcode-scanning apps and advanced click-and-collect services, JLP can be considered one of the pioneers in this field (MarketLine, 2015a; Moth, 2013). The firm was, in fact, awarded best multi-channel retailer in recent years (Thomson, 2013, 2014).

5. Pricing Power: Undersold Policy

JLP has long been hailed for its pledge to refund price differences found elsewhere (Brignall, 2011). Although, or actually as a result of the fact that, the historic policy has been significantly altered and nowadays relies on warranty promises, customers still place trust in the company and agree to reward it with a price premium (Aronowitz, 2013; Attwood, 2007; Edwards, 2011).

6. Brand Loyalty

As a result of JLP’s dedicated and consistent focus on customer satisfaction, the company has built a loyal customer base that rarely questions the higher prices or even bothers comparing with other retail branches (Aronowitz, 2013). JLP ensures this reputation and high brand recognition with targeted and effective marketing communications, such as the renowned Christmas campaign (Bold, 2014; Weyland, 2010).

4. Strategic Capabilities

The following section is set out to detect JLP’s strategic capabilities. After discussing the firm’s value creating activities, using the idea of Porter’s (2008) value chain, the key capabilities will be assessed with Barney’s (1991) VRIN framework on whether or not they create a sustainable competitive advantage.

4.1. Value Chain

The value chain, coined by a 1985 work of Porter, is the established framework to analyse the value-creating activities within a firm (Johnson, Whittington, Angwin, Regner, & Scholes, 2014, pp. 83-84).

illustration not visible in this excerpt

Figure 4-1 Value Chain Analysis for JLP

Source: Created by the author

As argued by Spence and Bourlakis (2009), JLP, and Waitrose in particular, can be regarded an industry’s best practice as they have managed to holistically integrate corporate social responsibility into their value chain. In the following section the important value-adding activities will be discussed in detail.

[...]

Excerpt out of 29 pages

Details

Title
Strategic Analysis of the John Lewis Partnership plc
College
Northumbria University  (Newcastle Business School)
Course
Strategic Management and Leadership
Grade
1.0
Author
Year
2015
Pages
29
Catalog Number
V323356
ISBN (eBook)
9783668225947
ISBN (Book)
9783668225954
File size
2052 KB
Language
English
Series
Aus der Reihe: e-fellows.net stipendiaten-wissen
Tags
John Lewis Partnership plc, Strategic Analysis, Performance Evaluation, Strategic Capabilities, Value Chain, VRIN Framework, Internationalisation
Quote paper
Markus Bäder (Author), 2015, Strategic Analysis of the John Lewis Partnership plc, Munich, GRIN Verlag, https://www.grin.com/document/323356

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