Name: Bradley ArtertonStudent Number: 14033808

Module Code: MKT1002Degree Programme: NN52 Marketing &

Management

Organisation: JD SportsWord Count: 2038

This is an essay analysing the external/internal environments, and competitors of JD Sports. JD Sports is a leading Sports Goods Retailer in the UK. The methods of analysis used are PESTLE, Porters Five Forces and SWOT.

POLITICAL:There is currently a large amount of uncertainty in the UK about which party is going to win the upcoming elections, this means that there is a good chance of change in leadership of the UK, which would likely result in a change to the tax laws. JD Sports may therefore have to compensate for them, for example change the prices of their products or reduce production costs. However altering prices could result in customers not willing to pay that amount, and moving to Sports Direct, JD’s cheaper competitor.Employment laws state that employers have to employ people without discrimination, meaning JD needs to employ people from all different backgrounds. With the election coming up there is a good chance that many political factors are going to change, which in turn makes it very difficult at this stage to anticipate how political factors are going to affect JD Sports.

ENVIRONMENTAL:The wellbeing of the environment is becoming more and more important across the globe, especially in the UK. The UK Government has a carbon footprint commitment, which means businesses need to comply with certain standards and procedures and meet targets. JD PLC (2014, p.31) states in their annual report that the key environmental areas they are focusing on are:

Ensuring efficient use of energy and other materials. Maximising the amount of waste which is recycled. Ensuring compliance with relevant legislation and codes of best practice.

Not only this but JD have a number of procedures in place to ensure that these key areas are worked on, for example training for all employees, so that they know how to work in an environmentally friendly way. They also have a number of KPI’s in place to monitor and evaluate how successful they are at meeting their environmental targets.

ECONOMICAL:With the UK having a low inflation rate of 0% at the moment (This is Money, 2015), average household incomes are rising faster than prices are, meaning that in theory people should have more money to spend, thus meaning a predicted increase in sales at JD Sports. (See Figure 1)The sterling pound is at a 5 year low against the dollar, meaning it costs more to import products, so JD have to alter prices and therefore consumers have to pay more. (BBC News, 2015)The decrease in oil prices has resulted in the cost of production for businesses to drop considerably, and also means that consumers have more money to spend. The UK economy is expected to continue growing for the near future, which makes it a steady market for JD to operate in.

Figure 1 – (Mintel, 2014b)

RPI v average weekly earnings growth, 2009-14 This shows the retail price index vs the average weekly earnings, it shows that

they are getting closer together, meaning people in theory should have more money to spend.

SOCIAL:One key social factor that affects JD is fashion trends, in particular the recent rend of wearing sports clothes for fashion. Buying sports clothing to be fashionable for example rises to 19% amongst 16-24 year olds and 18% amongst 25-34 year olds (Mintel, 2014a). This is JD Sports core customer group. This is JD Sports’ core customer group.Figure 2 - (Mintel, 2014a)

Price is still a key factor for consumers in the UK, despite the economy improving in recent years, and is often the deciding factor when choosing a retailer.

Figure 3 - (Mintel, 2014b)

Most popular incentives to buy sports goods from a new or different retailer. This graph shows that pricing/cost is by far the most common reason for

selecting a new or different sports retailer.

TECHNOLOGICAL:Many sportswear brands are using advancements in technology to focus their efforts on creating innovative and newly designed products, in an effort to create better sportswear, with the aim to give whoever uses the products that edge over their opponent. These products are particularly appealing to more serious and competitive sportspersons.For years now online shopping has been becoming more and more popular, and now it is getting to the point that many businesses are struggling to compete with online retailers, and many companies have closed all of their stores and moved their business online. Mintel (2014b) reports that ‘Online retailers are eroding physical stores’ advantages of convenience and service through virtual fitting rooms, click-and-collect partnerships and shoppable content on non-retail websites.’ This backs up the point that e-commerce is becoming too strong a competitor for retailers, and with the new features becoming available such as the virtual fitting room mentioned, online retailers are starting to offer what these retailers already do and then some.

LEGAL:Due to only operating in the UK it makes it much easier for JD Sports to keep on top of all the laws they have to follow, because for global businesses there are different laws in each country, making it extremely difficult to ensure you are operating 100% legally. JD Sports legally have to have a written health and safety policy, which includes things such as procedures, using dangerous equipment safely and reporting serious injuries. For JD this would include things like fire procedures, using forklifts at warehouses and a heavy object falling onto an employee etc. The UK also ensures that businesses’ offer equal opportunities, so JD need to employ people from a variety of backgrounds. They need to follow advertising standards too, for example weight control must receive the correct level of scrutiny, to ensure people don’t get offended, and being a sports based company, JD could potentially cross the line.

WORD COUNT: 839

THREAT OF NEW ENTRY:According to Mintel (2014b) ‘Independents remain at a disadvantage in terms of supply as well as price, with Adidas and Nike reported to be imposing minimum annual order values that are beyond the budget of many single-site operators and even small chains.’ This means that there is little threat of a new entrant to JD Sports.

Figure 4 - (Mintel, 2014b)

Consumer expenditure through specialist sports goods retailers, by retailers share (2013)

The sporting goods market is largely dominated by Sports Direct and JD Sports, making it extremely difficult for a new entrant to come along and earn itself a good market share.

COMPETITIVE RIVALRY:Sports Direct is JD Sports main rivalry. They offer lots of products from big brands such as Nike and Adidas, but due to producing and selling their own-brand products, they make enough profit on them that they can sell these branded items at a discounted price, thus using competitive price cutting to entice customers to shop with them over JD.

THREAT OF SUBSTITUTION:JD have had a competitive edge over online competitors in the past, due to being able to offer better choice through getting the right fit through trying products on etc. But internet retailers are now closing the gap by offering new features such as virtual fitting rooms and click and collect, meaning they are getting closer and closer to offering what JD can in-store, as well as all the convenience that online shopping has to offer.Figure 5 - (Mintel, 2014b)

Retailers from which sports goods have been purchased

This graph shows that a reasonable percentage of purchases for sports goods are being made online, thus showing that there is definitely a threat that more and more people will opt to purchase their sporting goods online, rather than in store, especially with all the new features becoming available online.

POWER OF SUPPLIER:The suppliers have some bargaining power over JD Sports but not masses. For example Nike and Adidas, they are both highly popular and sought after brands, meaning there is always going to be consumers wanting these products. Therefore they have power bargaining power over JD, because JD need their products, and if they lost these brands, then customers would go to Sports Direct, however with these brands having minimum annual orders in place, so if they lost JD as a retailer, then they would struggle to find a replacement.

POWER OF BUYER:The buyer has a fairly average amount of power. In favour of the buyer there is; it costs nothing to switch between retailers, they are generally price sensitive and have a good enough knowledge to know how much they should be paying, and finally there are substitute products available, for example cheaper own brand products at Sports Direct.On the other hand there is a large number of buyers with only a small selection of retailers to choose from, the customer can’t begin to sell the same products and JD offer many exclusive products.

WORD COUNT: 390

STRENGTHS:JD Sports is a well-established brand known across the UK for selling high quality sporting goods, and are one of the market leaders. Despite not being quite as successful as Sports Direct, they have a much stronger brand image, due to Sports Directs image of being cheap and counterfeit. JD have recently put a lot more concentration into their sports fashion department and this has been hugely successful for them. Talking about the sports fashion segment, Mintel (2015) says that ‘Within this segment the company’s namesake retailer JD Sports is the single largest business accounting for 49% of total stores and 69% of stores under the sports fashion banner.’

Despite once being known as a sporting goods retailer, and still being classed as one, JD Sports are very much now a sports fashion retailer. This has not only set them apart from Sports Direct and allowed them to gain more control of the market, but they are also now known as a middle-to-high income.They have altered their business plan in recent years to become more appealing to people interested in sports clothing, which is young men, and have used a combination of high quality, exclusive and sought after products; and because of this, JD Sports are now in complete control of this segment of the market.

WEAKNESSES:With JD Sport altering their business plan to appeal to young males interested in sports clothing, they are now selling more expensive products, and as stated under the social factors of the PESTLE analysis, price is a key factor for consumers in the UK. This means that JD is likely to lose some of their lower income customers to Sports Direct. Until recently, JD Sport has only operated in the UK; this is a weakness for two main reasons.

Firstly it means that Sports Direct, as well as other national sports goods retailers in their respective countries, have had more time to develop and alter their business plans to satisfy customers in these countries, meaning their businesses are fine tuned for their customers needs, whereas JD Sports have no experience in these countries and will therefore take time to adapt their business to these countries, and while doing this all of their competitors will be increasing their brand loyalty amongst their customers, making it harder for JD to establish a customer base.

Secondly they have no experience at taking their business abroad. It can be difficult for brands to tap into foreign markets, even for the biggest of brands, an example would be Tesco attempting to move into the grocery market in America. Despite being the leading supermarket in the UK they failed in America due to Walmart being to strong a competitor.

OPPORTUNITIES:There are a number of opportunities for JD Sports in the near future. Firstly there is the potential for celebrity and athlete endorsements, due to the rising trend for wearing sportswear as fashion. Young men in particular are likely to be influenced by their idols, so having their favourite athletes wearing exclusive JD sportswear seems like a great opportunity to capitalise on this current trend.There is an increasing amount of females taking part in sport, so there is a good opportunity to move into this market and offer a larger range of fashionable sportswear for females. Not only this but they can also try and extend the appeal of sports and sportswear to less sporty females who are too intimidated to go into specialist shops. This is also true for larger consumers, meaning JD could potentially tap into two more markets and offer a more comfortable alternative for overweight/less active people to purchase sportswear.

THREATS:Due to JD Sports focusing predominately on fashion sportswear in recent years, they know have a brand image for this particular style of clothing, however in the future its very likely that this trend of wearing sportswear for fashion will die off and there will be another style in fashion, meaning that JD will have to do what they have just done again and alter their products and brand image to meet the needs of the next fashion trend. This would be a costly cycle and one that could harm the brand, meaning they should find a more general style of clothing to offer rather than just fashionable sportswear.

A change in government could also be a threat to them, because each party have a different set of policies, which means JD could potentially have to pay more to import their products, which would be very costly to them due to a large percentage of their products coming from abroad. Another threat to the company is the rise of e-commerce. JD Sports risk losing a large amount of customers to online competitors if they do not focus their efforts more towards their website.

WORD COUNT: 809

REFERENCES:

BBC News (2015) Pound at five-year low against dollar on weak output - BBC News. Available at: http://www.bbc.co.uk/news/business-32246657 (Accessed: 29 April 2015)

Committee of Advertising (no date) Advertising Codes - Committee of Advertising Practice. Available at: http://www.cap.org.uk/Advertising-Codes (Accessed: 7 May 2015)

JD PLC (ed.) (2014) Annual Reports & Accounts 2014

Mintel (2014a) Performance meets style in sportswear retail. Available at: http://academic.mintel.com/display/725585/?highlight (Accessed: 29 April 2015)

Mintel (2014b) Sports Goods Retailing - UK. Available at: http://academic.mintel.com/display/709278/ (Accessed: 29 April 2015)

Mintel (2015) Understanding The Success Of JD Sports. Available at: http://academic.mintel.com/display/737066/?highlight (Accessed: 7 May 2015)

This Is Money (2015) Economy tables: GDP, interest rates, inflation history, unemployment. Available at: http://www.thisismoney.co.uk/money/news/article-1586103/Inflation-Interest-rates-Economic-growth-Unemployment-Latest-statistics.html (Accessed: 29 April 2015)