Potential Action Steps for David Jones - Case Study Example

Potential action steps for David Jones By understanding the internal and external business environments, one can understand the strengths and weaknesses that David Jones has and the threats and opportunities that it faces in the market. Operating both in the Australian retail industry and the financial services all characterised by stiff competition, the firm has to optimise its strengths, utilize opportunities, manage threats and work on the weaknesses to improve its competiveness in the market. The figure below captures alternative strategic options that the firm has dependent on its SWOT analysis. Table 1. TOWS matrix Strengths -Brand recognition -Exclusive positioning of stores -Association with high fashion -Long history in the market -direct demographic targeting/identification -High margin brand driven retailing Weaknesses -Relatively few number of stores -focuses only on high income earners -poor online store - Opportunities -Growth in higher income population -Fashion awareness -regional market -population growth -Green consumers SO-strategies -Diversify into new into new markets -Widen product range -Strategic partnership with designers -expand into fashion-conscious regional markets WO-strategies -Aggressive online marketing -Create subsidiary to cater to lower income earners -Link online retailing as a green strategy to environmentally conscious consumers Threats (T) -Competition from fellow players -Direct sales by designers (designer-owned stores) Inflation -High population of price sensitive immigrant consumers ST-strategies -More innovative products -Increase promotion WT- strategies -Develop subsidiary stores that use different pricing structure to address low income earners -Increase product range to increase customer satisfaction -Clear focus on market segmentation SO- strategies Diversify into new into new markets David Jones has a long history in the Australian department store industry. Along the way, the firm has managed to ‘own’ Australian fashion by targeting high end consumers who are brand conscious. This means that the retailer has the opportunity to completely dominate the fashion industry in the region as the population of middle and high income earners grows in the region. Furthermore, it history and success in the Australian industry implies that the firm has a chance to replicate its prowess in emerging economies in Asia with a growing number of fashion conscious middle to high income earners. Widen product range David Jones has been considering entering the financial services market by offering products such as insurance and home loans. This diversification will insure the firm against fluctuations and business cycles in the retail industry. Strategic partnership with designers The strong position that David Jones enjoys in the fashion and design industry puts the firm in a strong position to establish strategic partnerships and agreements with leading designers around the world. The firm should pursue exclusive distribution rights in Australia for some global fashion brands. For existing brands, the firm should use its position to negotiate for lower prices to support its high margin pricing strategy as a bulk buyer. Regional markets The firm can expand into regional markets especially in the ASEAN trade block. In China for instance, the growth of a wealthy middle income class that has a high taste of fashion presents DJs with an opportunity to expand into the country. WO- strategies Aggressive online marketing The online marketing industry is growing at a very high rate in Australia and worldwide. Currently, online sales account for a very small percentage for all revenues made. Competitors such as Coles have used online retailing aggressively as a distribution channel such that their inline sales are over $200 million annually. While still on this, the firm should adopt a multichannel rating approach in their distribution to boost their online presence and increase sales. The future of the retail industry lies in retailers innovating more convenient ways of availing their products and services without changes in price, quality or experience (Heineman & Christoph 2010). Create subsidiary to cater to lower income earners The current strategy only addresses the higher income earning market segment. This is because the higher end consumers associate the brand with a higher social class and affluence. Shopping at David Jones is a lifestyle of the fashion conscious high income earners. To address the lower income earners, DJs would dilute the value the value of their brand. To do so effectively, the from will require to acquire or set up stores with a different brand name that addresses the fashion needs of price sensitive consumers. This will allow the firm to remain relevant in both extremes of the income scale. Link online retailing as a green strategy to environmentally conscious consumers The fact that online stores utilize fewer resources such as fuel used to drive to stores can appeal to environmentally conscious consumers. This has the potential to increase online sales and also create a new niche market for the firm. ST- strategies Innovative In future DJs should further differentiate itself from competitors by adding value addition products and services. This include multi-channel retailing that allows consumer to make purchases online and pick from a chosen store or view catalogue online and reserve products. This will assist the firm dominating online sales market as more consumers become receptive to e-tailing. Increase promotion There are many upcoming department stores and supermarkets that compete directly with DJ’s and could possibility eat up their market share. The company should thus increase its promotion activities and thereby stabilise its high brand recognition and exclusive positioning in Australia. This will further ensure that the brand is highly recognisable. WT strategies Develop subsidiary stores that use different pricing structure to address low income earners Inflation and the increase of immigrant population from countries such as China, India, Vietnam, Philippines and Pakistan have created a price sensitive market segment. To address their needs effectively, DJs need to establish a new brand of stores that consumers can associate with affordable fashion without affecting the brand equity of DJs and stores that can probably use a different pricing strategy. Further, this will enable the firm to compete more effectively with players such as Target and Big W which dominate the low income earners market. Increase product range to increase customer satisfaction Offering a wide range of products all under one roof will address competition from designer-owned or franchise branded stores. Designer brands such as Gap and Zara operate their own stores. Clear focus on market segmentation Maintaining clear market segmentation will enable the firm to maintain a customer driven approach that increases customer value, allows effective marketing communication and high returns David Jones strategy towards success The proposed strategies above are possible courses of action that the firm can employ to improve its position in the market, boost its sales and increase brand value and address its weaknesses and diffuse threats. These strategies can be categorised into the following alternative sets of procedures: Market development i. enter new regional markets (China, New Zealand) ii. clear market segmentation iii. Multichannel retail marketing iv. Green marketing v. Customer loyalty programs Product development i. Launch a new brand of stores to address low income earners ii. Increase product range iii. Product offers and discounts Public relations i. Green retailing lobbying ii. Corporate social responsibility programs iii. increase promotion in the Australia and the region Diversification i. Acquire or establish a new brand that addresses low income earning market ii. Address different/new market segments All these strategies have different impact on the firm. To understand how much impact they have on the business in terms of brand image, business performance (profits/revenues/market share) and costs, the different categories of impact were assigned a value and prioritised as below. • Impact on performance (importance factor 0,5): Does the strategy affect business performance? Possible indicators could be: profits, revenues and market share • Image (importance factor 0,3): Is the strategy acceptable to current and future customers? Possible indicators are sufficiency of programs in meeting client needs and accessibility of multiple channels. • Costs (importance factor 0,2): Is the strategy affordable? Possible indicators return on investment ratio and sales per unit outlet. Table 2: Strategy Evaluation Market performance product dev’nt public relations diversification Impact (x0,5) Image (x0,3) Costs (x 0,2) According to the evaluation results, DJs should conduct a diversification strategy. Buying an existing brand from the lower price segment seems to be the most suitable approach. This is because such brands are exclusively positioned to serve their low income earners segment and they have an established clientele. For DJs, there are number of options in acquiring existing firms that target the low income earners market segments. This could include Chickenfeed Bargain Stores which largely targets older women. This could be in line with the aging population in Australia. Another option could be Supre Pty Ltd or Pilgrim clothing both of which are privately owned garment stores dealing in fashion and trendy clothes for women. By such existing firms targeting the lower price segment, DJs would be able to expand its markets and reach customers out to consumers previously ignored. By operating in the lower market segment, the firm will be cushioning itself against increased competition from designer-owned retails stores. Designer houses such as Gap and Zara run their own stores in Australia which directly compete with DJs. The low income earning segment is not adequately addressed by such stores. Diversifying products enables the firm to spread the risk from the retail industry. There have been reports in the past that the firm was considering making entry into financial services as indicated by its association with American express credit cards. Works cited David Jones. Annual report 2012. 2013. Web. Findouter Retail store players. 2013. Web Hanson, D., Hitt, M., Ireland, R. & Hosisson, R. Strategic Management: Competiveness and Globalisation. Sydney: Cengage Learning. 2011. Web. Heinemann, G. & Christoph, S. New Online Retailing: Innovation and Transformation. Sydney: Springer. 2010. Print. Thompson, J. & Martin, F. (2010). Strategic Management Awareness and Change. Sydney: Cengage Learning. 2010. Print. Read More