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Matthew Edwards - Brand and Marketing

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Introduction

Since its commencement in 1864, the John Lewis brand has increasingly developed in to one of the UK’s foremost departmental stores and durable brands. John Lewis can boast the only outstanding traditionally English brand with a concentration on excellence and quality, value-for-money and practicality. John Lewis specializes in selling food and drinks, clothes and household goods. It has to be mentioned that John Lewis has diversified into financial services such as insurance and credit cards also which shows its intentions in the future, john Lewis not a brand that is now only happy to remain one dimensional which is definitely a criticism of many department stores, but within its modernization and inclusion to other areas of investments it has managed to keep its traditional branding. Looking back at John Lewis over the last ten years and beyond we can get a clearer picture in to what the future holds for john Lewis, it hasn’t by any stretch of the imagination been immune to the current climate, and has definitely seen big losses when it comes to annual profit over recent years. But with the decline of many companies and its competitors namely BHS and Debenhams, there is argument there to say that john Lewis is the outstanding department store that has survived the financial crisis in the best way and therefore we can make an educated analysis forecasting a very promising future. following the credit crisis in the united states and the problematic trading environment in the UK over the 2010 Christmas period, the corporation’s sales growth saw a clear slow-down and its shares plummeted almost overnight. John Lewis has recently gained the title of “bell-weather” in theUKretailing industry, which means that if John Lewis is besieged, the whole sector is also struggling to stand on its feet. To this end, the SWOT analysis below looks at the environment in which John Lewis is operating, bringing in to light the company’s strengths and weaknesses while exposing the opportunities that the institution can capitalize on and the possible threats it may lurch in to in the process of further growth.

SWOT Analysis

Strengths

  • John Lewis relishes a robust brand of embodying qualities, practicality and value-for-money promoting its customer loyalty.
  • John Lewis profits have been increasing progressively since 2001 and the cash position was very sturdy as at the year ended 31 March 2011 marking a decade of mammoth economic growth.
  • The highly qualified management group has being significantly celebrated for having overturned John Lewis fortunes in the last decade.
  • John Lewis antagonistically markets itself and has recently used celebrities as their brand ambassadors.
  • Robust growth strategy
  • Very strong online presence
  • Creates a platform to innovate and creation
  • Very strong brand strength
  • Extensive product selection/offering

Weaknesses

  • John Lewis performance slithered over the 2010 Christmas period. While all retailers practically underachieved during this time, John Lewis was the most exposed. At the time of writing, the share price was 361p with the 52-week low of 367p and high of 759p, which means that John Lewis M&S had lost more than 50% of its value during the year.
  • Similarly, the price/earnings ratio of 9.4 is very low as compared to that of its competitor’s i.e Mark and Spenser. The price/earnings ratio is the key indicator of investor assurance in a company.
  • John Lewis has recently started cutting prices to match up the ever increasing competition. This may devalue the brand.
  • The company has been recently criticized for fuelling accusations of poor managerial incompetence, corporate governance and lack of transparency infuriating many large investors.
  • Lack of international presence Opportunities
  • The idea of developing markets to Asia presents large opportunities for John Lewis.
  • Designing of trendier clothes would attract young and potential customers to its stores.
  • Online sales provide a great opportunity since online margins are higher citing extensive growth from online companies like eBay.
  • The adoption of healthy lifestyles by customers presents an opportunity to sell healthy foods and sports gear.
  • Growing insurance and credit card industry. The industry has been on an upward trend over the past decade. Considering that John Lewis has a division that contributes over 23% of its total revenue dedicated to this segment, it is likely to reap significant benefits if this opportunity is fully utilized.
  • Extremely growing demand for private labels
  • Scope to enter new markets specifically internationally
  • Growing market for healthy foods

Threats

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  • Currently, John Lewis target group are older customers usually over 45 years. This might pose as a risk in the future due to the fact that today’s 20-30 year olds will still stay trendy after 10-20 years and might be reluctant to shop in John Lewis, especially taking into consideration the desire for people to look younger nowadays.
  • Jeremy Paxman shaped a storm of negative publicity when he criticized John Lewis underwear due to lack of support.
  • Even though it is considered that every third woman and fifth man in the UKbuys John Lewis underwear, the publicity may have an adverse effect on sales.
  • Laws and regulations
  • Intense competition John Lewis SWOT Analysis explained in further Detail.

Competition in the retail industry sector is extremely ferocious. I believe that John Lewis Predicament to this issue is exacerbated by the fact that institutions are vastly diversifying into non-core turfs thus creating extra competition. John Lewis is particularly exposed to competition as it sells not only food and drinks but also apparel and household goods. This could be seen a positive in the sense that in caters for many different needs, however on the flip side this leaves the organization vulnerable to competition from the giant supermarkets such as Tesco, Asda, Sainsbury’s and also big clothes retailers such as Next, Topshop, Marks & Spencer and Zara. The more competition in a field makes the market extremely volatile and leaves john Lewis exposed to expensive changes just to keep up with the rest of its competition simultaneously. Porter wrote that “companies pursue one of three generic strategies: low cost, differentiation or hybrid”. John Lewis has tried to distinguish itself from competition by placing itself as a higher quality value-for-money brand. However, this is a strategy that facies its own risks, as again companies such as the large supermarkets are managing to retail similar quality products for a lesser price, the modern world has seen the discount become more popular than ever and I feel like that may be a representation of the time and this could be a big factor in John Lewis future. Prices which poses a risk of de-valuing the brand in the market and losing the scope of specialization. Although not a key business for John Lewis, the John Lewis credit cards and insurance also face a lot of competition from banks and building societies. Even with all these disadvantages there are many advantages to detail too. John Lewis despite the competition is a very large store which still rakes in a huge turnover. Suppliers will always want their products on the shelves of such organizations in order for their business to reach a larger customer base.

Pestel analysis for John Lewis

  • Political

John Lewis is entering the rising market that UK is part of the European Union. Competitors from Europe can arrive the UK market without any limit or restriction. UK Government is deciding to decrease the corporation tax from 30% to 28% that help John Lewis to increase their profit in the future.

  • Economic

The UK economy is facing recession and very delicate to changes in interest rates. Rigid competition within every sector of the retail sector has led to retailers giving a lot of incentives to the customers. This will influence John Lewis’s as the prices have to be driven down most of the time.

  • Social

Consumer shifting preference and lifestyle correspond to opportunities for the business. Opportunities into the new market that created by consumers caused by the society is becoming more materialistic. John Lewis should introduce more branded and latest fashion product to please the customers.

  • Technological

Internet shopping is the main trend for the retailing industry, directly influence the sales approach. Paperless operation, the management and administration of the company are carrying out on IT systems, which are access through secure servers and make available flexibility in the operation of the business.

  • Environmental

The renewable source of resources used in production, namely cotton and wool are environmentally friendly. The threats are in terms of legal penalty for livestock’s in terms of health and safety. A lot of emphasis western companies have been on the role of big companies in reducing carbon footprint and increasing energy efficiency. This is just not a backburner issue anymore and every firm will have to prove they are reducing their impact on the environment.

  • Legal

National legislation has been stiffen for health and safety both in terms of consumer rights and production of own natural renewable resources for making clothes.

Recommendations

John Lewis is not totally reliant on suppliers, and in fact outsourced goods is not its main outlay. They rely heavily on their own branded goods, and they have over the years managed to build a reputation of top quality. I feel that it’s time to rebrand. I think john Lewis will be able to keep their reputation by also having more suppliers. They could have a vigorous process in which outsourced suppliers have to meet their standard in which to go on the John Lewis shelf, but neither the less I feel this is a path they need to look into. The threat of the competition in prices especially in food and fashion, will force John Lewis to keep losing profits if they do not adapt and essentially follow a more modern model that is being in cooperated by many other big organizations. Contrary to this maybe the direction John Lewis could go in is the upping their private label products. If they could find more third parties at a cheaper rate that could make the same quality of product, they will be in a very commanding position. Reason being that john Lewis brand remains the one of the strongest brands worldwide however the profits have been recently affected, I think a lot of the blame comes between the margin at which they make their products and the margin in which they sell their product is not larger enough in today’s current climate.

People are just not prepared top pay as much for products as they used to on the high street, the increased competition on the high street hs pushed prices ridiculously low, and john Lewis have to find a way to match these low price and bargains for the average high street shopper. I believe john Lewis brand although advertised and represented quality, it was also something cherished by the average working class as quality at affordable price. What is seen as affordable 20 years ago and what is seen as affordable today is completely different. Organization such as Primark which pretty much dictate 40 percent of the high street market have changed the game. Another recommendation for me would be for John Lewis to enter the international market. Especially the Asian market. I feel that a department store of its magnitude can close a gap in the market in cutting edge designs by having displays in store of innovative décor for home ware and fashion. Yes john Lewis have a great online presence and yes the online market has become maybe the most lucrative market over the recent years but I believe that one niche that John Lewis have is the ability to display in real life.

When people are shopping for certain things like homeware they want to be able to feel and touch what furniture is going to enhance their home, john Lewis can give shoppers a instore experience before they part with their money, almost a mini example of what will soon be yours. This is a very positive advantage to have over the competition, especially as its competition may not have the space for such displays. This is where the Asian market could also be lucrative. Opening stores in maybe countries like china or japan can provide them a completely different profit margin at the end of the year, one area John Lewis is strong in, is advertisements and Asia will definitely welcome such a respected westernized brand, this I a opportunity that I would definitely recommend.my last recommendation would again to step up the advertisement specifically in to the healthy foods market. I think the fitness industry is huge right now and idea that I would push forward is to maybe use some of the space that john Lewis have in their huge stores to create their own gyms. If people could have an experience where they can work out keep fit and shop healthy all at the same time this could allow john Lewis to capitalize on 3 different markets at once, and really lead the way in an idea that is yet to be done.

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