David Jones SWOT Essay

David Jones Ltd (DJS), one of Australias oldest and most recognised department lineages was founded in Sydney in 1838 and is a retailer of diversified harvest-tides ranging from clothes to daily home products. This reputes purpose is to cater the David Jones Board and Senior Management advice with the assessment of SWOT, resources, capabilities and strategies with a Balanced Scorecard and Strategy mapping as the measurement of the strategies. Part A-1 David Jones Strategic Analysis SWOTSTRENGTHS de versionity Name, Product and Brand PortfolioDJS was the initiatory department store in Australia and its black-on-white hounds tooth was judged one of the Australias top ten favourite trademarks in 20061. DJS maintains a wide variety of products and greases ranging from fashion to electrical dandys with a portfolio of over 1000 grimes covering international and topical anesthetic labels as well as its own internal DJS and DJS Plus label names. Services PortfolioDavid Jones o ffers both in store and pecuniary services to cater for clients. In store services include personal obtain, behavior advisors, beauty and free health screening services. Financial services hand overd include David Jones Platinum AMEX, Qantas Frequent Flyers points and the DJS submit card. Corporate services provided include DJ gift cards. investment firm PortfolioOperates 35 stores and twain w behouse outlets in metropolitan locations nationally. The four premium Sydney and Melbourne CBD retail properties ar owned outright with 85,000 sqm of retail space summation existing leased properties and the opening of impertinently village format stores in areas with appropriate demographics with no study stock centre. Capability for Fund RaisingEven with challenging retail conditions, DJS balance sheet exhibits blotto fundamentals exhibited by solid cash f grims, low debt to equity and debt to asset balances in FY11 and FY12. WEAKNESSES High Brand Switching Low Brand Loyal tyDJS is primarily a mid to advanced-end luxury brand. With the multitude of product and service options available for consumers from direct and indirect competitors and the current economic environment, David Jones target merchandise is now seeking out bargains when it comes spending. Limited Global PenetrationWith the globalisation of retailing, DJS faces formidable competition in an attempt to growing its penetration in domestic and international markets as confirmed in the IbisWorld Report, the globalisation of this industry is low but the trend is change magnitude. Weak utilityability IndicatorsVolatility in the global equity markets, financial uncertainty in Europe and the US and weak domestic consumer sen eonnt impacted on DJS financial performance leading to a decline in all profitability ratios in 2012 as compared to FY112. assign Target MarketDavid Jones focuses on the premium market and with a constitute external driver of retail sales being real disposable income, DJS market primarily comprises of the baby boomers with high disposable income, who downstairs the current economic climate receive reduced their spending dramatically. (IbisWorld 2012 p.15) OPPORTUNITIES Growth prospects E-RetailWith cultivatements in technology and an change magnitude number of people utilising either computer or smartphone platforms, the trend towards online shopping is increasingly popular market both for its high efficiency and convenience with massive potential still to be explored in Australia. Statistics fork up 12% of sales earnings are derived from e-retail in UK compared to 4.9% in Australia. Business transformationWith the rise of E-commerce, consumers have more than(prenominal) options than ever before. To seize the opport unity and become a more enhanced profitable unit is to be vigilante across tunes in that respectby giving customers m whatsoever options for purchasing products, which involve providing the personalisation of strong-arm stor es, online options for convenience and usage done social media. Brand expansionGlobalization brings in more brands and more competition from other countries. Instead of being a competitor, DJS sees this as an opportunity of a win-win situation by cooperating with more international suppliers evidenced by the introduction of three hundred new brands over the past 26 months. Business expansionThe physical store is an experiential centre where customers are able to interact with the brand and although e-retail provides choice, convenience and access, face to face customer service still reigns supreme (business insider article) the physical store plays an fundamental role in the retail industry allowing consumers to touch, feel and take a product home fast. By increasing physical mien, and improving systems and processes, companies will be able to enhance the customer experience. THREATS Customer income and choice influenceReal household disposable income has reflected a downward trend from 2009 to 2013 and household saving did non decrease during 2012, which reduced the invention of cash prey meaning store sales will be affected by a decreased aim of income remaining for shopping after spending on daily necessities. In addition to this, switching hails remain low for customer changing their preferences because of the diverseness of options like Myer, K-Mart or the brand retailer like ZARA and Gucci. Counterfeit goods marketAs globalisation brings in new and various products, counterfeit goods withal spread quickly. This has a disconfirming influence on topical anaesthetic retailers and trademark owners by taking a counseling part of their local market divide, taking advantage of the designs of a brands products as well as the millions of jobs lost, lost tax revenue and additional public functionance spending as a result of counterfeit products. Competitive environmentThere are an increasing number of overseas and online competitors entering the Australia market. In addition, a strong Australia currency and online business exploration is also seen as a threat to retailers for it has adeflationary impact on domestic sales4. Growing meshing and wages rising cost of doing business in generalIbisWorld has stated that the capital to wage cost is expected to be 16.590 in 2013. Although industry research indicates employment and wages reducing in 2013, David Jones is increasing sales staff working hours and introducing hundreds of new positions in a bid to improve customer service and exponentiation. Part A-2From our analysis on the external environment we have understood that in modern years the Australian department store industry has been characterised by increasing competition due to the presence of online competitors and overseas specialists, like Zara and Top Shop. Moreover, adverse macro-economic conditions further decrease the potential profitability of the industry. In item after the GFC, a deteriorated consumer sen timent index and a reduced real household disposable income together with a strong Australian dollar increase the aim of rivalry significantly. In this kind of environment, we powerfully believe that DJS must rely on two fundamental capabilities first class customer engagement and customer service and Brand Positioning.These two capabilities are mainly based on a parking area group of resources in addition to some specific resources that are tabled in Appendix X in detail. Upon analysis of the internal environment of DJS, the key factors for the success of the firm are The property portfolio, which includes a wicket of extremely well located and high-end profile buildings in all the major cities in Australia. These stores are crotchety and highly desirable assets for a premium retailer, are highly costly to imitate and surd to embossment for potential premium competitors since they are a highly scarce resource. DJs is a particularly well-capitalised company with significant borrowing capacity as demonstrated by a gearing ratio of 13%, interest coverage ratio of 14.5x (FY12) and excess cash held allowing the company to continue investing in the development of its strategy. The brand portfolio with over 1000 brands DJS can meet the expectations of its customers and reckon the preservation of its premium brand lead as home of brands The employees and management culture DJS has and continues to invest in training and development programs to ensure that the face and the leaders of the company are strongly oriented to customer retention and satisfaction. In assessing whether the two capabilitiesmentioned above constitute a core competency for DJS, we have reached the following conclusion 1) Ability to develop and maintain first class customer engagement and customer service CriteriaAssessmentValuableYesA high level of customer service is a key element for the success of the David Jones differentiation strategy. noble-mindedYesIn the department store comp etitive arena only Myer have achieved a homogeneous level of customer service. Non-substitutableYesOn-line based competitors can circumnavigate some key resources of this capacitance such as premium store locations and well-trained employees through an efficient on-line web store, however the physical experience of shopping in the store can non be replaced. Costly-to-ImitateNoFirst class customer service is extremely difficult to imitate and would require any potential competitor to heavily invest in training and services, although as Myer (Roy Morgan Awards in 2012) has shown this capability can be replicated in the coarse run. According to our vision, DJS has a temporary competitive advantage from its first class customer engagement and service since, at the positioning quo only Myer has a similar capability. However, it is of primary importance that DJS keep improving, for instance through an impeccable implementation of its OCR strategy in stray to further improve the quali ty of its customer service so as to avoid new entrants reaching the same level of service. 2) Brand Positioning ability to maintain premium leadership status in the department store market as the Home of Brands CriteriaAssessmentValuableYesThis capability helps DJS to explain its premium price and to increase customer loyalty. RareYesThe premium brand of DJS is a unique capability no ones in the actual competitive environment can rely on a similar core competency. Non-substitutableYesThere is no strategic substitute for this capability the DJS brand is one of the most iconic brands in Australia. Costly-to-ImitateYesDeveloping a brand identity comparable to DJS is not one that can be achieved easily by competitors due to the massive investment required and the unique historical conditions that have contributed to form it. DJS has a Sustainable Competitive Advantage from its brand and in our opinion, the firm should heavily supplement on it to successfully implement its future strat egy. PART A3 Stakeholder AnalysisStakeholder groupSpecific interestAssessment of shareowner value alignment1. EmployeesEmployees in David Jones as same as other employees who are interested in premium payout, promotion, training and recognition from employers. Fair company policies e.g. safety workplace and effective company talk and structure are additional requirement staff are looking Employee reward to encourage employee to flow in their idea to the business e.g. Innovation Workshop Training provided to retain staff executive leadership program, Future leaders program, Operations Online Compliance Training Incentive program in different level of management that align with shareholder value, e.g. New Frontline Incentive Incentive program only represents part of employees salary which means employees interest is not fully aligned with shareholders.2. CustomersCustomers in David Jones prefer exclusiveness. The products they purchase from DJS wont be able to find outside the store. That also applies toshopping experiences which they are serviced in professional and favorable environment that cannot be experienced in other shops. Customers expect DJS can provide the best brand with premium quality and reasonable price. Only added value products can be found in DJS Customers are common to look for better price with top quality and service however shareholders expect DJS to be more profitable with generous dividend, especially DJS have maintained GP in these few years. It is a fact that both parties interests are contradicted. Ultimately customer satisfaction draws higher sales and margin. Mainly skilful and loyal customers can maintain the profits in long term which shareholders can receive value3. SuppliersThey want to maintain good relationship with David Jones and make long term contract to get good margin for their business. Because of the reputation of DJ, suppliers want to achieve their brand recognition in the market. Suppliers value do not align with DJs shareholders value, they desire to maximize their margin but the cost of goods increase which freeze off shareholders dividend. But considering the brand recognition and reputation, both shareholders and suppliers want to capture market shares. They have to obtain a balance between their interests.4. CommunityThe community expects DJ concerns more about corporate social accountability such as social wellbeing and environment sustainability such as producing environmental annual report and reducing greenhouse gas emissions. DJS outlines a list of environmentally sustainable managements to eliminate greenhouse gases, wastes and upgrade energy saving. DJS give charity depart to employees to support the National Breast Cancer Foundation and monetary support other charities. Community is not fully satisfied as DJS only concern a small portion of the society. Every group of stakeholders value has certain degree of alignment with shareholders but none of them is fully in lin ed. DJ relatively put more effort to appreciate employees who are the key personnel to draw the sales. However, the unbalance of stakeholders investment will disappoint the others and DJS should be careful to avoid any relationship damage. Part A-4 David Jones Generic Business Level StrategyIn a highly saturated and competitive retail environment, David Jonespursues a Differentiation Strategy. It has historically targeted the 30 to 54 year old high income woman and the strategic factors relevant to her and is now seeking to expand this market to include the younger propagation with medium to high disposable income. David Jones is known as a quality store and to achieve this, it focuses on providing a combination of exclusive product ranges, a high standard of customer service, image and store presentation and location. This is directly evidenced by optimisation of the David Jones private label and the introduction of over 300 new brands over the past 26 months. Additionally, furthe r investment in customer service and engagement via increased frontline staff hours and in-store events as well as its continued focus on its personal shopping service and the introduction of style advisors offers their target shopper the complete shopping experience. PART BTransformationsuitabilityAccording to pro-rata population, the number of online customers in Australia ranks the third, but the sales generated from e-channel are far lower than other countries (IBIS-pp33). Although there is increasing competition in online business, retailers need online channels to expand business and take advantage of e-commerce to manage both national and international customers (IBIS-PP4). FeasibilityIn 2012, David Jones invested more than A$11 million in Technology CAPEX (AR12) and allocated a 200 person team in collaboration with IBM to successfully implement its scientific revolution. High bargaining power with suppliers and very strong brand identity can greatly assist in the Price Har monisation Process. Overall, David Jones has the necessary borrowing capacity and management skills to properly implement its reverse strategy. ConsistencyDJS strategic point of Transforming the Business is not entirely consistent with its generic business level strategy but aims to provide a solid structural retail platform upon which its supplemental strategic points of strengthening the core business and growing the store network canflourish as stand for by price harmonisation which allows DJS to be competitive on price but not a discounter. Shareholders repute ImplicationThis is insecure to conclude that Omni channel is profitable when other competitors have already got a well developed system several years ago. The cost to maintain and develop this channel will take a couple of years to recover and reduce profit margin in the short term. Better customer engagement via mobile or internet and price reduction through price harmonization will attract more customers to shop at D JS over competitors, with potential to set off the expenses and eventually increase profit margin in long term.Strengthening the core businesssuitabilityAfter the global financial crisis, expected profit margin decline to 3.9% in 2012-2013s department industry with scaling back of disposable income, cost reduction becomes a key factor for safekeeping GP margin (IBIS pp19). Keeping high margin categories helps to increase GP margin. Brand portfolio is also grave for mitigating competition from the effect of globalization. However, even though DJS has a better inventory management system, cutting time for clearance events may still cause excess inventories, which may incur inventory costs. Overall, this strategy is worthy in the current environment. FeasibilityIn 2012 David Jones added 85 new brands into its Home of Brand model. DJS can leverage on its brand positioning and on its knowledgeable merchandising team to develop its brand portfolio. DJS has the financial resources to fu lly complete the store redevelopment program. This together with the change in product mix (Fashion& beaut/Home) should guarantee a higher GP margin. The reduction of the CODB is based on the management teams capabilities and on the new investment in technology that have allowed a more efficient way of conducting business.ConsistencyStrengthening the Core Business is directly related to DJS generic strategyof differentiation through its focus on Offering the best National and International Brands and the high value refurbishments it is undertaking. By keep to invest in and expand its brand portfolio as well as the image and presentation of its stores and the preparation of accompanying services, DJS provides an experience not offered by any other department store in Australia. Shareholders Value ImplicationIn the short time, expanding labels and store refurbishment will lower DJS margin. In long term, the aim for David Jones is to minimize COBD and strengthen GP generation which i mproves operational profit and ultimately increases dividend to shareholders.B2 Key Stakeholder ImplicationsImpact on this stakeholder groupProposal to better align stakeholder interests with shareholder value 1. EmployeesPositive open challenge and opportunity. It is risky but it will be profitable if success Negative senior management was forced to leave DJS due to internal restructure happened in 2012.Time to adapt new systems and management. High risk to fail the duologue with supplier to harmonise the cost.2. CustomersPositive better shopping experience (store refurbishments). Open another channel to shop (Internet/mobile) welcome lower price better customer service more brands to shop Increase customer retention and loyalty (more exclusive brands) profitable customers which drive higher profit and give out more dividend. Lower price encourage to choose DJ over competitors and potentially improve margin Store refurbishment attracts more customers to come and visit.3. Sup pliersNegative Cost of good is entitled to price harmonization agreement. Profit is minimised. Increase competition between suppliers when DJS introduce morelabels to sell. Increase brand awareness and market share to offset the margin loss due to price harmonisation. Shareholder is also benefit if sales are promoted by lowering the price.4. CommunityPositive Mobile apps and website will facilitate the communication with the community and provide more business opportunities to benefit the society. Introducing more products of choice to society and encouraging employment rate. Negative refurbishment and new stores increase greenhouse gas emission and wastes.The new strategies have both positive and negative impact on stakeholders. The above analysis gives us a picture that customer is clear succeeder and supplier is loser in these new strategies. DJS has a lot of works to do in order to create the links of interest between all stakeholders and shareholders. Suppliers benefit will b e captured in long term if DJS can achieve the goals of these strategies and increase sustainable sales.