David Jones Limited is an Australian based department store chain that was founded by David Jones in the year 1838. Currently, the company has about 37 stores located in most Australian states and territories. The Australian department store industry is mostly dominated by large players which are David Jones and Myers, alongside smaller and independent companies. The report analyses David Jones’s external environment using Porter’s Five Forces model alongside the PEST model.
The industry does not possess major threat from new entrants due to strong barriers to entry and strong competition for retail space. There is also a strong rivalry between competitors as limited space is being contested by major players alongside competing sales events meant to attract new customers. Online shopping is the most significant substitute for David Jones but is not as threatening as the hand on experience is not replicable by online shopping. Buyers or consumers possess a moderate amount of power as consumers are more careful of expenditure after the GFC and with the strong Australian currency, they can afford to purchase cheaper imported products. Supplier power is split in two, where more popular brands possess high power as they can choose whether to supply or not while smaller companies have considerably less as they depend on department stores to gain awareness and momentum. With the PEST model, it is shown that the department store industry is expected to show only a small amount of growth due to lack of confidence and increased spending. Also, government legislation is increasing David Jones’s fixed cost for operating by increasing employee wages, electricity bills and taxation. However modern technologies used such as Radio-Frequency Identification (RFID) can help reduce expense and achieve high performance. Increasing population, increasing importance of sustainability and also increasing multi-cultural growth, forces David Jones to adapt to satisfy these different needs and demands.
The internal environment of David Jones is analysed using the value chain analysis and also analysing their resources and capabilities. The value chain analysis focuses on general management, HRM, technology development and procurement. David Jones provides financial services with an agreement with American Express via the use of credit cards. They also train and retain its over 9000 employees through constant development programs managed by their HRM department. David Jones focuses heavily on technology to manage their activities revolving around their products such as managing inventory levels and procurement. David Jones faces economies of scale when it comes to procurement as they possess multiple stores and tend to buy in bulk and also allowing products to be sold cheaper compared to smaller, independent stores. David Jones also focuses on partnerships with brands as they only sell final products, making contact with brands important so as to ensure exclusive distribution. Heavy investment is also placed into maintaining and improving store appearance to ensure the best consumer experience. In terms of resources and capabilities, David Jones possesses a few resources that build sustainable competitive advantage. The first major one is David Jones store locations as they are rare and hard to imitate due to the high cost and lack of availability. David Jones is also moving into the online market with a partnership with IBM to help improve online integration and give them a first mover advantage over Myers. Though the loyalty program employed by David Jones contains points of differentiation, it is easily copied by Myers as the offerings are similar making it a temporary sustainable advantage at best. Improving service staff to act customer sales advisors may be a powerful source of differentiation, but as consumers are more tech savvy, this may become a strategic rigidity and is therefore viewed as a temporary competitive...
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