On behalf Li & Partners consulting firm, we are pleased to present the strategic recommendation report. This reports divided into five sections. David Jones’ external and internal environments are discussed in the first two sections. The following section focuses on the identification of stakeholders and their interests. Our strategic recommendations to improve shareholder value are explained in the fourth section followed by the impact our recommendations have on stakeholders. A balance scorecard is constructed in the last section to illustrate the effect our strategic recommendations have on stakeholders and future company performance.
1. EXTERNAL ENVIRONMENT ANALYSIS
2.1. Macro environment analysis
Legal: The deregulation in retail industry’s opening hours has resulted in an increase in retail spending. However, Western Australia’s decision to decline department stores from operating on Sundays reduces the profitability of this market sector (The Australian, 2009). Additionally, the threat of climate change will increase energy costs and put strain on David Jones’ operating efficiency (Annual report, 2008).
Economic: The global financial crisis has resulted in a decline in consumer spending and confidence. However, government’s stimulus package may reduce the impact of the crisis and expected to have positive impact on retail sales, at least on the short-term.
Socio-Cultural: People are demanding a more stable balance between work and social-life. As people are becoming more inclined to spending long days at work, the customer stream is expected to increase in department stores during weekdays.
Technological: Major technological improvements have resulted in an increase in web-enabled business. These e-commerce businesses have the potential of reaching to every single consumer in the marketplace and thus reducing the geographic boundaries that physical stores face.
Demographic: Australia is facing aging population and increasing immigration. Due to lower fertility and improving life expectancy Australia is facing a lower workforce in decades. The proportion of the population aged 55–64 years increased from nine per cent to 11 per cent between 2001 and 2006. The aging demographics will reduce the supply of workforce. It will also require David Jones to design its facilities more suitable for this new customer place. Additionally, the increasing overseas migration from Asia (Australian government, 2009) will have an impact on consumer behaviour. These demographic groups have higher spending pattern and higher preference for branded products. Hence, increasing immigration from Asian has a potential of increasing the market size for high quality products.
Global: Even though Australia’s relatively close proximity to China and other Asian countries it lacks an international image as a major tourism shopping destination compared to Hong Kong or Singapore that have successfully positioned themselves as central shopping and retail destinations. This reduces David Jones ability to take advantage on globalisation that offers retailers the potentiality of increasing their customer base over national borders (Essay, Maria folk). On the other hand, the rise in protectionism around the world may reduce demand due rising cost of imported products (Reuters, 2009).
2.2 Industry attractiveness analysis
Threat of new entrants: Threat of new entrants in the retail industry is low. High capital requirements, specialised assets and economies of scale of existing retailers act as major barriers of entry. Similarly, the customer loyalty and brand awareness gained through David differentiated product category reduce the incentive to enter the Australian retail market (Ondix 2009).
The bargaining power of buyers: The bargaining power of buyers is medium. While the low switching costs enable consumers to take advantage of the alternatives available to them, the lack of strategic equivalents to David Jones...