The Workings Of The John Lewis Partnership Commerce Essay
The purpose of this report is to look at the John Lewis partnership as a whole and using factors such as a SWAT analysis attempt to recognise what the business does well and where the threats may derive from. An analysis of Porters Strategic fit will also help to lead to both recommendations and conclusions upon what the business does well and on what it needs to do better or expand into in order to become more successful.
PESTEL Analysis and Porters Five Forces
Both the PESTEL Analysis and the summary of Porters Five Forces can be found in the Appendix.
The first strength of John Lewis is that it is built upon its reputation for high quality goods backed up by an excellent customer service. Since the 1920’s the company has been renowned for its relaxed shopping atmosphere for the slightly higher demographic consumer. The business itself is a partnership meaning that everybody has an equal share of the company profits. Furthermore this means that there are no large shareholders making corporate decisions without some level of consultation, producing a more thought out course of action. Once an individual is employed under the John Lewis name they receive a voice in the running of the company, can suggest ideas for future development and take their partnership income at the end of each financial year.
This idea now expands onto John Lewis economical impact with John Lewis making numerous large charitable donations each month, funding projects from a local level right through to trying to solve poverty in Africa. Giving the consumer the perception of a business that John Lewis is an ethical business, this company image can be highly important to the business in the future. The business also goes out of its way to reduce its environmental impact, by using two level lorries in order to carry twice as much in a single journey. John Lewis has also started to make use of E-Business, which cuts down costs dramatically as there is no need for a department store as all products come from the warehouse, as well as reducing levels of staff therefore expansion into this area may prove an option in the future.
One potential weakness John Lewis now faces is due to its choice of cutting costs in its department stores and Introducing a “basics” line into its Waitrose arm of the business. Consumers remain loyal to John Lewis because of their “never knowingly undersold” policy, that being although their prices may be higher than competitors, they can provide the better quality service. By introducing budget lines however, this consumer Loyalty is being put to the test as John Lewis loose the one thing that sets them out from the rest of the market, product differentiation.
Furthermore, the other key weakness is also one of its strengths and that is the organisation structure of a partnership, because everybody is entitled to their say, decisions within the business are often slow and as such key gaps in the market may be missed due to lack of obvious leadership.
John Lewis is now in a position to ascertain its goods at a much cheaper price as suppliers are desperate to sell due to the credit crunch but only a limited number of companies wish to purchase. The company could use this to its advantage by purchasing the goods now, holding them in storage and then sell them at a higher price when the market picks up. Government legislation also opened up opportunities for John Lewis by offering a VAT break of 2.5%, hence consumers thought they were getting a better deal while John Lewis managed to maintain and increase their profits.
John Lewis also has large opportunities for expansion into other markets, for example personal finance. The John Lewis credit card is all ready proving popular with its customers, and offering a 19.9% return to the company in charges on those who don’t pay their bills at the end of the month. Just like companies such as Tesco and Asda though, the business could look at factors such as insurance for example, all of which could be sold under the John Lewis name be it a branch of the company (such as Waitrose) or even sold in store as an add on to certain products (for example customers buying new televisions may be interested in home content cover.)
Furthermore, John Lewis could expand further with its budget food items particularly within its Ocardo and Waitrose stores. However this goes against every value that makes John Lewis what it is today and as such consumers may not be so fond of the move however the basic range brought out in Waitrose called their “essential range” have sold over £100 million of products since there release indicating a changing market for John Lewis showing a very lucrative opportunity for John Lewis.
John Lewis online could also be a potential move, as mentioned having an online store would cost considerably less while at the same time giving the consumer the chance to shop from anywhere at anytime they wish. Furthermore discounts could be offered as there are many less overheads involved in the running of the store.
The biggest threat to John Lewis comes from within the business itself, its own structure. That being a partnership structure, hence everybody is a share holder. Therefore in theory if enough shareholders got together to oppose the managing body of the company and the business is left without any clear leader. It also leaves the company open to possible a takeover bid as if enough of the shareholders agree to sell their shares, then the company’s current controlling shareholder will lose their power and become minority shareholders. Numerous competitors also play a key threat in the running of John Lewis, as many offer exactly the same products and services. Therefore the only value added John Lewis can add is their customer service, however this is something that can easily be replicated and as such many competitors may start offering a John Lewis service but at a more competitive price.
The economy as a whole also presents a threat, to all companies in general but more so to John Lewis as their higher quality goods carry a higher price tag meaning a lower price indicates lower profits.
Varying exchange rates can also provide threats to John Lewis as prices for the goods imported can vary dramatically depending upon when they were bought. Obviously the in store price can’t vary at this rate however and as such profit margins may be larger at some times than others, in theory it could be possible that some products even end up being sold at a loss due to poor exchange rates. (A yearly average breakdown of the pound to euro exchange rate can be found in the appendix.)
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