Strategic management of the JD Wetherspoon PLC

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1.      Introduction

 

1.1.   Aims and objectives

The aim of this assessment is to look into the company profile, the development of the company, current news regarding the company and to analyze the strategic management of the JD Wetherspoon PLC.

In order to achieve the aim of this assessment, a few objectives will need to be look into:

  • To critically identify the strategic analysis of the company
  • To establish the strategic formulation of the company such as the future strategic direction of the company, competitive positioning, financial management and other strategic methods.
  • To critically evaluate the strategic implementation and propose a series of recommendations for the company

 

1.2.   Definition of key terms

1.2.1.              Strategic management process

According to Henry (2008), states that strategic management process is an analysis about analyzing the situation facing in the company, and on the basis of this analysis formulating a strategy and finally implementing that strategy. The strategy management process also provides a convenient to study markets, industries and organisation to identify the organisation structured process of analysis, using tools and framework to study the environment and provides a logical approach to strategic decision making (Jeffs, 2008). Three ongoing processes referred as strategy analysis, strategy formulation, and strategy implementation. The result is to achieve the competitive advantage over its rivals in the industry.

 

1.2.2.              Strategic analysis

The purpose of strategic analysis is to gather information. There are two main stages in strategic analysis: firstly, macro-environmental analysis which examines the organization’s internal environment and micro-environmental analysis which examine the external environment of the organization (Evans et al, 2003). According to Henry (2008), strategy analysis allows the organization to evaluate how well it is positioned in the market to exploit the opportunities in its external environment.

1.2.3.              Strategic formulation

Strategy formulation is to allow the organization to achieve sustainable competitive advantages and to produces a clear set of recommendations, with supporting justification, that revise as necessary the mission and objectives of the organization, and supply the strategies for accomplishing them (Henry, 2008). Minztberg et al (1998) stated that strategy formulation occurs as a creative and as a subconscious act which synthesizes experiences to form a novel strategy. The principle of strategy formulation is to identify the opportunities and threats in the company’s environment and attaching some estimate or risk to the discernible alternatives.

1.2.4.              Strategic Implementation

In organizations, strategies must be implemented to achieve the intended results. This final stage in the strategic management process involves developing an implementation plan and archives it to make the new strategy operational and effective in achieving the organization’s objectives (Henry, 2008). According to Mintzberg et al (1998) effective implementation can make a strategic decision to be sounds either ineffective or a debatable choice successful, where it is important to examine the processes of implementation of strategy which comprised of a series of sub activities.

 

1.3.   Summary

The first Wetherspoon pub was opened in 1979 in Muswell Hill of north London by Tim Martin. It was the first pub company that serve food and beverage all day long where it’s truly ground breaking back in 90’s. JD Wetherspoon is one of the United Kingdom’s largest and fastest growing chains of publican pubs. JD Wetherspoon blended a unique formula of unconventional locations – including former automobile showrooms, theatres, banks, and grocery stores – low beer prices, all-day food service, non-smoking areas, and a strict ban on television and music.

They have been recognised as UK’s fastest growing company where they have won hundreds of awards which highlight the best practice in wide areas such as real ale, design, food, training, customer safety, corporate social responsibility, quality of toilets floral display and etc. In addition, Wetherspoon’s pubs across the UK have won praise for the manner in which they provide a safe environment for customers to enjoy and staff to work in. This has been reflected in the many Best Bar None awards presented to Wetherspoon pubs – by the council and police authorities who organise the schemes.

Overall, JD Wetherspoon is a forward thinking and innovate which sustain their growth by repeatedly been recognize with wining lots of awards which beneficial its customers and led to transform across the pub world. Currently there are in total of 775 pubs with 47 newly opened and 3 closed (JD Wetherspoon plc, 2009).

 

  1. 2.      Strategic Analysis

The environment is what it provides for the company to be survived in the market. Environmental change can be a fatal for organisations, hence, the organization needs to analyse their environment carefully in order to anticipate the environmental change. There are sources of threats such as revolutionary technologies or the entry of new competitors and environmental change can be fatal for organisations (Johnson et al, 2009).

 

2.1.   Macro environment analysis

Macro environment is the highest – level layer in the business environment. This consist of factors such as political, economic, social and technological which impact to the organization. Gillespie (2007) identified that there are many factors in the macro-environment that will affect the decisions of the managers of any organization. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change. To help analyze these factors managers can categorize them using the PESTEL model (refer to appendices 1).

 

 

 

2.1.1.              Political factors

This may refers to the government policy such as the degree of intervention in the economy. Government alert with the health of the nation as well and restricted areas for smoking, JD Wetherspoon pioneered completely to non-smoking in most of the pub which this could attract family type customer. Government responsible for the economic policy and regulation as well which leads the economic to determine the extent of population’s spending power on goods and services and this might bring impact on the hospitality businesses. Government may imposed tax on the good and services such as the value added tax (VAT), and hence businesses like JD Wetherspoon need to pay tax for their businesses (Gillespie, 2007; Hassanien et al, 2010; JD Wetherspoon, 2010). According to Thomas (2009), JD Wetherspoon attacked the Government over its “opportunistic tax grabs”, which it believes are contributing to the demise of the struggling pub sector where the pub industry as a whole is under great pressure and that the costs of taxes and regulations have gone too far.

2.1.2.              Economic factors

According to Hassanien A. et al (2010), economic factors are concerned with fiscal and monetary issues that have a great impact on hospitality businesses. According to the interim report 2010 of JD Wetherspoon PLC, there have been 2 pubs closed down but 17 pubs opened in a total of 775 now. This shows that the economic issues does not affect much of the company to continue expanding. JD Wetherspoon has battled against the smoking ban, recession, above-inflation increases in beer duties and cheap booze offers in supermarkets, which kept drinkers at home (JD Wetherspoon plc, 2009). Jeffs (2008) stated that the economic environment is an evaluation of a country’s statistical data provides an insight into all manner of factors such as inflation rates, consumer spending, unemployment and exchange rates. According the BBC News (2009), the recession hits Wetherspoon’s sales where else the taxes and regulation faced by the industry had made them increasingly expensive compared drinking at home. And hence, the consumer spending may decrease.

 

2.1.3.              Social factors

Changes in social trends can impact on the demand for a firm’s products and the availability and willingness of individuals to work for. Social influences include changing cultures and demographics. The social structure will affect people’s lifestyle and expectation and so will strongly influence their attitudes towards their work and their demand of goods and services (Johnson G. et al, 2009; Hassanien et al, 2010). To follow up the consumer trend, JD Wetherspoon did a series of changes such as offering breakfast to be served in their pubs during day time which cause them to expand their business hours from 7 in the morning. They even strengthened its cider, beer and wine range to offer customers a choice of nine ciders in its outlets across the UK (Morning Advertiser, 2005).

 

2.1.4.              Technological factors

Hassanien et al (2010) and Evans (2003) both stated that the internet has generated a process of disintermediation and reinters mediation in the hospitality goods and services where technological influences may refer to innovations such as the internet, nano-technology or the rise of new composite materials. In recent year, e-commerce and information technology have given a great impact on the hospitality and tourism industry. Technological factors did affect JD Wetherspoon as well, they set up their own website on the internet by providing information about what are they serving, promotion that they are having and even a web page about their job opportunity for those who seek for a job. JD Wetherspoon does keep themselves up to the trends since social networking becomes one of the market trends, through setting them up on the Facebook to interact with the public (Wetherspoon – Facebook, 2009). JD Wetherspoon deployed web-based door security compliance scheme according to Anthony Savvas (2007), this could allows the chain to automatically check that door staff have full security accreditation. It also enables JD Wetherspoon to ensure that individual pubs are fully resourced and that the right numbers of senior staff are on duty at all times. Meanwhile, the coffee shop and hotel that they operate do provide the Wi-Fi services bringing the customer convenience (JD Wetherspoon plc, 2009).

2.1.5.              Environmental factors

Environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities. JD Wetherspoon been tried to keep up with the no smoking campaign by banning smoking inside the pub not just because to follow the law and they actually started that in early 1990 by providing some areas of non smoking. Besides that, glass bottles been classified out to be recycled, JD Wetherspoon did shows some environment concern. On the other hand, the hotels that they operate they can operate under more environmental friendly, such as providing limited bed linen and amenities which can cut down some of the cost and as well may bring extra profit for them where JD Wetherspoon is a corporate social responsibility (CSR) to run sustainable and profitable business by supporting the people, the communities and the environment (Henry, 2008; Gillespie, 2007; JD Wetherspoon plc, 2009).

 

2.1.6.              Legal factors

According to Gillespie (2007), in recent years in the UK there have been many significant legal changes that have affected firms’ behaviour, legal factors are related to the legal environment in which organisation operate.  Legal changes can affect a firm’s costs and demand. Legistration on labour affects JD Wetherspoon managing their staff such as working hours, compensation, benefits, off days and so on. JD Wetherspoon joined the Institute of licensing where the institute aims to develop, recognise and promote the best practice on licensing for both the public and private arenas (Ewan Turney, 2010). Wetherspoon had chosen to work with Reading Borough Council, which will offer it a single point of contact for issues such as health and safety and food hygiene where the new partnership agreement enable them to concentrate more on their business and less on red tape, whilst at the same time adhering to all the relevant legal standards (James Wilmore, 2010).

The priority issues and threats that faced by JD Wetherspoon will be the political, legal and economic factors; the UK government have been continued to impose tax. According to the Nick (London Evening Standard, 2010), Wetherspoon calculates that the reintroduction of the 17.5% rate of VAT in and add on labour’s policy been raised duty by 2% more than inflation and tax rises have cost drinkers 10p a pint more than last year and where UK economic growth been slowdown. Meanwhile, the technology factors do help out the company a lot in terms of advertisement, promotion, job offers in the company and all sort of information can be find through online and it’s an opportunity of marketing for JD Wetherspoon. Besides that, the company’s expansion of its facilities into newer markets will reach a greater number of customers and should equate to a stronger financial position where they owned 775 outlets (JD Wetherspoon plc, 2009). In 2006, they invested £15m in beer chilling equipment to be the first pub industry in UK where to satisfy the customer appetite and to lead over the rivalry (Caterersearch.com, 2006). They have won numerous numbers of awards as well which by change named as top 100 companies in UK where they are the only pub on the list which they have achieve certain level of brand attributes and recognition in the public (JD Wetherspoon plc, 2009).

 

2.2.   Micro environment analysis

This involves individuals or organisations that a firm deals with on a regular basis. For example, suppliers, distributors, competitors, customers and employees are all members of the micro-environment. These groups are stakeholders of the business. They all may have a direct or indirect interest in the activities of the firm and are clearly affected by its actions. 

2.2.1.              Direct and indirect sector

JD Wetherspoon’s direct competitors are The Walkabout, All Bar One, Mitchells & Butlers and Eerie Pub Company where they are offering the same goods and services and target the similar markets. Meanwhile the indirect competitors are competitors that operate in a different category of the same sector such as The Luminar Group, Mercy Premier Night Club and Concorde2, they are serving alcoholic beverages as well but they operate as a night entertainment.

2.2.2.              Sector lifecycle

According to Johnson et al (2009), sector lifecycle concept proposes that industries start small in their development stage going through rapid growth, maturity stage and decline stage. JD Wetherspoon falls in between of the maturity and decline stage (Appendices 2), where they experienced benefits and economies of scale but at the same time there’s high entry of competition into market such as The Walkabout, Mitchells & Butlers and some other local household established business.

2.2.3.              Industry analysis

Industry is defined as a group of businesses that produce the same principle of product or services. And hence, Porter’s five forces framework used to identify the connection of the industry in terms of competitive forces. It provides the key points for strategic analysis which help the company to identify the five forces which are: the threat of entry into an industry, the threat of substitutes, the power of buyers and suppliers and the extent of competition rivalry (Johnson et al, 2008). This framework help to determine the attractiveness and profitability of the industry, the possible sources of competition in the industry, threats to the stability of the industry and the development of for the future strategies (Jeffs, 2008).

                                 i.            The Threat of substitutes

Substitutes are products or services that offer a similarity benefit to that industry’s products or services with undergo different process. The threat of substitutes is high in such case; for example supermarket or convenient store that offers the beverages can be lower than the price that JD Wetherspoon offers, customer may switch to buy from supermarket or convenient store instead of paying a higher price. Healthy trend has become the hottest issues nowadays, consumer begin to be health conscious that without consuming alcoholic beverage, they might switch to healthy beverages such as fruit juice, yogurt and etc. According to Janice Burn (2009), supermarket giant Asda slashed price on 1,000 products while offering deals such as 3 for £10 on the alcoholic beverage.

                               ii.            The power of suppliers

According to Johnson (2009), suppliers are those who supply or produce the goods or services that the organization needed such as raw material, ingredients, machinery and equipment, labour source and financial source. The powers of suppliers are high, because they are usually the major supply for the beverages to the pub and lounge. Without the labour source, the business may unable to continue working, because they are the essential key to co-operate together and operate the business.

                             iii.            The power of buyers

Buyers are also known as the customer, they are one of the essential tools of survival for any business, without them, the business is meaningless. The power of buyers for JD Wetherspoon is high, because there’s a range of competitors operating the similar business and hence, the buyers’ decision really a matter to JD Wetherspoon. The buyers are the one who brining in profits to the business as well. Therefore, JD Wetherspoon promotes a range of promotion to attract the buyers and even create brand loyalty (BBC News, 2009).

                             iv.            The threat of entry

The more profits an organisation in an industry made, the higher the attraction to new entrants to enter into the market. The threat of entry depends on the existence of barriers to entry in the market and the reaction of the existing competitors. The barriers will include the economies of scale, capital requirement, product differentiation and access to distribution channels according to Henry (2008). Due to the economies of scale, new entry may easily enter into the market with similarity as JD Wetherspoon where they have flexible pricing strategy for selling the beverages and foods as well. However, this does not affects Wetherspoon, where managed chain JD Wetherspoon has emerged as the only pub to make it into a list revealing the UK’s most customer friendly companies this shows that they have certain amount and standard of customer  loyalty (Matt Eley, 2010).

                               v.            Competitive rivalry

Competition among the organisation within the market determine with their overall profitability. The competitive rivalry in the market as JD Wetherspoon is quite intense as the others competitors serve the similar goods and services as well. In contrast, JD Wetherspoon needs to provide more of advertisement, product innovations, and improve the customer service as well. Competitors of the pub industry includes The Walkabout, Mitchells & Butlers plc., Whitbread and etc.  And hence, JD Wetherspoon offers a wide range of variety on their menus include serving healthy breakfast (JD Wetherspoon plc, 2009).

 

 

2.3.   Stakeholder analysis

The stakeholders in an organisation are the individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and that are therefore its potential beneficiaries or risk bearers (Johnson, 2008).

The stakeholders for JD Wetherspoon will be suppliers, customers, government, owners/shareholders and employees. To identify the stakeholder’s expectations and power, the power/interest matrix will be used as a model to classify the stakeholders to show that they are interest in supporting or opposing a particular strategy.

Suppliers for JD Wetherspoon will be fall under low interest and high power, which they have the power to or not to supply the goods to the business. Without the supplier, the business of JD Wetherspoon can’t be continuing.

Customers of JD Wetherspoon may have high interest and high power towards the business. Because customers is one of the main essential resources to bring in resource in terms of financial for JD Wetherspoon. Customer of JD Wetherspoon do have high power, whenever what’s the customer needs, JD Wetherspoon will try their best to satisfy their needs. There’s an incident where JD Wetherspoon was responsible to the injury of a customer due to the safety and health offence and was sued an amount to be compensate to the victim. This shows that customers do bring a big impact towards the business (BBC News, 2009).

Government may have low level of interest but high level of power. The government sets the policy and legislation where there are laws for certain matters, such as no selling alcoholic drinks for youngster under 18. And hence of such rules and regulation, JD Wetherspoon need to be aware of who are they serving to. Besides that, governments do charge tax on their business of goods and services. JD Wetherspoon followed the rule of no smoking by banned smoking inside the pub (BBC News, 2008).

Owners and shareholders of JD Wetherspoon are the key players of the business. They are the one who started up the business, invest and control over the business. Therefore, they have high power and high level of interest on their business. They have the power to control over their employees in the business, setting strategy implementation such as distribution outlets, decision making for their business to choose what the best is for them and to portrait the charismatic leadership. They may have high interest in terms of the financial statement as well whether it’s making a loss or profit.

Employees may falls under low level of power and low level of interest. The main thing that employees concern about is their pay and their work satisfaction. The only matter that may have high level of interest is their job satisfaction, whether they can be promote to have a higher position and increase in their wages.

 

 

2.4  Vision and mission analysis

According to Johnson, vision is about the desired or intended future state of an organisation in terms of its fundamental objective and strategic direction which need commitment and performance to be done to achieve the vision. Mission is to provide the internal stakeholder of the organisation with the purpose and what should be done in the organisation to achieve the vision.

JD Wetherspoon’s aims are to have by far the best CQSMA (Cleanliness, quality, service, maintenance and atmosphere) where the company aims to provide customers with good-quality food and drink, served by well-trained and friendly staff, at reasonable prices and they wanted to have the standards in the pub world, to be the best company to work for and, by doing all these things, to be the most profitable.

(JD Wetherspoon plc, 2010)

 

2.5  Organisational culture and strategy

According to Schein (1984), organisational culture is the pattern of the fundamental assumptions that an invented, discovered or developed group of people to cope with its problem externally adaption and internally integration. It can be a thought of values and beliefs that are shared by members of the organisation which they commonly holding on. The culture of an organisation been conceived as consisting four layers which include: Values, beliefs, behaviours and paradigm. The Culture of an organisation will affect the development strategy which lead them to undergo implement and formed corporate performance.

       By applying the model of the culture web by Johnson (1992) into JD Wetherspoon which lead to identify the behavioural, physical and symbolic manifestations of a culture that inform and are informed by the paradigm of Wetherspoon. The Paradigm of Wetherspoon is: they are an entertainment industry which serves food and beverage at the same time, their products and services are value for money and the businesses are entrepreneurial.

       The Rituals and routines of Wetherspoon are they are striving for the best quality of products and services like what they had set CQSMA and develop their brand around a simple set of ideas. Employees need to work under long hours where they open from 7 in the morning until late night and training programme is available for the employees as a key of motivations. They will update their everyday or weekly promotion boards to attract the customers as well.

       Wetherspoon’s symbols are the wording of JD Wetherspoon with chrome surround and gold in colour. Tim Martin, the founder, was described as the ‘giant of the British pub industry’ and they are the top award winning in the category of ‘pub and wine bars’ category in the Loo of the year competition.

       Their control system monitored the performance management system for their sales businesses and customer service is very important that they had set the CQSMA. A web-based compliances checking system been installed for their door staff and security purpose. Wetherspoon monitored their budgeting, financial report and target setting for their businesses.

       Wetherspoon’s organisational structure is in hierarchical form and divisionalization where the shareholders and owners are on top of the pyramid, then division of managers, supervisors and employees. Meanwhile, their power structure is to influence over other pubs. Wetherspoon head quarter located at Watford, UK and currently with 775 pubs.

       The stories of Wetherspoon were founded as a single pub by Tim Martin in 1979 where Tim went from construction site to Wetherspoon chairman. He owned the Lloyds No.1 chain and Wetherspoon hotels and his company even on the stock exchange market as well.

(JD Wetherspoon, 2009)

 

2.6  Issues to Consider

In recent news, Nikhil Kumar (2010) reports that there are shareholders who left JD Wetherspoon due to the management and strategy of the organisation. This incidence may due to disagreements over “how far to use cost savings to protect margins” in the short term. The implication is that Wetherspoon will accept costs on items like repair and labour for the underlying good of the business, even if this brings short-term margin reductions in the face of, say, an inability to pass on VAT increases in January. But both of the shareholders do not agree with that agreement, and hence, they resign from the post immediately.

The Office for Fair Trading (OFT) has rejected a complaint from the Campaign for Real Ale (CAMRA) that the ‘beer tie’ requiring pub lessees to purchase beer solely through their pub-owning company landlord is uncompetitive instead  the Office of Fair Trading has ruled that the pub sector was competitive and the OFT recognises that many pub lessees are concerned about issues regarding the contractual relationship with their pub-company The consumer watchdog will not take action after consulting on the findings of last year’s investigation into the practice of leased pub operators tying tenants into buying their beer. The OFT has squandered an opportunity to support a process of industry self regulation to benefit consumers. This may affects JD Wetherspoon on their sales price on their beverage (Digital look, 2010).

 

  1. 3.      Strategic Formulation

 

3.1.   Competitive positioning school

By adopting Porter’s generic strategy model (1985) able to help to determine competitive advantages of the organisation, these strategies are cost leadership, differentiating the product and combining either of the above with a focused or niche strategy. Companies must look for having a superior comparable performance regarding competitors in the same industry, and described that the competitive advantage is to have a profitability level greater than those in the industry on the long run. He also described that the cost leadership and the differentiation as the two types of competitive advantage a company can have, depending on the sources on which it is based on. And hence, JD Wetherspoon falls under cost leadership where the differentiation with other competitors will be rely on the speed, reliability, service and customer relationships, design, technology and brand image (Johnson, 2009 ; Jeffs, 2008; Appendices 3).

Since JD Wetherspoon is the major pub operator in the market alongside competing with Whitbread and etc, they set their alcohol as low as 99pence a pint which is the lowest price, but at the same time, this incidence causes the alcohol campaigners called on Wetherspoon to cancel the promotion, saying the cost of dealing with Britain’s binge drinking culture would exceed the savings for consumers (Alastair Jamieson, 2009). Even so, that did not affects JD Wetherspoon at all, and after they announced that they start to serve up breakfast, it helped them in their profits by 7.3% and it claims to be the only major pub company to open at 7am and now sells more than 400,000 breakfasts and 600,000 coffees a week, a 40% increase (Nick Fletcher, 2010).

This benefits the Wetherspoon business beside increasing their profits and sales, it can even build their brand attribute stronger by which consumers are more recognize on their business, gaining economies of scale such as bulk buying the food and beverage, they even have efficient and effective distribution systems where customers able to book rooms online on the internet and their website able to acknowledge the customers on their promotion and what’s on their menus, because of these, other major competitor may not necessarily able to inimitable (JD Wetherspoon plc, 2009).

 

3.2.   Strategic direction

According to Johnson (2009), Ansoff’s matrix (1987) offers four types of strategic directions which the business can undergo – market penetration, market development, product development and diversification. Under market penetration, JD Wetherspoon used the consolidation strategies to defend on their current market, on current product such as they maintain as budget food and beverage leader and offers a wide range of promotion as for consolidation strategies is to sustain business in the long term plan or in the future that Wetherspoon may buying up other rivals businesses which are going to close or weaker.  In market development, JD Wetherspoon pub’s opening times have been extended; open from 7 in the morning by serving breakfast until late night which brings great opportunity for JD Wetherspoon as well as a competitive advantage. They had started to consider about the healthy trend by introducing healthy option on their breakfast menu such as porridge with strawberry and blueberry compote as their product development. A series of new menu will be offered by the Wetherspoon to attract the consumers. Meanwhile, they can undergo related diversification where they expand their current strategy such as by offering happy hour, buy one get one free on certain beverage, and even new facilities in their hotel – swimming pool, gym and other relevant facilities, they may even register for licensing night entertainment to open night clubs like what Luminar operating  (JD Wetherspoon plc, 2010).

 

 

3.3.   Resource-based view and Core competence

Strategic capabilities and competitive advantage by Johnson et al (2005) analyze an organisation’s threshold and competitive advantages (appendices 4) on resources and competence (threshold competence, threshold resources, unique competence and core competence) of an organisation needed for their survivor tool vice based upon Haberberg and Rieple (2001) offers a model to classify the organisation’s unique resources and core competence into valuable, inimitable, rare and un-substitutable.

The threshold resources of JD Wetherspoon are the employees, machinery and equipment, finance and plant – these are tangible resources. While intangible resources are the reputation of JD Wetherspoon, the information of the organisation and the knowledge and skills of employees, shareholders and owner. Threshold competences are those that help JD Wetherspoon to achieve the competitive advantage and outstanding their performance to meet the basic requirement that to be compete in the market. JD Wetherspoon has in conjunction with Nottingham Trent University by offering an advanced diploma or degree in leisure management to develop staff training and they recently developed the Advanced Diploma in Leisure Retail Management, for pub and area managers, allowing all of their pub managers to gain a university qualification which sits just below degree level where this is valuable and inimitable for other competitors. They provide entertainment, food and beverage to meet the customers’ minimum needs where recently offered breakfast to their customers and opening hour been extended start from 7 in the morning which is rare by serving a series of healthy breakfast (JD Wetherspoon plc, 2009).

JD Wetherspoon’s unique resources are they have large quantity of outlets – 775 outlets throughout UK, they offer a series range of product and services which include: food and beverage – Wetherspoon and Lloyds No.1 and hotels. Meanwhile, the core competences of JD Wetherspoon are the brand attributes of itself where it’s a value for them, effective training and development systems for the staff is inimitable which lead to a series of competitive advantages for JD Wetherspoon over others competitors and JD Wetherspoon announced that in the next coming five years they would create over 10,000 jobs opportunity in the new opening of 250 pubs. JD Wetherspoon even won the most awards winning as individual and company as a whole. In financial view, they had been invested heavily in ensuring that they are ahead of their competitors (JD Wetherspoon plc, 2009; BBC News, 2009).

 

3.4.   Adding Value

According to Porter (1980), value chain is a systematic approach to examining the development of competitive advantage. The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organisation. Primary activities are directly concern with the delivery of product and services. In Such case, Wetherspoon’s inbound logistics will be receiving and storing stock, then operates their businesses with outbound logistics where distributing the products and services to the consumers whereby by advertising their businesses to alert the consumers and lastly promoting their product and services by giving training to their staff.  Where each of these primary activities linked to the secondary activities such as procurement, technology development – using newest technology to sale their products and investing into latest technology as well, human resources management – deals with recruiting staff, training and managing and infrastructure – finance, quality control and information management. Which this value chain help Wetherspoon to understand and identify their business model (Johnson, 2009; JD Wetherspoon Plc, 2009).  

 

3.5.   Financial resources and management

According to Wiscombe (2009), to ensure companies make profit is not easy where financial management helps large and small organizations keep on track, by the use of budgets and forecasting. This enables to control their decision making on their business strategy thus ensuring profitability. Businesses with sound financial management techniques were able to quickly implement strategies to offset the effects of these disasters by understanding their businesses costs, reducing these where possible, and find ways to help find marketing strategies to increase the much reduced sales.

According to the annual and account report 2010 ended 31 July of JD Wetherspoon plc (appendices 5), they have a total of £996,327,000 of sales and a total of £71,015,000 of profit before tax and exceptional items. Earnings per share before exceptional items are 34.9 pence with a £71,344,000 of cash flow. There are in total of 775 pubs with 47 newly opened and 3 closed. Compare to last few years of sales, profits and earnings per share, there’s an increase and getting better each year. Beside the cash flow for this year there’s been a decrease, this may because of the increase of net cash outflow from the investing activities such as purchase of lease premiums and investment in new pubs and pub extension. Increase of net cash flow of financing activities such as repayment of private placement, increase of equity dividend paid, finance cost of new loans and lease of payment (JD Wetherspoon plc, 2010).

Competitors such as Mitchells & Butlers plc has a £134 million of profit before tax where they stated that there’s a drop of 23.9% in 2009 while Whitbread has a £239.1 million of profit before tax where they claim that there’s an increase compare with the year 2009 (Mitchells & Butlers plc, 2009; Whitbread, 2010).  

The liquidity ratio of JD Wetherspoon is 0.26: 1 for the quick ratio, which means that JD Wetherspoon’s has about four times as many liabilities as it has cash to pay for those liabilities, while for the current ratio will be £65,719: £176,883 where it’s equivalent 0.37: 1 shows that Wetherspoon only have 37 pence to cover every £1 where this may lead to financial risk for the company. As for the profitability for Wetherspoon is 13.99%, this shows that for every £1 Wetherspoon sales, they make a gross profit of 14 pence.

Overall, JD Wetherspoon’s annual reports and account show that the company operates well where the recession did not hit them seriously. Even though there were 3 pubs closed down where this may due to the location where does not attract the crowds but another new 47 pubs were opened this year (JD Wetherspoon plc, 2010).

 

3.6.   Strategic Methods

Since early 2000, Pub chain JD Wetherspoon has bought 10 Lloyds No. 1 pubs from Wolverhampton and Dudley Breweries for an undisclosed sum. JD Wetherspoon intends to keep the current trading format for the time being, which includes music and most of the Lloyds No. 1 have late night licences where Wetherspoon’s other pubs are music-free. Chairman Tim Martin said that by introducing Wetherspoon’s systems, standards and pricing will greatly enhance trade at these outlets where these pubs will be run as a separate business and will not affect the trading style of existing or future Wetherspoon pubs. And today there are over 130 Lloyds No.1 bars in the company and Lloyds No.1 successfully help Wetherspoon to boost sales (JD Wetherspoon plc, 2009; CatererSearch.com, 2000; Louise Bozec, 2001). In early 2010, JD Wetherspoon acquisition over The Foley Arms Hotel in Malvern where 21 staff will be offered job within the firm where it will remain as a hotel and pub after it reopen and Pub group JD Wetherspoon has taken over the Graduate Barfly pub in Cambridge and renamed it The Tivoli which is an ex-Cambridge cinema (BBC News, 2010).

According Lynch (2009), franchise is a form of co-operative strategy where a firm – franchisor develops the business concept to offers the others – franchisees in the form of a contractual relationship or license agreement to use the business concept and to share their mutual benefit. Johnson (2008) stated that franchising involves the franchise holder to undertake specific activities such as manufacturing, distribution or selling whilst the franchiser is responsible for the brand name, marketing and probable training. Since JD Wetherspoon conducts excellent training and development towards their staff, this would be a great opportunity as well if they undergo franchising for their company.

Both licensing and franchising offer a fast means of expansion while minimising risk and financial outlay of the business. In return, the franchisee may need to share a portion of profits back with the franchisor or the parent company. Besides that, franchising able to create stronger brand attribute where they could expand their market to other region. Examples like Coca-Cola, McDonald’s and KFC. The franchisees provide the capital for expansion, which allows JD Wetherspoon a high degree of financial leverage because the expansion at the unit level is financed by the franchise where the company takes minimal risk. The franchisees are also more responsive to local markets than salaried managers, and typically can more readily achieve local public awareness of the business. Finally, the franchisees is an important source of new marketing and product concepts which can benefits the entire franchise network and increase the royalties towards the brand (Jeffs, 2008; Cashian, 2007).

       But at the same time, there’s some draw back as well, according to Cashian (2007), the major initial problem is the actually setting of criteria and length for the contract. If the contract is set for too short a length of time, then companies will be put off bidding for the franchise where they will have sufficient time to recoup their initial investment and vice versa. The franchisor may need to be adequate funds to cover the initial start up of the franchise and there’s a risk where the business falling as well, as JD Wetherspoon may losing control of intellectual property or risking damage to brand’s reputation and at the same time by disclosure the confidential information to the franchisee (Jeffs, 2008).

 

 

 

  1. 4.      Strategic Implementation

Implementing a new strategy often requires direction from organisational leader where change may also be incremental and implemented over a long period of time possibly. Many organisations will undergo periods of change that may be rapid and transformational followed by periods which are relatively stable and only require incremental changes (Finlay, 2000).

JD Wetherspoon classified as a divisional structure where divisionalization involves breaking the organization down into autonomous units called divisions where each division might serve a particular product or market, each will have its own divisional chief executive and management committee and different structure which this structures shows that the main functions of a group are overall financial planning and management, strategic planning, business development and management development. This structure allows accountability to be ‘pushed’ down the organization, providing a balance between corporate development and control (Carnall, 2007).

According to By and Dale (2008), there are three categories of organisation change – changed characterised by how it comes about, by rate of occurrence and by scale. JD Wetherspoon may undergo changed characterised by how it comes about – planned change. According to Burke (2008), planned changed is a deliberate, conscious decision to improve the organization in some manner or change the system in a deeper and more fundamental way. Managing the organisation changes the organisation may need to manage with the transitions, dealing with organisational cultures and the politics of organisational change. When it comes to organisation change, the organisation needs to consider the external environment, mission and strategy, leadership, culture, structure, management practices, individual and organisational performance. JD Wetherspoon can explore more of their market into networking types such as targeting the working class consumer as well by situating a section where computers are available that even people after work. They even can change to licensed night club on some of their pubs such as turning into The Luminar Group, but by operating licensed night club, it might cause changes in their organisation culture whereby the existing customer may not able to adopt the changes and even the employees are not flexible enough for that.

Such Changes may affect the roles such as leadership, external consultants, change action team and functional delegation where how are they going to react on it. Balogun et al (2008) stated that there’s a list of some areas of resistance such as opposition to the strategy proposals, people may lack of interest, lost of power or position, irritate and pessimism. In such case, to overcome these resistances, the organisation may need to built support networks, offering assistance, extra incentives for the employees and involve those who resist in the change process.

 

 

  1. 5.      Conclusion and Recommendations

 

With the evaluation criteria of Thompson (2001) and based on the mission statement of Wetherspoon, the internal stakeholder should invest more on their capital for Wetherspoon such as diversified the business as turning the brand as a franchise. By Franchising, JD Wetherspoon may manage to build stronger brand attributes where they can expand their network as well create more brand loyalties and there’s a chance to build and sustain the strong competitive position where it’s feasible or maybe consider creating alliance with some of the local travel agent to promote their hotel business as well. JD Wetherspoon may able to expand their business by undergoing franchising where this strategy direction is appropriate for JD Wetherspoon which to create stronger brand attributes and making more profits by selling their brand. Since the company aims to provide customers with good-quality food and drink, served by well-trained and friendly staff, at reasonable prices is well compatible, they might consider to invest more in depth than what they are doing for now for example the education that they are giving and the latest technologies and equipment that they are investing such attribute not just maintain their standard but to do better. Their business created lots of job opportunities to the society this is a great contribution to the society.

Most of JD Wetherspoon’s opportunities able to overcome the threats that they are facing not just only with a strong financial background they have but with a certain strong fundamental base they have. The organisation manages to possess the skills and competences that they required. They even won list of awards such as the most recent Loo of the year award (Wilmore, 2010). Base on the annual and account report 2010 ended 31 July of JD Wetherspoon plc, JD Wetherspoon’s did not face any problem on their financial resources where their business goes well and the recession does not give a huge impact on them. Overall with the strategy management process shows that JD Wetherspoon may successful to undergo the three processes. 

 

Appendices 1

Macro Environmental Analysis

 

Opportunities

Threats

Political

 

 

  • Quality of infrastructure (Road & rail system)

 

  • Taxation – Value added tax, corporation tax, goods tax
  • Government restriction on banned smoking
Economic

 

 

 
  • Changing taste / consumer preference
  • Unemployment rate
  • Spending power
Social

 

 

  • Expectation of standards
  • Consumer demand
    • Fast pace of trends changing
    • Homogenisation of product
 
Technological

 

 

  • Online advertisement
  • Internet and E-Commerce
  • Setting up a website
  • Social networking (Facebook) – online word of mouth

 

  • False information from unofficial creator of site – might be a scammer, leading untrue resources.
Environmental

 

 

  • Corporate Social Responsibility
  • Recycle ( eco-friendly activities such as water conservation, electrical conservation)
 
Legal

 

 

  • Health and safety food hygiene
  • Competition laws (this will be a threat for big company but opportunity for small company, as this is to aimed to protect the smaller business to ensure that customer are not exploit by firms with monopoly power)
  • Illegal migrants issues (the employee that hire, may need extra alert and background track)
  • Employment laws (redundancy, dismissal, working hours and minimum wages)
 

Appendices 2

Sector lifecycle of JD Wetherspoon

JD Wetherspoon Plc

 

 

 

 

 

 

 

 

 

 

 

Appendices 3

Porter’s generic strategy

 

 

FOCUS

 

 

JD Wetherspoon

Differentiation

Cost Leadership

 

 

 

 

 

 

 

 

 

Appendices 4

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendices 5

Annual summary report of JD Wetherspoon from JD Wetherspoon site available at: http://www.jdwetherspoon.co.uk/home/investors/finance-reports/final-annual-report-2010.pdf

 

 

 

 

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