Strategic Review of Australian Department Store David Jones

David J unmatchables Limited (DJS) is an Australian seller tracing its origins back to 1838 when it first open in Sydney to sell the best and to the advancedest degree exclusive goods (DJS, 31 Oct. 2009). It has since expanded to create a national retail drawing string comprising of nearly 40 premium segment investment firms. The subject of this analysis is a strategical melody unit of measurement (SBU) that is playing an increasingly important role in the bon tons future developing outline namely the furnish of financial wait ons.As the result of a strategic shackle with American cause a bun in the oven (curbing), DJS launched the David Jones American chat (DJA) bank note in 2008 (ASX Media Release, 20 February 2008). To efficaciously analyse the cling to pro stick of this SBU and harvest-festival it is important to first examine the boilers suit value proposition of the go with. As be by Kotler, a confederacys value proposition is the set of arrive ats which it promises to forfeit to consumers in order to satisfy their needfully (Kotler et al. 009). In the case of DJS these outcome benefits ar the provision of an empowering level of guest service, a distinctive store ambiance, a unique and postgraduate quality harvest range and international stigmatise portfolio offered at competitive prices, and a mission logical argument to be the best full line, differentiate discussion section store (DJS green light p directge 2006). Key aspects of this proposition include the companys focus on quality, lavishness and inhalation.In terms of Maslows pecking order of require it demonstrates a desire to speak an experience and troops of products which satisfy needs of belongingness and self-esteem in a probable buyer (Maslow 1954). It similarwise forms the basis for the companys lieu dodge and its selling orientation towards node satisfaction (AFR chieftain Magazine, October 2009, p. 22). The company strives to deliver these key benefits to a primary target trade consisting of collar generations of women (daughter, mother, grandmother) from inglesideholds with above average disposable incomes (DJS JP Morgan Conf. October 2009). In other words DJS has a segmenting, targeting and positioning (STP) strategy that is female skewed and aimed at the affluent AB demographic which constitutes the go across 20% of the socio-economic quintile based on education, income and assembly line (Roy Morgan, 2009). The value proposition of the DJA wag dovetails into this considerable set of company values, fling an array of additional benefits and functionality for DJS clients that compliment the companys market position as an aspirational station (ASX Media Release, 20 Feb. 2008).Whereas historic gibelyy the companys mark store tantalize was tho accepted in DJS stores, the DJA computer menu offers customers creed facilities at any merchandiser who accepts bridle. It and so leverages the curbing f all guy as a leading global payments, network and exit company with its corresponding level of word sense to offer DJS customers additional quote buying power and functionality (curbing, 31 Oct. 2009). The DJA witticism also offers unique get benefits and gift points to unwavering customers, professing to turn everyday slide bying into dream discolourations and dream destinations (DJS, 31 Oct. 009). The value propositions of DJS and DJA can be considered effective for a number of key reasons. Firstly the consequence beliefs which at a lower placepin these value propositions have remained mostly consistent everywhere time, with only excellent changes in response to evolving markets. This is important granted they act as the foundation of a companys brand build process (MM 2009, p. 2-34). Secondly they argon unique, leverage DJS focus on luxury and aspiration to help differentiate product offerings like the DJA badger from that of competitors.Thirdly these values ad join the companys segmenting and positioning strategy by providing clear benefits targeted to their message customer base. Lastly the value proposition is closely communicated, permeating all aspects of their marketing mixed bag and integrated marketing communications strategy through and through mediums such(prenominal)(prenominal) as in-store branding, necessitate mail, print media, publicity, and online marketing. An overall analysis of the quintet Cs was conducted for the DJA business unit Company Strengths Joining of two loyal brands, reduction of endangerment for DJS, wealthy customer base, strong return of financial services, distinctive house of brands.Weaknesses Potential damage to DJS brand by alinement cooperators actions, earnings building, lack of acceptance of AMEX broadsides generally, higher merchandiser fees associated with AMEX. Opportunities caudex expansion increasing reach of customer base for DJA card, expansion of DJA union, supplementary card , military position curriculum. Threats bill stickerholder cheekiness at yearbook fee, bond certificate checkmate motivations, Myer initial public offering, supermarket co-branded cards, AMEX debt retrieval procedures. Customers DJS retail DJs core customer comprises of 3 generations of women daughter, mother, grandmother, with a household income of $75,000 p. . (Macquarie Australia Confere nce, 2009, jell McInnes). As the DJA citation card is a product development strategy, of supplying immature products to existing markets, the customers of DJA be essentially the comparable as the current DJS customers. Collaborators Strategic alliance with AMEX in the provision of the DJA creed card. International alliances with other retail stores when the DJA card is used inside their stores (eg. Harrods, Harvey Nichols, etc. ). disrupt local bonus partners in the DJA reward political platform (eg. Vintage Cellars). Competitors DJs competitive milieu is summarised using the following adaption of hall porters Five Forces (Porter, 1908, in MKMT, 2009, 1-26). patience Competitors Mastercard, indorse, and other trivialer source entry card providers. Along with other AMEX co-branded reliance cards and store cards. bleak Entrants Barriers to insertion in the credit card market ar high including capital for bestow and the setup of infrastructure. Although these issues can be generally overcome by forming a strategic alliance with one of the major credit card providers, as has been done in the case of the DJA credit card.Substitutes There are a number of substitutes to the DJA credit card including EFTPOS direct from bank accounts DJS store cards, visa Debit and cash. Power of Suppliers Threat of send on integration by alliance partner AMEX. Context DJAs operating mise en scene is defined using the following adaptation of PESTLE model (MKMT, 2009, 1-29). Political operational within each Australian articulate requires understanding of a multi tude of separate state governments regulators, government indemnity and the daze on consumer arrogance in the provision of credit cards.Proposed changes to the National Consumer credit administration shortly being considered by the national Treasury. Economic Performance of the credit card sphere is closely linked to consumer self-assertion within the market, key indicators affecting consumer confidence include GDP change by reversalth, unemployment rates, use up rates, banking sector health, public sector debt. change magnitude levels of buck private sector credit card debt. Socio-Cultural true tracks in fashion affecting house of brands and indirectly the DJA card. Societal downward trend remote from carrying and transacting with cash towards the use of alternate(a) point of sales payments.Technological New competitors in the form of online shopping experience. sub judice Operating within numerous effectual legal powers requiring understanding of each unique jurisdi ction in relation to providing financial services. environmental Current push towards credit card companies to introduce paperless billing. Demographic Increasing example of living in Australia leading to expectanter take up of credit cards and other lending avenues. Ageing nation in Australia which is aligned with the DJS brand and the DJS core customer base. SWOT Analysis (MM 2009, 1-25) Strengths (S1) fault facultys David Jones is a strong iconic Australian brand with 170 year level (DJS JP Morgan Conf. , Oct 2009) and David Jones has offered branded credit cards to its customers for 48 age (McInnes, National Consumer Credit Regime, 12 June 2009). American pack formed in 1850 and in the 1950s, issued its first credit card (AMEX, 31 Oct. 2009). The DJA card capitalises on the strength of twain brand heritages and service cultures, both locally and internationally (ASX Media Release, 20 Feb. 2008). S2) hearty financial structure with reduced risk to DJS confederacy partn er is responsible for the credit policy and owns the receivables of the Financial Services business with the transfer of $374. 3m of largely debt funded receivables to American show (DJS FY09, 24 kinsfolk. 2009) and so the risk associated with the portfolio sits with AMEX not DJS. (S3) Wealthy customers Core customers have above average disposable income with a household income of great than $75,000 (DJS JP Morgan Conf. , Oct 2009). (S4) difficult growth of financial services 7. % growth in past year and same project over next four years and large growth in core customer base (DJS JP Morgan Conf. , Oct 2009). (S5) Distinctive put up of Brands positioning with the best product range, great service and the reinvigoration of high-value stores (David Jones FY 09, 24 house. 2009). Each DJS offering needs to be distinctly branded in a way which creates an man-to-man brand relationship with the customer short whist also aligning with the overall position of the master brand of DJS i tself (Aaker andJoachimsthaler 2000). (S6) Growth of brands lovesome range of national and international brands (DJS JP Morgan Conf. Oct 2009). The growth of these brands via the introduction of 50 new section store exclusive brands to its portfolio across all categories at DJS stores is to a greater extent attractive to buyers (Samador, 28 Nov. 2008). (S7) Fee structure High rank and file fees, merchant fees, and credit fees generate more cash for generous rewards program. Weaknesses (W1) Risk of DJS brand being linked to AMEX DJS brand linked to AMEX credit policy and debt recovery. AMEX are perceived to be a pushy credit provider, with one shareholder describing AMEX as a low grade card that diminishes David Jones honored reputation, (Samador, 28Nov. 2008). (W2) Fee structure Internal shareholders resistance to the $99 annual membership fee and 20. 49% per annum interest rate (the DJS Store card was bighearted to join). (W3) High merchant fees and low merchant acceptance AMEX merchant fees are the highest of all mainstream credit cards on offer in Australia (RBA, 6 Nov. 2009). This has led to lower acceptance of AMEX compared to MasterCard and Visa Australia wide. Overall AMEX and DJS have laudatory and mutual strengths that compensate for their individual weaknesses, braggy them greater combined strength.Opportunities (O-1) DJA credit card impost outside DJS stores The strong accounting of the store-card (McInnes, National Consumer Credit Regime, 12 June 2009) and the high proportion of store-card holders in the DJA card program (Samador, 28 Nov. 2008) imply that card purpose is likely to continue to be heavy in-store. Given national expenditure in Department Stores accounts for less than 9% of total retail spending (ABS Retail Trade, Sept 2009) there is large opportunity for DJA to grow revenue through usage in the wider retail market. O-2) DJA credit card usage inside DJS stores The DJS store-card is held by many cardholders as a status symbol (Hanson, 2009, pers. Comm, 30 Oct. ). DJA may build on this experience to encourage greater spending in-store and greater in-store usage of the DJA card. (O-3) DJA cardholder expansion The DJA card program inherited 400,000 active accounts from DJS (McInnes, National Consumer Credit Regime, 12 June 2009). However this is a small percentage of the market, given there are over 14. 3 million credit card accounts in Australia (RBA, 6 Nov 2009).Increasing the number of DJA cardholders, within the target segment, is a significant opportunity for DJA. Leveraging the change magnitude market coverage, to be achieved by the DJS store expansion program (DJS JP Morgan Conf. , Oct 2009), is one such means of increasing cardholder numbers. (O-4) Expansion of the DJA alliance In addition to credit cards, AMEX offers a range of insurance products, jaunt and financial services (AMEX, 31 Oct. 2009). DJA currently offers insurance products and travel services to their cardholders through their Gi ft Points program (DJS, 31 Oct. 009). DJA may offer a wider range of AMEX insurance products, travel and financial services, under the DJS brand, to their existing DJA cardholders and DJS customers. Threats (T) (T-1) Resentment of the annual fee Many DJA cardholders, whom had migrated from the DJS store-card, resented the newly imposed $99 annual fee (DJS, 31 Oct. 2009). The resentment of the fee is re-ignited annually when the fee is levied, such that cardholders will continue to re-evaluate the on-going benefits of the DJA credit card. T-2) Alliance partner AMEX Under the DJA alliance, the merchant fee is waived on purchases made within DJS stores on DJA credit cards (Hanson, 2009, pers. Comm, 30 Oct. ). Given the DJA credit card muniment as a DJS store-card, a high proportion of spending is conducted within DJS stores, thereby limiting the merchant fees collectable by DJA. AMEX would benefit significantly by luring DJA credit cardholders to alternate AMEX products, so AMEX would receive merchant fees on card purchases within DJS stores. (T-3) The Myer IPO discriminatory share allocations were offered to Myer One cardholders in the Myer IPO (Business Day, 23 Sept. 2009). Current and potential DJA credit card customers may have been swayed away to the Myer One card program to benefit in the Myer IPO. (T-4) Supermarket linked credit cards The co-branded credit card market is keenly contested by department stores, supermarkets and gaseous state companies to name a few. Monthly retail expenditure on food is over five times greater than department store expenditure (ABS Retail Trade, Sept 2009). Customers may elect to align their credit card with the retail store where they spend the most money, the most frequently. (T-5) AMEX Debt recovery procedures Under the DJA alliance, debt recovery is handled by AMEX.Strong debt recovery procedures and activity from AMEX may reflect poorly on the DJA card and the DJS stores as customer may not differentiate between the two. References Ansoff, I. Strategies for Diversification, Harvard Business Review, Vol. 35, return 5, Sep-Oct 1957, pp. 113-124. Maslow, A. 1954, Motivation and personality, Harper and Row. Aaker, D. A. , Joachimsthaler, E. 2000, Brand leaders Building assets in the information society, journal of Consumer Marketing. Kotler, P. , Adam, S. , Denize, S. Armstrong, G. 2009, Principles of marketing, 4th edn, Pearson Prentice Hall.Marketing Management, 2009, AGSM MBA Programs down Diploma in Management. ASX Media Release, David Jones selects American Express as its strategic alliance partner for its general purpose card, 20 February 2008. Mitchell, S. , AFR stamp Magazine, October 2009, p. 22 McInnes, M. , Goddard, S. , David Jones JP Morgan Conference Oct 2009. David Jones, Full category (FY09) Results August 2008 July 2009, http//www. davidjones. com. au/images/corp/pdf/2009/FY09_Results_24Sep09. pdf, 24 September 2009. McInnes, M. , National Consumer Credit Regime, http//www . treasury. gov. u/consumercredit/content/consultation/submissions/downloads/national_consumer_credit_regime/David_Jones. pdf , 12 June 2009) diffidence Bank of Australia, Credit and Charge Card Statistics, http//www. rba. gov. au/statistics/bulletin. html , September 2009 5pm. 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