Decathlon Strategy free essay sample

Thus, one of its activities is the creation of range of specialized clothing and sportswear as well as sport equipment. So, by marketing its own brands ‘Passion’ Decathlon is diversifying its business as a distributor with the business as a manufacturer of sports products. Examples of those ‘Passion’ brands are Quechua, dedicated to mountain sports, and Tribord for water sports. However, competition in this sector has increased in recent years with the expansion of the supply of sports goods in hypermarkets, which are indirect but important competitors. Concentration of direct competitors such as Intersport, Go Sport or Twinner also plays an important role in this environment. In a market increasingly competitive, attention should be paid to the strategy that Decathlon has put in place in its sector in order to sustain its position. Thus, we will study as a first part the competitive environment of Decathlon. In a second time we will analyze the strategy of the famous French brand, and finally we will focus on the strategic fit. 1. Competitive environment . 1. Pestel †¢ Political factors: Creation of sport structure by local authorities †¢ Economical factors: France is the biggest European market, with 9. 1 billion of euros in 2009 (according to the National French Sport Federation) 78% of the market share is hold by large-scale specialized retailers Lot of sporting goods retailers, which increase competition Hypermarkets are also very interested by the sport sector Growth of second-hand market Producer-dealer are growing in the competition †¢ Social factors: Mass men phenomenon of sport activities: 84% of French over 15 years old practiced a sportive activity in 2010, 10 million were members of sport club and 5 million took part in a sport event Growth of spare time and of purchase power since 2 decades Positive image of sport: health, wellness Recent inflation lead to a reduction of leisure budget Reduction of sports activity with the age †¢ Technological factors: New technologies lead to new activities, or renewal of old one (roller skate have been replaced by rollerblade) ICTs let the development of online sales in sport sector Fast obsolescence in some sports (snow sports for example) †¢ Environmental factors: Outdoor sport is seen as a leisure in harmony with nature †¢ Legal factors: French law restrict the opening of new department store 1. 2. Porter five forces †¢ Rivalry among competitors: Two types of actors are present in the market: large-scale retailers (supermarket chains, department stores) and specialized retailers. In the specialized distribution, we can distinguish: the suburban store and the city center and local shops. Indeed, the current trend shows that the sport is growing urban, getting closer to fashion. Thus, parkas and sneakers are no longer reserved exclusively for sports; they invade the streets and offices. For example, Intersport, a direct competitor of Decathlon, has completed its network of supermarkets with Sport Expert (small local sports shops), Intersport Montagne (in ski resort) and La Halle aux sports (discount local shops). We can also notice that hypermarkets are very interested by the sport sector, and many of them are dedicating a part of their store to the sport goods. The last actor of the market is less important, but must be considered: Some independent shops are specialized in one sport (e. g. cycle shop). Finally, there are numerous distribution channels: shops, mail order, e-commerce, sales at the factory The diversity of actors explains the intensity of competition in the sector. The sector is growing (6%) but this growth is highly variable from one product to another and market share can change quite fast. Competition is particularly important because the market is saturated. †¢ Threats of new entrants and entry barriers: Actual sporting goods retailers are occupying the whole market in term of product offer and price range (low-end to high-end). The actual retailers seem to have locked their area of activity. Therefore, enter the sector involves significant barriers to overcome. Clear barriers: Differentiation is very difficult Require a large capital to have a chance to get in the market Necessary expertise in the sport field Need to be part of a network of manufacturers/distributors In conclusion, the threat of new entrants is very low, considering the important barriers a potential new entrant has to face †¢ Bargaining power of suppliers: As the distributor of its own brand and of international brands products, Decathlon faces two types of providers: Its own subcontractors Manufacturers of sports brands such as Nike, Adidas, Salomon or Reebok The relationship between Decathlon and its subcontractors is based on a strong partnership. On the one hand, the company provides a vital outlet for little French suppliers. On the other hand, the group selects subcontractors who are geographically close and asks them to provide quality exclusive products. Thus, the group is able to deal with this part of suppliers. In contrast, the relationship between sporting goods multinationals and Decathlon are strained. The big brands (Nike, Salomon, and Adidas) have a strong pressure on the place of their articles in the stores. They are complaining that the private label is too much present on the side of their articles. Moreover, the bargaining power is on the side of the major manufacturers and they refuse to be less important than the store’s brand. This choice is very effective in time of crisis, but when the consumer wants a product that also conveys values, it weakens. Threat of substitutes: To evaluate the pressure of substitutes, the question arises about the use of a sports article. On one side, the sports article is related to a sport. In this case, the risk of substitution can come from a change in these activities: they may become less important (in favor of other activities) or a new practice requiring little technical equipment can emerge. On the other hand, if wearing sports clothing is fashionable, clothing habits can take over sport use of the clothe (e. g. streetwear). Therefore, the distributors of sport goods find themselves in competition with retailers of clothing. †¢ Bargaining power of buyers: The bargaining power of customers is important. Indeed, the transfer costs from one distributor to another are small. The major brands are available in all stores of competitors of Decathlon. Moreover, the market of sports equipment especially the sportswear and the shoes are increasingly depending on fashion and seasons: for example, rollerblading have exploded in recent years, but when this market will become mature, a new sport may arise. Consumers are becoming more demanding and less loyal. 1. 3. Strategic group Group A: These are the market leaders offering a wide range of equipment and products of high technology. In addition, these industry leaders are present in clothing, footwear and sport equipment. This strategic group includes brands extremely specialized, whose products are very technical. These companies, for example Eider or Columbia, are positioning themselves in the market of outdoor goods. Group C: Decathlon is itself a strategic group, as it is the only sport equipment distributor to offer its own brands. Decathlons sports products are very broad and also very technical compared to the one of Go Sport and Courir for example. Group D: Here we find ‘riding’ brands, such as Quicksilver and Rip Curl. They position themselves on a particular niche: large variety of fashionable products but no particular technical advantage. Group E: This strategic group includes most sportswear brands like Reebok, Puma (the followers of the market leaders). These companies can be defined by a multi-sports offer (shoes, clothes ) but the products are less technical. 1. 4. Key factors of success †¢ Management knowledge Setting-up: To be able to enter this sector, companies must have a very important capacity to invest, because the costs are very high. An international presence is an advantage in a market without borders. Distribution channels: It is vital to diversify the distribution channels, with the importance of the presence on Internet and in Business to Business. Marketing knowledge Communication policy: Creating brand image through advertising campaigns and sponsoring. Services: The quality of the services is very important to create customer loyalty. Thus, reception, advising, after-sale service and equipment hire are part of the key factors of success. †¢ Production knowledge The range: A large and diversified range, for all consumers with a price range adapted, or a small but very specialized range, aiming very regular user who will pay the price for very high quality.