3.21Business culture and strategy

PESTL analysis is to explore the external environment affecting the organization, which includes five factors: Political, Economy, Social, Technology and legal. This strategy tool can also effectively understand the growth or decline of the market and assess the enterprise's prospects, risks and opportunities.

- Political factors will control and influence an organization or a specific industry, such as trade tariffs, taxes, fiscal policies and so on. In the case of J D Wetherspoon PLC, a bar could not exit independently without being attached to a brewing company. This rule has been broken and bars can either still rely on brewers or exist alone. The traditional link between brewers and pubs, known as the “tie house” system was broken by MMC, giving JDW a chance to enter into the market. But the MMC restrictions not only limited the number of pubs that brewers could operate, they also forced JDW to entered the market as independent retailer.

- Economic factors will directly affect an organization's profitability, performance and long-term prospects in the marketplace, such as disposable income, unemployment rate, economics growth patterns and so on. In the case of J D Wetherspoon, they voluntarily removed promotional prices on spirits in 2004. When cocktails contain less alcohol and become more expensive, people's demand for alcohol decreases, which lead to lower revenues and profits for companies.

- Social factors will affect the environment of an organization or industry by influencing people's different purchasing needs, purchasing habits and lifestyles, such as education, health, brand preferences and so on. In the case of J D Wetherspoon, people may be more inclined to enjoy cheap ale and have a pleasant conversation with friends without TV and loud music. Therefore, JDW's business model is to provide customers with a socialized and conversation place, which can attract more customers.

- Technological factor refers to technological innovation and development. These factors will affect the functioning of organizations and also may affect markets, consumer choices and purchasing power. In the case of J D Wetherspoon, they've installed ventilation systems in every room to ensure customers don't smell of smoke when they leave the pub, and have specially adapted toilets for disabled customers. These technological updates have brought better customer experience and improved customer satisfaction.

- Legal factors can affect the internal and external environment of a company, and even the business environment of an industry or country. Such as employment laws, customer protection laws and environmental regulations. The Monopolies Commission became the Monopolies and Mergers Commission (MMC) responsible for what are now merger control and Market Investigations. ‘Tied house’ refers to the traditional connection between a brewing companies and pubs. Each brewer can attach to a limited number of pubs. In the case of J D Wetherspoon, they entered the market as an independent retailer, so MMC's removal of the "tied house" didn't have much impact on the company.

SWOT analysis is a tool that used to objectively assess an organization's strengths, weaknesses, opportunities, and threats. All of these factors can help companies make smarter decisions. Strengths and weaknesses are analyzed from the internal factors of the organization, while opportunities and treats are analyzed from the external factors of organization.

1.3 Guidelines used to conduct SWOT analysis

SWOT analysis is a framework, which includes strengths, weakness, opportunities and threats. It can help an organization assess its current position and compare it with competitors, and then appropriately adjust the company's plans and strategies. But SWOT analysis can be subjective. Some deterministic factors are based on opinion rather than fact, and it can generate a lot of information, not all of it useful. Therefore, companies should use it as a guide and not necessarily as a prescription.

Strengths and weaknesses are internal factors, but sometimes what seems like a strength can also be a weakness. Opportunities and threats are external factors, these factors may be subject to changes in the external environment. Managers must remain aware of changes in the organization's external and internal environment and constantly adapt their strategies and plans for the organization.

Shared value is defined explicit or implicit fundamental beliefs, concepts, and principles that underlie the culture of an organization. These value guide decisions and behaviours of the employees and management. In the case of J D Wetherspoon, their shared value is ‘involvement and communication’. Employees can stay in touch with the company through a weekly newsletter, monthly company videos, and the publication of board meeting. Martin encourages employees to participate in the company's strategy development process. He not only shares ideas and suggestions on various business aspects with employees in weekly meetings, but also appropriately adopts these suggestions, for example, providing children's cutlery in children's meals.

Taken for granted assumptions is a supposition, it deeply held beliefs that guide behavior and tell members of an organization how to perceive and think about things. In the case of J D Wetherspoon, their taken for granted assumptions is “People are its best asset”. JDW offers flexible training to employees without taking up their leisure time, and offers certifications for relevant qualifications. Employees can work only 48 hours a week, have two days off in a row and work no more than four nights. The company's attention and welfare to employees can improve the loyalty of employees, and employees can bring more benefits to the company.

Deal and Kennedy's model of culture is based on characterizing different four types of organization, based on how quickly they receive feedback and reward after they have done something and the level of risks that they take. JDW is in the work-hard, play-hard culture of Deal and Kennedy's cultural model, which means the company has low risks and can get feedback and rewards rapidly.

Low risk: In 20th century, the company grew rapidly- opening more than 90 pubs and increasing its share price more than tenfold. Furthermore, JDW belongs to the bar industry and restaurant industry, it doesn't have many competitors. Therefore the company is not sensitive to changes in PESTL factors.

Rapid feedback: The market will give rapid feedback after the company provides reasonable prices, high quality products and services. Market signals such as traffic, revenue and profit are received in the short term. The JDW does not play music or TV shows, has built a ventilation system in every room and set up in a quarter smoke-free area. These factors attract more customers, which leads to an increase in customer volume and revenue. The JDW can rapidly receive feedback from market. On the other hand, employees can put forward questions and suggestions in the company weekly meeting, and JDW will also give employees some feedback on the work as soon as possible.

Organization culture refers to an organization that shares common values. It reflects the organization's ‘personality’. For example, the style of the leader, the policies of the workplace and the working environment may all form the unique culture of the company. Organizational behavior is a course in the field of business. Organizational behavior is carried out in the form of companies, teams or individuals. The main subjects of the course are personal cognition, team, employee motivation, corporate culture, leadership, organizational structure, etc. The research purpose of this course is to improve organizational performance (e.g., work efficiency, profitability, etc.). Organizational culture will affect the behavior and activities of the organization and its members. Effective organizational behavior strategies can establish unified values for employees and help the management to motivate employees to work better, which can ultimately enhance the cohesion of the organization. In the case of J D Wetherspoon, their culture is that people are the company's best asset. So what the company does is provide flexible training and relevant qualifications to its employees. Furthermore, the common value of JDW is' involvement and communication', so the organization's behavior includes discussing various problems and opinions with employees in weekly meetings and giving rewards to employees who give feedback.

Before the 21st century, JDW adopted the ‘work hard, play hard’ culture, which would having less risks and the company could get feedback rapidly. After the 21st century, the high risk caused by changes in external environmental factors. Therefore the JDW’s culture has changed to from ‘work hard, play hard’ to ‘tough guy’, which would fit the condition of the company has high risks and could get rapid feedback. After the change of culture, JDW also can get feedback from the market faster, such as through customer flow, business revenue and profit. They reduce the participation of employees, which can speed up the decision-making speed of the organization. Therefore, the previous management mode of employee deep participation cannot be used, and the company needs to make corresponding adjustments. Furthermore, the management of JDW has changed, it has changed from a relaxed management model to a more strict management model.

Porter's Generic Strategy who was proposed by Michael Porter in 1980. Porter's generic strategy includes four types of competitive strategy: differentiation, cost leadership, focus (cost), focus (differentiation). Each of these strategies can help an organization pursue competitive advantage in its chosen market.

Differentiation means that an organization's product or service has some unique characteristics that can be distinguished from other similar products or services in the industry, so as to gain competitive advantages. For example, organizations can adjust product functions, quality and appearance to make products unique in the market and attract more customers, which will affect the company's marketing strategy. To achieve a successful differentiation strategy, companies often need to have strong marketing skills, product innovation, customer support and exclusivity.

Cost leadership is related to the production cost of the enterprise. It means that the organization needs to establish and maintain a lower cost structure than any competitor in order to achieve more competitive advantages. For example, it can create a higher profit margin for the enterprise, or provide a lower price for customers to increase the market share. To achieve a successful low cost position usually requires have enough capital, because it needs to invest a lot of capital in the early stage to gain more market share, and then it needs continuous capital investment, so that it can maintain cost advantage through economies of scale and market share.

Differentiation focusing is similar to differentiation leadership, both of which are based on the unique characteristics of products or services to gain competitive advantages. However, the differences between them are as follows: Differentiated leadership involves appealing to a wide range of markets, while differentiated focus involves appealing to specific market segments without considering price at first.

3.2 Strategy followed by JDW before 21st century and its benefits

Before 2000, JDW adopted the differentiation strategy of Porter's Generic Strategy. Compared to most other pubs, it doesn't have loud music or TV shows, but instead it provides a quiet environment for customers to have a pleasant conversation, which could give JDW a competitive advantage. This market positioning is closely related to customer’s needs and Tim Martin's business philosophy.

Differentiation strategy can bring many benefits to JDW. Firstly, the company achieved rapid growth. JDW is expanding at the rate of an average of one new pub a week, many of which are in the centre of towns and cities. Secondly, the financial performance also becomes better. Its share price rose tenfold a decade after JDW went public. What's more, some prominent features in the pubs have attracted more customers group, so its sales and profits have increased. Finally, JDW provides more job opportunities, because it invited people from different backgrounds to join the company and provide relevant training, which increases the loyalty of employees.

Before 2000, JDW adopted a differentiation strategy, with consistent operating characteristics for all pubs and uniform training for employees, which resulted in organic growth. After 2000, JDW adopted the focus differentiation strategy of Porter's Generic Strategy, because of the increased competition. In adopting a differentiation focus strategy, the company focuses on narrow market coverage, selling a specific product to a specific group of customers. In the case of J D Wetherspoon, it is not only a quiet pub where customers can have a conversation, but also it has developed the 10 pubs it acquired into entertainment bars with loud music and TV shows. This change in strategy enables JDW to gain advantages in the fierce market competition. In addition, JDW set up a family dining area where children and adults could eat together, which would cater to a specific group of people and thus increase the number of customers. Therefore, the management mode of the company has also changed, Tim Martin gave up day-to-day control and became non-executive chairman, working two days a week.

3.4 Factors being considered when changing its business strategy

JDW needs to consider two factors before changing its business strategy.

External environmental factors. Firstly, people were encouraged to drink at home rather than in bars after supermarkets were allowed to sell alcohol at low prices and the government banned alcohol, so JDW needs to consider this social factor when changing its strategy. Secondly, the ‘tied housing’ system was removed by the MMC, so the number of retail bars increased, which led to increased competition in the market. Lastly, the public's attitude towards pubs has changed. Instead of having a conversation in the quiet atmosphere of a pub, they are more likely to enjoy entertainment activities in a pub, such as watching a football game or listening to music.

Exiting management factors. First of all, the original management strategy hindered the further development of the company, because the deep involvement of employees resulted in the company's inability to make quick decisions. They also spend a lot of time communicating their ideas to employees, which is not suitable for the new competitive environment.

Business strategy refers to a plan of action designed by an enterprise to achieve its particular goals. Properly executing a business strategy can help a business gain a competitive advantage. There are three steps to make a business strategy, which are strategy analysis, strategy choice and strategy implementation.

Strategic choice involves that the organization needs to evaluate the advantages and disadvantages of each business strategy by integrating various factors, and then select the most suitable one for the organization from these business strategies.

Therefore, the company needs to choose some strategies from all business strategies which can best achieve competitive advantage and achieve organizational goals.

In the case of J D Wetherspoon, JDW chose a differentiation as business strategy rather than a cost leadership business strategy at the beginning. This is because organizations consider external environmental factors, social factors and organizational values and preferences. For a startup organization, differentiation makes JDW easier to label itself and appeal to a specific demographic of customers.

There are two factors that JDW needs to consider when managing its business strategy. First of all, for the overall management of the company, it needs to consider the company's business direction, and whether all stores should maintain the same business direction. For JDW, their business direction is to provide a quiet environment for customers to have a pleasant conversation, without loud music and TV programs. And all the stores maintain the same business direction. The company has made a unique impression through its differentiated business strategy.

Secondly, for the management staff of the company, they need to consider the employees' knowledge of the company's strategy and employee engagement. For JDW, employees should be well aware of the company's business strategy, as they are encouraged to discuss business related ideas and issues at weekly meetings. In addition, JDW offers flexible training programs and internal selection mechanisms for employees.

The static management style will affect the development of the organization. And Lewin's 3-stage Model, which is a cornerstone of understanding organizational change developed by Kurt Lewin in the 1940s, it is divided into three stages, unfreezing, changing and refreezing.

Unfreeze is the most critical stage in the change management process. The organization needs to make adequate preparations for the change. For example, the management should communicate the reasons for the change with the team in advance. Change is a transitional stage, and organizations need to gradually change their behaviors and attitudes to adapt to and implement new changes. Refreeze is a stage in which the organization has completely completed the change. The team has fully adapted to the new way of working and has returned to stability. But some people in the organization will resist change for fear of uncertainty and personal loss. There are external and internal forces that may cause organizational change. External forces: consumer demand, new government regulations and economic changes. Internal forces: new organizational strategies, new equipment and changes in the workforce.

For JDW, the impact of the driving forces on the company is greater than the impact of the resistance forces, so the company needs to change. It has become a trend for pubs to provide special dining areas for families. Therefore, this social factor may be the reason for JDW to make a change, and they should take advantage of this trend. As the number of pubs in the town and city center increases, JDW has more competitors. Therefore, it must develop new marketing strategies to gain competitive advantages. This competitive factor also becomes the driving force for JDW to make changes. However, there are also factors preventing JDW from changing, for example, the company has achieved success in the past, so they do not think it is necessary to change. Moreover, the company has a strong culture -- providing a good environment for customer communication. If JDW were to be changed into a recreational pub, they would face a lot of uncertainty.

Social responsibility also influences organizational change. The social responsibility of management is not only based on profit, but also needs to improve the level of social welfare. Companies are accountable to their stakeholders, more importantly, they have a moral responsibility to the larger society, such as engaging in social, legal and political issues. When a company changes to become a socially responsible company, it can help manage risks and enhance the company's image and reputation in the market. It can also boost the morale of employees within the organization, resulting in increased productivity and profitability. In the case of J D Wetherspoon, as growing public and government concern about alcohol abuse and the resulting anti-social behavior, JDW responded to the government's binge drinking policy by canceling promotional prices and reducing the alcohol content of cocktails. This was due to the changes made by JDW with social responsibility, but it led to a decline in the company's turnover.

Five different broad approaches to effecting change were identified by Thurley and Wirdenius (1973), which are Directive strategies, Expert strategies, Negotiating strategies, Educative strategies and Participative strategies. An organization's strategy is usually developed and overseen by its top management. But strategic leadership is where the top management of an organization helps team members and the organization achieve long-term goals. In the case of J D Wetherspoon, the role of the company's management was to develop and implement change strategies. They decided to implement differentiation strategy before 2000 and focus differentiation strategy between 2000 and 2014. In the process of JDW's changes, the company's management has strong motivation to timely adjust strategies to cope with the changes in the external environment. For example, they promptly took the initiative to cancel the promotion of large doses of alcohol when the government issued the policy of binge drinking. In addition, they are also aware of the loss of customers during the World Cup, because there is no TV in the store to show the game live. Furthermore, JDW also owns and runs a chain of hotel in the UK.

Change is not always experienced as pleasant and it often leads to resistance in organizations. John Kotterand Leonard Schlesinger developed six change approaches to minimize resistance, which are Education and Communication, Participation and Involvement, Facilitation and Support, Negotiation, Co-optation and Manipulation, Explicit and implicit coercion respectively.

The Education and communication is to inform employees before the change, let employees participate in the change process and reduce the resistance to change; The Participation and Involvement is increase employee involvement so that they support change to reduce resistance of change; The Facilitation and Support is help employees cope with fear during change to reduce resistance of change. JDW could use these three methods, because JDW communicates with employees in advance and inform the details of the change. Furthermore, they also provide training for employees. Good communication and training can make changes with the cooperation and support of employees. And then when employees participate in the change, they will better understand and cooperate with the organizational change, so as to achieve the expected change. Furthermore, JDW can help employees adapt quickly to organizational change by providing support or facilitating training and counseling.

In the case of urgent change, Negotiation, Co-optation and Manipulation, Explicit and implicit coercion can also help organizations reduce resistance in the change. Providing financial incentives or using coercive means can make employees actively cooperate with the change, because the need for change is more important than the interests of employees. However, the reason why JDW does not choose these three methods is that there is good cooperation and participation among the employees of the company with little resistance, so these three methods are unnecessary.

<https://www.tsw.co.uk/blog/leadership-and-management/lewis-change-model/> [Accessed 12 March 2023]

-Jason Gordon, 2022, ‘Porter's Generic Strategy- Explained’, [Online] Available at:

<https://thebusinessprofessor.com/en_US/business-management-amp-operations-strategy-entrepreneurship-amp-innovation/porters-generic-strategies> [Accessed 12 March 2023]

-Van Vliet, V, 2011, ‘Six Change Approaches (Kotter and Schlesinger)’, [Online] Available at: <https://www.toolshero.com/change-management/six-change-approaches-kotter/> [Accessed 12 March 2023]