Will a price war and snow finally kill off JJB Sports?
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Is it really a year since we were pouring over the accounts and strategy of JJB Sports (or “Target Sports” as we renamed them) at our AQA BUSS3 workshops? At the time, JJB seemed to have weathered a significant threat to its survival by completing a fresh share issue and by disposing/closing over 100 loss-making outlets. Their changed marketing strategy, repositioning JJB Sports as being “serious about sport” held out the prospect of better fortunes.
But 12 months on, and things are looking bleak for JJB. The recent snow disruption certainly won’t help JJB given the reliance of the business on the crucial Christmas trading period. But there are other external influences which are damaging the business too. Continued weakness in consumer demand is one factor (and that won’t get any better in early 2011 with the VAT rise to 20%). And there is also Sports Direct - the key competitor and market leader - which (according to this article in the Independent) is waging a price war against JJB.
Price wars rarely benefit anyone in a market, but this might be one occasion when the short-term cost of a price war (lower gross margins) for Sports Direct results in a longer-term gain (increased market share if JB is forced to rationalise further).
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