Cost Dynamics: Strategic Market Planning - Essay Example

SuperDry of the al affiliation Introduction Business model has been one of the crucial forces driving strategic renewal efforts of many enterprises around the globe. A study done by IBM (2006) on Global CEO, Case Study, for example, clearly indicates how the top management in a wide range of industries is aggressively seeking direction on how to continuously innovate in their enterprises models to develop the ability to both create and capture value. Despite the fact that the expression “business model” has been a widely used business term, the models have not been used in business operations. The notion of business model has just gained prominence recently both in practitioners and academics (Hax, 2005). This, however, does not translate to the fact that enterprises did not employ business models before this renewed wave of interest, but rather that, the business model did not carry much weight as it is does today. Arguably, the latest advancement in information and communication technologies coupled with the wave of globalization has sparked the recent attention in business model innovation and business model design. In fact, the so-called “e-businesses” comprise new business models (Riley, 2009). Shafer, Linder and Smith (2005) postulates that majority of these models are related to e-business. Certainly, other forces have been at play in the recent development in business models such as forces resulting from deregulation and increased consumer awareness. New strategies for forces of competition in globally emerging markets have also accelerated researchers and practitioners towards the systematic study of business models (Grant, 2001). Most academics study concurs that, for companies to be successful in such different and ever dynamic environments, it is imperative to come up with innovative business models (John, 2008). In point of fact, globally motivated enterprises that aim to reach the top ladder in the global markets must find business innovations and model an important constituent (McWilliams, 2000). Therefore, it is precisely right to state that, for an organization to thrive in the current dynamic markets, the management must have hands on skills in business models. In this regard, this study will attempt to look at various models that can be used by Super Dry in the endeavor to become a globally competitive fashion industry (IBM, 2006). Overview of the company Superdry owes its existence to a British international corporation, Super Group Plc. The Superdry products include fashion and clothing line designed in Americana styling inspired with Japanese graphics. The company started as a clothing line for a certain group in early 1985 but later grew to provide a wide range of artistic clothing options. Super Group Plc opened the first store in London UK, under the name Superdry. Afterward, the company growth was phenomenal, and it increased its operations nationwide opening other branches in various cities in England. By the end of year 2012, Superdry had increased its operation oversee to over 40 countries across South America, North America, Europe, Asia, Australia and Middle east (SuperDry, 2009). Market-Orientation Various studies that have been done on marketing-orientation draw conclusion to one point that marketing-orientation (MO) is an evolutionary and ongoing process. In addition, businesses can employ marketing orientation as a means of laying the foundation on the development of their business activities. Various strategies in marketing exist. Some enterprises are inward-looking, and the management focuses more on internal aspects of their businesses. This is usually the case in small manufacturing companies where the employees spend most of the time in the production process. Notably, the extent and likelihood to which Superdry adopts marketing orientation has been shaped by a number of crucial drivers or barriers. The marketing orientation plans for Super dry ranges from Customer Focus, Competitor Awareness, Supportive Corporate Culture and Strategic Perspectives to Inter-functional Co-ordination (Riley, 2009). In the case of customer focus, Superdry understands that the customer is the lifeline of the business, and the business can hardly survive without their input. As such, more focus is laid on customer satisfaction. The competitor awareness closely examines the move by the competitors in the market. The aim is to be always the best in the market. This follows the basic premise that, there are many players in the market and consumers would always buy from the best service provider. Supportive culture recognizes that a positive workplace has a lasting impact on increasing productivity through ability to keep skilled workers and improve employee morale. In converse, negative attitude would kill the business. As such, Superdry engages in the methods that strive to satisfy the workers which in return have a direct impact on the productivity, productivity quality and customer satisfaction (Kotler, 2009). The coordination of all business activities leads to increased productivity. This is the principle of inter-functional coordination as a marketing orientation. If the company activities are well-coordinated, then the market for the company is well guarded (Kotler, 2009). Superdry has well understood its niche, and the competitive strength, and it that regard have employed various marketing orientation to ensure the company remains competitive. SWOT-TOWS The management of the business is tasked in setting company’s goals, mission and developing a strategic plan on methods to achieve the set goals. Superdry employ a variety of tools for informed decisions during planning such as SWOT and TOWS analysis. While the SWOT analysis list the company’s strength, weaknesses, opportunity and threats, the TOWS use the same principle but outlines the threat and opportunity first and then strength and weakness (Werner Felt, 2013). After coming out with a list of opportunity, threats, strength and weaknesses, the management of Super Dry will look at the option of maximizing on the opportunities and overcoming the weaknesses (Gregory, 2014). Being a globally competitive company, Super Dry has effectively listed its SWOT-TOWS as summarized in the table. External Threats 1. competition from rival firms 2.Unproductivegovernment policies 3.increased operation cost due to bad environmental factors 4. External Opportunities 1.Increased markets 2.increased sources of skilled labour 3.Reduced operational costs due to economies of scale Internal Strength Strategies that use strengths to maximize opportunities. Strategies that use strengths to minimize threats 1. skilled labor 2.ideal management practices 3.adequate capital for business expansion Produce quality products Smoothen the operation of the company Increases sales hence profits Improve on the quality standards Integrate business models in running of activities Expand to new markets with fewer restrictions Internal weakness Strategies that minimize weaknesses by taking advantage of opportunities. Strategies that minimize weaknesses and avoid threats 1. the large size of the company weakness management of employees 2.additional cost occasioned by over-production 3.Poor management systems Exploring additional markets Incorporating business models in running the business operations Regulating the number of employees in the company Employing qualified management team Using economic curves in the production systems to avoid over-production PESTEL POLITICAL Though the political conditions of the UK are stable; however, are growing concerns in businesses with respect to general election and along with the probable EU referendum to be held in 2015 (Groom, 2014).Also the independence of Scotland is to pose a challenge (Huffington Post, 2014a). ECONOMICAL Despite of taking steps for the recovery from economic crunch of 2008 and the inflation standing at 1.5%, the interest rate is maintained at 0.5% to support the slowing growth (Huffington Post. (2014b). SOCIAL The rising percentage of different religions, slow and huge rise in the young and old age population respectively are the social trends in UK (Slane, 2014). TECHNOLOGICAL Technology is making waves in the UK and almost every business has online presence for serving its target customers. ENVIRONMENTAL Growing concerns for environment had led every business reduce the impact of operations on environment in the best interest of stakeholders. LEGAL Labor laws with respect to manufacturing, trading laws and tariff influence in the business in apparel industry. Five Forces Analysis Porter five forces analysis is a model used to analyze the magnitude of competition within the industry and strategy development. It is found from industrial organization economics to derive factors that influences the competitive intensity and hence the attractiveness of the market. The attractiveness is used in this context to refer to industrial profitability. These forces are close to the company and affect the business ability to serve its customers and make profits (Porter, 2008). The five forces that might affect the profitability of Superdry include three horizontal forces comprising of threats of established rivals, threats of substitute products, and the threats of new entrants and two vertical forces namely bargaining power of suppliers and consumers. A profitable industry attracts new firms. As such the new entrants would decrease the productivity of the industry. Superdry has experienced phenomenal growth over the last decade. The industry has been lucrative and hence has attracted other firms dealing with branded clothes. This is expected to reduce the profit margins the company previously enjoyed. Threats of substitute goods and products occasioned by availability of the similar products in the market: Superdry has the competitors such as Fitch and Abercrombie who produce similar products. This increases the propensity of the customers to buy from other firms. An increase in the products and services in the market compels the firm to lower the prices and produce high-quality goods in an attempt to maintain a competitive edge. In turn, this lowers the profits margin for Superdry. Many producers have envied the pace at which Super Dry had commanded the market in the last decade; as a result, the products have increased giving consumers’ choices from which to buy (Porter, 2005). Bargaining power of the consumers has much influence on the productivity of the firm. The voice of the consumers piles pressure on Superdry to produce quality products and at low costs. The consumers are also sensitive to price changes and hence any change in price may lead to Superdry losing its loyal and prospective customers to Fitch and Abercrombie. Bargaining power of the supplier suppresses the firm profits by increasing the costs at which a firm obtains its raw material. In most cases, the suppliers have multiple choices of business partners. In this case, Fitch and Abercrombie are potential buyers. Ultimately, Superdry is put under pressure to buy the raw materials according to their set prices. The intensity of competitive rivalry: this is determined by the level of expenses incurred during advertising, marketing and sales promotion. Competition experienced between online and offline companies and the degree of transparency. In this case, the intensity in the clothing line business has always been high for a while now. This is attributed to the factors such as globalization and increased use of technology. This has affected the profits margin for Superdry significantly. However, with the renewed efforts to understand the market structures, the company is expected to bounce backs into its winning ways (Porter, 2005). Value Chain Competitive advantage for an enterprise means not just matching or exceeding what other business competitors have in their powers, but establishing what clients need and then profitable satisfaction, and to a larger extent, exceeding their expectations. As barriers to international and interregional trade have narrowed, and accessibility of goods and services has improved, clients have been presented with a wider choice. Under the current intense competition that in turn raises the customer expectations, enterprises must strive to meet customers need. Hence, the need for value chain. The term value chain was first used by Porter (1985), he detailed on how the customer value accumulates along a chain of activities that lead to the end product. Value chain can be aptly be defined as the internal processes that a company engages in to design, produce, deliver, market and support the products its making (Shank, 2004). Superdry must meet two conditions to survive in the market: supply what the customer needs and survive the competition. One way Superdry can survives the competition is through adding value in the production chain. Majority of the organization has their goals as producing goods and services. The products generated are more important that the steps in the value chain. In contrast, Superdry is aware of the importance of individual activities within the value chain. This is the supporting pillar which works on concentrating on specific activities that allow them to get maximum benefits for both the company and the customers. McKinseys 7S Frameworks The McKinsey 7S Framework is a business management model. It represents the core areas of the management namely; strategy, structure, systems, style, skills, staff and shared values. The model is mostly applied as organizational analysis to determine and see the changes in the internal operations of the company. The basic premise of this model is that for an organization to perform well these core seven elements needs to be aligned and supporting each other. Therefore, the model is used as a management tool by identifying what need to be aligned to improve performance or maintain alignment when changes occur. Changes in business can be varied such as organizational merger, restructuring, new systems, new processes and so forth (Porter, 2008). The model can be applied in Superdry organisation to understand how the elements of an organisation are interrelated and hence ensure the wider impact occasioned by change in one area is well considered. Superdry has employed this model in order to improve business performance, work on best strategy implementation procedure and examine the probable effects of potential adjustments within the company. Superdry categorizes these factors into hard and soft elements. The groups of hard elements consist of structures, strategy and systems while the soft elements include skills, style, staff, and shared value. Both hard and soft elements need to work in cohesion for an organization to grow (Peters, 2009). Super Dry Resources has a wide base of resources ranging from tangible, intangible and human resources. The tangible component includes the machinery, the financial base, lands and plots owned by the company. On the other hand, the intangible assets comprise of items such as the technical know-how of doing things, the technology of databases and information, Super Dry operatives’ processes and the continued goodwill from the clients. The company also prides of its skilled labor which it has managed to maintain through productive employee welfare among other strategies. Marketing Decisions As outlined earlier, businesses must provide what the consumer wants and be able to weather competition. In this respect, Superdry has continuously evolved the marketing skills to combat competition from the rival businesses. Some of the marketing strategies Superdry uses to combat competition include segmentation, differentiation, positioning and market targeting (Abell, 2005). Marketers would find it hard to appeal to all clients in all markets or appeal in the same manner for different needs. Often, companies single out the segments that it can serve best to develop the desired relationships with the right clients (Scherer, 2007). For a firm to create value for targeted consumers, the company should target, segment, position, perceive the product in a given manner and always differentiate its product. Market Segmentation is the process by which companies divide markets into distinct faction of buyers who naturally have different needs, behaviors or characteristics, and indeed require independent products. A Segment can be described as a group of consumers who respond in a parallel manner to a given set of marketing effort. This means the demand in such a group is influenced by the same factors (Philip, 2006). Super Dry has segmented the markets depending on the geographic locations. People from different locations have different tastes and hence the need to categorize the products to suit the needs of the different markets. Demographics which touches on areas such gender, family size, income and occupation. Super Dry has developed products for both male and female to suit the needs for these market groups. Similarly, efforts have been made to categorize the product depending on the income levels of the potential and loyal clients. The behavior such as changes that occur with occasions such as valentine day, loyalty status, usage rate and attitude has also been part of the market segment for Superdry. All these factors define the needs of the consumer at particular given time (Kotler, 2009). Superdry has also used multiple segments categorizing them sub-go, sub-behavior and sub-demographics to get smaller and well-defined target group. Since Super Dry is an international company, the management has deemed it wise to categorize the business markets and international markets. The business markets are categorized by such factors as the demographics and purchasing approaches while the international markets are categorized by factors as political, legal and economies. This allows the company to reach a wider group and hence a larger customer base. Targeting involves evaluating each and every segment attractiveness and choosing one or more segment to subscribe. The target market can be described as a group of customers of whom the seller designs a given marketing mix. For Super Dry, to evaluate the market segment to target, it focuses mostly on company resources and the objectives, the size and growth and attractiveness of the market. After careful examination of the markets, the company differentiated the markets in that it offers products depending on the status of the market. Positioning is the manner at which the product has been defined by consumer on essential attributes such as the place the products have in his or her mind compared to other products. This is usually based on perceptions, feelings and impressions. Super Dry has captured the potential and loyal customer by positioning their clothing line as; super-soft clothing that has hand feel vintage washes that are authentic, fabric of high quality that offering detailing from vintage with the graphics that are hand produced by leading designers; hence, fits and suits to everyone for its styling diversity (Armstrong, 2012). Perceptual positioning indicates how consumer perceptions of their liked brands compared to the competing brands on an essential buying dimension. Superdry will then need to identify the competitive advantage. The competitive advantage is brought about by differentiation. Differentiation comes from different aspects such as a product, service or channel differentiation. Differential complements the product positioning (Kotler, 2007). Corporate Social Responsibility By definition, Corporate Social Responsibility (CSR) is a planned voluntary activity that an enterprise undertakes to operate in a social, economic and environmentally sustainable manner. Super Dry understands the responsible corporate behaviors that not only increases the likelihood for success for the business, but contribute significantly to broad-based economic benefits for the countries and regions where it operates. Investing and operating in a sustainable and responsible manner also plays a vital role in promoting the Britain values internationally and add to sustainable community development (Kytle & Singh, 2005). Super Dry understands that operating in a socially, economically and environmentally responsible manner and act transparently would help it attain great heights through encouraging social license and shared values. Management and improvement of risk factors brought about by social and environmental factors are becoming increasingly important for the business abroad, as the cost of losing such social license is significant. As Super Dry takes advantage of global opportunities, incorporation of the responsible and sound business practices into economic investments may not only benefits both local economies and communities living around but makes good sense in business (McWilliams & Siegel, 2001). Marketing Strategy Super Dry has employed over the last three years For the year 2011, Super Dry widely used all four strategies from marketing choices. For product development, it stretched to footwear as well as refined women’s wear with the appealing fragrance. The fragrance is a strategy to differentiate while product development is intended to diversify the products offered. Additionally, Superdry has diversified the markets by integrating wooden floorboard in soft-lit outlets to encourage the customers for additional shopping. The strategy extended the markets by 4 %. The cost of establishing new markets, estimated to be$ 100, 000 were neutralized by the huge revenue garnered from the increased customer base (Halt 2014). The year 2012 was a success for the company by managing to capture new markets in Asia. Super Dry has implemented basic principles of marketing in an endeavor to reach out to more customers. The company has devised new strategies such as using social website such as Facebook and Twitter and has continued to engage its consumers with its popular app that offers gifts as Super Dry clothes from Superdry. The response has been phenomenal to say the least. The market growth shot up with a staggering 15 %. This was attributed to the fact that new clients could be reached far-off countries with much ease. As expected, the profits grew immensely with the company recording a 9 % increase in the profits margin. Cost of doing business online which rated at $ 89, 000 was spread by the significant benefits which the company enjoyed in the current financial year (SuperDry, 2009). With increased use of technology and globalization, SuperDry has utilized the year, 2013 expanding the markets on various aspects. The social media have captured a bigger percentage of local and international consumers hence have assisted in the extending the customer base. SuperDry has laid much emphasis on building social platform for its clients. The websites have been loaded with more informative and appealing data. Besides, to increase the width of the content, Super Group bought rights from renowned artists to conducts broadcasts in their name and website to attract more customers. Further, Superdry blog is constantly updated to give the clients a fresher view in terms of information on products and other queries. Arguably, this has been the winning ways for SuperDry, the company has extended the profits margin with 20 % margin and reduced the cost with almost 2 %. It is expected the company will maintain its trends even in the coming years (SuperDry, 2009). Role of Marketing in Business Marketing has played multi-facet roles in the company growth. Most importantly, Superdry has increased the growth through various marketing choices. For instance, through differentiation of the products, the management has exploited the advantage. First, increasing the prices until it offsets the improvement in consumer benefits, hence maintaining the market share below the full premium which allows the company builds the market share. Marketing Strategies Successful and effective marketing highly depends upon tackling a number of central issues. These include: what a business is preparing to produce; the level of the cost for the product; the placement method; and how the customers will be made aware about its products and services. Traditionally, these points of considerations were described as the 4Ps — Product, promotion, Price and Place. With time, marketing tended to be more sophisticated field, this resulted to a fifth ‘P’ donating People (Peters, 2009). Recently, two further ‘P’s were added, mostly for service industries namely physical evidence and Process. These points of considerations are now referred as the 7Ps of marketing, also known as the marketing mix. These factors have much influence on Superdry performance, for instance, in product concept, the company should look at what the customer want and start producing the product. However, this was not the case before. The company would go direct to produce the products even without determining if the customer wants the product. Similarly, the pricing may not always be cheap, but it should be competitive. The customer would always be willing to get value for their money. Needless to say, the marketing mix has very useful role in overall performance of Superdry. Superdry, following the theory by Philip Kotler, a renowned marketer and economist knows the product is more than the tangible things. The products consumer needs tangible values and most importantly the abstract value. Following this argument, there are five products level that can be identified and developed (Peters, 2009). Source: tools hero (2013) The core product means the basic products and the chief focus on which it was intended. For instance, for Superdry products, they are warm and protect the clients from cold and rain. The generic product denotes all qualities of the product. For a warm coat Superdry makes, it is all about rain repellent ability, material, fit, high-quality fasteners among others. The expected product stands for the values the consumer expects to get when they purchase the product. The augmented features are additional features that set apart the product from the rest with which it is competing and lastly, the potential products, which entails transformations and augmentations the product may undergo in the future (SuperDry, 2009). For instance, Superdry may start producing warm yet lighter coats. This will be a market niche in the future when developed. The management has learned that competition is not necessary determined by what they produce rather what they add to the product in the form of advertising, delivery, packaging and advice among others. Having said that, the future priority for Superdry remains in product positioning and differentiation besides other processes such as segmentation and targeting. Conclusions and Recommendations As business people, we reside and work in the world of dynamic technological and social upheavals that has brought all kinds of competition for organizations. The businesses are becoming more global; the customer awareness has also increased; the mature markets restrict growth in various aspects; the environmental pressure is growing, and the pace is changing quickly. The urgency of market introduction and acceptance is an integral aspect in the business world today. Combined, all these factors present a challenge to the business. In this regard, Superdry has endeavored to employ relevant models in an effort to withstand the competition and initiate the much-needed growth. Superdry has seen phenomenal growth in the last couple of decades. This does not mean the company does not need growth anymore. In fact, the management should always strategise on the best marketing concepts to the weather competition occasioned by globalization and increased use of technology. I recommend the following strategies for Superdry: Market Research and Design, which will help, identify augmented products. This will improve brand development strategies. Integrating relevant business models such as Kotler product level during decision making. This will help identify brand strategies that will enable Superdry compete effectively in the market. Constant innovation within their production sphere to come up with new and competing products. This will add value to the product. 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Interfunctional Coordination at Hi-Tech Firms. Retrieved Nov 12, 2014, from www.interfunctionalcordinationathitech.com Appendices Industry value chain Value chain activities within a firm support actv McKinseys 7S Frameworks Read More