Current Strategic Position of Topshop - Essay Example

?The strategic position and potential opportunities and threats of TOPSHOP in the future. Contents The strategic position and potential opportunitiesand threats of TOPSHOP in the future. 1 Contents 2 Introduction 3 Environmental analysis 3 Current Strategic Position 6 Strategic options and Tactics 8 Factors in the decision 9 Test of strategic option 9 Choice of strategic option recommended 10 Implementation 10 Conclusion 11 Reference 13 Bibliography 15 Appendix A: 15 Appendix B: 16 Appendix C: 17 Appendix D: 18 Introduction Topshop is a retail outlet which deals in women clothing and accessories. It is one of the most influential brands and a flagship brand of Arcadia group which is the second largest retailer in UK. Topshop was launched in 1964 and presently it operates in about 20 countries and also online operations in some of the markets. The retail outlet shares a good reputation with students and offers discounts to those students with an NUS card, targeting the student market by offering deals on their websites such as shopping nights and campus tour (People & Planet, 2011). The brand has also launched its own websites through which customers in USA gets an opportunity to shop. The website is updated 5 times a week and with over 300 styles (Topshop, n.d). Environmental analysis The environmental analysis is done with the help of PEST analysis. This tool helps in detecting the trend of the environment which can become issues in the competitive environment (Henry, 2008, p.51). Political factors The countries political factor in terms of clothing has been shaped by the international trading agreement. But the rules on trade remains complicated and changes rapidly. The trade blocks and trade agreements maintains distortions to free trade, which has resulted in rise in the Chinese exports and a drop in prices for UK consumers (Allwood et.al, 2006, p.8). Economical factors Economical factors have an adverse affect over the industry. If the growth rate is high the country will be able to produce more goods and services. The retail industry is also affected by the economy of the country. The GDP rate of UK by the end of 2010 was $2.247 trillion; the textile industry experienced a growth of 15.9% which implies that the retail clothing sector is growing (US Department of States, 2011). Social factors The social factors affecting the retail clothing industry includes the age range of buyers which helps the retailer to determine what kinds of product to offer. Topshop has targeted the students and thus they produce fashionable clothing. The disposable income creates an impact on the buying behaviour of the consumers. The buying habits of the consumers are also a matter of concern as the retail outlets needs to match up with the consumers taste and demands. Technological factors With the help of technological factors the retail industry are able to cut down cost, enhance sales and can access customer information by way of bar coding and scanning, by using LAN, utilising the point of sales terminals. The distribution of the products will be done electronically enabling reduction of price due to product supply lines (Wilson, 2001, p.7). Porter’s Five Force Model Porters five force model focuses on five forces that shape the industry. The forces includes bargaining power of buyer, bargaining power of supplier, threat of new entrant, threat of substitute, and rivalry among the firms. (Refer Appendix A). Bargaining power of supplier The bargaining power of supplier in retail clothing industry would be high because there are many buyers but few dominant suppliers. Topshop clothing is usually designed by fashion designer thus making the bargaining power high. Bargaining power of buyers In a retail clothing industry the bargaining power of the buyers are high because they can easily switch from one brand to another as they have a wide range of options available in the market. Topshop produces fashionable clothing and accessories which are easily available as the product are standardised with other brands thus giving more power to the buyer. Threat of new entrant New entrant can raise the level of competition, reducing the firm’s attractiveness. The threat of new entry largely depends on barriers to entry. The retail clothing industry requires a huge investment, the existing brands have a high level of loyalty such as Topshop and Peacocks and the switching cost of the customers are also high. But it should be noted that due to a decrease in the customer’s loyalty which has resulted in higher degree of competition and also threat of new entry (Business Teacher, 2011). Thus the threat of new entrant would be moderate to high. Threat of substitute Clothing cannot be substituted for other products but the manners in which the product and services are supplied have become substitutable with technological development. Due to the development and with the acceptance of internet the customers have accepted the e-shopping methods (Business Teacher, 2011). However considering the nature of demand for the product the threat of substitutes is fairly low. Rivalry The rivalry among the industry is high as there are many retail outlets in UK competing with each other in all respects such as price, style; fashion etc. One of the biggest competitors of Topshop is River Island, one of the successful companies on high street. The competition is not only from the existing competitors but also from the potential threats such as the supermarkets (Business Teacher, 2011). Current Strategic Position SWOT Analysis The SWOT analysis allows the organisation to maximize the strengths and minimize the weakness, take advantage over the opportunities and overcome the weaknesses (Fine, 2009, p.74). Strength Its strength lies in its innovation and creativity, as the brand keeps on inventing new lines of product creating a portfolio for its brand. Topshop has more than 300 stores in UK and over 100 stores overseas. The brand name and its image is the biggest strength for the retail outlet. The charity work performed by Topshop also adds on to its list of strength. Weakness The major weakness lies in with the retail shop is that Topshop deals particularly with female clothing. The customer base is limited to women only whereas its competitors have positioned themselves as a family brand. Opportunities Since it has targeted the women, where fashion keeps on changing, its opportunity lies in innovation and fashion style. Topshop can go for international expansion targeting the emerging countries like China, India and countries where the demand for its product is high such as USA and Europe. Topshop has expanded its product line and has introduced Topman. Further with the charity work undertaken by the company is able to attract more potential customers. Threat Threat imposed on Topshop is from the other retail clothing stores, those which have positioned themselves as a family brand. The company faces competition from other brands which has a similar range of clothing and is made available for the same age group. Thus the consumers have a large variety of options to choose from. According to a report, there has been a decline towards the spending on clothes and non food items by 1.8%. Thus the economy can be a threat to the retail industry (The Guardian, 2011). Value chain The value chain activities from the conception of the product to its final stage which adds value at each stage were neglected by the managers, technical experts in the clothing industry about 25 years ago. But now outsourcing and off shoring has helped the industry reshaped itself. With the use of value chain, at present only 10% to 20% of clothing is manufactured in the western countries. Topshop manufactures its cloths mainly from India and China because of low labour cost. Clothing been recognised as highly globalized industry, the value chain is still influenced by the social context of the firms. The UK companies primarily focused mainly on lower and middle market of fashionable clothing for the younger consumers and mainly serve the domestic market (Lane, 2009). (Refer to Appendix B) Stake holder analysis Topshop business is highly influenced by its stakeholders. Stake holders are people or organisations who are interested in the business. Customers are one of the major stakeholders of Topshop. The main motive of the business is to please the customers and live up to the expectation of the customers. The customers expect good quality and value for money clothes from the company. The human resource team plays a vital role in Topshop and Topman success. The HR teams helps in creating an environment where the teams are motivated and equally contribute to the success of the brands. The company’s human resource team excels in areas such as employee relation, reward and resourcing and learning and development. The human resource team help to shape up the business through close relations with the managers and focusing mainly on resourcing and developing the people (Topshop Topman, n.d). Strategic options and Tactics Strategic options are creative alternatives to an external situation that an organisation faces. After analysing the trends of the organisation, its opportunities and threat a strategic option can be identified (MDF, n.d, p.1). By using the Ansoff matrix, two factors can be defined, what is sold and to who it is sold to. The matrix gives four alternative choices while considering the objectives (Stone, 2001, p.50). (Refer to Appendix D). According to the needs of Topshop, the company either go for market penetration (expanding into other cities in existing markets and strengthening the online channel) , market extension (international expansion into new markets), product development (launch of new product line) or else diversification (launch of a complete different line of products in new markets). Factors in the decision The issues Topshop might face while expanding globally is the risk involved, the consumers might not like its product due to difference in culture. Also partnership and franchising methods needs to follow certain regulations according to the country’s political terms and condition. Apart from this Topshop have to face high cost of promotion to create awareness about its brand and products. Test of strategic option The test of strategic option is done through TOWS matrix which was developed by Heinz Weihrich. This matrix compares the strengths and weakness of the organisation with market opportunities and threats (ICAI, n.d, p.2). S-O strategies: Topshop have a huge brand name and has over 300 stores in UK and more than 100 overseas. This strength can be utilised as an opportunity. The brand value would help the business to set up overseas thereby reducing the promotional cost. W-O strategies: Topshop has introduced a new range of product line for men Topman. With the introduction of Topman, the business could overcome its weakness of catering only to women. Thus Topshop could use this opportunity and go further to introduce new product lines for the kids as well. This would help it to get recognition not only of a brand which caters to women but to families. S-T strategies: The company major strength is its brand name and is one of the biggest retail stores of UK. With a huge brand name the company can attract the potential customers and convert the threats of the organisation into strengths. W-T strategies: If the weakness is not taken care at an early stage, this may prove to be threat for the company. Topshop’s weakness was that it targeted only the women whereas its competitors had put up an image of being a family brand. To overcome its weakness Topshop had introduced new product for men, Topman that would help it to target the men’s market (Inspired Business, 2010). (Refer Appendix C). Choice of strategic option recommended Strategic option for Topshop can be of market extension, into countries where the demand is high and also the future growth for the retail industry is also high. It can extend itself in countries like India and China because these countries are expected to grow at a steady rate in the future. Also the demand for product is fairly high in Europe and USA thus expanding into these countries would prove beneficial for the company. Apart from market extension, Topshop can also choose the option of product development by offering new clothing range for men and kids which would portray the brand as family brand. (Refer Appendix D). Implementation Topshop should introduce clothing for men and kids, which would influence its potential customers as well as its loyal customers to purchase from them. Also, Topshop plans to further expand its business globally where the demand for its product is high such as Europe and USA. India and China being emerging countries where the retail sector is at a growth stage, Topshop could engage into partnership or franchising with the local market operators which would prove to be cost effective for the company. Conclusion The target group of people needs to be modified, as Topshop main target is the students and women. The company should broaden its target group so that it is able to survive the competition. The competitors of Topshop have positioned themselves as a family brand store thereby attracting more customers. Thus, Topshop needs to reposition itself as a family brand but the company should not change its core competency that is of stylish and fashionable clothing which makes the brand a huge success. Apart from its target audience, the company needs to expand its product line. The brand has already expanded into countries where the demand is high for its product, now the company can target emerging countries where the growth for retail market is high such as China and India. The company can either enter into partnership with the local operators or operates as a franchise in the overseas countries and also can endorse the celebrities for the promotional events. Before launching its store the company should properly analysis the market and its trend and offer the products accordingly and much emphasis should be put on the price strategy, as the culture overseas are different from that of UK. The consumers are different in China and India and hence the pricing strategy should be made according to the people residing in those countries. Thus Topshop would be able to achieve success and would maintain its position of being the most successful brand in UK and overseas. Reference Allwood, et.al. (2006). Well dressed. [Pdf]. Available at: http://www.ifm.eng.cam.ac.uk/sustainability/projects/mass/uk_textiles.pdf. [Accessed on November 10, 2011]. Bidgoli, H. The Internet encyclopedia, Volume 1. John Wiley and Sons. 2004 Business Teacher. (2011). Porters five force essay. [Online]. Available at: http://www.businessteacher.org.uk/free-marketing-essays/porters-five-forces-essay/. [Accessed on November 9, 2011]. Fine , L.G. (2009). The SWOT Analysis: Using Your Strength to Overcome Weaknesses, Using Opportunities to Overcome Threats. CreateSpace. Henry, A. (2008). Understanding strategic management. Oxford University Press. ICAI. (No Date). Strategic analysis. [Pdf]. Available at: http://icai.org/resource_file/20085ipcc_paper7B_vol2_cp3.pdf. [Accessed on November 9, 2011]. Inspired Business. (2010). How to use a SWOT analysis and a TOWS matrix to develop strategies for your business. [Online]. Available at: http://www.inspiredbusiness.eu/business-articles/how-to-use-a-swot-analysis-and-a-tows-matrix-to-develop-strategies-for-your-business_4.html. [Accessed on November 9, 2011]. Lane, C. (2009). Fashioning the value chain. [Online]. Available at: http://www.research-horizons.cam.ac.uk/preview/fashioning-the-value-chain.aspx. [Accessed on November 10, 2011]. MDF. (No Date). MDF Tool: Strategic Options. [Pdf]. Available at: http://www.toolkitsportdevelopment.org/html/resources/9E/9EB316CD-083E-4C09-B7A5-E22DEA312F05/06%20Strategic%20Options.pdf. [Accessed on November 9, 2011]. People & Planet. (2011). TopShop. [Online]. Available at: http://peopleandplanet.org/redressfashion/topshop. [Accessed on November 8, 2011]. Stone, P. (2001). Make marketing work for you: boost your profits with proven marketing techniques. How to Books Ltd. The Guardian. (2011). Retail sales slump amid fears over euro and job losses. [Online]. Available at: http://www.guardian.co.uk/business/2011/nov/08/retail-sales-slump-job-losse. [Accessed on November 9, 2011]. Topshop Topman. (No date). Working at head office. [Online]. Available at: http://www.topman.com/careers/head_office/hr.html. [Accessed on November 9, 2011]. Topshop. (No Date). About us. [Online]. Available at: http://www.topshop.com/webapp/wcs/stores/servlet/CatalogNavigationSearchResultCmd?catalogId=33057&storeId=12556&langId=-1&viewAllFlag=false&categoryId=273012&interstitial=true&intcmpid=W_FOOTER_WK45_HP_UK_ABOUT_US. [Accessed on November 9, 2011]. US Department of States. (2011). Background Note: United Kingdom. [Online]. Available at: http://www.state.gov/r/pa/ei/bgn/3846.htm. [Accessed on November 9, 2011]. Wilson, L.H. (2001). Retail industry study. [Pdf]. Available at: http://www.sbtdc.org/pdf/retail.pdf. [Accessed on November 9, 2011]. Bibliography Pradhan, S. (2009). Retailing Management 3E. Tata McGraw-Hill Education. Ferrell, O.C. & Hartline, M. (2010). Marketing strategy. Cengage Learning. Grant, R.M. (2005). Contemporary strategy analysis. Wiley-Blackwell. Proctor, T. (2000). Strategic marketing: an introduction. Routledge. Appendix A: Figure 1: Porter’s Five Force Model for Topshop (Source: Author’s Creation) Appendix B: Figure 2: Value Chain Analysis (Source: Bidgoli, p.534) Appendix C: Figure 3: TOWS Matrix for Topshop (Source: Author’s creation) Appendix D: Figure 4: Ansoff Matrix for Topshop (Source: Authors creation) Read More