Strategic Management in Clothing Industry

Introduction

The clothing industry has attained higher recognition through ready-to-wear garments. The production of the clothing in bulk has declined the production costs of the appeal and also get a review of the quality. The usage of strategic management and Innovation has enhanced the success level of the industry and has enabled us to attain better performance. Strategy management assists the company in appraising its competitors, perform environmental scanning, strategy evaluation, which further helps the company to meet the organisational goals. This study will analyse the macro- and micro-environment and competitive success factors. Moreover, business models and business strategy along with innovation strategy will also be analysed along with the strategic situation of the organisation whereon case study of Primark and the world clothing industry will be taken into consideration.

Analysis of Macro-Environment

Political Factors

The political factor is one of the significant sources of uncertainty in the clothing industry. The main political decision which affects the clothing industry is the rate of the tax, which is levied by the government. It affects the company's bottom line through corporation tax and also influences the purchase decisions due to income tax. Geopolitical instability, government policies, tax policies, trade restrictions are some of the significant factors of politics that affect the fashion industry and influence the ease of doing the business.

Economic Factor

The economic factor possesses a considerable influence on how an organisation performs its business and ways they attain a profit. The economic factor maintains economic growth, exchange rates, consumer's disposable income, employment, and also inflation. The rise in raw material makes the fashion products expensive, which decreases the demand for the products and makes it difficult for the company to sell them. Due to Brexit, the economic environment become uncertain. This has generated lots of pressure on companies like Primark, which has business operation in European nations also. Apart from that the currency fluctuations have also influenced the operations of Primark. This economic uncertainty has negative transactional effect on profit margin of the company. However, increasing disposable income of people has been observed in the UK, for past few years. In the year 2019, median disposable income of people in the UK was about £29400, representing 1.4% more than 2018 (ONS, 2019). This suggests that more money will be available for customers to purchase clothes, which can increase the sales of Primark.

Social Factor

The fashion industry is one of the sectors which gets affected by socio-cultural trends. Since the majority of the world's population is aging, those appeal firms which are teenage-oriented are an insignificant risk as the shrinking segment's competition is more intense. A company should focus on mature customers with an appropriate size and simple designs. Moreover, there is an increase in social trends of getting overly concerned regarding health so that customers may show a significant interest in ‘green’ and sustainable actions of the company. The more profound concern of customers towards Corporate Social Responsibility and social media also affects the attitude of customers towards fashion companies. Furthermore, tastes towards fashion and trends of teenagers, young and adults are very diverse and volatile in present days and is influenced by celebrities and social media. Due to this trend companies like Primark spread the fashion trends through different channels like social media (Chavan, 2018). However, the company also need to be conscious regarding any negative trends and publicity in social media.

Technology Factors

The fashion industry has always got impacted by technological change. The emergent of the Internet and other innovative technology has led to accelerating the flow of data and information on newer trends from its customers, which makes companies give responses to its market in a faster manner. The advancement in technology has also enhanced the demand of the customers as media updates regarding the new styles of fashion. Moreover, the lower advertisement costs and other marketing platforms using social media also assists the retailers to attract the consumers for the purchase of the fashion products. Furthermore, due to advancement of technology, development with respect to knowledge transfer and increased interaction between other retailers and producer is witnessed among companies, so as to obtain advantage from more effective distribution and communication network.

Environmental Factors

Clothing production units utilizes significant amount of energy, water and chemicals. This generates environmental and sustainability issues. The increasing trends of buying products that are sourced ethically and through sustainable sources are some of the significant issues of the fashion industry. The growing concern to reduce the carbon footprint and include environmentally friendly practices are other trends which attribute the fashion companies to apply sustainable supply chain in its operation. The changing terms and regulations due to increased production of waste have made it difficult for the fashion industry to dispose of issues. Lastly, the increased concern of the stakeholders towards the environment also impacts the fashion industry's operation.

Legal Factor

Various legal factors affected the process, such as an equal opportunity to employees, health and safety, rights and laws of customers, product safety, proper labeling of the product, and also advertising standards. The increased trends in taking care of the safety and health of customers and employees have impacted the fashion industry more excellently if a company does not fulfill the legal rules and regulations than the organisation might lead to fines and other legal issues.

Analysis of Micro-Environment and Competitive Success Factor

Porter’s Five Force Analyses

It is an approach to determine the competitiveness of the given market.

Bargaining Power of the Consumers

The main force is the bargaining power of the buyers who choose to minimise the prices, switch to the other retailers, and even to stop buying products. In the case of the Fashion industry, the power of the buyer is higher. Since the shoppers of clothes are individuals who have either little or no direct power of bargaining as compared to bigger companies, they possess alternative locations to shop for clothes, which gives them several indirect bargaining power. The presence of a huge number of competitors even increases the power of bargaining. However, it is seen that there are various with higher brand values and quality products which suit each of the types of customers. This increases the choice option of the consumer. Thus, it can be stated that consumers possess higher bargaining power in the fashion market. For instance, players like Marks and Spencers have started giving value-added services to its customers to attract them in their store. Celebrity promotion is also very trending in targeting its consumers for its promotions.

The Bargaining Power of Suppliers

In the clothing industry of the UK, the suppliers’ bargaining power is relatively small. The industry players in the UK outsource the raw materials from third world nations like India and China, where there is accessibility of inexpensive products and labor. This enhances the supplier base for Primark also, both nationally and internationally. Furthermore, the company does not demand much from a sole supplier. This indicates that there is no sole supplier for Primark who has significant power to influence the prices of raw materials. This allows the company to secure raw materials at reasonable rate and earn sufficient profit. Primark can also put pressure on the local suppliers in the UK to minimize the prices. The company faces low switching expenses with respect to the new suppliers. This additionally enhances the bargaining power of Primark in relation to the suppliers.

Competition from the Existing Players

The UK clothing industry comprises many competitors. This suggests that Primark functions in a competitive business environment. Furthermore, there are competitors such as Next and Gap among others, who have completely taken advantage of clothing demand for young customer segment and therefore poses significant threat for Primark in the market. The competitive rivalry is also facilitated by the fact that any company can enter into the market of the UK. This act as a motivation for foreign brands to start their business in the UK and rival with Primark (Ali, 2015). Furthermore, Primark is also facing competition from low end retail clothing players. For example supermarkets like ASDA also provides clothing brands such as Matalan and George. Apart from that competitors like Top Man, Zara and Oasis among others are also providing designing clothes which attracts the young customer segment. This suggests strong rivalry for Primark in the industry.

The Threat of the New Entrants

The new entrant does not lead to a major threat for the prevailing players. This is because existing players already attract their customers and increase their brand presence in the targeted market. Moreover, there are higher costs required while entering the market. Thus most of the new entrant company stops the new players from entering the UK market. It can thus be stated that new players do not possess major power to affect the existing players. The brands like Marks and Spencers, Next, etc. do not possess a higher threat with the new entrant due to its increase in brand value among its customers.

Threats of Substitutes

The substitutes are those products and services which possess the attributes which are similar to the actual /genuine. The customers who are present in certain segments of firms such as Marks and Spencer are in a higher position, and it is difficult for the customers to switch to its substitute. The threat of substitute in a branded fashion company is even lesser as customers do not want to compromise with the quality of products for a lower price. Hence, it can be stated that substitute does not reveal major threats for the existing players who are present in the market.

The Competitor Success Factor

The Competitor success factor for the fashion industry is government support, customer awareness, and continuous Innovation.

Government Support

Government support is one main element in the fashion industry’s success. The pro-active policies provided by the government assists the new company and enhance the existing company to create effective market conditions, which helps in enhancing the value of customers. The generation of competition further enhances Innovation, which is the main element in the fashion industry.

Customer Awareness

The fashion industry attains success when there is an increasing level of awareness of customers. The advancement in technology has assisted the consumers in attaining regular updates regarding the new product of the fashion industry. Different fashion events have emerged as a platform for fashion designers and retailers to showcase their products and services. The endorsement of the product in different fashion events assists in attracting a larger number of the target network and thus acts as competitive success factors.

Continuous Innovation

Innovation is the leading competitive factor of success in the fashion industry. The firm such as park and Spencer have attained competitive advantage through continuous innovation in the product line. Change in the fashion industry has included a combination of the traditional and modern fashion. The innovation aspects have generated significant interest in the firms as innovating its products assists in creating sustainable competitive advantage.

Analysis of the Business Model and Business Strategy

Value Proposition/Differentiation

The value proposition is the unambiguous promises which are owed by the company to its customers for the delivery of value-creating products. It is a written statement that directs the activities of the organisation into the critical elements of the customers, which varies the decision-making process of customers and attracts the customers to purchase the company's product over the competitors. Taking Primark’s into consideration, it could be stated that the company offers its customers a higher quality of the products with up-to-the-minute fashion at reasonable prices. Although at the initial stage, the company had come up with the market to sell basic items of clothing such as socks, t-Shirts later company had studied the latest trends through Zara and Topshop and implement it. It is further evaluated that company’s lower price of products with enhanced quality as compared to other retailers such as Forever 21 and H&M have acted as value proportion for the customers. The company's respect for everyone's dignity and making progress using collaboration acts as a competitive advantage for the company. Apart from that, Primark was also seen responsible for delivering values to its end customers and employees and also environmental support and social commitment, which differentiate Primark company from other companies.

VRIN analysis

Valuable

The company possesses an international distribution system along with agents and contracts in different countries all over the world. This assists the company in reviewing that its products and services are present and accessed all over the world by the consumers. The company’s expansion to various countries has further permitted the company to achieve experiences in the business, trades, and cultures. Primark has also possessed skills in marketing, which have permitted the company to reach consumers using different channels. This has acted as a valuable resource as it has permitted the company to attain a competitive advantage. It is also analysed that company investment in the research of the market to review the updates of the fashion trends, needs of the consumers, and also changes required in the targeted group. It is essential and valuable as it helps the Primark company to make a change in the products and services as per the requirement. The company has also applied economies of scale as rare resources wherein it has emphasised the costs, production, and also increase of the sales wherein the main focus was given upon the premium quality of the products. Moreover, the company’s Primania sections on its website were a rare section wherein customers could post their picture on how they have styled its Primark appeals, which had further reached as trends wherein the firm had 8 million followers. This has helped the company to give a stronger awareness of the brand among the customers.

Rare

The company has made the usage of progressive technology and has invested in modern technology to make effective and efficient business. It is essential to make a competitive differentiation. The technology applied by the company leads to a decline in the chance of human errors and enhance the level of precision. Primark is found to make the usage of modern and new Innovation and has given its higher emphasis on the quality and final products. The effective and efficient usage of the resources has further permitted the company to maintain economies of scale.

Inimitable

The firm's design of the new store usage of social media, and also sustainable cotton programs are certain examples of the company's commitment towards Innovation, which is hard to imitate. Moreover, the company building of a relationship with its business partners to increase revenue streams, increase focus towards customers' services, and financial performance is also difficult to imitate. The company's control over the price of the products is maintained and controlled, and affordability by targeted audiences is another competitive advantage that is hard to imitate.

Non-substitutable

The higher brand recognition of the company in various groups of people in different countries permits the brand to increase the sales and unique bond with the consumers. The brand recognition could not be substituted as it was built after hard work and delivery of higher quality. The company's response to the future needs of customers and the introduction of new initiatives also acts as perfect resources. The brand fulfills the emotional and psychological needs of the consumers and have also build honest and trusted link with clients.

Business model canvas

The business model canvas is a template for strategic management and lean start-up for the development of new or documentation of existing models of business. It is a chart that possesses elements such as value proposition, infrastructure, customers, and finances.

Strategic Resources and Capabilities

Resources and capabilities are the main sources of competitive advantage and profitability for a firm. It even empowers the company to enhance its business and tackle competition along with products and offerings for the customer’s needs. It plays an essential role in business wherein resources are divided into three major parts, namely, tangible, intangible, and human resources. On the other hand, Organisation capabilities are the business routine, organisational culture, and processes wherein the identification of core competencies are useful in the identification of things that contributes to the customer's values. Resources and capabilities are essential in providing a competitive advantage to its firms and also provide a sustainable competitive advantage to the firm. Taking Primark into consideration, it could be stated that the experienced managers, thousands of workers, suppliers, machines, products, premises, and patents are the resources of the Primark. The effective usage of these resources might describe the attainment of success by the company. For instance, the core competences of Primark are Cost, which is very tough for its competitor to overcome, whereby its other resources assist the company in attaining economies of scale and achieving efficiency and productivity that leads to company success. The company possesses behaviour competencies wherein it maintains a stronger relationship with its procurement and legal bodies. The strength of the company, along with its brand name, have acted to have given capabilities to the organisation to sustain longer in the market. The company's resources and capabilities have led the company to offer a competitive advantage and deal with the change in the environment.

How Primark’s International Strategy Influence its Business Strategy

International strategy is the focus of the company upon the export of the products and services in the foreign market. Conversely, it imports goods and resources through other countries for the sake of domestic usage. The business which follows such strategies often possesses smaller local manufacturer which export resources to the larger companies. The company’s international strategy has helped the company to attain success. Primark’s lower prices have attained success universally and have attracted customers. The international strategy has even raised the overall living standards for its employees. The company has also managed global logistics where import, export, and ensured trade regulations. The key concern of organizations with respect to international strategy is tradeoff between international integration and local reactiveness. International integration is the level to which organizations are capable of using similar products and methods in other nations. On the other hand, local reactiveness is the level to which the organization require to customize the products and methods to satisfy situations in other nations. These two dimensions result in four fundamental international business strategies, which is demonstrated below.

With respect to Primark, it uses the standardization strategy by providing standard products to the customers (Snowdon, 2015). It treats the whole world into one market will little meaningful variation. In this way it uses standard marketing internationally.

Analysis of Innovation Strategy

Innovation plays a major role in the delivery of the solution in both a sustainable and competitive environment. The fashion business needs to make a competitive advantage and stay in a changing global market as it struggles to tackle the increased environmental and social impacts and even provide consumer values using Innovation.

Forms of Innovation

There are different forms of Innovation, wherein, not all Innovation is of the same type. Some of the innovations are of new technologies wherein others are of new practices and processes. Different Innovation requires different opportunities to develop wherein it is not required to use brand new ideas. A smaller change can even assist in attaining success. The product innovation, process innovation, marketing innovation, and organisational Innovation are four forms of Innovation. Product innovation is a newer product and services with new or improved characteristics. Process innovation is improved production, or delivery methods wherein marketing innovation possesses changes to pricing, positioning, and packaging. Organisational Innovation is the change in how the company does things, which leads to gain and efficiency. Taking Primark into consideration, it could be stated that the company is continuously updating its innovative strategies. The company has applied organisational Innovation wherein new designs of outlet is made using Innovation, and creatively wherein comfortable ambiance and attractive designs are added to attract the targeted customers. Primark has also used marketing innovation in its operation wherein it has applied social media and introduced the Primania sections on its websites for which the customers could post their images after styling with Primark attire (Trotter, 2015). This unique and innovative method has assisted the company in making 6 million followers on Facebook as well as a larger number of followers on Twitter and Pinterest. In addition to that, the company has also organized Sustainable Cotton Programs, which was part of an innovative strategy to attract more people by providing awareness regarding sustainable cotton raw materials. The company is also applying and implementing process innovation in several plans to manage and respond to several innovation ideas along with the opportunity of business to deliver effective customer experience.

Primark's Source of Innovation

Innovation sources are crucial factors in innovation activities, and several innovations lead to different innovation types. Seven sources of Innovation include unexpected, incongruity, market structure, Necessity, demographics, changing perception, and also new knowledge. The unexpected source of Innovation reveals that Innovation takes place unexpectedly. Incongruities are an essential source of innovation wherein Innovation is born while resolving the existing discrepancies. The market structure, on the other hand, give rise to Innovation. Necessity is another source of Innovation with new things which fulfill existing needs. Demographics is another source of Innovation which discover due to change in lifestyle (The One Off, 2009). The difference in perception regarding things has even led to Innovation. Lastly, new knowledge is also a source of Innovation that conceptualises newer ideas wherein new ideas arrive from the whole market. However, considering Primark, it had been reviewed that the company has applied demographic sources of Innovation wherein it has started using social media as per the need and change in trends of the customers. It can be stated that in this competitive market, the company has not upgraded itself with Innovation and has used very less source of Innovation. The absence of the company in providing an online facility to its customers states that the company is not able to make effective usage of different sources of Innovation. On the contrary, Uniqlo had made the usage of changing perception sources of Innovation wherein it has developed a new material by recycling fabrics and PET bottles.

Appraisal of Primark’s Strategic Situation

Macro-Environment Analysis

The market value for global fashion clothing and footwear in 2020 is estimated to be between $1.5-3 trillion in 2020. More importantly, the global clothing industry is identified to be growing at an estimated rate of 2.5 and 5% per year. Even though this growth is sensitive to the changes in the economic growth rate, but currently, this growth rate signifies that there is a huge opportunity for the firms operating in the clothing industry to grow and expand their business to earn a substantial profit from their operations. It is also anticipated that the level of competition may be intensified in the future due to the entry of new films to exploit the exiting opportunities offered by the steady growth of the global clothing industry. Also, it has been observed that the free trade agreements between the countries are increasing. Correspondingly, such agreements between the countries can also have a positive impact on the firms in the clothing industry. In this regard, an important impact of free trade agreement can be in the form of access to larger market. The firms in the industry may undertake aggressive foreign expansion strategies to exploit the opportunities presents by the untapped foreign markets. Besides, it can eliminate many restrictions for sourcing raw materials and help the firms in the industry to diversify their supply chain. In the recent times, there has been a significant change in the way people are engaged in purchase of clothing and other items. In fact, it has been observed that there has been a significant change in the channel of shopping. Notably, more and more customers today are identified to prefer online shopping rather than visiting to physical stores. This change in the medium of shopping among the customers is more likely to bring a significant disruption to the traditional brick and mortar business model. Such change in the medium of shopping may further requirement for the firms in the clothing industry to develop their own e-commerce site in order to compete and survive their businesses effectively. Nonetheless, expanding business online can also help the firms in the clothing industry to increase their market reach while reduce their operating expenses as the online business model usually requires limited numbers of employees and physical assets. On the other hand, it may create requirement from the firms in the clothing sector to develop IT infrastructure and hire and train IT experts in order to maintain the e-commerce sites and deliver enhanced online shopping experience to the customers. The advancement in the technologies and the changes in the business and marketing landscapes have increasingly created requirement for the firms in the clothing industry to focus on implementing new technologies in order to remain competitive in the clothing industry. In this regard, firms in the clothing industry are identified to be adopting “fast-fashion” strategy, in order to avoid the situation of overstock and under-stock and to ensure that right quantity of products are available at the right time. This strategy is anticipated to create greater requirement for the firms in the clothing industry to implement information system (IS). At the same time, it has been noted that the increasing numbers of firms including large enterprise as well as small fashion brands are actively engaged in using social media platforms such a Snapchat and Instagram for marketing purpose. Correspondingly, the use of social media in the industry is anticipated to make the competitive landscape more intense for the leading fashion brands as more small fashion brands can get attracted towards social media due to its cost effectiveness and increased efficiency than the traditional media.

There has been a growing environmental concern among the customers across the world. Customers today are not evaluating products offered by the firms in the clothing industry based on price, quality and performance but they are increasingly considering the ethical and environmental performance of the firms in the clothing industry. Such changes in the consumer behaviour are expected to create considerable pressure on the firms in the clothing industry to demonstrate ethical and socially responsible behaviour. In other words, the firms in the clothing industry that are looking to attract large customer base and develop string brand image and reputation will have to focus on invest on corporate social responsibility (CSR) activities such as recycling of plastic waste and investing on employee and community welfare programs among others.

Micro-Environment Analysis

Currently, there are large numbers of firms operating in the clothing industry. The availability of the numbers of firms has offered the customers in the industry with more options to choose from. At the same time, the switching cost for the customer is relatively low. These factors clearly signify that the bargaining power of the buyers in the industry is high. Correspondingly, the high bargaining power may pressurise the firms in the industry to reduce the prices of their products. Thus, to succeed in the industry it will be suitable for the firms to focus on increasing the switching cost for the buyers. In this regard, pursuing differentiation strategy and leveraging social media to build strong brand customer relationship to increase the switching cost for the buyers. There are several suppliers in the clothing industry spread across the world which has weakened the bargaining power of the suppliers. However, with the increasing focus on ‘fast fashion’ strategies, which requires active participation of the suppliers for the success of the strategies, the role of suppliers in the clothing industry is more likely to increase. Majority of the firms in the clothing industry have their suppliers’ base in the developing countries and there always a threat of supply chain disruptions. Correspondingly, in order to succeed in the clothing industry, it is suitable for the firms to focus on building strong relationship with the suppliers for ensuring smooth exchange of information between the firms and the suppliers. At the same time, dual sourcing policies where at least one supplier is located in proximity can help the firms to eliminate supply chain disruptions risks to a certain extent and ensure interrupted supply of materials. The steady growth in the clothing industry followed by low capital investment required for building e-commerce websites for the potential players in the clothing industry has increased the threat of new entrants in the industry. Accordingly, to succeed in the industry and to increase the barriers for new entrants, it would be suitable for the firms in the clothing industry to focus on building strong brand positioning as well as pursue production differentiation.

There is a fierce competition in the clothing industry. The level of competition may further intensified with the entry of new firms in the industry and the growing usage of social media channels by the small fashion brands. The firms in the clothing industry need to overcome this force to succeed in the industry. In this regard, the firms in the clothing industry can leverage social media to build strong social ties with the customers and ensure greater customer-brand engagement. Furthermore, the use of social media influencer marketing can help the firms to increase the sales of their product while improving their competitive position in the industry.

Conclusion

The Fashion Business is one of the most happening industry which have its effects on the economy of the nation in both direct and indirect terms. This study analyses the world fashion industry and also Primark company to understand the strategic analysis and Innovation applied in the fashion sector. It had been explained that this sector is facing significant issues due to environmental issues and social values. The higher costs of the raw materials, along with the change in trends, gave lead to an increase in the higher challenge for the players. The presence of the strategic players also increases the competitive rivalry and affects fashion brands. It is thus suggested that the organisation should apply a global innovation strategy, which is a pillar of the overall corporate strategy of a worldwide organisation. It possesses potential in the long term in attaining global organisational competitiveness, profit, and performance. Global growth, competitive advantage, financial performance, and technological superiority are some of the results of an effective innovation strategy. The business environment is a term to business marketing wherein macro factors termed as PESTEL are external, which requires to be understood and reached useful by the fashion industry to carry out the business in a more ethical manner for its sustainability. Technology has also played a significant role in fashion products and posing the threat of competition. Thus, the creation of the brand image, which is linked with ethics and provision of environment-friendly products, also assists the company in sustaining the global fashion industry.

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