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Workshop 2 presentation (1)

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In the fashion industry everything is about change and changing trends. It is a fast-paced business with short product life cycles and immediate customer response.
H&M and Zara are well known for delivering the latest designs to customers, partly in collaboration with famous fashion designers, at affordable prices. Both H&M and Zara are famous for their ‘fast fashion’—their ability to respond quickly to changing market trends with new collections—in a manner that appears to be different to the rest of the industry. Their success in this industry can be seen to rest on their strategic positioning and specific strategic and threshold capabilities

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Workshop 2 presentation (1)

  1. 1. Strategic Positioning  Furness LT3, 12/02/2015, 12:00-14:00  Group 4  Chloe Bradley, Dan Ellis, Cheng Shi, Amanda Vainio, Minjae Kim, Daniyar Meimankhan, Jingjing Zhao
  2. 2. Overview  Porter’s Generic Strategies  Customer Segments  PUV analysis of Customer Segments  Bowman’s Strategy Clock  Bowman’s Strategy Clock
  3. 3. Executive Summary  Task  Action  Recommendation
  4. 4. Identify how H&M and Zara are positioned  High Ability of Design  High Quality of Product  Changing product lines frequently  The latest fashions (trendier) “Zara, implement the strategy to suggest rational price while they reflect most recent fashion trend rather than opting the strategy to gain competitive superiority by low price simply” (Mikyung, 2010)  Low Price “These brands like H&M implements low price strategy in the way that they develops diverse products with the capability of swift planning and design by themselves, and manufactures the products by outsourcing in third countries, by which they induce cost reduction, and supply products in low price without mediating marginal prof it utilizing well established distribution networks of themselves” (Mikyung, 2010)  Low cost of sale  E-commercial market Zara H&M
  5. 5. Porter’s Generic Strategies Industry wide Single Segment Source of Competitive Advantage Low Cost Differentiation CompetitiveScope COST LEADERSHIP H&M BROAD DIFFERENTIATION Zara COST FOCUS • Asian market? DIFFERENTIATION FOCUS • No focus
  6. 6. IDENTIFY HOW THIS IS LIKELY TO CHANGE IN THE FUTURE Expected future changes in the position Zara • Attempting to adopt local preference(e.g. America and China) • Expend E-commercial market • Adjust the price differences • Improving the differentiation strategy/avoiding the risk of copycat • More advertising H&M • Improving the quality of product • More cross-brand selling • Invest Asian market by generating revenue from EU • Expand its market no only by opening new stores but also by upgrading their online shop
  7. 7. Customer segmentation Both Zara and H&M cover two segments within their clothing ranges;  Women, 18-40, middle income  Men, 18-40, middle income
  8. 8. Customer segmentation  Zara’s products are more expensive on average and targeted to more mature customers  H&M’s key segment area is women who want variety of apparels at affordable price  Both have to change their marketing strategies in different market areas due to cultural and taste differences
  9. 9. The Customer Matrix PerceivedUseValue(PUV) Perceived Price (PP) H&M Zara
  10. 10. Bowman’s Strategy Clock for H&M
  11. 11. Bowman’s Strategy Clock for Zara
  12. 12. PUV Analysis  New Trends  Fit  Quality  Store experience  Appearance  Fit  Quality  Low Price  Celebrity endorsements – David Beckham underwear Zara H&M
  13. 13. Key Strategic issues  Entering Asia due to sales stalling in Spain (25% of revenue) (The Economist, 2012)  Struggling in America due to trendy cuts and slim fits (The Economist, 2012)  Higher price in Asia (likely due to transportation costs) “Zara’s clothes are far pricier than local rivals’, where as in Europe they are relatively cheap’’  Fast fashion is less of an option due to harsh economic situation in Europe  Singled out for poor quality by Chinese government. (The Economist, 2012)  Traditional countries- differing styles and marketing techniques  Entering Asia. “H&M expects to have opened 275 more Asian stores by the end of this year” (The Economist, 2013)  Send clothing made in Asia, back to base in Spain, and then back to Asia (cost inefficient) (The Economist, 2011)  Traditional countries- differing styles and marketing techniques  Only 3% of revenue in Asia (The Economist, 2011)  Asia is prone to Long Term Orientation (different management styles may slow down decision making and fashion regeneration) Zara H&M
  14. 14. Competitive Strategic Options STRATEGIC OPTIONS NEEDS/RISKS Focused differentiation Perceived added value to a particular segment, warranting price premium Success depends on:  existence of less price sensitive buyers – prepared to pay more for added PUV  and whether the added PUV can be easily imitated Low price Maintaining value and cutting price Risk of price war and low margins; need to be cost leader Hybrid Adding value and cutting price. Low cost base and reinvestment in low price and differentiation. Successful when volumes can be achieved and when cost reductions can be found on dimensions not valued by customers
  15. 15. Competitive Strategic Options STRATEGIC OPTIONS NEEDS/RISKS Differentiation (a) without price premium (b) with price premium Perceived added value by user, yielding market share benefits Perceive added value sufficient to bear price premium
  16. 16. INTERNAL EXTERNAL Strengths Weaknesses Opportunities SO STRATEGIC OPTIONS WO STRATEGIC OPTIONS Threats ST STRATEGIC OPTIONS WT STRATEGIC OPTIONS Use famous Asian people to promote branding (like in Europe) for example; Zhou Xun Move the rest of production for Asian market to Asia to reduce cost Use the fact that Chinese people hold foreign brands in high esteem to deter away from local brands such as IT By moving all Asian production to Asia, this would allow H&M to speed up fashion delivery times TOWS Matrix H&M
  17. 17. TOWS Analysis Strategic Options ranking
  18. 18. TOWS Matrix Zara Emphasise Western roots to gain advantage over local competitors Expand online shopping opportunities Sizes and styles match those of Chinese women’s (Fleming, 2012) Always have the trendiest clothes available because of high turnover, this may eliminate some Justify the higher price by presenting their clothes as luxurious items Or Lower the price Could move some of the production to Asia to lower the cost of products
  19. 19. Strategic Options & Recommendations  Using appropriate strategic analyses & TOWS:  Identify key strategic issue(s)  Identify strategic options  Forward recommendations (using TOWS Analysis)  Rank your recommendations
  20. 20. Strategy Evaluation: Lecture 9 ACCEPTIBILITY Does the proposed strategy address the key opportunities and constraints the organisation faces? SUITABILITY Does the proposed strategy meet the expectations of stakeholders? FEASIBILITY Would the proposed strategy work in practice? Do the strategic options you have defined address the key strategic issues & industry success factors? (Johnson et al., 2007) SUITABILITY
  21. 21. Critical Reflection  Hard to arrange meetings for such a big group  Difficulties finding information on H&M, most the of the information is from comparison reports  Very marketing based, hard to find sufficient background information
  22. 22. Critical Reflection Strengths and weaknesses of our strategic stance:
  23. 23. References • Anon., 2007. H&M Annual Report 2007. [Online] Available at: http://about.hm.com/content/dam/hm/about/documents/en/Annual%20Report/Annual_Report_20 07_en.pdf • Anon., 2012. Global stretch; Fashion for the masses. The Economist, p. 76. • Anon., 2013. China Average Yearly Wages in Manufacturing. [Online] Available at: http://www.tradingeconomics.com/china/wages-in-manufacturing • Mikyung, K., 2010. Marketing strategy and the current status of Global SPA Brands. Journal of Fashion Business, 14(3), pp. 35-51. • The Economist, 2011. Global stretch; Fashion for the masses. The Economist. • The Economist, 2012. Fashion forward; Inditex. The Economist, 402(8777), pp. 63-64. • The Economist, 2013. Asia/world: Fast fashion firms look for global domination. The Economist.