Feb 28, 2020 in Economics Essays

 SWOT Analysis Economocs Essay

Introduction

The company specializes in women’s performance and active clothing, which is a part of the highly competitive fashion industry. Its major competitors are LuLu Lemon, Athleta, Gap Performance, and Nike. The company imports its goods from overseas production factories in China, Indonesia, Vietnam, and Cambodia, which helps to reduce production costs and keep competitive prices for customers. It supplies private yoga clothing to Walmart, T.J.Maxx, Stage store, Century21 and Saks OFF Fifth Outlet. The company also has partnership with a trading company in Korea. However, the company still has weaknesses and threats that should be addressed. This could be done through the effective use of its strengths and opportunities. The paper will discuss the current state of the organization, including its weaknesses and strengths in such areas as Management, Research & Development, and Production. Besides, there will be an analysis of opportunities for further expanding operations as well as threats that should be addressed. Finally, the paper will offer recommendations for taking advantages of the opportunities and reducing threats.

Internal Analysis – Strengths

The company has several strengths. First, it has a skilled founder with appropriate experience, who knows how to manage international buyers and overseas production. It is highly important for the company because its production is located overseas and its operations depend on the timely delivery of goods. If the company fails to deliver products in time, it will lose its customers. International buyers are also important for the organization because they bring in a significant part of its revenues. Second, the company effectively manages its human resources. Its employees are good team workers, which is important for the fashion industry because it involves the work of many specialists. They are also effective and agile, so they are able to work long hours on a project and produce a quality final product. Another positive characteristic of the company’s employees is their ability to work under pressure and adapt to rapid changes within tight deadlines. Third, the organization has outstanding resources and a global assembly line that connects offices in Korea, fabric production in China and production manufacturing in Indonesia, Vietnam, and Cambodia. This allows the company to minimize its expanses and maximize profits. Finally, the company has quite strong research and development, which is currently very important for achieving success in the market because the leaders of the industry try to invent new fabrics and expand characteristics of clothing to create a competitive advantage and increase brand awareness.

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Internal Analysis - Weaknesses

The company also has a few weaknesses. First, the company has some technology/ software issues. Some full-time employees demonstrate poor performance due to their inability to use such basic programs as Microsoft Word, Excel and Photoshop effectively. For instance, they sometimes have problems with editing or saving files. This has negative effects on the work with customers and suppliers, making operations slower. Second, the company has unreliable servers, so it is sometimes difficult to send or receive emails and make some other tasks online. Therefore, employees occasionally suffer from stress, especially if the deadline is very tight. Finally, the company does not use online opportunities effectively. Thus, the company is not present in the social media (e.g. Facebook, Twitter), so it fails to attract new customers thorough applying these communication channels. In addition, the official website is not convenient for users.

Apart from the software/technology issues, the company could become weaker due to plans to sell products of own labels instead of producing mass quantities for private labels. This requires some time because the connections with current distributors Walmart, T.J. Maxx, Stage store, Century21 and Saks OFF Fifth Outlet have existed for years, whereas introducing proprietary products demands new distribution channels. In addition, new products need new promotion and marketing campaigns, which creates new risks because it is impossible to be completely sure in the success of new products. In any case, selling new products is an additional weakness for any company due to absence of stable connections with partners and well-tuned operations.

External Analysis – Opportunities

The first opportunity for the company is innovative products. The previous failures of the company demonstrate that selling ordinary clothing is not effective today and cannot increase the sales of the company. For example, the organization has already tried to launch a new product two years ago, but this initiative did not bring expected sales. Moreover, the company had problems with sales during the first quarters after launching this new label. In the end, the founder even had to sell the products to a wholesaler agency at a fractional margin. The main reason for this failure was the company’s decision to sell products without any innovations, so they did not have any competitive advantage and were not noticeable for customers. However, the company analyzed its mistakes with previous launches of new products, so it has good opportunities to have high sales this time. Moreover, the organization has already received access to a bleeding edge technology; particularly it is going to launch new clothing that is made with the use of an innovative production technique called laser-cutting, which creates a translucent fabric that lifts breathability to a new level. This technique is effectively applied by other competitors, too (e.g. Nike, Lulu Lemon), which means that there is a demand for this kind of products.

Besides, the company can use its current strengths as an opportunity. For instance, it creates strong synthetic fabric that consists of polyester and nylon that is mixed in a specific way. The company has been selling the products made of this fabric for many years, which means that staff has much experience with its production and sale, including the ability to supply goods even at high speed turnarounds. In addition, the market demonstrates interest in strong synthetic fabrics, too. It could be seen from the market trend for penetration of some aspects of women’s performance clothing from street clothes to fashion show catwalks. It has become fashionable to wear gym clothes not only for doing sport (Sherman). For example, yoga pants are worn with fur vest for such social occasions as lunch with friends or shopping. Sales of this product grew by 45 percent (Germano). This means that there are significant opportunities for increasing sales through supplying yoga pants with various characteristics.

Another opportunity for increasing the company’s sales is emerging markets. The US market has too many offerings, so it is really difficult to attract new customers. For example, it is reasonable to increase presence in such countries as China, India or Brazil. Their advantage consists in the rapid growth of economies and the potential for further growth in the future. For example, Nike had 9 percent of its revenues in China in 2014, and the company expects to increase its presence there through strengthening brand image in the country (Nike, Inc.).

The results of research also prove the presence of significant opportunities. According to the research company Trefis (Boston), the global sports apparel market is expected to increase to $178 billion by 2019 (Sherman). American market of female active wear also demonstrates growth (it increased by nine percent compared to 2012 and 2013, which amounted to $11.5 billion in 2013 (Sherman). Experts say that sales will continue growth if customers keep choosing active cloth for wearing outside the gym. The CEO of under Armour Kevin Plank said that his company would reach $ 1 billion by 2016, and this only for women’s cloth (Sherman). He also admitted that women’s business has a greater potential than the men’s one. Nike also has greater sales of women’s clothes than men’s (Nike, Inc.).

External Analysis – Threats

First, the company operates in a highly competitive environment, so competition is the major threat. Thus, its operations are in danger due to fast changes in technology and consumer preferences. Competitors constantly work on developing new fabric technologies. The most significant components of competition in the industry are also quality and reliability of clothes. Customers also pay attention to correlation of price and value. Another important factor is customers’ connection to a brand or a product. This aspect could be managed through marketing and promotion. In addition, the amount of sales depends on customer support and service as well as identification with popular sportspeople or teams that strengthen a brand. One more aspect of competition is participation of the company in sponsoring various sport events. Finally, efficient distribution of products is important. This also should be combined with appealing merchandizing and availability in stores and online retail market (Nike, Inc.).

Second, the company could have problems due to importing products from various countries. For example, it sometimes has troubles with shipping and tracking orders. If these issues occur, they have to be solved immediately due to the threat of potential penalties or losing customers. This could cause additional financial losses to the company. For example, it is supposed to provide shipping by air in case of failing to meet delivery time, which is more expensive. Besides, the company imports goods from production factories in South East Asia, which is quite unpredictable due to frequent natural disasters such as hurricanes and floods.

Third, the industry is affected by seasonality. This could lead to fluctuations in the company’s operating outcomes. Thus, the organization usually has higher revenues in the first and fourth quarters than in the second and third quarters. Besides, the mix of product sales depends on the modifications in geographic demand. For instance, the company could have financial losses due to deterioration of economic conditions in certain region. Customers may also cancel their order as well as modify delivery time or mix of products without informing about this beforehand. Other related problems are changing of import quotas or currency exchange rate.

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Action Steps

To increase its sales and keep the market share, the company needs to follow a range of steps. First, the HR management should provide training to employees for improving their abilities to work with such programs as Microsoft Word, Microsoft Excel and Photoshop. The training should include providing theoretic knowledge, some practical part and evaluation. Despite the simplicity of these programs, employees cannot improve their competence, so some control of HR management is necessary. Second, it is necessary to enhance the work of the company’s server in order to provide constant access to high-speed Internet. These actions would help improve the efficiency and speed of operations within the organization.

The company is planning to launch new products. This requires significant preparation work including studying of customer’s tastes and demands. For example, selling of products with new labels includes the search for new distributors and intensive promotion due to the absence of loyal customers. This would help to achieve high sales. Apart from that, the company needs to search for new distributors in emerging markets. To meet tastes and preferences of customers there, the organization should also conduct appropriate investigation. Particular attention should be paid to developing marketing and promotion strategies because people living there respond to other messages (in comparison with American customers).

The growth of the industry expands opportunities as well as intensifies competition because such positive trends attract companies from other sectors of the fashion industry that do not specialize in sports clothing. This means that the organization should improve all the operations. First, customer service and support should be enhanced. This includes not only meeting the delivery time (it is currently provided by the company) but also providing friendlier service, flexibility, loyalty program and customization. Second, the company needs to invite some popular sportsmen or teams to increase brand awareness and create connection of customers with a product and a brand name. Despite the additional spending, it is a necessary action because intensive competition requires making something for differentiation from other competitors. Specific attention should also be paid to quality, performance and correlation of price/ value. For example, the company could monitor these aspects through questionnaires of customers. The company also needs to focus on research and development of new fabric technology, especially the fabric that could be worn outside the gym. This is important because customers purchase sports clothes not only for doing sports but also for going to a café or for other social occasions.

Dependence on the import from other countries could not be fixed. It is too beneficial for the organization to produce goods in South-East Asia, and it is not reasonable to search other locations. Besides, natural disasters do not occur very frequently there. The seasonality of sales could be addressed by studying customer preferences in various seasons and making offerings that would meet the demand.

Finally, the official website should be enhanced. It should be made easy and convenient for use. Second, employees need to start using social media (e.g. Facebook, Twitter, YouTube) as an additional channel of communication with their customers. Social media could be also applied for studying customer’s preferences.

 

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