Business Strategy Analysis: Ascena Retail Group. Inc - Research Paper Example

? Business Strategy Analysis: Ascena Retail Group. Inc. December 8, The company, Ascena Retail Group engages in the Apparel business. The company has been in business for the past 50 profitable years. The research focused on gathering the financial, economic, marketing strategies, Porter’s Five Forces, and history of the company. The research included the processing the financial statement analysis of the company’s 2011 and 2012 business operations period. Summarizing the important points of the above discussion, the company was able to produce a favorable financial performance during the 2011 and 2012 accounting periods. The company was able to effectively and effectively market its high quality apparel products to its current and future customers at reasonable prices. The company implemented the viable customer-based marketing strategy. The company sells its apparel products in places that are easily accessible, including the company’s online website. The company profitably advertised its products for the past 50 years. The company’s purchase of Charming Shoppes enhances the Apparel outlet sales, The Porter’s Five Forces shows that company successfully applied the principles of Porter. The company income statement’s indicating the company generated high revenues and net profits during the 2011 and 2012 marketing plan implementation. The net profit figures and financial report shows that indicate the company was able to keep its place as one of the top apparel retail shops during 2011 and 2012. Lastly, it is highly recommended that the Ascena Retail Group Inc. must not stop or reduce its current marketing plan. The company’s current marketing plan proves that continuing the current marketing strategy will generate the same or even higher revenues and corresponding net profits. Table of Contents. Part One. Ascena Retail Group. Part Two. Chapter One Part Three. Chapter Two, Part One Part Four. Chapter Two, Part Two Part Five. Chapter Three, Part One. Part Six. Chapter Three, Part Two. Part Seven. Chapter Four – Summary and Recommendations. List of Tables. Table 1 Current ratio Table 2 Debt to Equity Ratio Table 3 Total Debt to Total Assets Ratio. Table 4 Return on Assets Ratio. Body of Analysis. Part One T he research focuses on choosing one company listed in the Stock exchanges. The stock market shows there are many companies are traded on a daily basis. The research centered on Ascena Apparel Company. The company markets Apparels to the female gender. The company has been in operations for the last 50 years. The company actively sells its stocks in the stock market (http://finance.yahoo.com/q/is?s=asna). Part Two. Chapter One Company background History. Ascena is currently the nation’s top seller of women’s and teenage girls’ clothes (Ascena 2012). The company generated profits during 2012. The company has its 50th year of nonstop business operation during 2012. The company’s stock market price rose from below $ 15 per share during January to $ 19.40 on December 7, 2012 (http://www.bloomberg.com/quote/ASNA:US). The company has been selling its products under several subsidiary brands. The subsidiary brands include Justice, Maurice, Dessbarn, Lane Bryant, and Catherines. The company combines colors and top quality materials in each Ascena product (Mehta, 1998). Further, Ascena effectively engaged in customer-based marketing strategies (Luther, 2011). The company grew in size by acquiring Charming Shoppes. Consequently, the company’s desire to focus on its top selling brands, precipitated to weeding out previously lesser performance brands. The company plans to drop the lesser performing Charming Shoppes apparel brand, Fashion Bug brand. Likewise, the company is planning to sell another less performing Charming Shoppes brand, Figi’s. With the prior year’s acquisition of Charming Shoppes, Ascena becomes one of the largest apparel retail stores in the nation with an excess of 3,800 stores (Ascena 2012). Vision and Mission. Ascena’s vision is serve the company shareholders’ needs and create value by aiming to be a retail concept entity with $10 billion in sales and top-tier profits. The company’s mission is to make people look and feel their very best by using the Ascena brands. To comply with this mission, the company sets up stores that offer both comfort and style and availability of the company’s products (http://www.ascenaretail.com/). Main Products and /or Services. Current Events. Ascena’s purchase of Charming Shoppes opened up for retail shops for one of the Ascena’s top selling brands, Lane Bryant brand. Ascena acquired Charming Shoppes for $890 million. Further, the Acquiring of all the Charming Shoppes branches, Ascena opens the marketing avenues of another Ascena best seller, Catherines brand (Ascena Completes Buyout of Lane Bryant Owner, Charming Shoppes 2012). Legal or Ethical Issues Ascena filed several lawsuits during the prior year. During 2011, The United States courts approved the settlement in the case between Ascena and Tween Brands. The case was filed in the Eastern District Court of California. The charged bordered on the noncompliance with the Fair Labor Standards Act. Likewise, several shareholders of Charming Shoppes filed several cases in Federal Court in Pensylvania. The five cases were consolidated into one lawsuit case. The complainants wanted to prevent the sale of Charming Shoppes and Ascena to push through. The United States Court’s 2012 decision was to permit the sale of Charming Shoppes to Ascena (Ascena 2012). Part Three. Chapter Two, Part One General environment of the company Economic Trends The 2007Economic depression forced the United States, United States banks to reduce interest rates to allowable levels. The current economic trend shows an improvement in the United States economy. The second trend is that the government is planning to increase interest rate. Decreasing the interest rates increases the buyers’ purchasing money. The trend where the government will be increasing its interest rates reduces the inflation rate (Clark, 2011). Further, the 2012 economy indicated the unemployment rate had dropped to only 8.1 percent during August 2012. The private sector was able to absorb more than 100,000 new employees during 2012 alone. During the last 30 months, 4,600,000 jobs were filled (Greenstone, 2012). The unemployment rate favorably dropped. The United States November Economy [2010] amounting to 9.8 percent had dropped to only 7.6 percent during November of 2012. The ratio indicates that more people are able to find jobs. With more jobs, there is an automatic increase in demand for apparel, including Ascena apparels (http://www.bls.gov/bls/newsrels.htm#OEUS). Political Trends The current government is a democracy. The political trend indicates the government is cooperative federalism. Likewise, the political trend indicates that the people democratically elected their present and other political leaders. The President for the U.S. President is November 2012. The country‘s political trend continues to be a Democratic Republic. Likewise, each state is headed by a Governor. The people exercise their civil liberties and civil rights. The rights include the right to purchase Ascena products (Schmidt, 2011). Socio-Cultural Trends The current American socio cultural trend is a blend of many cultures. The business environment includes Mexican residents. The business environment includes Native Americans. Further, the Business environment includes the Spanish and Asian residents. The other residents are people of European descent (DeGuzman, 2012). Further, the nation offers free school benefits to its population in order to mold them into more effective and efficient leaders of society, including future business leaders (Steffes, 2012). Technological Trend First, many companies sell their products online. The company’s online website is http://www.ascenaretail.com/. The website displays the many apparel styles in changing fashion. The apparel pictures constantly change to show other apparel designs. The website persuades the current and future customers to buy the advertise products. Additionally, the company also shows information for investors. The site offers many benefits to the current and future investors in Ascena company. Second, current and future customers buy products from online websites. The customers can visit the company’s website, http://www.ascenaretail.com/, to find information regarding the company’s current and future apparel styles. The Ascena website shows the different store locations. The current and future customers will save time and energy searching for the nearest Ascena physical store. The current and future customers can simply click the computer mouse to find the latest Ascena apparel styles. The customer can save the time and money travelling along the major streets searching for an Ascena store. Part Four. Chapter Two, Part Two Industry Environment Standard & Poor. Ascena has a favorable Standard and Poor statistical performance. The Standard and Poor stock market information is based on the changes in the company’s stock volume sale. The Company’s December 7 2012 Standard and Poor result is 1,418.07. The figure shows a favorable 4.13 increase over the prior Wall Street Standard and Poor result. The current Standard and Poor 4.13 increase shows a 0.29 percent increase from the prior Standard result (http://www.dailyfinance.com/quote/nasdaq/ascena-retail-group/asna). In terms of stock market price, the Ascena stock price for December 7, 2012 is $18.96 per share. The stock market price shows a $0.03 increase from the prior stock market price. The $ 0.03 increase indicates that there was a favorable increase amounting to 0.15 percent (http://finance.yahoo.com/q/in?s=ASNA). Porter’s Five Forces Model Threat of Entry. The apparel industry is a volatile market segment. Volatility includes an unpredictable future. Many new companies try to try their luck in the apparel market segment. Consequently, there are many threats of new companies encroaching into the Ascena market segment (Graham, 2005). Many Department stores come up new apparel brands. Some new Apparel stores sell at off-price activities to grab a share of Ascena’s current and future customers. Many small apparel competitors create their clothe products within small spaces such as homes and any available space. The threats are increased when the prices of the new entrants are lower than the Ascena current store prices. To repel the entry of the new entrants, Ascena lowers its prices to meet the new competitors’ normally lower store prices. To combat the new entrants, the company offers high quality apparel products (Ascena 2012). Power of Retail Buyers. The customers have the power to change to the other competitors’ products and services. The company consistently offers high quality products to the current and future customers. Likewise, the company sells its apparel products at reasonable prices. The prices will persuade the company’s current and future customers to prioritize the Ascena brands over the other competitors. Marks and Spencer, Arcadia, and other competitors control the sales of clothing manufacturers. The two companies greatly influence the prices of apparel products (Graham, 2005). Power of Suppliers The suppliers of the clothing materials dictate the prices of the Ascena products. As the supplier increases their supply’s prices, the Ascena stores must incorporate the additional costs of producing each Ascena product into the selling price. If the company does not increase its selling prices, the company may have to suffer from not generating the required net profits. By not generating the required net profits, the company may be forced to close shop due to bankruptcy fears. The supplier’s delay in the delivery of the required clothe materials may cause delay in the Ascena stores’ sales of its quality apparel designs. Ascena must ensure that its suppliers can deliver the required cloth materials on time. Supply delay triggers delay in supplying the current and future customers’ Ascena apparel products. Delay in filling the customer’s apparel needs may drive away the disgruntled Ascena current and future customers (Graham, 2005). Threat of Substitutes The company has to contend with threats of substitutes. There is threat that overseas competitors may export clothing products that will compete with the Ascena products. The foreign competitors may come from the Far East, Eastern Europe, African and the North (Canada). Further, calamities and other emergencies may threaten the Ascena apparel sales. Victims of hurricanes, cyclones, fires, earthquakes and other unexpected acts of Mother Nature will force the victims to postpone their planned purchase of Ascena apparel products (Graham, 2005). Competitive Rivalry Ascena has many competitors. The competitors are also engaged in the same apparel market segment. The competitors include big competitors like J. C. Penney Company. J.C. Penny generated$ 17.56 billion revenue during 2012. Another big competitor of Ascena is Kohl’s Corporation generated the profitable $ 18.96 billion revenue during the year 2012. The competitors include the smaller competitor, Arerospostale Corporation. The competitor generated the profitable $2.40 billion revenue during the entire 2012 year (http://finance.yahoo.com/q/is?s=ASNA+Income+Statement&annual). Part Five. Chapter Three, Part One Marketing Mix Product The company will sell quality products. To increase sales, the company targets ladies from the below 50 years old market segment (Ascena 2012). The company has been selling its high quality products for 50 profitable years. A company that sells poor quality products will not last long in the saturated apparel market segment. Poor quality products will generate low revenues. Low revenues may precipitate to net losess. Net losses may force the companies to file for bankruptcy. A bankrupt company closes its shop doors because the company’s coffers are running dry or had dried up. The Ascena 2012 income statement shows that the company generated $ 3,353.3 million sales during 2012 alone. The sale figure indicates that the company sells quality products. Price. Ascena sells its products at reasonable prices. The company’s 2012 income statement indicates that the company generated a net profit amounting to $ 162.2 million. The amount shows that the company is selling its products ate reasonable prices. If the prices of the products are too high, the current and future customers may transfer to the lower priced apparel products of the Ascena competitors. The company’s price is reasonable because the products are price to recover the costs and expenses of manufacturing each Ascena brand and generate profits (Ascena 2012). Place. The store has set up stores in many locations throughout the United States. Ascena has 3,800 stores selling the company’s different brands. The above net income amount shows that Ascena was able to set up enough branches to generate a net profit amounting to $ 162.2 million during 2012 alone (Ascena 2012). Promotion. The company advertises the company’s different brands using different promotional strategies. The company uses online marketing to promote the latest apparel designs. The company’s website, http://www.ascenaretail.com/, shows several ladies modeling the different Ascena apparel styles and brands. Indirectly, the company’s marketing strategy includes word of mouth advertising. Through its 50 years of apparel marketing, the company sold many apparel products. Former customers would proudly display their Ascena brand products. Consequently, the friends and relatives join the Ascena bandwagon. Likewise, by setting up 3,800 Ascena stores, the company is advertising its brand name in 3,800 different locations. With more store locations, there is a corresponding increase in the advertising or promotion statistics of Ascena. By purchasing the Charming Shoppes apparel company, Ascena can sell in its apparel products in all the Charming Shoppes locations, increasing its future apparel sales (Ascena 2012). Part Six. Chapter Three, Part Two Financial Statement Analysis Current Ratio. Table 1 Current Ratio. 2012 2011 Current Ratio 1.52 1.99 Current Assets $ 1040.2 $ 760.5 Current Liabilities $ 685.6 $ 382.2 The Current ratio shows the company’s capacity to use the current assets to pay for the current liabilities. The above table shows that the current ratio for 2012 is 1.52. Likewise, the above table shows that the current ratio for 2011 is 1.99. Comparing the two year’s current ratio performance, the 2011 accounting period generated a better current ratio compared to the 2012 accounting period’s current ratio (Warren, 2011). Debt to Equity Ratio Table 2 Debt to Equity Ratio. 2012 2011 Debt to Equity Ratio 1.09 0.59 Total Debt $ 1,466.20 $ 681.60 Total Equity $ 1,340.90 $ 1,158.00 The debt to equity ratio shows how much cash inflows are generated from borrowing. The same ratio also indicates how much of the cash contributions came from investments by the stockholders. The above table shows that the company’s 2012 debt to equity ratio is 1.09. Similarly, the company’s 2011 debt to equity ratio is 0.59. The best debt to equity ratio is 1.0. Since the 2012 debt to equity ratio is nearer to the 1.0 benchmark ratio when compared to the 2011 debt to equity ratio, the 2012 business operations generated a better debt to equity ratio. Another name for the debt to equity ratio is leverage ratio (Warren, 2011). Total Debt to Total Assets Ratio. Table 3 Total Debt to Total Assets Ratio. 2012 2011 Total Debt to Total Asset 0.52 0.37 Total Debt $ 1466.2 $ 681.6 Total Asset $ 2807.1 $ 1839.6 The total debt to total assets ration indicates how much of the company’s current and long term assets come from loans. The above table shows that the company’s 2012 total debt to total assets ratio is 0.52. The company’s 2011 total debt to total assets ratio is 0.37. Since the 2011 year’s 0.37 total debt to total assets ratio is lower the 2012 year’s 0.52 total debt to total asset ratio, the company’s 2011 business operations performed better than the 2012 accounting period (Crosson, 2011). Return on Assets Ratio. Table 4 Return on Assets Ratio. 2012 2011 Return on Assets 0.06 0.09 Net Income $ 162.2 $ 170.5 Total Asset $ 2807.1 $ 1839.6 The Return on Assets Ratio shows how the assets were used to generate revenues. Another term for Return on Total Assets is Return on Investments. The above table shows that the company’s 2012 return on total assets is 0.06. The company’s 2011 return on total assets is 0.09. Comparing the two year’s business performance, the company’s 2011 year’s 0.09 return on assets ratio is better than the 2012 year’s 0.06 return on assets output (Crosson, 2011). Part Seven. Chapter Four –Summary and Recommendations. Summary of Analysis with recommendations Conclusion Summarizing the important points of the above analysis, the company generated a favorable financial performance. The Company’s financial statements indicate the company generated favorable financial statement analysis results during 2011 and 2012. The company effectively and effectively sells its high quality products and services at reasonable prices. The company’s marketing strategy included selling the apparel products in places that are easily accessible. The company profitably advertises its products for the past 50 years. The company’s purchase of Charming Shoppes increases the Apparel outlets, increasing company revenues. The Porter’s Five Forces indicate that the company is able to coordinate with its suppliers in increasing the revenues and repelling the current and future apparel competitors from grabbing a piece of the market segment pie. Recommendation It is highly recommended that Ascena Apparel Company continues its current marketing strategy. The company’s current strategy is profitable. Implementing the current marketing strategy will continue the company’s current high revenue and net profit outcomes. The company’s purchase of Charming Shoppes will increase the stores’ current outlets, leading to more revenues and more profits in the future years. References: Ascena. Ascena. Retrieved December 7, 2012 from < http://www.ascenaretail.com/ > Ascena Completes Buyout of Lane Bryant Owner, Csharming Shoppes. (2012, June 15). Daily Herald , p. 1. Ascena, Ascena Products. 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American Government and Politics Today. New York: Cengage Learning Press. Steffes, T. (2012). School, Society, and State: A New Education to Govern Modern America . New York: University Press. Warren, C. (2011). Managerial Accounting. New York: SouthWestern Press. Yahoo. Ascena Stock Market. Retrieved December 7, 2012 from < http://finance.yahoo.com/q/in?s=ASNA > Read More