Business Organization - Assignment Example

Running Header: THE CASE OF TED BAKER PLC: TAKING ADVANTAGE OF GLOBALISATION The Case of Ted Baker: Taking Advantage of Globalisation in APA Style by Student's Name Course Name University 1.0. Introduction Ted Baker Plc traces its origin in 1988 when Ted opens his first store in Glasgow. During the same year, this is followed by the launching of two other stores in Manchester King Street and Nottingham Exchange Arcade. From these humble beginnings, Ted Baker Plc has grown to become one of the largest players in the United Kingdom clothing industry. The business organisation is primarily involved in the design, manufacture, wholesale and retail of menswear, womenwear, and childrenswear and related accessories which includes skinwear, fragrances, eyewear, and watches. With its quest to become a global brand, UK has widened its scope to take advantage of the opportunities abroad. Currently, it is making a strong presence in the United States and other parts of Europe (Ted Baker Plc 2006). Its 2006 annual report states that the company has 102 retail outlets comprised of 19 UK stores, 7 overseas stores, 68 concessions, and 8 outlet stores. Since its inception, Ted Baker Plc has already imbued itself with the commitment of quality designer clothes. The company's core competence is threefold comprising design, product quality, and attention to detail. The company is known to have "for applying quirky twists to their products" (Ted Baker Plc Annual Report 2006). Thus, Ted Baker has become the "official outfitter" (Hoovers 2006) for trendy individuals. Instead of trying to capture the mass market, the company opts to win the purchasing power of the high-end market who wants quality and top of the line clothing. It is irrefutable that business organisations like Ted Baker Plc need to cope with the challenges posed by the changes and developments happening in their external environments. This report will look at how the impact of the evolution of a single global village in the operations and strategic directions. Each recommendation will be supported by analyses utilising management tools and techniques. 2.0. Analysis and Evaluation In order to recommend strategic direction that Ted Baker Plc should take, this report will analyse the strategic position of the business organisation through the use of management techniques. These tools are designed to reveal the internal factors which affect the performance and well being of the firm. Recognizing that environmental forces are also important, environmental scanning will also be conducted. The conceptual frameworks to be used are Porter's generic strategies, Porter's five forces model, and SWO analysis. 2.1. Porter's Generic Strategies According to Porter, companies can stick to three best strategies-cost leadership, market segmentation, and differentiation. Generic strategies are highly commended because they identify a certain area that a company can focus instead of trying to be "everything." These definite winning strategies help business organizations to market scope and their competency (Thomson 2004). In its website, Ted Baker Plc states its threefold strategy as: "considered expansion of Ted Baker collections; controlled distribution through main channels-retail wholesale, and licensing; and carefully managed development of overseas markets" (Ted Baker Plc 2006). As stated above, these strategies are supported by the manufacturer's main competences which are design, product quality, and attention to detail. Through these factors, Ted Baker Plc is able to establish an image of quality and trend which sets it apart from its other competitors. Even though clothing is very much like a homogenous good, the business organisation is able to define itself and create an image in the mind of consumers. In line with Porter's generic strategies, it is apparent that the company is banking on a differentiation strategy for success. Ted Baker offers not just any other ordinary clothing company. Standardstyle states that the company's products are "stylish, obviously high-quality with unusual features brought into all areas of design patterns." As Ted Baker's products are perceived to be of excellent design, trend, and quality, it also commands a higher price in the market. It should also be noted that even though Ted Baker Plc started out targeting only the male population, the business organisation has now products for both men and women, even kids. 2.2. Porter's Five Forces Model The competitive forces analysis is concerned with the external environment and the various stakeholders of the firm. According to Porter, there are five competitive forces in the environment of a business entity namely the suppliers, buyers, customers, potential entrants, and product substitutes. Thus, environmental analysis helps managers come up with strategic moves in response to the trends and changes in the current environment (Thomson 2004). Intensity of Rivalry. In generally, there is an intense competition in the UK fashion industry. This is even intensified by the developments brought about by globalisation. It can be recalled that increasing globalisation has facilitated the influx of cheaper goods from countries like India and China as well as more prevalent outsourcing of manufacturing processes from the countries where labor is relatively cheaper. With these developments, players in the UK fashion sector are pressured to improve their efficiency to cope with the decreasing costs, higher number of players in the market, and the more aggressive moves of other competitors. Barriers to Entry/Exit. There is relatively low barrier to entry and exit in the UK fashion sector. It can be recalled that globalisation has reduced the trade restrictions protecting the operation of the players. Business organisations that are planning to enter the UK market can now more easily set up their operations. However, it should also be noted that in order to compete with Ted Baker Plc and other established players which have already established a name in the fashion industry; they need to invest in order to launch an aggressive marketing strategy. Threats of Substitutes. As stated above, Ted Baker Plc has already established an image of excellent quality and design in the UK fashion industry. This significantly insulates the clothing manufacturer from the influx of cheaper products from China and other Asian countries. This is in part due to the company's strategy of differentiating itself from other players in the UK fashion sector. Supplier Power. The increasing integration of the business arena into a global village lowers the power of supplier in the UK fashion industry. Globalisation has facilitated the sourcing of material and labor to other parts of the world where these factors of production are relatively cheaper. Thus, manufacturers like Ted Baker Plc gain a higher leverage than its various suppliers. It can be seen that the current elimination of trade barriers as well as the higher preference for outsourcing highly benefits Ted Baker Plc. Buyer Power. Kotler (2004) states that the business arena is currently evolving into a hypercompetitive environment characterised by higher bargaining power from the customers. It should be noted that globalisation also involves the technological advancement particularly the internet technology which enables business organisations to connect to all consumers in all geographic regions. This technology has strongly boosted the bargaining power of customers as it enables them to gain sufficient information about the price, design, and quality of the different products in the fashion industry. This also allows customers to compare products and design from other players. 2.3. SWOT Analysis SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is one of the most widely utilized business models in assessing the current position of a business entity. This analysis is an integration of the results of other tools like the PESTEL analysis, industry analysis, and internal analysis. The company's strengths and weaknesses are derived from internal analysis while the PESTEL and industry analyses provide the required information to ascertain the opportunities and threats specific to the company. Putting all the information together will yield the needed data for the SWOT Analysis (Thomson 2004). Strengths. As stated above, Ted Baker Plc prides itself of being passionately committed in design, quality, and attention to detail. These have become the company's core competences which are also the key success factors in the fashion industry. Ted Baker Plc enjoys its high brand equity which enabled it to establish a good image in the fashion sector. This is coupled by the company's expanding scope and size which allows it to target more customers even in other geographic regions. Weaknesses. Looking at the financial statements of other players in the UK fashion sector, it can be seen that Ted Baker lags behind in terms of financial health. When examined closely, players like NEXT Plc appears to be profitable and more efficient while Marks and Spencer creates more value for its shareholders. Opportunities. The era of globalization presents new opportunities for Ted Baker Plc and other players in the fashion sector. It should be noted that globalization has significantly reduced barriers in entering new markets. It has opened up various geographic regions encouraging the inflow of foreign direct investments and capital. The rise in the number of developing economies like China and India also posts opportunities for expansion for Ted Baker Plc. Threats. Currently, Ted Baker Plc is faced with intense competition not just from its UK rivals but also from other foreign players which are eyeing or serving its different markets. Even though it is quite insulated due to its differentiation strategy, Ted Baker is still threatened by the rapid growth of competitor and products in the market. Ted Baker is also faced with financial challenges and needs to cope with its competitors. 3.0 Necessary Strategic Changes After examining the current situation of Ted Baker Plc through the use of strategic management techniques, this report will now turn in giving the necessary strategic changes that the business organisation needs to put in place. It should be noted that the main focus of this paper is to present a strategic plan which the company can utilise for the next five years. It should also be stressed that as the core competences, strengths, weaknesses, opportunities, and threats of Ted Baker Plc has already been established in the previous section, recommendations will primarily deal with how the business organisation can use its core competences and strengths to take advantage of the opportunities in the market. The recommendations will also focus on how Ted Baker can further improve on its weaknesses and how to cope with the threats which it currently faces. This report comes up with four recommendations for Ted Baker Plc namely, focus on geographic expansion, enhance customer value, strengthen financial position, and cultivate customer loyalty. 3.1. Focus on Geographic Expansion It is irrefutable that the rapid globalisation encourages business organisations to operate beyond their national borders to capture potential market. It is also apparent that most countries encourage the inflow of capital and foreign domestic investment to support the growth of their economies by extending both financial and non-financial incentives. Nowadays, the rapid industrialisation and development in Asian economies like India and China has paved the way for the increase in disposable income and creation of larger number of middle class which might demand the products and services offered by Ted Baker Plc. Also, one of the rationales of geographic expansion is the intense competition in the UK market. By tapping opportunities beyond its current market, the company does not become solely dependent on the UK market. Currently, Ted Baker Plc has operations in UK, Ireland, Australia, New Zealand, Canada, Norway, Spain, Greece, Netherlands, Belgium, and the United States. Before the end of 2006, the company hopes to open its stores in Bath, Hong Kong, Singapore, Jakarta, Bangkok, and Dubai (Ted Baker Plc 2006). This report supports that Ted Baker Plc should focus on establishing its presence on Asian countries like Japan, Malaysia, and China within the next five years. However, in order to do this, Ted baker still needs to conduct an intensive market research in order to reveal the much different preferences and sizes of Asian customers. This paper strongly stresses that Ted Baker Plc will be profitable in conquering the aforementioned markets namely Japan, Malaysia, and China. It should be noted that consumers in these countries have high disposable incomes and high consumer base. Ted Baker Plc can choose to cater the middle and the high income classes in these regions who are seeking for fashionable, trendy, and high quality outfits. The company can start wholesale businesses with its partners but can further deepen its involvement by establishing its own stores. 3.2. Enhance Customer Value It should be noted that Ted Baker Plc, in contrast with its competitors which uses traditional advertising media in promoting their products, solely rely on word of mouth. In line with this, the only way that the company can promote its service is by constantly examining its marketing mix and integrating features and add-on services which it feels necessary to maximize customer satisfaction. This is very necessary because, as previously discussed; buyer power is high in the current business environment. This report will recommend some of the ways which Ted Baker can further enhance customer value. It is recommended that Ted Baker focus on improving its customer service and store layouts and formats. These factors irrefutably contribute to the overall shopping experience of Ted Baker. The company should always make sure that their in-store staffs are always there to assist every customer. Ted Baker can also add to trendy and fashionable image by changing its store formats and moods according to the fad in the fashion industry. However, this should be done with customer convenience in mind. In its virtual store, Ted Baker can enhance the shopping experience of customers by allowing the customization of products and designs. It will be profitable if the business organisations also offer products which can be customized by the customers in terms of color, design, and size. It will also be nice if Ted Plc can install a feature wherein the customer can upload their full body pictures and see how they will look with the dress or blouse they are contemplating to wear before purchase. This will further enhance customer value. 3.3. Strengthen Financial Position The financial performance of a business organisation is a determinant on how it can finance its prospects and plans. This section which deals with the strategic recommendations for Ted Baker Plc, recognizes that in order for the company to carry out these changes, it also needs to have a strong financial muscle. Thus, Ted Baker Plc should strive to improve on its profitability, efficiency, capital structure, and its worth as an investment. It should somehow be at par or even superior to its other competitors in order to secure financing. It should be noted that creditors and investors often choose to invest in or lend to companies which are more financially healthy. Improving the financial position of Ted Baker Plc means enhancing its business operations as financial statements only mirrors the qualitative performance of companies. The firm should closely examine its production process and eliminate processes which are not value-adding. Ted Baker should also focus on the maximisation of its resources while minimizing its costs. In the face of a globalisation era where efficiency is a must, the manufacturer should see to its processes yields no wastage. 3.4. Cultivate and Reward Customer Loyalty Marketing teaches us that even though attracting new customers is important, retaining current ones is also imperative. This is especially true for Ted Baker Plc which solely relies on the power of word of mouth to promote its products. The business organisation should be aggressive in cultivating and rewarding customer loyalty in order to ensure repeat purchases. However, it should only use customer retention programmes which are not detrimental to its image in the fashion industry. This report recommends that Ted Baker Plc cultivate and reward customer loyalty by awarding loyalty cards to its frequent shopper. These cards should be issued free to customers with a certain amount of purchases from the store. The company can then offers hot deals and gifts for cardholders like free samples of products to be launched in store, free tickets on fashion shows, spa packages, and free invites to popular shows. In this way, Ted Baker can communicate its appreciation to its customers. This loyalty program does not only cultivate loyalty but also helps the company tracks the purchases of customers in order to have a more efficient target marketing effort. 4.0 Conclusions Changes in the external environment of business organisations strongly impact their operations. It is irrefutable that globalisation has become one of the major drivers of strategic changes and developments in the UK fashion sector. This phenomenon paved the way for the influx of cheap clothing items from developing countries while encouraging the outsourcing of business processes where labor is relatively cheaper. For the players in the UK fashion industry, globalisation becomes a challenge and opportunity which can determine their success or even mere survival. In line with this, Ted Baker Plc should consider globalisation as an opportunity for development, improvement, and expansion. The changes in the business environment bring about current trends and pressures Ted Baker Plc to institute strategic changes in its operation. This report highlights that within the next five years, Ted Baker should focus on geographical expansion in untapped regions, enhance customer value by enhancing the client's shopping experience, improve financial position by cost minimization and efficiency enhancement, and cultivate and reward customer loyalty through a loyalty programme. It is expected that the institutions of these strategic changes will not only boost the competitiveness of Ted Baker Plc but also improves its positioning in the UK fashion sector, enhance its core competence, eliminate its weaknesses, and enable it to battle head on with the challenges of globalisation. References De Wit, B. and Meyer, R. (2004) Strategy: Process, Content and Context. 3rd edition. Thomson, chapter, 5 Kotler, P & Armstrong, G (2001). Principles of Marketing, Prentice Hall International, Inc., New Jersey Ted Baker Plc. (2006) Retrieved 01 December 2006, from http://www.tedbaker.co.uk Ted Baker Plc Annual Report 2006. Retrieved 01 December 2006, from http://ww7.investorrelations.co.uk/ Thompson, A. Jr. & Strickland, A.J. (2002) Strategic Management. 3rd ed. New York Mc Graw-Hill. Read More