Market Analysis of ASOS.com - Essay Example

Executive Summary: ASOS.com is an online retailing unit, and it has a wide presence in Europe and America. The company seeks to introduce the production and supply of ballet shoes, which customers have played a role in its design. Allowing customers to choose the design of their shoes is a differentiation strategy that the company aims to use in achieving a competitive edge over the rival companies. This is because the footwear industry is very competitive in United States, and the only method to break into the market is to come up with innovative ideas aimed at capturing the market. This paper also contains the market analysis of the product, describing the industry, size of the market, and the description of the product. It is very difficult for the company to achieve success in penetrating the American market without ban elaborate and effective marketing strategy. This paper contains the marketing strategy that the organization should use, and the estimated financial flow that the project intends to attract. The company intends to start making some profits during its third year of operations. Table of Contents: Introduction................................................................................. 4 Market Analysis............................................................................6 Industry Description, Size of the Market and Its Description: Objectives of the Organization..................................................... 10 Overall Business Objectives......................................................... 10 Marketing Objectives...................................................................10 Operations objectives...................................................................11 Marketing Strategy......................................................................11 Operational Plan.........................................................................16 Financial Summary......................................................................18 Bibliography..................................................................................20 Introduction: The product of the company under review is ASOS.com. This is a British online company that is responsible for selling beauty and fashion products. The target markets of the company are young adults. Furthermore, the company manages to sale over 850 clothing brands, and it also has its own brand of accessories and clothing materials. As of the year 2013, the company was able to make a sale of 753.8 million pounds. The products that the company manages to sale are menswear, womenswear, beauty products, jewellery, accessories, footwear. On each and every week, the ware house of the company normally comes up with new products, aimed at replacing the already sold out products. The major disadvantage is that these products removed from the warehouse are not unique (Sachdev, 2004). This is a major disadvantage to the company, and it ought to invest heavily in research and development for purposes of developing unique products aimed at catering for the needs of its target market. ASOS.com has various websites that target markets in USA, UK, Australia, Germany, China, Italy, Spain, Russia, etc. These are not the only countries that the company operates in, and this is because it normally ships its products to over 237 countries of the world. It has two distribution centres in the United Kingdom, which is responsible for undertaking this job. The company has approximately 21 million unique customers per month, and 7 million active or permanent visitors. This is over 160 countries of the world. The mission of the company is to be a leading online organization responsible for selling high quality fashionable clothes, jewellery, and other accessories (Prelipcean, 2012). In as much as the company has a huge customer base, and is successful in its endeavours, there is one product that it lacks, and if introduced, it would result to an increase in the sales revenue of the company. The product under consideration is a flat ballet shoes that customers have designed for themselves (Lemper, 2012). A ballet shoe is an example of a lightweight shoe, and is normally weared by women for daily use. It is possible to make this shoe from canvas, satin, or leather. These shoes normally have very thin soles. Traditionally, women normally wear these shoes when attending unofficial duties or work, and this includes, going for sports, recreational activities, etc. Furthermore, these shoes are far much comfortable, when compared to high heeled shoes, and other types of shoes (Joshi, 2012). The productions of these shoes are unique because customers will have a chance to design the manner in which their shoes will look like. This is by using the 3D printing technology on the website of the company. The ASOS.com website will be developed in such a manner that customers will gain the capability of choosing the material to use in making ballet shoes, the colour of the shoes, the glitter, and other small scale design ornamentations (Colli, 2011). Each of these details will be added on the final ballet shoes, but at an additional cost. The use of 3D printing technique that allows customers to choose the design of their ballet shoes is a new technological innovation, and is aimed at ensuring that the company achieves a competitive advantage over its rivals (Sachdev, 2004). This is because these shoes are unique, and this is mainly because customers have a chance to decide on the design of their shoes. The target group of these shoes are women. The design of these shoes are normally made for women, and hence they would be the most desirable people whom the company will target, for purposes of ensuring that they sale their products. Amongst these women, the company will target students. Students are the people who normally prefer to buy these shoes, and use them in their day to day lives. Furthermore, the student population of United States is high (Joshi, 2012). The country in which the company will sale these products is United States. The United States economy is capitalistic in nature, and it is a free economy. This means that the company can carry out its business activities within the country (Sachdev, 2004). . The American shoe industry is very lucrative, and women are constantly involved in purchasing shoe products. Furthermore, there are numerous colleges, Universities, and Schools, whereby the company can target its students, with the intention of selling the shoes to them (Colli, 2011). Furthermore, there isn’t any company that offers the services which allows its customers to design the manner and nature of shoes that they want (Ayub, 2013). On this basis, the ballet shoes that the company aims at introducing into the American market will bridge this gap. Furthermore, this product is a new product, and this is an indication that there will be another revenue stream for the company. This means that the company will manage to increase its revenue base (Ayub, 2013). The sale of flat ballet shoes is fitting to the mission and objectives of the company. This is because flat ballet shoes are highly fashionable, and in demand. Market Analysis: Industry Description, Size of the Market and Its Description: The American shoe industry is dominated by companies such as Nike, Acme Boots, Lauren Jones, etc. This industry is responsible for manufacturing footwear for women, children and men. These companies manufacture plastic and rubber footwear, house slippers, protective footwear, and slipper socks (Prelipcean, 2012). Furthermore, these companies are able to manufacture women and male footwear that are designed for formal, work and casual related work environments. These products include plastic or rubber soles that are to be fitted in male and female shoes. This industry is very competitive, with shoe companies constantly coming with measures aimed at achieving a competitive advantage over its rival companies (Woodside, 2000). Some of the measures used to achieve a competitive advantage include cost leadership, and differentiation strategies. A company such as Nike and Acme Boots have a long history in operating in United States. They have managed to survive intense competition because of their differentiation strategy. Differentiation strategy involves the situation whereby a company comes up with innovative products aimed at improving the quality of their current product (Acar and Zehir, 2010). Nike is very good at this concept, and this is because of its huge investment in research and development (Joshi, 2012). Furthermore, the company has an aggressive marketing strategy that involves constant promotion of sports teams and personalities, advertisements through the major television and radio stations, etc. This is one of the major competitors that ASOS.com, through its production of flat ballet shoes would face. Another factor to consider is the cost leadership strategies developed and pursued by other shoe companies (Asthana, 2012). This involves a situation whereby shoe companies are involved in selling shoe products at a lower price, when compared to other companies. The advantage of this policy is that the company will manage to sale its products to a large number of people, despite the quality of the product. However, the major disadvantage of this policy is based on the fact that the products of the company are associated with poor quality (Sachdev, 2004). This would be difficult to attract high end customers, who have a large purchasing ability. Despite the existence of companies using this type of strategy, ASOS.com will pursue a differentiation strategy. By allowing their target customers to choose the design of the shoes, the company will be pursuing a differentiation strategy. This is because most competitors of the organization normally have a finished shoe product, without the involvement of the customer in its manufacturer. This is a situation that the company would seek to avoid, by allowing customers to play a role in the design and manufacture of the products that they need or want to use. This is a strategy that is unique, and the company believes that it will manage to attract a large customer base, by using this strategy (Joshi, 2012). Based on these facts, the differentiation approach that the company choose to use, is the best method in penetrating the ballet shoes market. For purposes of positioning this shoe product, the company needs to use branding positioning. An effective brand positioning technique is based upon the identification and communication of the differentiation, uniqueness and verifiable value of the company (Sachdev, 2004). The process of brand positioning involves the following, Identification of the direct competitors of the business organization. This includes any player or stakeholder who can affect the operations of the business organization. Having an understanding on how the major competitors of the organization have positioned themselves. For example Nike uses the Tick mark to brand itself, and the product differentiation strategy. Giving a comparison on the positioning strategy of the company, as compared to its competitors. Coming up with a value based and distinctive positioning concept. Creation of a positioning statement that has key and important messages used for purposes of communicating to the customers. When developing its brand, the company seeks to use extensive advertisements to communicate to customers on the quality of the product. The company would also uses the ASOS.com label to brand the shoes, giving them a brand identity (Woodside, 2000). This strategy has been successfully used by companies such Nike, Adidas, etc. That is, in the American footwear industry. The annual footwear revenue in the United States stood at approximately 48 billion dollars, in the year 2012. Currently, there are approximately 29,000 shoe stores in the United States. This shoe industry is an employer of approximately 189,000 people. There is an increase in the imports of shoe products in United States. Because of this increase of shoes, the number of stores in the shoe industry is declining (Woodside, 2000). The best way of managing to be in competition is to be innovative and produce shoe products that target the niche market. This is the reason why the ASOS.com has to develop flat ballet shoes for purposes of selling it to women, and most specifically young women, who are still in school. Furthermore, the use of the internet would give the company a more competitive advantage, in comparison to other companies that use physical stores for purposes of selling their products and substances (Sachdev, 2004). The use of the internet, to sale the products of the company is an effective positioning strategy, that gives ASOS.com a competitive advantage over its rivals. By allowing customers to design the shoes through 3D printing is also a suitable marketing strategy. This is a good innovation that has the capability of transforming the business performance of the company (Ayub, 2013). Objectives of the Organization: Overall Business Objectives: The following are the overall business objectives of introducing the 3D printed ballet shoes. Allowing customers to design the ballet shoes through the use of the 3D printing technology. This technology would allow target customers to choose the color, and the type of materials to use in creating the shoes. Gaining the capability of selling more than 10000 brands of ballet shoes within a month. Hiring the best marketers and sales men, who will be constantly communicate with customers, and helping them in choosing the design of their ballet shoes. In as much as the company would have the capability of selling approximately 10,000 ballet shoes monthly, the only realistic figure is 3000 shoes. This is mainly because of competition that emanates from other companies and shoe stores in the United States. The company therefore aims at establishing an infrastructure that would make this possible. The company aims at achieving this objective in the first two years of its introduction of 3D printed ballet shoes. Marketing Objectives: Carrying out a market research for purposes of identifying the various needs of US customers. To be successful, there is a need of understanding the behavior of customers, and their likely reaction to the introduction of 3D printed ballet shoes. Developing an effective advertisement strategy that can reach the target market. The strategy should incorporate the use of the internet, electronic and print media. Developing strategies aimed at developing the brand image of the company. This includes engaging in promotional activities such as issuing scholarships, sponsoring sports teams, etc. Employing highly talented marketers who will have the responsibility of developing the advertisement strategies of the business organization. Creating these advertisement strategies within the next six month of introducing 3D printing ballet shoes in the United States. Operations Objectives: Creation of administrative offices responsible for monitoring the sale and production of 3D printed ballet shoes. Creation of a sales team that will be responsible for delivering the products. Managing to set up an administrative and distribution center within one month of entering the market. Marketing Strategy: a) Product Strategy: The product under consideration is a 3D printed ballet shoes. This type of shoes is produced to the taste and satisfaction of customers. The major competitive advantage that this product has against other products is based on the fact that customers have a chance to choose the design of their products, and the manner in which they want this product to look like (Timmers, 2003). This is very advantageous to the company, mainly because few companies have implemented such kind of a technology that can make people choose the kind of shoes they want. Furthermore, the company would use its website, ASOS.com, to make people be aware of this new product within the market. The company should also aim at investing in research and development, for purposes of coming up with measures or strategies aimed at improving the quality of the products. Innovation is an important marketing strategy and this mainly because it helps a business organization to be more competitive when compared to its competitors (Sachdev, 2004). Companies such as Apples, Samsung, and Microsoft have managed to survive the intense competition in their industry, mainly because of innovation. However, it is impossible to be innovative without investing in research and development. This assertion is proved by companies such as Samsung, Apples, Nokia, Microsoft, who have invested heavily in research and development. This is the reason they have managed to constantly produce innovative products or substances. Packaging is also another important marketing strategy that the business organization would use (Lemper, 2012). While delivering the products to customers, the organization will have to ensure that the shoes are well packaged. Furthermore, the consumer will have to choose the colors of the materials to use while it is being packaged. This is because the website will provide provisions that allow a customer to choose the packaging materials and color for the product. Proper and good packaging of the product is an after sales service, which has an impact of creating loyal customers. Customer loyalty is a very important issue in business (Ayub, 2013). This is because the business organization will have a guarantee that a particular customer will always come for the products of the organization. Furthermore, when a customer is loyal to the business organization, then he or she will always act as a marketer for the organization (Woodside, 2000). This is by recommending their friends and family members to try purchasing the products of the business organization. Furthermore, good packaging will help in developing the brand of the 3D printed design ballet shoes. A good brand name is an important marketing strategy that business organizations should aim at achieving (Gibler and Lindholm, 2012). This is obtained through the production of high quality products, and also following good ethical practices. Following of ethics is an important method that can be used for purposes of developing a positive brand name of the business organization. Ethics is a branch of philosophical beliefs and values that involves defending, systematizing, and providing a recommendation on the concepts of what is wrong or a right conduct. Ethics normally addresses issues that deal or pertain to moral diversity. The company should therefore establish a series of ethical procedures that it should follow while dealing with its customers (Woodside, 2000). This includes designing the shoes based on the preferable of the customer, maintaining honesty when dealing with the customer, and providing the shoes to the customer, on the given date. Furthermore, while developing the brand name of the organization, the business should set aside some funds, for purposes of sponsoring destitute children. For example, for every shoe purchased, the business organization should set aside some five dollars to pay for maintaining some destitute children. This would build a positive brand name for the business organization, and help in increasing the sales of the ballet shoes. b). Pricing: Pricing is also an important strategy that the business organization should look into when marketing its products. It is advisable that the company should not follow the cost leadership strategy when coming up with the prices of the ballet shoes. This is because the company would be targeting young college women who prefer high quality products (Woodside, 2000). This is a niche market, and selling these products at lower prices would make its target customers to think that they are of low quality. This is because there is a general perception that low quality products are always cheap. On this basis, while coming up with the pricing strategy, the business organization should ensure that it charges its products in a manner that it would receive approximately 25% of profits. It is important to explain that companies which normally pursue cost reduction strategy are unable to retain a large percentage of its employees. An example is Wal-Mart, which has a high annual labor turnover, of over 50%. This means that the company is unable to retain 50% of its employees, within a given year. A high labor turnover is not good for any business organization, and this is mainly because it increases the administrative costs of the business organization. The organization will be forced to hire more staff, to replace the employees who left. Furthermore, where there is a high labor turnover, the company will be losing experienced member of staff (Gibler and Lindholm, 2012). It may be difficult to find a replacement to these people who have left. Therefore, looking closely at the cost leadership strategy, it is correct to denote that it is expensive in the long run, when compared to the differentiation strategy. To avoid this scenario, the company should avoid the cost leadership strategy, and involve itself in differentiating its products. This would result to an increase in revenues and sales of the 3D printed ballet shoes (Ayub, 2013). c) Place/ Distribution Strategy: The company mainly uses its website as a place of carrying out business. The website of the company is referred to as ASOS.com, and it is interactive in nature. This means that the consumer can interact with the sales person, or a representative of the company, while choosing the design of his or her ballet shoes (Sachdev, 2004). An interactive website is an important social tool that can help in improving the number of people visiting the website. The social media is a popular channel of conducting business operations. Furthermore, for efficiency of the delivery of the products, the company should open a distribution store in United States. This would make it easy for the company to deliver the ordered materials on time, and with efficiency. Personal delivery of the products is an important marketing tool that the business organization would engage in. This is because most companies would not personally deliver an ordered product to the door step of an individual (Timmers, 2003). Through this strategy, the company will achieve a competitive advantage over its rivals. Furthermore, the use of the internet to carry out the operations of the business has eliminated the use of physical stores. These stores are always expensive to maintain. The use of the internet and 3D printing technology is will therefore help in ensuring the company maintains a lower administrative costs, hence giving it the capability of making more profits. d) Promotion strategy: There are a variety of methods that ASOS.com should use in promoting the 3D printed ballet shoes. One important method is advertising. The company should choose an advertisement strategy that would be able to reach its target market. One of the best advertisement strategies is the use of the internet and the social media (Timmers, 2003). The internet is a good channel of advertisement, mainly because so many people are using it. The company should use advertisement sites such as Google Ad sense and Chitika for purposes of advertising its products. Google runs an advertisement program referred to as Adsense. Under this program, Google will run a link that contains a web page that on information that pertains to the products of the company (Sachdev, 2004). The company will pay for these products, only after it has been clicked by a user. This program is referred to as the cost per click advertisement program. Another advertisement strategy that ASOS.com should use is the use of the social media. The company should advertise its products through face book, and twitter. These are the most popular social websites, and they have a large number of people. Chances are therefore high that the business organization will reach a large audience, who may have an interest in purchasing the products of the company (Sachdev, 2004). The company should also use the electronic media for purposes of advertising its products. This includes the use of the television and radio channels. This is an effective strategy because the company will manage to reach a large audience of people. e) People: Since this is a new product introduced by the company, there will be a need of training employees on how to respond to the demands of customers. Furthermore, there will be a need of training employees on how to market and sale these products. Operational Plan: ASOS.com operates as a manufacturer, and at the same time it is a retailing organization. It is a manufacturer because the company also sales and produces its own accessories, and clothing products. As a retailing unit, the company manages to sale the various products of other companies. However, when it comes to the 3D printed ballet shoes, the company would manufacture its own shoes and sale it to the customers. On this basis, the company would bypass the retailers, including itself (Acar and Zehir, 2010). This is an important method of reducing the administrative costs of the business organization. On this basis, the supply chain of the business organization would go directly to the customer. This is because there isn’t any middle man, to act as a go between the company, and its target customers (Asthana, 2012). The company needs suppliers, who will provide it with the tools to use in manufacturing and producing the products. The major suppliers of the company will be leather and rubber producers. These are the two materials that the company will constantly use to manufacture the shoes. For purposes of supplying the shoes, the company should identify strategic locations within United States that can act as distribution centers (Sachdev, 2004). It is at these locations that the company would use for purposes of distributing the finished products, as demanded by the customers. For efficient coordination of the activities of the company, there will need to be an administrative center in United States. This center would host the members of staff, and this includes customer care personnel, and the people responsible for manufacturing the designed shoes. Furthermore, the company will employ riders, who will have the responsibility of taking the shoes to the customers. This is an after sales service, aimed at creating customers loyalty. Financial Summary: The company intends to start making profits after the three years of its operations. The onetime cost that the company would incur is the license cost. The company aims at incurring 45,000 pounds for its licenses. This is the money that the company would pay in its first year of operations. Variable costs that the company would incur in its first year of production, includes the print costs of approximately 155,000 pounds, and the website maintenance cost of approximately 20,000 pounds. The fixed cost that the company aims at incurring during the first year of its operation is the administrative costs, and this would amount to 100,000 pounds in the first year. The company aims at producing and selling approximately 5000 shoes within one year. The selling price of one shoe would amount to 50 pounds. During the first year of operation, the company aims at making approximately 250,000 pounds. During the first year of operation, the total loss that the company would face is, (variable costs + fixed costs) – Selling Price 320,000- 250,000 which is, 70,000 During the second year of operation, the company would not pay any license costs. However, it expects the fixed costs to remain the same, and the sales of the shoes to remain the same. The following is a forecasted loss for the second year of its operations, Costs = 275,000 Sales = 250,000 Loss = 25,000 During the third year of operation, the company aims at reducing the administrative costs to 80,000, and it aims at selling approximately 6000 shoes. The projected profits for the organization would amount to, Costs = 80,000+ 20,000+ 155,000 = 255,000 Sales, 6000 * 50 = 300,000 Projected Profits = 300,000- 255,000 = 45,000 pounds Bibliography: Acar, A., & Zehir, C. (2010). The harmonized effects of generic strategies and business capabilities on business performance. Journal of Business Economics and Management, 689-711. 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