Fashion Retail in the UK - Essay Example

FASHION RETAIL IN THE UK School Fashion Retail in the UK The BCG is a business strategy model that seeks to evaluate the relative position of a business portfolios and their potential. The portfolios are classified into four sub classes. These four sub classes are categorized based on the market share and the growth rate of the industry in which the organization operates under (Botten, 2005). This assignment will seek to summarize the ideas behind the BCG business strategy. In addition, it will look critically into Zara UK’s strategy model and the benefits it has drawn by implementing the strategies. Large companies always face challenges to allocate effectively their resources amongst its numerous units. The BCG strategy suggests that the resources of an organization be allocated depending on its relative position on the grid (Spender, 2013). The grid has four sections/ positions. These are cash cow, star, question mark, and dog. The BCG strategy is diagrammatically represented as follows: The relative market share is a dimension that is utilized in evaluating a business portfolio. A corporate that enjoys high market share would ultimately get a high return of cash. This can be explained in terms of economies of scales. A firm that manufactures large quantities of goods has benefits of economies of scale and thus they enjoy higher profits. On the other hand, the market growth rate is a representation that earnings and profits increase (Hambrick, 2005). An increase in the growth rate means that large amounts of cash would be utilized to stimulate further growth. This means that an organization in the rapidly growing industries use up a lot of cash and one should only invest in such organizations when there is an underlying growth or a sustained market share. An organization’s brands can be classified according to the following quadrants: Dogs: the brand in this quadrant is in a slow growing market. Furthermore, such brands are not the market leaders: they hold a low market share. Such brands generate nil or sometimes negative cash on returns. It is not wise for one to invest in such brands unless one opts for a long-term investment. As such, one may opt for retrenchment or divesture into other forms. Cash cows: are the best brands in the portfolios of organizations (Gohnson and Scholes, 2002). In this quadrant, the brands should be “milked” so that they give out as much money as possible. The money collected from the cash cow is used to support the ‘stars’ quadrant in order to effectively develop their future growth. The organization should invest into product development, which leads to better innovation and creative structures. The stars quadrant is those brands that operate in industries which record high growth (Hambrick, 2005, 134). The stars enjoy a high market share. An organization should make sure that it invests in stars since they are the next cash flows. However, not all stars would become cash flows. Industries, which are constantly utilizing new technological advancements, may render useless innovative products used. The question marks are brands in the portfolio that require much more consideration. The question marks however have a low market share. The brands in the question mark quadrant are fast growing. The brands in this segment struggle to gain market share (Ian, 2003, 55). The company has to learn an adoptive strategy whereby they will need to change frequently their goals and the way that they run their activities. In a situation where the company needs to move fast and react to situations swiftly, the company needs to learn to be flexible. They need to be able to adjust their goals from time to time in order to meet the needs of the customers (Gohnson and Scholes, 2002, 23). Any long-term plans made by the company will be useless if the predictions that had been made are wrong. Therefore, to remain relevant in the industry, Zara has to be flexible and react to changes in the market as swiftly as they can the plans made by the company are short-term and they change from time to time, instead of the plans being fixed and careful imprints, the data is in such a way that they are hypothesis that can be adjusted according to the available information (Zara, 2003). In trying out the various hypothesis, the plan must be linked to the operations to ensure that all the changes in the industry are noted as soon as they occur. This also ensures that little, if any information is lost and time is not wasted. Johnston and Wittington, 2012, opine that in the fashion industry, the trends change very fast and tastes of the people change very rapidly as well. Upcoming trends gain momentum very fast and people lose interest in them in the same way. There is no way that the fashion industries will be able to know which trends will be upcoming and therefore, Zara has the capacity to continually produce a variety of products as fast as they can. They constantly need to adapt to the changes to meet the needs of the markets. Zara Company does not solely depend on a formal planning process but rather aims at being as flexible as possible (Zara, 2003). The company has strong relationships with it’s over 1400 suppliers of their goods who work hand in hand with the designers and the marketers in the company. Due to the efficiency of all the workers and the professionals involved, the company is able to make a garment in as little as two weeks, which under normal circumstances would take about four to six months. By being flexible, they are able to play round with a few new looks and experiment by making small batches of clothes to test the market with (Myer, 2008). If the clothes that they use to test the market prove to be a hit in the market, then Zara can do larger productions of the same before the rest of the companies get theirs to the markets. On the other hand, if the product does not do well, then the company does not lose much. Zara can respond very quickly to information that is given to them by the retailers and on the trends in the industry (Kin, 2012, 30). The retailers are best placed to understand the needs of the customers since they get in close contact with them. Zara Company can thus experiment and respond accordingly to the events in the industry as they happen. References Botten, N., 2005. Management Accounting – Business Strategy. 6th ed. UK: CIMA Publishing. Gohnson, J. & Scholes, K., 2002. Exploring Corporate Strategy. 6 ed. New Jersey: Prentice Hall. Hambrick, D. C., 2005. Toward an Empirical Prioritization of Contingency Variables for Business Strategy. Academy of Management Journal, 28(4), pp. 123-152. Ian, C., 2003. Zara Japan Corporation,. Boletin Economico de ICE, 8(6), pp. 50-62. Johnson, G. & Whittington, R., 2012. Fundamental of Strategy. 2 ed. New Jersey: Pearson EDUCATION. Kin, L., 2012. Zara leads the new retail way : brands @ work. Journal of Moarketing, 11(5), pp. 125-140. Myer, A., 2008. International retailing. 3 ed. Oxford: Blackwell Publishers. Spender, J., 2013. BCG. [Online] Available at: http://www.bcg.com/about_bcg/history/history_1968.aspx [Accessed 9 December 2014]. Zara , 2003. Business Model of Zara. [Online] Available at: http//: www.docstoc.com [Accessed 9 December 2014]. Read More