Francais Company Fashion Industry Small Business - Case Study Example

Francais Company Fashion Industry Small Business project Full SS # number/ Section number Fashion Business Practices Love Fall 2008 Introduction Francais Company, a Limited Liability company, is a retailer (marketing intermediary) of a United States fashion lifestyle brand principally engaged in the retail distribution of a wide range of women’s apparel and accessories under the Francais brand. The Francais brand is promoted under the lifestyle image and products are strategically positioned as excellent quality and fashionable. As of today, Francais has a distribution network of 15 retail stores in Los Angeles, San Francisco and New York. The main markets are in California, which accounts for 80 percent of the stores and 2008 sales. The Francais brand merchandise is sold via directly managed retail outlets located in shopping malls. Demographic Profile of Target Customers Francais serves a niche in the United States market for high-quality, fashionable ladies wear. Currently, Francais focuses on a select trendier, upscale segment, with 15 high profile stores in California and New York. With its Francais line of smart blouses, dress pants and short skirts, the company targets young, stylish women and benefits from the bigger margins enjoyed in more upscale niches of women’s clothing. The typical customer of Francais is female, in her early 20s to mid-30s and has a budget for clothes of $150 to $400 per month. Psychographic Profile of Target Customers Many middle and upper class American women are willing to pay a higher price just to get the best product quality and service they can have. Common personality traits include being concerned with physical appearance and prioritization of quality and brand. Furthermore, consumers from our target segment desire clothing products which satisfy changing fashion tastes. The target customers can be described as those who shop as a form of therapy and escape from everyday life, and who enjoy scanning almost as much as buying. Hence, their personality possesses the tendency to shop more, spend more and seek the greatest enjoyment out of the shopping experience. Based on survey conducted among target customers, Jessica Alba and Jennifer Aniston are viewed as positive role models for the women customers because both are believed to have overcome adversity and are women of integrity. To them, apparel is the most important product category consuming the greatest proportion of their disposable income. In addition, usual customers intimated that characteristics most associated with a popular brand are high quality and advertising. Reason for entering this business I entered this business because I noticed that there is a need for fashion apparel retail stores catered to young women seeking higher quality clothing at an affordable price in many areas in California and New York. Based on statistics, there is a void in the market for higher priced but quality design clothes and women are a growing base in many cities in the United States. Company motto and logo “Be elegant, be beautiful with Francais clothing. Feel free to be you” Francais is able to consistently sell quality merchandise through careful selection of commodities, meticulous quality control, and responsiveness to changing trends. Mission statement Our mission is to be the most valued retail clothing brand to customers, investors, business partners, and the communities where we work and live. Specifically, our goal is to provide and bring to market best quality clothing apparel to women all over the United States. This goal has been supported by our substantial expansion and development investments. Form of Business Enterprise Francais is a Limited Liability Corporation registered in Los Angeles. The L.L.C. business formation structure was chosen as a personal liability shield for me (the owner). I have two outside investors (a cousin and a friend) who possess a note securing their investment (30 percent of total), although I am the majority owner. Specifically, we have selected this business form to avoid double taxation. The disadvantage of a Limited Liability Company is that a LLC is dissolved when a member dies or undergoes bankruptcy. Furthermore, running a LLC requires more paperwork and complexity than a sole proprietorship or partnership (Martin, 1988). Organization Chart Francais maintains a flat organizational structure. As the chairman and CEO, I believe that this gives us the intensity to react to market changes on a day to day basis. Overall, my management style is easygoing, with little display of office perks to senior executives. Managers work closely with lower line staff, and in cubicles separated only by the shoulder high partition panels. This facilitates communication, quick responses, and decision making, which are important in a world of fast changing consumer tastes and fashion trends. Financing Short term In the beginning, the business was self-financed by the 3 investors (a cousin, a friend and me). Francais started without loans. After a few months of successful operations, additional capital was needed to increase inventory, hence we decided to borrow capital from our credit card accounts amounting to around $10,000. This was quickly paid back in less than a year, because of the disadvantageous high interest rate of 3.5 percent per month credit card companies charge. Another source of short term capital for Francais is trade credit. After a year of good standing, the manufacturing company supplying the clothing merchandise granted a longer credit period (3 months, compared to 2 weeks previously) to Francais. However, the capital contributed to the company by the investors and short term credit is not sufficient for financing the increasing number of retail outlets of Francais. In order to increase market share and access additional markets, Francais must raise additional capital. Long Term The business has loaned money 2 years ago amounting to $50,000 from a commercial bank for working capital and for its expansion. The disadvantage is that the loan was approved by using part of the business as collateral. Francais is currently planning to go public within 2 more years of operations. The funds used will both help create liquidity for investors as well as allow for additional capital to develop our expansion strategy to more cities in the United States. An Initial Public Offering (IPO) would clearly benefit the company by allowing us to leverage the additional resources and market valuation to purchase additional information, and increase company credibility. The additional funds would further be employed to increase promotion and to obtain a larger market presence. Code of Ethics Integrity We practice top ethical standards, and our commodities and processes will be of the best quality. We will exemplify open, honest and ethical behavior in all dealings with customers, clients, colleagues, suppliers, partners, the public and governments. Respect for People We recognize that people are the cornerstone of Francais’ success. We listen to the ideas of our colleagues and respond respectfully. We aim for a business environment that promotes personal and professional growth and achievement. We appreciate that communication must be regular and honest and that we must support others with the tools and authority they need to succeed in achieving their responsibilities and goals. Customer Focus We are committed to fulfilling the needs of our customers and consistently pay attention to customer satisfaction. We take sincere interest in the welfare of our customers. We recognize that we can grow only if we attain customer needs, are resilient to changing conditions and meet customer expectations better than the competition. We desire long-term relationships based on our extensive understanding of all our customers needs and on the value we provide. Teamwork We know that to be a prosperous company we should work together, constantly going beyond organizational and geographic boundaries to meet the changing needs of our customers. We aspire that all of our colleagues are able to contribute to the best of their ability, individually and in teams. Teamwork makes the quality of decisions better and increases the chances that good decisions will be made. Leadership Leaders enable people in the organization by imparting knowledge and authority and by recognizing excellent individual effort. We seek to provide opportunities for leadership in our organization. Leaders employ the specific talents of every individual and resolve conflict by helping others to focus on common goals. Leaders build relationships with others all over the company to impart ideas, provide support, and ensure that the best practices exist throughout Francais. Location of Facilities In 1995, Francais started by opening a retail outlet in Los Angeles selling casual apparel. The company sources its merchandise from a Hong Kong based manufacturer. In 1998, also began to expand its market by distributing Francais merchandise in other parts of Los Angeles and other cities in California such as San Francisco. In 2000, it opened its first retail outlet in New York City. Francais brand merchandise is sold via directly managed retail outlets located in shopping malls. Francais relies on a great deal of automation and computerization. The main distribution center located in its headquarters in Los Angeles facilitates the ongoing task of receiving bulk quantities of each garment from the Hong Kong based manufacturer, then recombining these garments into shipments for each store. Information system tracks where each Stock Keeping Unit (SKU) is stored as it enters the distribution center. Each Francais store places an order to its Distribution Center in Los Angeles twice a week. The order encompasses both replenishment of existing items and initial requests for newly available garments. In markets with expensive retail space, retailers try to maximize every square floor of the store for sales opportunities. Francias is no different. Its strategy involves not having a back storeroom in each store. Instead, a central distribution center replaces the function of a backroom storeroom. With information technology (IT), Francais is able to skillfully manage its inventory and forecast demand. When an item is sold, the barcode information identifying size, color, style and price is recorded by the point of sale cash register and transmitted to the company’s main computer. At the end of each day, the information is compiled to the store level and sent to the distribution center. The compiled sales information becomes the store’s order for the following day. Orders are filled during the night and are ready for delivery by early morning, ensuring that before a Francais store opens for business, new inventory is already available on the shelves. Channels of distribution Francais has a distribution network of 15 retail stores in Los Angeles, San Francisco and New York. The main markets are in California, which accounts for 80 percent of the 2008 sales. Currently, Francais has 15 retail outlets, 12 of which are in California (9 in Los Angeles, 3 in San Francisco) and 3 in New York. Francais recognizes the importance of limiting its expansion and focusing on one specific area. Focus makes the business more manageable: positioning in the market, keeping the store simple and better inventory management. Simplicity and focus are reflected in the way Francais merchandises its goods. There are no more than 60 items in a Francias store. There are 17 core items. Merchandising a wide range of products causes retailers to take a longer time to react to market changes. Shipping clothes to stores and deliveries usually shows up at stores one or two days after each order was placed. Merchandised are delivered to stores by a company owned truck which serves its Los Angeles branches and a tie up with a courier company for deliveries to its New York and San Francisco branches. Advertising and promotional strategies Francais spends a large proportion of its turnover on advertising and promotions. For the past five years, Francais has been spending around $25,000 annually on its advertising and promotional activities. Print advertising remains the primary communications medium. Francais regularly advertises in Glamour and Vogue magazine. Additionally, advertising at fashion events and through sponsorship of fashion shows reinforces the brand’s value to an existing customer base. Furthermore, Francais’ promotion campaigns are creative and appealing. One such campaign was the Madness Shopping with a U.S. FM station. Starting from store opening to closing, different items were put on sale with a 10 percent to 60 percent discount. Another recent success is the “Trendy Blouses” promotion launched in May 2008, which emphasized basic, trendy culture style that fitted all occasions. References Antonini, Orlando J. (1993). Getting a Business Loan. Delaware: Crisp Publications. Baumbach, Clifford M. and Lawyer, Kenneth. (1989). How to Organize and Operate a Small Business. New Jersey: Prentice Hall, Inc. Kotler, Philip and Armstrong, Gary. (2004). Principles of Marketing, 10th Ed., New Jersey: Prentice Hall. Martin, Charles L. (1988). Starting Your New Business:A Guide for Entrepreneurs. Delaware: Crisp Publications, Inc. Owens, James. (1989). Business ethics. Arlington, VA: Executive Publications Inc. Read More