Fresh Perspectives at Harrington Collection - Case Study Example

Harrington Collection is a large manufacturer and retailer of sophisticated high-end women’s apparels with high roots in the US. It was established in 1960 by Ella and Stephen Harrington and it started off as a manufacturer and marketer of designer women’s clothes. It continued to grow its product lines over the years and in the 1980s, it capitalised on the increasing demand for professional and stylish attire for women entering the workforce. It managed to establish itself as a force to reckon with in the area of high class fashions. Having established itself as a manufacturer and retailer of sophisticated high-end women’s apparels, it enjoyed high volumes of sales as well as profits during the 2000s until 2007 when it recorded a steep decline in the number of sales. Against this background, a critical analysis of Harrington Collection’s case study seeks to identify some of the problems and their causes to this negative growth in the financial results of Harrington Collection’s 2007 fiscal year. Probable solutions will also be given in an attempt to suggest the best measures that can be implemented in a bid to resuscitate its declining glory. Having posted high sales results for the past three years prior to the 2007 fiscal year, Harrington Collection later witnessed a sharp and an unprecedented decline in its sales. The problem is mainly attributed to the downturn in the global economy that began in the early 2000s. The problem of global economic recession was mainly caused by various factors which include the rising property prices, rising oil prices as well as the weakening dollar among others. This downturn in the global economy affected almost all sectors of the economy across the spectrum which resulted in contracting budgets. This meant that people had less disposable income for expensive apparels but had to resort to stylish, sporty as well as casual wear. These apparels are primarily meant for prestige and status due to their premium pricing which is beyond the reach of many ordinary people. Given such a state of affairs, it can be noted that even the rich and affluent would tend to revise their spending and focus more on basic commodities. As fate would have it, the consumers began to earmark technological products, home design products as well as leisure activities such as travel. They preferred to redirect their spending on commodities which had value for their money. This resulted in a steep decline of the sales for the women’s apparels. The other problem facing Harrington is making a decision into expanding the product line into something casual and lower priced fashion since this would be a departure from the organisation’s renowned sophisticated and high class roots. This would ultimately lead to the negative perception of the brand name among the seasoned customers. The main cause of this problem is that this organisation had established its expected standards among its mostly affluent customers and any shift would mean that it would lose its customer base. The fear of losing the trusted and loyal customers after the introduction of new products is the major impediment among the strategic planners to make an informed decision. This can also be attributed to the fact that the market segment of the organisation is not very wide hence unexpected changes would result in the customers shunning the products which would further complicate the already bad situation. Expanding downstream is also seen as problematic since it would significantly put a drain on the resources. This is mainly caused by the fact that the organisation is already faced with a situation whereby it has to stimulate its sales to recover the losses already incurred whereby venturing into something different at this juncture would further complicate the already dire situation. It is not guaranteed that they would capture enough sales in the first year to break even. Given that the company was established in 1960 and only achieved its position in the market in the 1980s is enough evidence to show that building a brand name is not an overnight event hence expansion of the product line does not guarantee a quick turnaround of events for the betterment of the organisation. Another problem is that managing the apparel industry is difficult as a result of short-lived product lifestyles. This problem is mainly caused by the fact that exclusively high class and fashionable brands are meant for prestigious reasons hence the affluent would expect to get the best every time. This means that the consumer tastes are also short lived and in this case, this required the apparel manufacturers to continue reducing their product design, production and retail placement cycle time. More quality things have to be designed which suit the situation obtaining in the market. This is the major cause of the problem since there would be every need to ensure that there is no overproduction of products which may end up failing to get buyers in the market which will also lead into loss making. Special consideration has to be taken when designing things that have a short lifespan as a way of trying to minimise the chances of incurring losses. Competition is the other major challenge that is facing Harrington Collection in this particular case. This cause of this problem is that there are various competitors in the market and there are no barriers of entry into this particular market. Leading companies such as Jones Apparel Group, Liz Claiborne have captured significant market share with their diverse brand portfolios. These were both involved in designing, marketing, retailing and wholesaling of women’s apparel. It has to be borne in mind that in a competitive environment, there is every need for the organisations to have a competitive advantage in order to successfully operate while at the same time realising profits. In this particular case, it can be noted that both Harrington Collection’s major competitors outsource their production which probably mean that they would lower the cost of production while at the same time managing to keep pace with the demand of the apparels in the market. Outsourcing of production to areas with low labour costs is advantageous in many ways. Cost of production in countries like China where there are trends of low labour costs meant that apparels produced in these areas would be lower priced compared to those manufactured in the US. This is a competitive advantage where an organisation seeks to be a low cost producer while at the same time managing to grab a reasonable market share in a competitive environment. The CEO at Harrington Collection could not easily buy the idea of outsourcing production for fear of compromising on quality. She also wanted to have manufacturing reasonably closer to US so as to ensure that when a fashion sensitive product was ready, it could be placed into retail outlets with maximum speed compared to the time that would be taken by container ships from China. Given that the products are primarily meant for a niche market, it remains difficult to overcome the challenges since other competitors are at an advantage where they spend less on production and still manage to operate effectively in the market. Factors of production are very important since they determine the amount of profitability for the organisation. On the other hand, Harington is mainly made up of two segments namely the manufacturing group that specialised on designing, producing and marketing of women’s apparel while the retail group focused on retail based operations for company stores. One major cause that could have compounded the company’s situation of significant lowering of sales is that it does not supply its products to the other retail shops but just focused on its own stores. Comparatively, the major competitors such as Jones apparel Group and Liz Claiborne, operated more than 350 retail stores each and the also managed an array of brands. Other competitors capitalised on distributing their products to various retail outlets thereby increasing the amount of sales of their products. The distribution aspect of a product is very important in that the product is readily available in the market where the customers do not need to stress about moving around searching for something that is widely viewed as a luxury. If a product is readily available, it also serves a purpose of appealing to the other potential customers rather than just relying on loyal customers. In every business, it is very important to attract more customers as a way of increasing the sales of a product. Another problem that could have led to a decline in the organisation’s 2007 sales is that it specialised in a narrow target market which mainly comprised of the affluent, fashionable, college educated and professional women of ages between 25 and 60. The customer base was very limited and its interest was in “sophisticated elegance” and status seeking. The problem related to specialising in a niche market is that when the loyal customers change their buying behaviour, the organisation is negatively impacted. It is always very important to widen the net as far as possible such that when the product performs badly, there would always be some people who are there to buy. A product should always appeal to a large number of people since the customers are the ones who determine the extent to which a product can perform in the market. In this given scenario, various solutions can be put in place which include marketing planning. Planning is considered to be the starting point of any management process (Bates et al 2006). In other words, before you can do anything in business, you need to determine in advance what you want to achieve and this will help you to visualise the end result and set objectives accordingly. Therefore, we can say that planning is the process in which objectives are decided upon and the plans on how to reach them are put together. Planning is very important because it gives the people in the organisation an idea of the direction in which the business is going. The first step in planning for strategic changes involves an assessment of the organisation’s environment as going to be illustrated below. This can be done using Porter’s five forces model. According to an online article, ‘Five competitive forces -Porter,’ the five forces model of Porter is, “an outside in business strategy tool that is used to make an analysis of how attractive an industry is.” This is often regarded as a reliable business tool in most cases (McCarthy J.E & Perreault W. D. 1996). Fig 1. Porter’s Five Forces Model Entry of competitors The entrance of other low cost service providers may lead to growing competition resulting in other businesses loosing customers to rival competitors as is the case in this scenario where there are also other competitors in the apparel business. No one company enjoys monopoly in the market. Threat of substitute This depends on the probability of a substitute overtaking the product already in the market in terms of cost. Can the service or product be easily replaced? Bargaining Powers Of Buyers This depends on the spending capacities of buyers on certain products. In this case focus is the company in question’s ability to capture the market. It seems that the customers have shifted their preference to other sporty products. Bargaining powers of suppliers Depends on how strong the sellers are. Are there many suppliers or there is monopoly? In this case, there is no one organisation which enjoys the monopoly. Rivalry among the existing players - Does a strong competition among the players exist? Whilst Harrington Collection is regarded as one of the largest apparel producers, there are also competitors in the industry such as Jones Apparel Group and Liz Claiborne. Source http://www.12manage.com/methods_porter_five_forces.html Another solution can be found in informed decision making. Having outlined the desired objectives and goals of the organisation, it then becomes the role of the management to decide what the organisation wants to achieve and then they need to coordinate the resources of the organisation in such a way that it will be better positioned to achieve the set goals. This is where strategies play an important role. Basically, a strategy is defined a planned method to help the organisation to achieve its mission (Bates Et al 2005). The other solution is trying to gain competitive advantage in the market. There are many successful business organizations in the market that are strategically so viable to such an extent that rival competitors can hardly exceed their performance. Such stable status can be achieved only when they apply certain strategies that can hardly be imitated by the competitors for long-term survival and stability, which is known as competitive advantages. Porter (1980) suggested a framework for competitive advantage through his generic strategies. In order to survive in the long term, Porter (1985) has argued that a firm needs to have sustainable competitive advantages. There are two sources of competitive advantage; cost advantage and differentiation. Through his generic strategies, a ‘Cost Leadership’ is where a firm seeks to be low-cost producer in its industry whereas ‘Differentiation’ is when a firm seeks to be unique in its industry through features of its products that are highly valued, and ‘Focus’ where a firm focuses on a segment in its industry using a low cost approach or a focus segment of differentiation. Porter argued, that for a company to ensure long-term profitability, it needs to be clear in its strategic positions and try to exclusively pursue one of them otherwise it will become ‘stuck in the middle’. Thus, in this model A Cost Leadership is where a firm seeks to be the low-cost producer in the industry as shown in Fig 2 below. Alternatively, outsourcing of production is another option. Cost leadership is the most ideal strategy that can be adopted by Harrington collection since it would give it a competitive advantage while at the same time minimising costs in the production chain. Porter argued, that for a company to ensure long-term profitability, it needs to be clear in its strategic positions and try to exclusively pursue one of them otherwise it will become ‘stuck in the middle’. The report will also attempt to look at how both low cost leadership as well as differentiation strategies may impact on their operations. Fig 2- Porter’s Generic Model Competitive Advantage Source: http://www.ifm.eng.cam.ac.uk/dstools/paradigm/genstrat.html University of Cambridge- Institute of Manufacturing Retrieved 23 June 2010. 1. A firm chooses to become the low cost producer in the industry in cost leadership. 2. In differentiation strategy a firm chooses to be unique from others. 3. In cost focus, a firm seeks a cost advantage in its target segment. In differentiation target, a firm seeks to be different in its target segment. Over and above, it can be noted that it is imperative for Harrington Collection to have information about how other similar businesses in the industry operate as a way of gaining knowledge that can give it competitive advantage over other rival competitors already in the market. The major strategies that can be adopted include Porter’s generic model of A Cost Leadership as well as competitive advantage. References Bates B. et al (2005), Business Management, fresh perspectives, Pearson SA McCarthy J.E & Perreault W. D. (1996), Basic Marketing: A Global Managerial Approach, 12th Edition, Irwin McGraw-Hill, USA. Competitive advantage, University of Cambridge- Institute of Manufacturing. Available at. http://www.ifm.eng.cam.ac.uk/dstools/paradigm/genstrat.html. Accessed on 23 June 2010 Porter’s Five Forces Model. Available at. http://www.12manage.com/methods_porter_five_forces.html Accessed on 23 June 2010. Smith P.R. (1999), Great Answers to Tough Marketing Questions, Kogan Page, UK. 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