Contemporary Developments in Business and Management - Case Study Example

Contemporary Developments in Business and Management A case of Cedar Clothing Table of Contents Executive Summary Part One: Primary External Factors and their Importance Brief Overview of Primary External Factors Importance of Primary External Factors to Company External Business Environmental Factors Responses to External Business Environmental Factors Part Two: Porter’s Five Forces and Cedar Clothing Porter’s Five Forces and Cedar Clothing Analysis of Porter’s Five Forces’ Relevance to Cedar Clothing and How It Influences Policies and Decision Making within my Chosen Organization or Industry Sector Critical Evaluation of Effectiveness of the Cedar Clothing’s Response Demonstrating Some Areas for Improvement in the Response of Cedar Clothing Conclusion Appendices Appendix 1: Profile of the Cedar Clothing Company Appendix 2: Porter’s Five Forces Model Appendix 3: What benefits does Porter’s Five Forces analysis provide? References Executive Summary This report focuses on the real life example of a clothing manufacturing company, Cedar Clothing. Cedar Clothing was established in 1969in Nottingham, England by a father, Tarlok and son, Balwant. Cedar Clothing is still manufacturing a range of clothing in its large factory in Birmingham, England. In the first part of the report, I would discuss and explore the external business environmental factors on a Cedar Clothing Company. Later in the second part of the report, I would discuss the responses of Cedar Clothing Company to external business environmental factors. I would also apply Porter’s Five Forces model to Cedar Clothing to analyze the relation between external environmental factors and Porter’s Five Forces model in the context of Cedar Clothing. Introduction Cedar Clothing is a UK based garment manufacturing company. Cedar Clothing manufactures a range of garment products for its UK customers. Cedar means a tall, wide evergreen tree that never loses its trees. It’s growing since its inception in 1969 by a father and a son. Today, it’s a name of quality. It manufactures a wide range outerwear and knitwear for men and women. Like other companies, it has also got some external environmental factors that adversely affecting its operations. Competitors, environmental policy, Import of garments, globalization, carbon management, new technologies, and raw materials are some of the important external factors that affect Cedar Clothing. This report is divided into two parts. 1st part of this report focuses on identifying the primary external environmental factors that affect the Cedar Clothing Company. 1st part of this report focuses on identifying the primary external environmental factors that affect the Cedar Clothing Company. Later in part 1, we would see the important of primary external environmental factors on Cedar Clothing Company. Then we would discuss the response of Cedar Clothing Company to the primary external environmental factors. Then in Part 2, I applied Porter’s Five Forces model to Cedar Clothing Company and studied the relevance of Porter’s Five Forces model with Cedar Clothing Company. There is strong relevance of Porter’s Five Forces Model and the external factors affecting Cedar Clothing. I have also critically evaluated the effectiveness of the Cedar Clothing’s Response. Moreover, I have demonstrated some areas for improvement in the responses of Cedar Clothing to primary external environmental factors. Following are the Cedar Clothing Company’s Mission Statement and Vision Statement (www.cgma.org) Cedar Clothing Mission Statement “To be market leader in garment products of children, men and women” Cedar Clothing Vision Statement “To become largest market share holder by the end of 2020 by making our company the favorite most brand of the UK” Part One: Primary External Factors and their Importance Brief Overview of Primary External Factors Although, there are many primary and secondary external factors that are severely affecting our chosen company, but here we would discuss some important primary external environmental factors (Sohail, Amir, 2012). Following are some primary external factors that need special attention of the management of the company, 1. Globalization: Globalization is a worldwide phenomenon. Through economic integration in major regions of the world, globalization is posing serious threats to every company. Globalization is a very important primary external environmental factor that affects Cedar Clothing Company. 2. Environmental Policy: Environmental Policy is very important in current context of climate change. International community has made necessary some international obligation to every country through series of resolutions and protocols thereby making it incumbent upon industries to formulate cautious policies with reference to climate change phenomenon. 3. Carbon Management: Carbon emission by industries has got the same treatment by modern world community as it’s a big ‘sin’ to emit carbon in environment. Emission of carbon contributes to degeneration of climate. 4. Competition: In the recent years many new garment manufacturers and brands has raised head in UK manufacturing industry. Growing competition in the market is posing serious threat of losing market share to new entrants in the market. 5. Imports of Garment: A large quantities of garments and textile components are being imported in to the UK. This is very important external factor that is like a hanging sword. Imported garments and textile components are generally of fewer prices thank to the cheap manufacturing conditions in China, India, Pakistan and Bangladesh. These countries are top exporters of garment and textile in the world. 6. Prices of Raw Materials: For every business prices of raw materials are of great important. Non-availability of raw material or increase in the prices of raw materials can make or break a company. It is especially most important factor for Cedar Clothing as it sources its raw material from other next door neighbor European countries. Any happening in those countries can direly affect the operations and manufacturing of Cedar Clothing. 7. Economic Recession: The world has observed hardest times of economic crises. The 2007 world economic crisis was not less than any other economic crises. World economic crisis of 2007 badly affected the US, the UK and many other Western nations who share bilateral trade with each other. 8. New Technologies: There are many innovations in the apparel world. Many firms in the world have introduced new products that are answer to pure clothes. So consumers are rapidly shifting to these products as they are graceful and cheap. So the company like Cedar Clothing, which are manufacturing quality purely cloth products face problem to attract their customers. Importance of Primary External Factors to Company All the external factors mentioned above are very important for Cedar Clothing Company. These external factors have direct impact of the operations of Cedar Clothing. So it is important to device a competent strategy to coup with these factors and to overcome the influence of these factors. In the following part I would try to elaborate the importance of primary external factors on the operations of Cedar Clothing. 1. Globalization: There is no denying of the fact that globalization serves as an important factor to every company. So Cedar Clothing should start to expand its operations to other countries. It should study the demand of its garment products in other countries and should start exporting its garment products to other neighboring countries. On the other hand, it should tap the potential of countries who offer cheap factors of productions. It can think of shifting its whole production line of a part of it to China, India, Pakistan or Bangladesh. Moreover, it can start a joint venture with a South Asian firm or it can acquire a firm in those countries. 2. Environmental Policy: Environmental policy has become among the top priority policies in the recent years. So Cedar Clothing needs to formulate an impressive environmental policy to stand on same footing like its competitors. In modern day world, social issues and causes have made rapid in roads in to rooms of policy makers of a company. So Cedar Clothing must also adopt a sound environmental policy. It must also try to become an echo friendly company. 3. Carbon Management: Carbon emission is the severe problem of the world today. Today, every government is trying to reduce the carbon emission of industries and manufacturing units. Some governments are levying ‘carbon taxes’ on industries and others are trying to move the industries in deserted areas. 4. Competition: Competition in garment manufacturing industry is increasing in the recent years. So it is very important for Cedar Clothing to maintain the quality of its products to retain existing customers. Cedar Clothing needs to maintain a distinct image in the eyes of the customers. Doing this it would enjoy the loyalty of the customers. 5. Imports of Garment: This factor has got immense importance. Import of garment from other countries is an issue of serious concern for Cedar Clothing. Imported garments are capturing the market rapidly. So it is a type of competitions and Cedar Clothing must do as mentioned in the previous point for competition. 6. Prices of Raw Materials: There is no denying of the fact that prices of raw materials serve as an important factor to every company. This factor is also very important. It must also have strong check and balance of the affairs of the countries from where it is sourcing its raw materials. It must also have contact with alternative vendor if something wrong happens to existing vendor. The bargaining power of supplier and bargaining power of buyer affects the price of raw materials. 7. Economic Recession: This external factor is also very important. Due to economic recession, Cedar Clothing has faced hard times from last 8 years. For long 8 years there for no major increase in the demands of the garment and textile products. So now the economy is reviving and there are bright prospect ahead. 8. New Technologies: Another important factor is new technology. It is very important to adopt new technologies. Cedar Clothing must stay up to dated in terms of new technologies knocking the market. It must also use the new technology to produce new form of garment products. Responses to External Business Environmental Factors Over the last decades after the establishment of Cedar Clothing, it has tried to give all its competitors’ tough time. It has nicely handled influence of all external business environmental factors. 1. Globalization: Cedar Clothing has nicely adopted the policies to meet the needs of the globalization. Cedar Clothing should study the needs of its products in the region. It has plans to expand its operations to other countries. 2. Environmental Policy: Its environmental policies are as per the laws of the UK government and protocols (like Montreal Protocol and Kyoto Protocol) of United Nations. So it is meeting its obligations of contribution to revival of climate process. 3. Carbon Management: It is among the low carbon emission companies in the UK. They have development some echo friendly environment around their factory. It has always tried to comply on the law and regulations. 4. Competition: Cedar Clothing has applied different marketing strategies life differentiation and market segmentation to coup with growing competition. Doing so, it has always tried to retain its customers. 5. Imports of Garment: Import of garments from other countries cannot be stopped as market forces are free to work in the UK. So Cedar Clothing uses the same strategies to coup with imports as it uses to coup competition. 6. Prices of Raw Materials: Prices of raw material vary from time to time. Cedar Clothing sources its raw materials from other countries through competitive process. If in case raw material is needed more than normal demand, it sources raw materials from other vendors. 7. Economic Recession: Due to economic recession, Cedar Clothing has faced hard times from last 8 years. Even though it is still a major market player due to its policies to absorb the shocks of the economic recession. 8. New Technologies: Cedar Clothing keeps itself up to date in terms of new technologies knocking the market. That’s why it is a major market player. But it still need to adapt changes more rapidly, sooner than later. Part Two: Porter’s Five Forces and Cedar Clothing Porter’s Five Forces and Cedar Clothing Porter’s Five Forces Model of External factors affecting a company are very important to analyze the external environmental effects on a company. This model is framework for diagnosing structure of industry. This framework is built around strong external market forces that erode long term profitability of a firm. Here I have tried my level best to apply and relate Porter’s Five Forces Model of External Factors on chosen company. As its name suggests, Porter’s Five Forces model focuses on five forces that affect a company’s operations. Although, there are many external forces that affect operations of a company, but according to Michael Porter following are the big five forces that affect a company’s operations adversely, 1. Threat of New Entrants 2. Supplier Power 3. Buyer Power 4. Substitute Products 5. Existing Competitors These big five force of Porter are also mentioned in Appendix 2 at the end of this document. One force is the new entrants in to market. New entrants can take the market share from Cedar Clothing. Second force is the power of supplier. Supplier must not be strong enough so that they can influence the prices. Third one is buyer power. If buyer is strong, he or she can procure raw materials in good prices. Substitute product is also a force. Substitute products can also snatch market share of Cedar Clothing. Existing competitors are also to shape market. Now I would discuss the relevance of Porter’s Five Forces model with Cedar Clothing Company. Analysis of Porter’s Five Forces’ Relevance to Cedar Clothing In this part, we would analyze the Porter’s Five Forces’ relevance to Cedar Clothing. Porter’s Five Forces’ model is completely applicable to Cedar Clothing. So now we are moving forward to analyze the relevance of Porter’s Five Forces’ to Cedar Clothing. 1. Threat of New Entrants: We have discussed in Part 1 that there are a large number of new companies that are joining the race to grab market share. Michael Porter has also elaborated the importance of new entrants in market in his world renowned Five Forces Model. There is no denying of the fact that the new entrants face a lot of problems like, economy of scale of rivals, no brand identity, marketing budgets, loss at start, but still they pose threat to existing firms. So in case of Cedar Clothing, there are plenty of new entrants. These new entrants are wreaking havoc on Cedar Clothing’s business. Cedar Clothing should try to attract customers through marketing and corporate strategies. 2. Supplier’s Power to Bargain: Supplier’s power to bargain is very important force of market. Suppliers always try to increase prices. Especially, if there are few suppliers to supply a particular raw material. Sometimes there are no substitutes of a raw material in the market. In this case suppliers tend to charge more to buyers. Some raw material is not easy to be sourced, so in this case suppliers also charge more than usual price. Sometimes there exist cartels or secret agreements among the suppliers to charge more or not charge below a specific price. This market force is relevant to Cedar Clothing. In case of Cedar Clothing, the role of suppliers is important because the major part of raw materials come from other countries. Political factors, conditions of sea roots and oil prices are very important to be considered by Cedar Clothing. Cedar Clothing always deals with the suppliers who are free from any influences. 3. Buyer’s Power to Bargain: Buyer also has power to influence prices. Especially when buyers are buying in large quantities they can easily bargain on the prices. Buyers can also reduce prices when there are few buyers to buy a particular item. This market force has strong relevance with Cedar Clothing. This factor also influences Cedar Clothing. Cedar Clothing tries 4. Substitute Products in Market: Substitute is always present in any market. Substitutes are strong force to shape the market. Whenever a firm makes delays in supplying products in market, they people can adopt the substitute product sooner than later. While if a firm compromises on the quality of the product, the customer again shifts to the available substitutes. This market force has strong relevance with Cedar Clothing. Same is the case with Cedar Clothing. Cedar Clothing is also facing tough competition from its competitors. A single mistake in quality of products can shift its customers to other substitutes. Or any delay in the supply of goods can also take away some market share from Cedar Clothing Company. 5. Existing Competitors: Fifth force of Porter’s Five Forces model is existing competitors. Existing competitors are more dangerous than the new entrants and pose great threats to other rivals. There are two main reason why these competitors are dangerous than new entrants. Firstly, they know the market very well and they are well settled in the market. They face fewer barriers than new entrants. They use the weaknesses of rivals and sometimes also do wrongs to rivals. In case of Cedar Clothing, there are a large number of competitors that are already present in market. So that’s why the market is full of people who want to take its market share. How it Influences Policies and Decision Making within Cedar Clothing? In order to answer this question, we would have to discuss how the management of Cedar Clothing Company formulates policies. The management of the Cedar Clothing Company is well aware with all primary and secondary, internal and external factors. The management of Cedar Clothing Company always consider all these factors while making policies and strategies. The policy makers of Cedar Clothing Company always apply the tools like the framework of Porter’s Five Forces Model. So doing so, the management of the Cedar Clothing Company also draws conclusions like we have discussed primary external environmental factors. (www.ifm.eng.cam.ac.uk) Critical Evaluation of Effectiveness of the Cedar Clothing’s Response The management of Cedar Clothing has tried its best to formulate best policies to coup with all external factors, but many of its policies failed to render desired results. Firstly, its new technology adoption is slow which can lead to loss of market share to the competitors firms who are adopting the changes in trends. Secondly, it is catering the expensive cloth market segment over a long period of time. So it must also respond to the needs of the ordinary used garments. It comes up with no surprise that quality products are the specialty of Cedar Clothing. But ordinary used garment is a very big market and it should be responded to. Moreover, it has not responded to the needs of growing market demands in the wake of revival in the UK economy. The market demand created by the revival in the economy of the UK is responded by the new entrants in the market and imported products. In the aftermath of the slump in the oil prices in the international market, it is high time that Cedar Clothing realized that it can stock extra raw material because raw material can be source on low prices than before. Demonstrating Some Areas for Improvement in the Response of Cedar Clothing There are some areas for improvement in the response of Cedar Clothing. Firstly, is has to establish a strong control on all external environmental factors affecting its working. To revive its lost market share and to put it on successful strategic position, it must assign a team with the goal to study external factors. Following are some areas for improvement in the response of Cedar Clothing. Growing competition is lethal. A little research on the operations and policies of the Cedar Clothing has revealed that the company did not seriously tackled the issue of new and new entrants into market. In order to establish its basis for strategic gains, it must keenly assign required resource and resource persons to deeply study the market statistics. Not doing so, will lead Cedar Clothing to lose its market share to new entrants. Over the last couple of years, many firms have started to copy the apparel articles of Cedar Clothing. It is due to the reason that the garment products or articles of Cedar Clothing are gaining so much popularity. So many firms are also violating the patent right of Cedar Clothing. A strong monitoring mechanism is needed to check the patent violations and activities of other competitors firms. It’s evident that economy of the UK is reviving from 2007 economic recession. So there is increase in demand of the garment products. So Cedar Clothing should increase the production as per needs of the market to tap this hidden potential of the market. Conclusion At the end we can summarize all the discussion about the external factors affecting Cedar Clothing Company, their affects on it and their response to external factors. The report is divided into 2 parts. In Part 1, I have identified the primary external factors affecting Cedar Clothing. Competitors, environmental policy, Import of garments, globalization, carbon management, new technologies, and raw materials are some of the important external factors that affect Cedar Clothing. Then in Part 2, I applied Porter’s Five Forces model to Cedar Clothing Company and studied the relevance of Porter’s Five Forces model with Cedar Clothing Company. There is strong relevance of Porter’s Five Forces Model and the external factors affecting Cedar Clothing. I have also critically evaluated the effectiveness of the Cedar Clothing’s Response. Moreover, I have demonstrated some areas for improvement in the responses of Cedar Clothing to primary external environmental factors. Cedar Clothing is a strong garment producer having major share in garments market. Currently its condition is stable. It should take all the primary and secondary external environmental factors in consideration. Doing so, it would be able to easily achieve its short term and long term goals. Doing so, it would also be able to achieve its missions and visions. (Alexander Berger, 2010) Appendices Appendix 1: Profile of the Cedar Clothing Company (http://www.cedarclothing.co.uk/about/) Cedar Clothing Mission Statement “To be market leader in garment products of children, men and women” Cedar Clothing Vision Statement “To become largest market share holder by the end of 2020” Cedar Clothing started in Nottingham in, England in 1969. It was founded by father (Tarlok) and son (Balwant). Both were enthusiastic about fashion and textiles. Father and his son and six other workers began making garments for baby and children’s in their factory. As the business grew, they faced skill shortage at Nottingham factory. They then opened a factory in the first manufacturing town in the world, the home of the first mechanized cotton mill, Birmingham, in the 1980s. The new factory was very big with a workforce of 200. Then company started developing traditional British outerwear including waxed jackets and coats, knitwear and outdoor country clothing. The company’s name is still Cedar Clothing. Today, it is under the helm of the two grandsons, paying homage to their forefathers by staying true to the British made ethos. Products are made from fabric and yarn procured from the Great British Isles, each piece offers function and durability, combining timeless silhouettes with modern design. Appendix 2: Porter’s Five Forces Model (http://www.cgma.org/Resources/Tools/essential-tools/Pages/porters-five-forces.aspx?TestCookiesEnabled=redirect) Appendix 3: What benefits does Porter’s Five Forces analysis provide? (http://www.cgma.org/Resources/Tools/essential-tools/Pages/porters-five-forces.aspx?TestCookiesEnabled=redirect) Actions to take / Dos Actions to Avoid / Donts Use this model where there are at least three competitors in the market Consider the impact that government has or may have on the industry Consider the industry lifecycle stage – earlier stages will be more turbulent Consider the dynamic/changing characteristics of the industry Avoid using the model for an individual firm; it is designed for use on an industry basis References (www.ons.gov.uk) Office for National Statistics, UK Government, Online: Accessed: 10th January 2015 http://www.ons.gov.uk/ons/guide-method/classifications/current-standard-classifications/standard-industrial-classification/index.html (www.cgma.org) Porters Five Forces of Competitive Position Analysis, Chartered Global Management Accountant, Online: Accessed: 10th January 2015 http://www.cgma.org/Resources/Tools/essential-tools/Pages/porters-five-forces.aspx?TestCookiesEnabled=redirect (www.cgma.org) Essential Tools for Management Accountants, Chartered Global Management Accountant, http://www.cgma.org/Resources/Tools/essential-tools/DownloadableDocuments/Essential%20Tools%20for%20Management%20Accountants.pdf Sohail, Amir (2012) “Risk Analysis of the Pakistani Textile Industry: A Macro Analysis” http://www.theseus.fi/bitstream/handle/10024/43815/Final_Thesis_Aamar%20Sohail.pdf?sequence=1 Contemporary Developments in Business and Management, http://www.ukessays.com/essays/business/contemporary-developments-in-business-and-management.php Cedar Clothing, http://www.cedarclothing.co.uk/ (www.ifm.eng.cam.ac.uk) Porter’s Five Forces, Management Technology Policy, University of Cambridge, http://www.ifm.eng.cam.ac.uk/research/dstools/porters-5-forces/ Alexander Berger (2010) “Contemporary Development in Business and Management”, GRIN Verlag, Norderstedt, Germany Read More