Strategy and the Management of Change - Essay Example

?Strategy and the Management of Change Table of Contents Introduction 4 The Environmental Analysis 5 The Current Strategic Position 8 The Strategic Options and Suggested Tactics 9 The Factors in the Decision 10 The Tests of the Strategic Options 10 Choice of Strategic Option Recommended and the Chosen Element of Change 11 Implementation Considerations 11 Conclusion 13 References 14 16 Bibliography 17 Appendices 18 A.Chronology of River Island 18 B.Environmental Analysis 19 C.Porter’s Five Forces 20 D.SWOT Analysis 21 E.Stakeholders Analysis 22 F.Value Chain of River Island 23 G. Resources and Capabilities of River Island 24 Introduction River Island is one of the well-known High Street fashion brands in the United Kingdom. It has about 300 stores throughout the UK and Ireland and is globally present across Asia, Europe and the Middle East. The company is a wholly owned subsidiary of the Lewis Trust Group Ltd. The diversified Lewis Trust Group operates in the retail, leisure, property and financial services industry (River Island, 2011). River Island has been present in the fashion retailing industry since the last six decades. The company is recognised for its elegant and reasonably priced fashion in addition to the exclusive touches the company gives to its fashion collection, making them standout from the other fashion retailers of the High Street (River Island, 2011). The company was established in the year 1948 in the form of a small store in London dealing with wool and ladies clothing. As the business expanded, the company started to focus only on ladies clothing and came to be known as ‘Lewis Separates’. By the year 1968, the company had around 70 stores in the UK. During the same time, Lewis Separates opened up few new concept stores with innovative designs and formats that were known as ‘Chelsea Girl’. Chelsea Girl was the foremost fashion boutique chain in the UK. In the year 1983, the company came up with men’s wear under the name ‘Concept Man’. Nevertheless, as a result of further progression, in 1988 the company evolved into theme store offering footwear, cosmetics, accessories, and men’s as well as women’s clothing and came to be known as ‘River Island’ (Competition Commission, 2004; Lea-Greenwood, 1993). The Environmental Analysis This section of the study would focus on the environmental analysis which would comprise of an assessment of the Political, Economic, Social, Technological, Environmental and Legal atmosphere affecting the United Kingdom where River Island is headquartered (Havergal & Edmonstone, 1999; Learn Marketing, n.d.). The United Kingdom offers a relatively stable domestic political environment to River Island. However, developed nations like the UK cannot contend with the developing countries in terms of low-cost manufacturing facilities and cheap labour. The regulations of the European Union impact the apparel industry of the UK in terms of minimum remunerations, fixed working hours and imports from across the EU boundary (Key Note, 2001). The economic environment of the UK would have an imperative impact on apparel stores like River Island. The rise in the prices of real estate particularly in the prime sites of the region might decelerate the store extension activity of River Island or might result in decrease in the floor space of the new stores. The augmentation in the oil prices would also increase expenses through the supply chain of the company. The potential economic depression in the region had lead to the decline in disposable income of the public on apparels and fashion products, causing a likely decline in the prospective market (Key Note, 2001). The major social trend prevalent these days is a shift towards lavish lifestyle and stylish clothing particularly among the urban adults. The increased inclination of the public toward fashion garments and accessories have enhanced the necessity for product diversification amongst the apparel stores and River Island is no exception. The rapid technological advancement and the exceeding utilisation of technology in the apparel industry reduce the supply chain expenses of the companies in this industry. The ubiquitous ability of the consumers to access internet had amplified fresh avenues for the apparel companies in the context of direct sales. River Island earns a major portion of its revenue by means of its online sales facility. Technological developments in internet have not only helped the companies to enhance their sales avenues, but also the customers. Internet facilitates the customers to compare prices of the products offered by various apparel stores effortlessly. This implies that River Island would have to price its apparels and other offerings accordingly, keeping their opponents’ pricing pattern in mind. The advancement in technology had amplified celebrity gazing by the customers and also augmented communication amongst the customers across the world. This has led to a decline in the shelf life of fashion garments and accessories and has simultaneously amplified the demand for innovative and up-to-date fashion (Key Note, 2001). Environmental concerns also affect companies operating in the apparel industry. The rise in global warming could result in augmented demand for summer-wear. With the passage of time, there are rising instances of design copyright concerns in the fashion industry. Moreover, there could be possible setbacks with business method patents in supply chain (Key Note, 2001). The implementation of the Michael Porter’s five forces model in the business environment of River Island illustrates the following situation: The barriers to entry into the fashion apparel industry are considerably high because of the enormous capital requirements for the establishment of a strong retail presence. Retailers like River Island, Topshop and Dorothy Perkins had to make huge amount of investment in terms of effort and time in addition to capital assets in order to build a strong and exclusive brand identity of their own. Thereby, any new entrant in this sector would not only require large amount of capital, but also access to distribution networks so as to build its brand equity. Moreover, River Island has established itself amongst the customers and has attained their loyalty. This implies that the threat of new entrants is not very high for River Island. The threat of substitutes are almost nil in this industry with no direct substitute for apparels available. However, the products of its peer retailers can act as substitutes for the offerings of River Island (Jones, 2006). There are large numbers of suppliers in the apparel industry, reducing the supplier power. Moreover, River Island designs the most of its offerings in-house, reducing their dependence on the suppliers. The threat of rivalry is very high in this industry, with discount retailers and speciality fashions houses competing with each other. Furthermore, there is high competition for the brand image in addition to the competition of prices. The major rivals of River Island are Topshop, Miss Selfridge, and Dorothy Perkins among others. All these retailers target the fashionable urban adults. The competition amongst them has facilitated the evolution of contemporary fashion apparels industry. The buying power of the customers is very high as the rapidly altering fashion aspirations of the buyers lead them to search for fashionable brands. Moreover, with a large assortment of brands available, River Island has to focus efficiently on their customer needs, so that they do not switch to some other brand (Jones, 2006). The Current Strategic Position This segment of the study attempts to comprehend the current strategic position of River Island by means of assessment of the strengths, weaknesses, opportunities and threats of the company. River Island had always concentrated on the market segment comprising of young adults and believed that there was enormous potential for high quality and elegant fashion essentials in this segment. The major strength of River Island is that the company designs almost all its offerings in-house and has one of the biggest design teams on the High Street. This approach helps River Island to have a magnificent range of fresh fashion line-up arriving at their stores as well as online on a regular basis (River Island, 2011). Moreover, River Island has developed itself as a recognised and distinguished brand in the UK. Additionally, the company has also developed a well-built online presence by means of their website. The principal weakness of River Island is its geographic limited operation, with its presence concentrated mainly in the UK and the Ireland (River Island, 2011). Moreover, the company offers a moderately less differentiated fashion collection, unlike Mark & Spencers and Gap. River Island targets the urban adults and with the rising fashion consciousness amongst the adults, the company has vast growth opportunities in the future. The emerging economies in the world with stable economic conditions and increasing fashion awareness amongst their urban adults, present a fine scope of international expansion to River Island. The industry consolidation and the elevating segmentation of the apparel market by brand would pose as a large threat for River Island. Furthermore, the likely economic depression in Europe raises the possibility that there might be a decrease in consumer spending on apparels in UK. The Strategic Options and Suggested Tactics The strategic options available to an apparel retailer can be established by means of understanding the strategic position of the company in addition to a thorough assessment of its environmental aspects which can act as the drivers for change (Burt & Sparks, 2003). In this context, the strategic options available to River Island are targeting the markets of emerging economies and strengthening its brand in order to sustain the business in future. The tactics to accomplish River Island’s strategic options could be reinforcement of its brand identity in terms of better differentiation of products and accompanying advertisement campaigns in addition to international store expansion. The Factors in the Decision The success of the business strategies of a company depends on the alignment of the strategies with the core business strengths of the company. This is because the consideration of the strengths of the company while planning its future business strategies would ensure that River Island sustains its competitive advantage over time. The Tests of the Strategic Options The strategic options available to an organisation should be evaluated in terms of the core competencies of the organisation, its past performances and its ability to adapt to further changes in the process of implementing the strategies (Grant, 2010). In this perspective, it should be noted that River Island had evolved immensely over the years as a High Street fashion retailer and have continuously brought about innovative changes in their business concept. The other consideration in the evaluation of the strategic options of River Island is the economic and environmental conditions of the geographic areas where the company intends to expand. Choice of Strategic Option Recommended and the Chosen Element of Change The strategy that River Island should pursue in consideration to its unique business strengths in order to ensure future success is the expansion of its stores in the developing nations, considering the stable economic condition and the rising demand for fashion garments and accessories in those regions. The chosen element under consideration for River Island is the process of attuning the present business model of the company in the new markets. Entering and expanding in a new geographic area would require River Island to adjust its pricing and advertising strategies accordingly. Implementation Considerations The offerings of River Island were primarily targeted towards the young and urban adults of the UK, however gradually, the product offerings of the company had appealed to a range of demographics around the globe. This is mainly due to the rising trend towards casual apparel and superior quality clothing. In order to capitalise on the broad appeal the company enjoys across the world, River Island should develop their growth and expansion strategy. Considering the relatively stable financial and economic conditions of the emerging markets, River Island should plan to spread out its presence in terms of store footprints in the Asian markets in addition to expanding in the United Kingdom. River Island should preferably transfer their existing business model, which has been successful in the UK, to the new markets as well. However, River Island should ensure that their business is attuned to the specific requirements to these markets. This would require the management of River Island to execute and manage the change in a sensible way. The advertisement campaigns of an organisation communicate an exclusive and specific brand image of the business that differentiates it from its peers (Shah & D’Souza, 2009). River Island’s advertising campaigns should attempt to build a connection with its target customers. River Island should continue to draw the urban adults by means of high-impact advertisements. The campaigns could be in the form of print, in-store, outdoor as well as electronic media. This kind of advertising activities would enhance the retail as well as online e-commerce businesses of the company. The retail stores of River Island had been an imperative element of the company’s branding initiative. Hence, the company should design and update its stores so that they communicate a contemporary and internationalist lifestyle (Petley, 2003). Conclusion Conclusively, it can be stated that in order to build future strategies for an organisation and the appropriate management of the change brought about in the process, it is imperative to consider the business strengths as well opportunities available to the organisation in addition to the environmental conditions prevalent. In this context, considering these factors for apparel retailer River Island, it was found that the appropriate strategic decision for the company would be to expand its stores internationally, particularly in the Asian markets. As the offerings of River Island are targeted towards the youth, hence the designs as well as aesthetics of the products offered by River Island should hence be attractive and alluring to the young and urban adults. River Island should offer a line of iconic and everlasting styles for their target segment throughout the year in an extensive assortment of colours. They should also make an attempt to price their offerings at a reasonable rate. This would facilitate the sustainability of River Island over time. Additionally, the management of River Island should consider the socio cultural differences between the UK and the Asian markets, while implementing their successful business model in the emerging economies. Consequently, River Island might have to change their model accordingly in order to succeed in these markets as well. References Burt, S. & Sparks, L., 2003. Department Of Trade and Industry: Competitive Analysis Of The Retail Sector In The UK. University of Stirling. Competition Commission, 2004. River Island Clothing Co. Ltd. Inquiries. [Online] Available at: http://www.competition-commission.org.uk/inquiries/completed/2006/storecard/pdf/initial_subs_retailers_river_island.pdf [Accessed November 12, 2011]. Grant, R., 2010. Contemporary Strategy Analysis: Texts and Cases. John Wiley & Sons. Havergal, M. & Edmonstone, J., 1999. The Facilitator’s Toolkit. Gower Publishing Ltd. Johnson, G. & Et. Al., 2008. Exploring Corporate Strategy. Financial Times Prentice Hall. Jones, R. M., 2006. The Apparel Industry. Wiley-Blackwell. Key Note, 2001. UK Clothing & Footwear. 2001 Market Review. Lea-Greenwood, G., 1993. River Island Clothing Co.: A Case Study On Changing An Image. International Journal of Retail & Distribution Management, Vol. 21 Iss: 3. Learn Marketing, No Date. PEST & Micro Environmental Factors. Home. [Online] Available at: http://www.learnmarketing.net/pestanalysis.htm [Accessed November 12, 2011]. Manufacturing & Logistics IT, 2011. River Island Works Smarter with JDA Portfolio. Supply Chain Management. [Online] Available at: http://www.logisticsit.com/absolutenm/templates/article-supplychain.aspx?articleid=1672&zoneid=5 [Accessed November 26, 2011]. OCSL, 2008. River Island Turns To Virtualisation For Flexibility, Cost Savings And Improved Disaster Recovery. OCSL. [Online] Available at: http://www.ocsl.co.uk/images/upload/casestudies/ri_case_2397.pdf [Accessed November 26, 2011]. Petley, J., 2003. Advertising. Black Rabbit Books. River Island, 2011. About Us. River Island. [Online] Available at: http://www.riverisland.com/Online/inside-river-island/about-us/river-island/about-us [Accessed November 12, 2011]. Shah, K. & D’Souza, A., 2009. Advertisement and Promotions: An IMC Perspective. Tata McGraw-Hill Education. Bibliography Dunphy, D. & Et. Al., 2007. Organizational Change for Corporate Sustainability: A Guide for Leaders And Change Agents Of The Future. Routledge. Hitt, M. A. & Et. Al., 2010. Strategic Management: Competitiveness & Globalization, Concepts. Cengage Learning. Robertson, A. & Caldart, A., 2009. The Dynamics of Strategy: Mastering Strategic Landscapes Of The Firm. Oxford University Press. Johnson, G. & Et. Al., 2009. Fundamentals of Strategy. Pearson Education. Appendices A. Chronology of River Island 1948: Set up of small lock-up shop named ‘Lewis Separates’ in East London, offering ladies clothing and wool. 1968: Creation of ‘Chelsea Girl’, the foremost chain of fashion boutiques in the UK. 1983: Menswear included under the brand ‘Concept Man’. 1988: Evolution of a themed store concept offering fashion clothing and footwear, under the name ‘River Island’. 2002: Lewis Trust Group Ltd., the parent organization of River Island diversifies into retailing, leisure, real estate and financial services industry. 2011: River Island comprises of around 300 stores throughout the UK and Ireland, in addition to Europe and Middle East. (Source: Competition Commission, 2004; River Island, 2011). B. Environmental Analysis Political Environment Stable political atmosphere in the UK Impact of EU regulations on the UK’s apparel industry in terms of remuneration, and working hours among others Manufacturing and labour expenses of the UK higher than developing countries Economic Environment Rise in real estate prices as well as oil prices Decline in disposable proceeds due to the potential economic depression in EU Social Trends Paradigm shift towards lavish lifestyle and stylish clothing among the urban adults Technological Trends Reduction in supply chain expenses due to technological expenses Emergence of Online Sales Amplified celebrity gazing due to internet and other communication technologies (Source: Key Note, 2001) C. Porter’s Five Forces Barriers to Entry Enormous capital requirements to ensure strong retail presence Massive effort to build strong brand image Access to quality suppliers Power of Suppliers A whole host of suppliers resulting in low prices Power of Buyers Rapidly altering fashion aspirations of the buyers lead them to search for fashionable brands Threat of Rivalry Very high competitive rivalry in apparel industry Discount retailers and speciality fashions houses competing with each other Competition for the creation of brand image in addition to the competition of prices Threat of Substitutes No direct substitute for apparels available (Source: Key Note, 2001). D. SWOT Analysis Strength Enormous market potential in its target segment In-house designing of majority of its offerings Well-built online presence It is one of the recognised and distinguished brands of the UK Opportunity Expansion potential in the markets of emerging economies Increasing fashion awareness amongst public Weakness Geographically limited operation Less differentiated fashion collection Threat Potential economic crisis in Europe Industry consolidation Augmented segmentation in terms of brands (Source: River Island, 2011; Competition Commission, 2004) E. Stakeholders Analysis F. Value Chain of River Island Support Services Primary Activities Structure: 300 Stores, HQ in London, U.K., In-House Design Teams, Online Marketing Structure in addition to Retail Stores, International Franchisee Stores Technology: Storage Arrays based on XP 12000 from HP for requirements related to Business Continuity and Disaster Recovery, VMware virtualization for Capacity Planning. HRM: Design professionals, Store Mangers, Other professionals, Models, HRM department. . Purchasing Stock and Merchandise Designing Warehouse and Logistic Management with Third Party System Marketing and Sales Advertising Customer Service Sources: (Manufacturing & Logistics IT, 2011; OCSL, 2008; River Island, 2011). G. Resources and Capabilities of River Island Strategy Reinforcing the market position of River Island by expanding its business in developing countries Competitive Advantage Six decades of experience in apparel retail, focussing on the fashion requirements of both men and women Brand recognition Prior exposure to the developing countries through online Sales Capabilities Efficient design team Continuous supply of the latest trends Efficient distribution network Implementation of Business Continuity and Disaster Recovery Enhanced Capacity Planning Resources: Tangible: Dedicated, experienced and skilled human resources, Efficient Suppliers. Intangible: Brand Image and recognition in the High Street Fashion Financial: Stable financial performance Resources Gaps No apparent resource gap to implement the recommended strategy Read More