Hanes Brand Analysis - Case Study Example

? Hanes Brand case analysis Company context The company the Hanes brands, Inc manufacture clothes and apparels (Hanes Brands Inc).Its area of focus is the design and distribution of hosiery and apparels under different brand names. Some of the brands the company deals in include Bali, Just my Size, wonder bra among others. The company has five main segments namely; innerwear, outerwear, hosiery, direct to consumer and international. The company operates in an international market where players from virtually all parts of the country can participate and brand analysis for strategic branding initiatives for brand buildings for a competitive edge. This text shall examine Hanes brand and strategies to make it effective and completive it is in its market. Several instruments and brand analysis such as the SWOT analysis (Fine, 2009) and the Porters five forces analysis shall be used to give guidelines and possible suggestions on possible strategies to be employed a. Description of industry and market segment The clothes and apparel industry in which the company deals with has good growth prospects both in the United States and in international markets (Textile international outlook). It is critical to examine the greater industry trends in general and then narrow down to the market segment of the company’s focus. The company is in the clothing and fashion industry which is a very sensitive industry and fast changing. Branding is also a key critical success factor for any company or individual in that particular industry. The company’s focus is in a small fraction of the fashion industry dealing mainly with innerwear and a bit of outerwear. The innerwear and hosiery markets have grown substantially with increase in brand names from the traditional big names. There has also been an increase in designs and innovations in this industry. The leading trends are the use of new and innovative fabrics and designs with major firms investing heavily in developing new materials and designs. The markets are dominated by large wholesale producers and distributors and very few small scale industry players. There has been growth in this market by middleclass and upper-class individuals who have more spending power with the relative stabilization of the global economic outlook. Globally the underwear markets for the year 2010 grew by 11% in the US according to the global underwear report of 2010 (Global Underwear Market Report 2010, 2010) b. Market Dynamics Important elements of this market that need to be noted that it has been established by the global underwear market report that the market in the United Kingdom was worth a massive 2.57 billion British pound. The apparel market segment like the larger fashion industry is very volatile and changes very rapidly. However it could be noted that there is a predominant brand loyalty by many of the customers of this markets. Since this is an industry in which large volumes have to be distributed it require proper distribution channels and companies such as Hanes brands need to seek more local marketing strategies to achieve substantial sales increase. The apparel industry is quite easy to start and thus provide quite a challenge of completion and is a real threat. For Hanes brands competitors comes mainly from other established brands. Completion may also arise from mergers of several competitors to create larger firms that can extent more massive branding campaigns. The future of the industry seems bright according to surveys due to the increase in economic stability as predicted in world economic outlook by the IMF (international monetary fund) and this in turn increases the spending power of individual and hence more demand for luxury items such as branded apparels and underwear. The increase in brand awareness and development of more designs in the industry has greatly increased the prospects for the industry. Many areas and opportunities have been developed in the recent past in terms of specialization. However with globalization and entry of the international markets of countries such as China that does not regard international copyright laws makes it impossible to prevent brand piracy and duplication which affect quality, brand and reputation that is quite expensive to maintain. Strategic characteristic of the company’s The company is a limited liability public company with international operations. Its operation extends to the United States of America, Latin America, Asia and Europe. The company is vertically integrated in which the company designs, produces and distributes their product which is a way to gain competitive advantage through the control of the processes that affect the brand and its profitability. It also helps in maintaining brand integrity in terms of predictability of prices. The company’s brands target the middle class and the upper class market segment that appreciates quality and brand affects choice of products in a particular market. The prices for the products range from relatively low as shown in the company’s online price list. The company deals in a wide variety of innerwear and outerwear apparel. The products on offer by the company include bras, panties, hosiery among other apparels. The company is quite competitive in its market segment. Its major competitors are fruit of the loom and jockey international. The company in the recent past had been recognized for its efforts in promoting “green building” and other CSR activities that have increased its brand in various communities globally. An instance is the climbing expedition found on (Expedition Hanesbrands) The financial position of the company is quite satisfactory according to the financial reports. The sales revenues were US $ 4.33 billion and the gross profit was US$ 1.41 Billion for the financial year of 2010 (Annual Report 2010). The company’s competitive advantage is its focus on low cost production which result in lower shelf prices thus more competitive brands. This is one that is sustainable but quality concerns need to be adequately addressed. The company also has a focused differentiation strategy to ensure its brands stand out as unique and providing something different from what is in the markets. A SWOT analysis of Hanes Brands Inc business model shows several important strengths, weaknesses, opportunities and threats. The company’s strength lies in its wide portfolio of leading brands, the streamlined operation due to vertical integration and new product launches. The diversity of products being offered is also a big strength that needs to be capitalized strategically. The weakness on the other hand includes concentration on a few customers which exposes the company to huge financial risks due to this dependency. In the 2008 financial year the records indicated that top ten customers accounted for 65% of the sales volumes. Some of the top customers include Wall mart and target. The company also experienced decline in profit margins as cost of operations increased over the periods of FY 2006-2009. This gives indications that the company had been unable to sustain its cost structures effectively by monitoring its costs The diversity of portfolio of brands on offer by the company gives it a competitive advantage over other companies. This is because it is able to penetrate more markets and as a result increase its turnover as compared to other companies. Based on the facts of the company and industry trends, it can be concluded that the key strategic issue for the company is increased branding. Alternatives and Recommendations According to porter’s five forces of maintaining competitive advantage it would be recommended that the company either diversifies in its number of brands or diversify its geographical market segments. Since the company is already vertically integrated this means that operational costs are well monitored and can be maintained at manageable levels. The threat of suppliers and buyers is relatively low thus giving it a competitive advantage. Due to ease of entry of competitors the strategy of diversification would be strategic in maintaining a sustained competitive advantage (Harrigan, 1983). This could include the acquisition of new established brand or developing new ones in response to customer needs. In diversification of the brands there should be an integrated approach toward frontier value creation (al, 2009). The company should focus on ensuring the clients get the maximum value for each of their products. This approach need to focus on the four competencies of Quality, Customer Responsiveness, Innovation and efficiency. The company’s product line need take into consideration the quality assurance in a consistent manner. The company also has to work on improving its research and development budget to facilitate the improvement of newer designs and better fabrics. Also in the process of selling, the distribution channels should be facilitating constant customer feedback so as to create customer focused designs. Another approach would be mergers and joint ventures especially with larger distributors. This approach is also would help the company increase its market presence using already established companies and international partners. This strategic approach would also help to give the company a sustained competitive advantage over its competitors in accessing new markets and blocking competition from various markets such as supermarkets and departmental stores. The disadvantage of diversification is that the cost of production would significantly increase due to the initial cost of establishment of brands or the acquisition of already existing brands. This process is also costly in terms of labor overheads that have to be included administratively. However, in the long run the strategy would give sustained returns and provide a competitive advantage over other similar companies in the industries. The pace of diversification should be sustained for competitiveness In focusing on mergers and joint ventures the company may lose its control and management structures and have to form a hybrid (al J. U., 2010). This has an implication in that at some instances some undesirable influences and cultures may be adopted such as higher cost of production. The general loss of total control and the state of dependence is what the company might lose. Alternatively the strategy if well deployed could lead to increased and sustained competitiveness over a long period of time according to porter’s model. In my assessment the best strategy for the short term of 3- 5 years for the company is to focus on diversification. This should be both in terms of product brands and geographical reach. Having greater variety would enable the company meet more responsive to customer need and also there more virgin markets in Africa and developing world that can be tapped. In conclusion the Hanes brands Inc have bright prospects in business and the operational structure and model are up to acceptable standards. The financial position of the company is also sustainable. The company should plan to increase its brands presence by diversification both in brands and geographically. This is to increase the market share and lock out competitors. Bibliography al, J. U. (2010). Strategic alliances, mergers and acquisitions: the influence of culture on successful cooperations. Cheltenham: Edward Elgar Publishing liminted. al, M. A. (2009). Strategic Management: Competitiveness & Globalization, Concepts. South western. Annual Report 2010. (n.d.). Retrieved December 9, 2011, from http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9ODUyMDB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Expedition Hanesbrands. (n.d.). Retrieved December 9, 2011, from http://www.climbwithus.com/ Fine, L. G. (2009). The SWOT Analysis: using your strength to overcome your weakness, using opportunits to overcome your threats. Create Space. Global Underwear Market Report 2010. (2010, April). Retrieved December 7, 2011, from http://www.ystats.com/uploads/report_abstracts/774.pdf Hanes Brands Inc. (n.d.). Retrieved December 9, 2011, from http://www.hanesbrands.com/hbi/Templates/Home/Default.aspx Harrigan, K. R. (1983). Vertical Integration, Outsourcing, and Corporate Strategy. Washington DC: BeardBooks. international monetary fund. (n.d.). world economic forum. Retrieved December 9, 2011, from http://books.google.co.ke/books?id=gax0rEEedtoC&printsec=frontcover&dq=economic+outlook&hl=en&ei=f__gTrmoE4LKrAfY7LSoCw&sa=X&oi=book_result&ct=result&resnum=7&ved=0CEoQ6AEwBg#v=onepage&q=economic%20outlook&f=false Textile international outlook. (n.d.). Retrieved December 9, 2011, from http://www.textilesintelligence.com/tilproducts/sendbrochure.cfm?repid=TISTOI Table 12: Global Apparel Retail Industry Value Forecast: $ billion, 2008- 2013 Year $ billion % Growth 2008 1,107.7 3.3% 2009 1,136.7 3.0% 2010 1,170.4 2.9% 2011 1,209.7 2.7% 2012 1,253.8 2.8% 2013 1,291.1 2.6% CAGR, 2008-2013: 3.1% Source: Datamonitor D A T A M O N I T O R opportunities Portfolio of leading brands Customer concentration Integrated operations help in innovation and Declining margins new product launch Extensive product offerings Threats Restructuring initiatives to improve efficiency Intense competition keeps market share Expansion of textile and sewing network Growing global apparel retail market Strengths Portfolio of leading brands Integrated operations help in innovation and new product launch Extensive product offerings Weaknesses Customer concentration Declining margins Read More