Ted Baker Environmental Analysis - Coursework Example

Ted Baker Environmental Analysis TED BAKER ENVIRONMENTAL ANALYSIS Introduction Ted Baker is a publicly listed clothing retail company in the UK that was started in Glasgow by Ray Kelvin, before expanding to Nottingham, Plymouth, and Manchester. A new store was opened in Covent Garden, as well as Leeds and Soho in London, after which the company was fully bought out from its part owners by Kelvin and opened the first exclusive range for women (Ruddick, 2013: p1). Today, the company has multiple exclusive stores around the U, while they also sell their range via other retailers, including House of Fraser. In addition, Ted Baker has outlets and stores across Europe, the Middle East, Asia, Australia, and North America, while they have also expanded into wholesale in countries in the EU, North America, New Zealand, the UK, and Australia. However, their wholesale operations, which started in the early 90s, are strictly done by selecting like-minded retailers (Davies, 2012: p1). This paper will seek to conduct an internal and external environment analysis of Ted Baker Plc. Internal Environment VRIN Analysis To achieve a broad overview of Ted Baker’s situation, it is crucial to analyze the company’s internal environment, rather than only the market. This is especially because company value is influenced by such external factors as market changes, which means that elements of value must be considered in the overall company analysis (Ruddick, 2013: p1) (Birtwistle & Tsim, 2008: p456). Ted Baker’s main resources are its pricing strategy and distribution strategy, particularly as they fulfill the needs of the consumer. Tim Baker’s efficient system of distribution allows them to keep costs low, thus can be considered a valuable especially because the extent of its efficiency means the consumer does not have to pay extra for clothing delivery. Regarding rareness, Ted Baker’s pricing strategy as a resource that seeks to reduce risk is similar to that of its main competitors. However, their distribution system is not as easy to imitate due to their expertise and experience in affairs of logistics. Finally, the organization is able to exploit their distribution system and policy resources, especially their distribution system that is valuable, rare, expensive to imitate, and offers them a sustainable competitive advantage (Lane & Probert, 2011: p45). In addition, their pricing strategy, although not rare, is valuable and exploited to reduce risk and gain competitive parity. Strategic Capabilities Ted Baker Plc has been relatively profitable due to their unique set of capabilities and resources that have offered them a competitive advantage. These include a brand reputation that is widely known by consumers, as well as a high degree of staff loyalty that results in a turnover that is lower than average and employee skill retention. In addition, the effective and close management of the company’s supply chain lowers costs, while they also have their stores in prime locations. According to Taplin and Winterton (2014: p33), the modern retail environment leads to organizations increasingly depending on their capabilities to develop opportunities as they arise, particularly by building on their core competencies. Ted Baker seeks to become one of the world’s biggest volume retailers, achieving both global recognition and a global brand. Their unique formula of retail already allows the company to participate in numerous markets in the world, despite not owning factories or making the products in their stores. Their strategic capability, which endows them with a competitive advantage, is their relationship with both suppliers and retailers. The symbiotic relationship across the entire chain of supply means that they depend on one another for success, which, in turn, fulfills consumer needs for constant supply, availability, value, and quality (Hassler, 2013: p520). SWOT Analysis Strengths Rapid growth in overseas market, such as Asia and North America Organic expansion of the company due to word of mouth and reputation Concessions with third party retailers like House of Fraser allows growth with reduced costs and risks (Taplin & Winterton, 2014: p34) The company has a strong brand recognition and strength Constant review of their knitwear ensures that the company is reactive to trends, fulfilling expectations of the customers. Weaknesses The costs of renting stores, especially in the UK, is rising The European and North American market are still depressed by the economic recession and slow recovery Limited control over their brand since they operate via licensing, wholesalers, and retailers (Taplin & Winterton, 2014: p34) Opportunities The company could expand on its existing Ted Baker collections There are opportunities for growth in E-commerce and online sales (Taplin & Winterton, 2014: p34) Ted Baker could also enter new markets overseas, such as Africa Threats Slow recovery from the economic recession from its major markets in Europe and North America There is also uncertainty surrounding store rental costs across Europe (Taplin & Winterton, 2014: p34) Fluctuations in interest rates and exchange rates also threaten the company’s exports The company’s wholesalers and retailers are in charge of protecting their brand, despite not being the real owners of the brand External Environment PESTLE Analysis Political Factors In the European market, the continued absorption of former soviet states into the European Union has opened new economical and geographical borders for companies like Ted Baker that are already dealing with mature markets. These markets, as well as increasingly liberalized Asian economies, offer a chance for ted Baker to establish a presence. Because these countries have to open their boundaries to international trade, including China after it joined the WTO; Ted Baker can license companies in these countries to sell their products (Bruce & Dally, 2011: p216). In the UK, the government decreased corporate tax to 28% and it has not raised it, enabling Ted Baker and other companies to save millions of pounds. Economic Factors The financial crisis of 2008/2009 and the subsequent economic recession had a significant effect on Western Economies, including the UK. This impacted on the amount of disposable incomes, which, in turn, affected consumer spending, particularly in light of the employment uncertainty and high rates of inflation (Bruce & Dally, 2011: p218). However, rising incomes in Asian and Eastern Europe countries that Ted Baker is expanding in to may offset depressed consumer spending in the west, at least partially. Finally, uncertainty in the crude oil market has had an effect on all companies, Ted Baker included. This is because the cost of exporting goods increases, necessitating an increase in price. Social Factors Greater mobility of work has meant that people have less time to go shopping physically, which has benefited companies like Ted Baker that have a robust E-commerce platform. In addition, the average person in Europe and North America now lives longer, meaning that there is an increasing population above the age of 45. This presents an opportunity for ted Baker to target people aged above 45 with customized clothing ranges. Simultaneously, the clothing retail industry has to deal with ever-changing and dynamic fashion trends as an ageing population wants to look more fashionable and younger (Serra et al, 2012: p217). Ted Baker must take advantage of this and review all their clothing ranges often, establishing itself to the older generation. Technological Factors In the western world, the internet is increasingly becoming the most powerful channel of communication and selling. By 2015, it is expected that at least €363 billion worth of retail sales will be transacted over the internet (Serra et al, 2012: p218). Among these consumers, it is also predicted that UK shoppers will account for as much as a third of the total revenue. In addition, the internet accounts for at least 10% of all global promotion and advertising spending, which is expected to grow significantly. The goal for ted Baker, therefore, should be to ensure they have an optimized E-commerce strategy that will take advantage of this trend. Finally, mobile phone shopping, although just being popularized, is expected to undergo tremendous growth in the next five years, which is another opportunity for Ted Baker. Environmental Factors The media and the public, as well as a more discerning public, are urging organizations to become more sustainable and eco-friendly. Ted Baker has received criticism once in a while for over-packaging, which they could change by charging customers for each bag to decrease usage of bags (Esbenshade, 2012: p546). Another criticism that faces the clothing retail industry is waste management, particularly emission of greenhouse gases and pollution. Ted Baker could decide to send all their waste for recycling. However, Ted Baker is already involved in helping local communities, fair trade, and waste reduction as part of their CSR strategy. Legal Factors As the consumer becomes increasingly knowledgeable of their rights, the risk for companies to become subject to litigation has increased, especially for western countries. For example, Marks & Spencer was sued a few years ago by a lady claiming that she had fallen and hurt herself due to defective shoes from the company (Esbenshade, 2012: p550). Although the company won the case, a similar occurrence would result in poor publicity for Ted Baker. Porter’s Five Forces Level of Competition In the clothing retail sector, competition is fierce, which is worsened by attempts to diversify by companies into areas that are not their core competencies, which only adds to the competition (Parker, 2012: p77). Ted Baker is vulnerable to such competition from other stores that also double up as clothing retailers, such as supermarkets, as well as regular clothing retailers like John Lewis, Zara, and French Connection. Therefore, the threat from competition is very high. Threat of Substitutes Overall, clothing has no substitute, from which it can be concluded that threat of substitutes is low (Parker, 2012: p79). Ted Baker clothing, however, can be substituted for clothing from other retailers, such as French Connection, which offers similar clothing to Ted Baker. Thus, at this level, it can be concluded that the threat of substitutes can be concluded to be high. Threat of New Entrants This threat is low because of the enormous investment of capital required to set up a chain of international stores that are profitable. The clothing retail market is already mature, which means that entrants would need to be radically different, a quest that is increasingly difficult in this sector (Gerber & Saiki, 2010: p223). Ted Baker and most of its competitors have a strong and established brand name, which, in a homogenous market, mean they enjoy consumer loyalty. Bargaining Power of Buyers This threat is high because there is a high concentration of consumers, meaning that they are at liberty to dictate their tastes. While costs of switching from one brand to the other are low, the consumer also has many alternatives to choose from (Gerber & Saiki, 2010: p225). The current slow recovery from the economic recession has forced most clothing retailers, including Ted Baker, to adjust price levels and increase focus on the needs of consumers. Additionally, uncertain income means that consumers shop around more before making purchasing decisions. Bargaining Power of Suppliers This can be considered low because ted Baker is a renowned company with relatively high turnover, which means that suppliers want to be in business with the company to reach a larger base of customers. In addition, Ted Baker does not depend on the suppliers as much as other competitors like French Connection because they sell their products and license overseas stores. Finally, majority of suppliers come from developing nations that are dependent on western firms for contracts (Lane & Probert, 2008: p249). 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M., & Winterton, J. (2014). The European clothing industry: Meeting the competitive challenge. Bradford, England: Emerald Group Pub. Read More