SWOT Analysis: Columbia Sportswear - Case Study Example

Due Columbia Sportswear Columbia Sportswear is an American company that specializes in manufacture and sale of sportswear.The company was started in 1937 as a small family business. Today, the firm has expanded significantly and has operations in over 100 countries. The company has also experienced significant increase in its revenues. The sportswear industry is highly competitive with major players such as Nike. As such, survival of Columbia Sportswear depends on general business environment, internal advantages and external advantages. The report will examine the strengths, weaknesses, opportunities and threats. In addition, external factors will be examined using porter five forces analysis. STEEP analysis will be used in the examination of the business environment. STEEP Analysis Issue Implications for the company Importance Social factors Social factors include demographics, culture, lifestyle and general consumer behaviour. The company reaches out people with sporting lifestyle. Recent trends indicate that most people prefer to engage in sporting activities on their own during vacations (Nicholson, Hoye and Houlihan 61). This sporting culture is expected to increase the sales of the company. The business invest heavily in product promotions to lure more people to take up sporting activities. Social factors determine the success of Columbia Sportswear. Thus, the company must consider aspects such as culture, lifestyle and demographics. Understanding the social factors that affect the business enables it take necessary steps in terms of products and prices. Technological factors Columbia Sportswear needs to adjust according to the changes in technology. The technology used in sportswear is increasingly evolving. The advancement in technology will require the firm to change its production techniques and its product. Columbia Sportswear manufactures high-tech product, Omni-Heat based on its thermal technology (DeLano et al. 105) Keeping up with technology is important as it enhances the performance of the firm. Technology reduces the cost of production. In addition, technology increases the quality of products. Implementation of the latest technologies in sportswear will also enable Colombia Sportswear to improve its production capacity. Environment factors The corporation is committed to minimizing the environmental impact of its production activities. The firm gives back to the society in terms of cleaning the environment, monitoring the activities of its suppliers about pollution. Environmental conservation is the responsibility of every business. Companies that contribute towards degradation ought to take necessary measures to clean. A company gains good reputation for social responsibility, a fact that may attract more customers. Environmental concern also strengthens the Colombia sportswear brands. Economic factors Sportswear products are luxury products. As such, aspects such as price and supply affect the business. Columbia Sportswear is affected by the world economy since it has operations in more than 100 countries. The company must understand and forecast economic conditions in the world since it is essential for its revenues. Columbia Sportswear is reliant on the American and international market. As such, understanding the economic conditions will help the firm in making business decisions such as opening new plants, prices and quantity of production. Political factors As an international company, Columbia Sportswear is affected by political factors such as tax laws, business registration and other legislation that affect the economy. A business operates well in areas with political stability. Political factors affect the ease of doing business in a country. Due to its expansive policy, the company must be aware of the political landscape of a country before investing. Understanding these factors may help in avoiding losses caused by political wars, high taxes and poor economic policies. Industry Analysis Using Porter’s 5 Forces This section analyses the competitiveness of the industry and the business strategies that the company uses to maintain its market share. The analysis looks into the lucrativeness of the industry. Threat of New Entrants The apparel market is experiencing the highest threat of new entrants. The reason for the threat is that starting and manufacturing apparel is very cheap as compared to footwear. In this regard, entrants in the sportswear business start in apparel. The presence of many entrants increases the costs of operations since the incumbent firms have to lower the prices to fight increasing competition. Competition in the apparel sector has made the firms start competing in brand awareness and market share. Threats of substitutes There are various substitutes to the company’s products. For example, regular light shoes can be used to perform the same purpose as Colombia footwear. In addition, light clothes can be used for sports in summer whereas heavy clothing can be used in winter sports. The situation means that substitutes are constantly threatening the sportswear business. The footwear division is the most affected. The company uses brand power to mitigate the threats of substitutes. Also, the positive reputation of the company is ideal in enabling its products bypass the substitutes. Power of suppliers According to Brinkman, Navarro and Harper supplier power is a term used to explain the influence that suppliers have on a firm (186). Suppliers can exert pressure in the form of reducing supply of products, increasing the prices and also in lowering the quality of products. Many firms in the sportswear business have outsourced their production to other companies. In fact, Colombia sportswear primary role is selling the products. It contacts other firms, in this case suppliers, do produce its products. The situation implies that suppliers have a lot of power in this industry. Any action by suppliers can cause turbulence across the whole industry. The firms in this industry outsource most of their production activities to lower the costs of operations. The major companies in the industry such as Nike, Adidas and Colombia Sportswear have outsourced their manufacturing activities to Asia where it is easier to acquire raw materials. The region has skilled labor that is cheap. Power of buyers Columbia Sportswear dependents on sportspeople for business. It also receives demand from sports enthusiasts who take on sports during vacations. The buyers know the industry very well and know where to get their desired products. Buyers have information on prices, quality and discounts offered by all firms. Industry rivalry All firms in the industry are actively jockeying for influence and position in the market. The firm uses price, market share and product promotion as a means to keep up with the competition. From financial data of the companies, it is clear that the two major competitors spend affair share of their revenues on advertisements. Marketing and other expenses for VF Corporation rose from $2336394 in 2009 to $3085839 in 2011. Similarly, the marketing expenses for Nike increased from $2352000 in 2009 to 2448000 in 2011. The expansive strategies employed by companies have led to a significant increase in sales. The company and major competitors have seen growth in revenues. The sales revenues of Colombia Sportswear increased from $ 1.2 million in 2009 to $1.69 million in 2011 (DeLano et al. 95). SWOT analysis The SWOT analysis will be used to ascertain the internal factors that directly affect the performance of the business. Strengths Brand legacy Columbia Sportswear has a strong brand name that has been built over 70 years. The Company has the largest, market and influence in ski apparel products. People associated ski products with Colombia Sportswear. The brand legacy it thus a key strength for the company. Marketing strategies The company has successfully identified its target market and conducts targeted advertising. Conducting targeted advertising is crucial as it enables the company to reach its key customers (Ferrell and Pride 474). Market share The company has established retail shops in over 100 countries. The move has helped the company to expand its market share, thus improving the revenues. Weaknesses Brand Strength The marketing strategies of the company are mainly targeted at boosting the local American market. However, the brand is weak in external markets. The brand performs poorly in the external market when compared to major competitors such as Nike and Adidas (DeLano et. al. 97). Marketing The company advertising budget is very low as compared to its competitors. In essence, the company does no advertise aggressively outside America. A firm operating internationally must be aggressive in promoting its products in all the countries where it has operations. In this regard, failure to have an international marketing strategy is a barrier towards growth of the company. Opportunities Brand advantage The company can use its brand power to establish retail centers all over the world. The retail centers that are fully managed by the company can increase the revenues. The company has not exploited this opportunity for a long time. Market penetration The firm has a chance to grow by investing in new markets. As noted, the company operates in 100 countries. The company has a growth opportunity by investing in other markets. Investing in more markets would increase the competitiveness of the firm and also its brand presence. E-marketing The company can increase its revenues by opening online shopping for customer outside the United States. Allowing people to shop online will increase the brand presence of the company. The company has plans use e-marketing to serve markets where it does not have retail outlets. Threats Counterfeit sportswear The company’s existence is threatened by increasing number of counterfeit products. Customers are duped into buying the counterfeit that sometimes use the brand name of the company. Apart from hurting sales revenue, counterfeit products also soils the reputation of the company since most items are of lower quality. Brand identity As noted earlier, the firm lacks a strong presence outside the United States. The situation implies that the company’s products are not well known outside America. The company thus faces a huge expense of popularizing its brands internationally. Market fragmentation The apparel market is very fragmented. The scenario implies that the players in the industry are at risk of losing loyal customers. The fragmentation, coupled with an increase in product information, makes customers chose the product that has the best quality, and is offered at the lowest price. The overall point is that it is becoming hard to maintain loyalty of customers. Strategic Options and Recommendations The company’s brand is small in the United States. However, its presence in other countries is relatively low. The management of the company should consider devoting more attention to the international market especially the new markets. By so doing, the company will deepen its penetration and also increase its market share. The company can improve its brand positioning by increasing product promotion activities, increasing its visibility in social events like sports. In fact, most of the company’s competitors are sponsors of popular games in the world. Columbia Sportswear brands should be visible in sporting activities since it specializes in making sports gear. As explained above, Columbia Sportswear is a common brand in the US. The company can boost its sales if it establishes more retail centers around the world. However, the company make incur costs associated with uncertainties in the new markets. As such, the company can test the lucrativeness of the market by launching online shopping services. The company can allow buyers to shop products that are offered in other markets online. The company can then ship the goods to the buyers. Taking this step will not only enhance sales but also increase brand penetration. Counterfeit products are hurting the company’s market. The company should thus look for ways to differentiate its products. The firm can use technology that will be exclusive to its products. The cat will ensure that only the company has the technical know-how of making the products thus reducing the chances of having counterfeits. In addition, investing in unique technology would make counterfeit makers incur high costs of products thus discouraging the counterfeits. The company can tale take legal action against persons selling counterfeit products. Works cited "Columbia Sportswear Company - Strategic Growth Initiatives." Columbia Sportswear Company - Company Profile. N.p., n.d. Web. 27 Nov. 2014. Brinkman, John, Ilve Navarro, and Donna Harpe. Unlocking the Business Environment. London: Routledge, 2014. Print. DeLano, Nathan, Craig Hooker, James Mendiola and Alisha Sanford. Columbia Sportswear. Texas A&M University . Print. Nicholson, Matthew, Russell Hoye, and Barrie Houlihan. Participation in Sport: International Policy Perspectives. London: Routledge, 2011. Internet resource. Pride, William M, and O C. Ferrell. Marketing. Boston, MA: Cengage Learning, 2008. Print. 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