Business Management and Decision-Making Progress - New Look and Next Stores - Literature review Example

Business management and decision making progress; A case study of New Look and Next Stores Executive Summary The study evaluates the management challenges faced by the garment industries in relation to internal and external factors. There is also the evaluation of New Look and Next stores company profiles in regards to their history, reputation and range of products. SWOT analysis of both companies was later outlined to determine their operational feasibilities. Primary collection of data was further used to analyse the companies’ organizational structures and leadership styles in regards to their challenges. Introduction The garment industry is among the oldest and also the biggest export industry. The garment industry has boosted the economic growth of many nations through the production and exportation of garments. The export of the garment and textiles provide earnings in form of foreign exchange realized by the countries. The exports of ready made garments, textiles and clothing constitute a bigger portion of the total merchandise exports of many manufacturing countries. Globally, China is the leading exporter of garments especially for the western brands. However, the management and leadership roles employed by the decision makers determine the efficiency and effectiveness of a successful garment manufacturing company. According to Fernie & Sparks (2009) several issues currently affect the garment industry. Garment organizations are occasionally influenced by technological advancements which affect their production machineries. The new technologies have enabled computerized knitting of garments without the need for sewing. Through the introduction of such technologies, most of the companies are forced to retrench their workers due to cost efficiency of the advanced technologies. In addition, the changing technologies have influenced the fashion trends which in return affect the global demand of garments. Some of the garment manufacturing companies fail to manage their products life cycle due to poor response of the current fashion trends. The companies lack effective collaboration with its customers as well as suppliers so as to remain relevant. Cattaneo, Gereffi & Staritz, (2010) confirms how majority of the garment manufacturing firms lack product life cycle management (PLM) which can assist them to manage their external and internal communications. The PLM also has software packages which can assist the organizations in managing their key issues like activities and processes. In product life cycle, key issues usually arise in planning, color management, cost estimations, product data management, designing and tracking a product’s development which can easily be solved by the use the computerized PLM system. Bernards (2012) illustrates that there is intense competition in the garment industry due to increased productivity and other competition variables like innovations, quality and fashion or design. The pressure is due to global competition which affects the export markets in terms of non tariff and tariff barriers. Additionally, increase in liberalization and globalization influence the trade policies which play an important role in providing frameworks for global competition. The companies operations and marketing strategies influence the consumers’ behavior and their purchase intentions. The companies marketing strategies like promotions, market knowledge and their brand image matters a lot to the consumers’ perception. Emery & Emery (2014) add that consumers purchasing behavior is greatly influenced by the social cultural, economic and personality factors during the purchase of garments. New Look Company Profile New look is a British Company formed by Tom Singh where it initially traded as New Look Roodepoort Company in 1969; it currently has its headquarters in Weymouth, Dorset United Kingdom. The company initially sold women garments which were imported from Middle and Far East by the founder. The initial strategy was to attract the rural customers while maintaining low prices in order to become the leading retail chain in the country. By the 1980s, the company predominantly became a family affair business. Mr. Sign entirely acted as the sole manager in all the company’s operations including the administrative duties. At this time, it exhibited family values so as to promote quality products at reasonable prices (Macdonald, 2012). Macdonald (2012) illustrates how the company has since increased to over 1100 chain stores both regionally and internationally. Currently, the company has magnificent warehouses and showrooms at Xavie Voulevard which stocks high end home accessories. By last year, the company had realized a gross profit of 805.9 million sterling pounds with over 17,000 employees in the UK and over 30,000 employees worldwide. The company deals with fashion lines, lingerie, shoes and home accessories. Today, the company is run professionally so as uphold the company’s high standards. The company has design consultants who assist the customers to match their needs with the ultimate New look’s style. The company maintains its customer base with its precise slogan “we save your money” so as to meet and exceed their customers’ expectations. Next Stores Company Profile Next Stores is a British Company founded by Joseph Hepworth in 1864 at Leeds where it deals with distribution of clothes, home furnishing and accessories. Currently its main headquarters is in Enderby, Leicestershire United Kingdom. In 1982, the company bought Kendall and Sons Ltd dealing with women fashion wear and rainwear so as to increase its retail market share. However, with time the company ventured into men and children clothing lines where NEXT clothes were designed to offer quality, style and value with regards to fashion. The company initially had two operational categories namely catalog sales and the retail stores. In 1988, the company practiced catalog retailing where it had a 350 page catalogue which was later upgraded to 1400 pages. In 1999 the entire catalogue was available online where customers could shop online which was the first in its kind in the UK (NextPlc, 2015). The company also enhances corporate responsibility to its environment, ethical and social perspective; so as to maintain its status. In 2014, the company achieved a gross profit of 695 million sterling pounds where it boosts of 52,533 employees both locally and globally. NextPlc (2015) adds in 2011, Next Company acquired its first consolidated business consisting of fashion, garden and home stores at Shoreham. Currently, the company has 500 chain stores in UK and over 200 retail stores internationally. The company financial objective is to enhance the shareholders long term returns through the issue of cash-dividends and share earnings. The company’s strategy involves developing and improving its products which could in turn be measured in terms of sales performance. Its slogan involves “...present collections that reflect aspirations and means of our customers.” New Look SWOT Analysis Strengths Bhatia (2008) depicts that New Look Company has a strong brand name in the UK market as well as internationally. New look is a trusted brand due to its greater market share and a huge number of loyal customer base. The multinational company has a good reputation with its slogan “we save your money” which in reality promotes the value in customers purchases. The company also provides convenience to the customers because its chain stores are located strategically within the cities. The company also produces quality and variety of items which strengthens customers’ loyalty to it. The company has a strong management team both from internal and its external consultancy agencies. The company enjoys cost advantages based on its low cost pricing which accumulates to its profits. The cost advantage also allows it to undercut its rivals leading to increased market share. The company also invests time and money in its people through training and retention of its employees. The company also has an updated website which displays the latest deliveries and offers; which intensely attracts the busy online shoppers. Their stores are also slickly visually displayed so as to attract the walk-in customers. Weaknesses The company experiences a high debt which poses the risk of becoming bankrupt in case of an inadequate decision. Last year, the company had a debt of 800 million sterling pounds which poses the risk of high interests accruing due to its prolonged debt. The increasing debt can damage the company’s reputation which leads to a reduction in its brand value. The debt also reduces the company’s profits. The company’s logo has a more feminine look; pink in color plus its design logo; which many men may perceive to be selling only female items (Bhatia, 2008). Opportunities The company is continuously venturing into other global markets for example India; which from the past has had cultural wears. The young generation is gradually adopting the New Look western-fashion which is evident which local celebrities especially from Bollywood. The use of internet has spearheaded the realization of online markets as well as the reduction of employee costs. Bohm (2009) explains how products innovations like Fair Trade products assist the company to increase its business while improving its products portfolio. The company can maximize on its co-branding and franchising with other retailers and manufacturers so as to fully realize its potential. The company’s new stores and locations can promote New Look’s market development. Threats The company being a multinational company entails that there are numerous rival competitors continuously trying to out-do its activitiess. This is even evident through the close proximity of rivals such as Next Door, H&M among others. The company is also faced with political issues especially in the global countries they operate in. Ferrell & Hartline (2011) argues further that the company being engaged in international trade through the buying and selling of foreign currencies, can incur losses due to instability of the currencies. The online retailers also pose a big challenge to the company due to the offering of cheaper prices as compared to retail shops. Next Store SWOT Analysis Strengths In Pahl & Mohring (2008) the company has had a progressive performance over the years through its impressive sales margins. The company projects further that with the revision of its sales guidance, it would achieve an increase of 30% profits by the end of the year. Innovation in Next Door is top priority with the use of NEXT directory, catalogues and ecommerce; which constitute among the biggest home-shopping strategies across the clothing market. The company’s brand earns respect through the production of stylish designs and quality products. The company sells only own brands which support its high ranking reputation. The company has long been known in spearheading excellent marketing operations. The company has heavily invested in celebrities’ endorsements for example pop-star Dannii Minogue as well as analogue and digital advertisements. Weaknesses Continental consumers usually prefer to buy at mainland stores for example H&M because of the expensive nature of the sterling pound. This trend poses high risk of decrease in sales across the UK main stores. Pahl & Mohring (2008) argues that due to incomplete product-range like sportswear, many customers especially men prefer shopping at large stores that offer different varieties so as to prevent shop to shop purchasing. The companies that offer discounted offers create a big risk to the company’s sales expectations. Opportunities The company’s ecommerce is performing tremendously well due to the increasing number of customers preferring to shop from their homes. The company has also created a new service of next-day deliveries which offers comfort and also attracts new customers. Okonkwo (2007) explains that through the decline of Next’s targeted age groups, the company can venture into new target groups so as to make an extra income. The company also engages in frequent publishing of its CSR activities for example the reduction of air pollution in order to appeal to the public and build its reputation. Threats Okonkwo (2007) further explains how competition offers a big blow to Next Stores considering other retail market players. Substitute companies like Marks and Spencer, Debenhams can influence Next Stores consumers in regards to improved qualities, brands and pricing. The company intends to proceed with full prices irrespective of the seasons for example the mid-season or end of season; which can hugely affect the customers behavior due to lack of discounts. There is the issue of new entrants to the already crowded market who can reduce the company’s profits while increasing its operational costs. Research Study Methodology The research was conducted in Manchester and Oxford Cities where the two companies have their town chain stores. A qualitative approach was undertaken through the use of telephone and email interviews due to the tight schedules of the managers. A descriptive survey was used on the upper and senior managers in order to have a critical understanding of their management issues and organizational structures. Data biasness was controlled through the administration of similar open ended questions to all managers by the researcher. Analysis Management and Leadership Challenges Faced By New Look From the study, one of the major issues that stood out was the management of its global expansion activities. This was accounted in comparison its major rival Gap Inc. profits, the slow growth rate of New Look’s profits, managing the emerging India and China complex markets and management of the escalating online shopping. Bruijn, Heuvelhof & Veld (2010) illustrate that New Look has been forced to follow this trend due to many companies venturing into China and India so as to make them their primary targets. One of the senior leaders explained how in 1988 they tried to venture into France market but the strategy failed. He further explained that global venture is majorly contributed by the ever increasing competition in the UK market leading reduction of profits. The company is majorly managed as a family business that is; not as a Public Limited Company which affects the shareholding capital that could have been realised by the organization. The family-based management style also poses the challenge of biasness when implementing key strategies. In 1994, the Initial Public Offering was cancelled due to a variety in-family dealings which offered questionable concerns by the potential investors. Bruijn, Heuvelhof & Veld (2010) adds New Look leaders face the challenge of managing its in-store operations for example price markdowns. The process is a bit paper based leading to inevitable inaccuracies and delays in its stores handling activities. There is also the challenge of managing unforeseeable risks due to its operations. In November 2009 there was a fire outbreak in Oxford New Look branch, where the company was fined 136,052 pounds due to lack of proper fire-safety precautions while using catalogues. Management and Leadership Challenges Faced By Next Stores Next stores management faces the challenge of managing its unforeseen growing populations and operations within its portfolio. In 2009, the company was forced to relocate 250 jobs from Dorset to London in order to merge its expansion plans. Iqbal (2011) depicts that from the move, the company retrenched half of its staff so as to cope with the fierce competition. Lussier (2008) adds that the company’s management is faced with forecasting difficulties due to the current economic instability of the country. The effect leads to volatility of the company’s profits. The management is also faces the challenge of controlling new entrants especially the big-label companies which enter the industry with huge financial and knowledge power. Next Stores Organizational Structure Aquinas (2010) outlines how Next Stores is governed under the leadership of three powerful committees namely the remuneration committee, the nomination committee and the audit committee. The company employs the committee organizational structure under its set bylaws which ensures the benefit of participative management, transparency and complex problem solving. The committees oversee the global expansion of its operations. All the three committees have their independent duties in the management of the organization. Based on the structure, the company then operates by the Role culture whereby decisions are implemented and communicated by the committees, logic and analysis. The company has its own code of practice which promotes ethical performance within its internal operations. The company stipulates in its code of practice; no forced labor, equal employment opportunities, safe working conditions and lawful benefits and wages. For example, the company employs disabled persons based on their ability and aptitudes levels. Gender diversity from the senior to the junior level is almost balanced; in 2013 the total population of males to females was 15,929 and 34,134 respectively having in mind this is a female oriented occupation. The employees are eligible for pension schemes within the company. By January 2014, almost 10000 employees are participating in the group’s pension scheme provided by the People’s Pension. The employees are further informed of other pensionable schemes through letters or via emails by the company’s employee portal (Aquinas, 2010). New Look Organizational Structure Baligh (2006) illustrate that the company is managed by a Board of Directors consisting of the founder Tom Singh who assists in the commercial management of the organization. The company has it’s code of business ethics which stipulates its values during the day to day operation of its activities. The company’s business code of ethics evaluates the expected ethical standards from its staff as well as its associates. In 2014, the company won Most Stylish Women’s Vegan Outerwear award from People for the Ethical Treatment of Animals (PETA) due to the abolished of Angora fabric in its fashion lines. This came after the realization of the mistreatment of Angora rabbits in garment making. In order to further maintain its ethical standards, the company gives its code of ethics to every person who has a business relationship with it. New Look intensely values its brand because it represents the company’s reputation. Baligh (2006) confirms that the code applies to every employee irrespective of their ranks as well as its partners and subsidiary companies. The company employs line management structure due to its vertical relationship with different departments. The company achieves the advantages of fast decision making processes, information sharing and responsibility from the board. Conclusion and Recommendations Based on the research, Caifu management should invest with Next Stores Retail Company. This is because the company has a more focused management structure of committee management as compared to New Look’s line structure. Next Stores employs participative management which guarantees efficient decision-making and problem-solving processes. In terms of profitability the company has medium profits with relatively small operating expenses which make its efficient. On the other hand, New look has huge profits with huge operating expenses and debts edging it to bankruptcy. Next Stores also has vast experience in retail business having been formed way earlier than New look. Next Stores also has transparent acquisition and operation of its activities as compared to New Look which has a controversial family acquisition of resources. Apart from Next Store having only 700 chain stores as compared to New Looks 1160, Next Store is the second leading chain-store in UK after Debenhams. Reference list Aquinas, P. G. (2010). Organization structure and design: applications and challenges. New Delhi, Excel Books. Baligh, H. H. (2006). Organization structures theory and design, analysis and prescription. New York, Springer. Bernards, N. (2012). Global industries and local development: labour in the Malagasy garment industry. Vol 5, No 1 (2011); 18-29. Bhatia, S. C. (2008). Retail management. New Delhi, Atlantic Publishers & Distributors. Bohm, A. (2009). The SWOT Analysis. München, GRIN Verlag. Bruijn, J. A. D., Heuvelhof, E. F. T., & Veld, R. J. I. (2010). Process management why project management fails in complex decision making processes. Berlin, Springer-Verlag. Cattaneo, O., Gereffi, G., & Staritz, C. (2010). Global value chains in a postcrisis world: a development perspective. Washington, D.C., World Bank. Emery, J. 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