Advantages and Disadvantages of Topshop Company - Research Paper Example

Market Environment Analysis of Topshop Company (Assignment) A business entity always operates in a market environment, which is nothing but the interplay of certain micro and macro factors that influence the functioning of the business. The micro environment is the immediate market environment and relates to the intra industry factors like competitors, substitutes, buyers and sellers that influence a business. It is evaluated through Porter’s 5-force model. The macro environment is the extended environment that takes into account the socio-economic, political and technological facets of the market. It is examined through the PEST analysis. PEST ANALYSIS The influence of environmental factor and its effect on any company can be better analysed by PEST analysis which is covering 4 important environmental factors namely political, social, economic and technological. Political Factors: An overview of its investment patterns will suggest that Topshop has constantly chosen to invest in countries that have a capitalist form of government. The capitalist government helps them to use labor, capital and fund more easily with less restriction. This is the reason why Topshop has invested mainly in Europe which is governed by capitalist systems.Recently after the change in the government policies in different countries, Topshop stated to operate in other parts of the world like USA and China. In USA, the company is looking to start its operation in 2014 only with their first store in Springfield Town Centre. (Bhattarai, 2014) Economic Factors: Amongst the economic considerations, the most vital factor is inflation. In case of high rates of inflation and resulting increase in money supply in the economy, the prices will rise. Then the people will not be able to afford the fashionable clothes and accessories offered by Topshop. Other economic factors that must be considered by the company before investing in any country are the balance of payment situation, fiscal and monetary policies, and the counter-trade policy of that country.Low labour cost, availability of raw materials with lower price, are also important aspects before setting up new outlets and considering these factors Topshop therefore now considering the developing nations(Like India, China) to setup there manufacturing unit to increase profit margin by reducing manufacturing cost.(Kaye, 2011) Social Factors: The social factors prevalent in the target market can have a major impact on the performance of a company. The social factors include the social systems, family backgrounds, education, religion, occupation and income levels of the potential consumers. Topshop while spreading their business all over the Europe and afterwards in other parts of the world considered this very minutely. These factors are important as they play a major role in shaping up the consumer choices, interests, attitudes and preferences for the clothing and fashion accessories offered by Topshop.. Generally people use to spend more for essential goods rather on fashionable elements. So to increase the purchase rate pricing is a factor and it has to be similar with social standard. Apart from that the industry must consider involving more women as employee to diminish the discrimination in the society. (Jasuja, 2012; Keane &te Velde, 2008) Technological Factors: In today’s world of globalisation, a plethora of new and advanced technologies have evolved that have boosted the growth of businesses and helped them to gain a substantial competitive advantage over business rivals.In the retailing industry, use of human’s creativity is more appreciable rather than technological designing. Human finishing can make products more attractive whereas technology can be used by them to reach out to more customers through internet marketing and online purchase facilities etc. Moreover they can introduce customized designing style for the customer with the help of technology. (Ziv, 2010) Apart from that, with the development of by employing e-commerce Topshop can widen its consumer base by marketing its products in newer target markets. Not only that, technological development can also help Topshop to introduce more advanced product ordering-payment mechanism, faster processing or online order, innovation in designing, and most importantly innovation in packaging system as well-for example introducing bio-degradable packaging system to ensure that company is following the environment protection law. This part can also serves as CSR for the organization. SWOT Analysis: Swot analysis is associated with the review and analysis of strength, weakness, opportunity and threat of any organization. Out of this four factors strength and weakness are the internal matter of the organization whereas opportunity and threat are associated with the external condition. Topshop is a British multinational retailer which is specialized in fashion clothing, shoes, make-up and accessories. The company was founded in 1964. (Sheppard, 2013) Strengths: Product Line: Variety of product line with modern style and trends; same style is available in various price ranges so people across various classes can afford the fashion style based on their financial condition. Accessibility: Availability of stores all over the UK and in other parts of the world. Online shopping facility is there to attract more customers. Innovation: Style advisor in every outlet to guide the customers based on their choices and economic range. Additional services like Topshop Café attract more customers and provide leisure. Own express delivery service is available for the people who purchase online. (Nguyen, nd) Weakness: Due to availability all over the world and more than 300 stores in the UK, the exclusiveness is not there anymore. The stores all over the globe are very big in size; therefore the customer service is often not up to the best. Management quality of the stores and of the company as a whole is not at the top level all the time. High cost compare to other easily available brands makes it a bit out of reach for a certain part of the society. (CDNIS, 2011) Opportunity: Introduce more attractive marketing scheme to attract more customers. Wide spread operation and comparatively lower price (not in all cases but is some parts) make the products easily accessible for middle, upper middle class during recession as well. Through online shopping, company can attract more male customers with their variety of products. The company can expand more in the countries like USA and China; especially in China where the developing economy encourage the young generation towards brand. (CDNIS, 2011; Bourgeois Daily, 2013) Threat: The most significant threat for Topshop is the growing retail chains like Spencer, Zara etc. All these companies are also taking same strategies like providing verities with wide price range for one and all. (CDNIS, 2011) The low price is no more the USP for them as in UK only there are various cheap stores available with various fashion products. PORTER’S 5 FORCES MODEL Existing Rivalry: Topshop is facing intense competition from its rivals in the industry such as Mrs Selfridge, H & M, Debenhams andRiver Island. All these offer the same products at similar prices, and they aim for the same target market. Threat of New Entrants: New entrants will find it highly difficult to enter the market due to the established large scale operations of Topshop. Topshop, being a global brand, can easily achieve economies of scale and thereby reduce its costs and increase profits. This will maintain a check on the new entries. Threat of Substitutes: Topshop faces a moderate threat from its substitutes since its rivals also sell similar products at identical prices. As the customers have a plenty of choices, Topshop faces the pressure of adjusting the prices and maintaining the quality to meet the customers’ demands. Bargaining Power of Buyers: Buyers always want more services and high quality at a lower price. Topshop’s customers can easily switch over from them to their rivals in case they are not satisfied with the products they receive, which would lead to a loss of buyers. To check this Topshop offers high quality products at reasonable prices. Bargaining Power of Suppliers: This factor depends on the number of suppliers available. If there are plenty of them, Topshop can choose the most profitable option and thus the vendors’ bargaining power decreases. Similarly, lesser number of vendors means increased bargaining power of suppliers and fewer choices for Topshop, which ultimately brings down the profits. Reference: Kotler, Philip, and Gary Armstrong. Principles of marketing.Pearson Education, 2010. Bibliography 1. Bhattarai A.; (2014); Topshop to open first Washington area store — but it’s not where you think; The Washington Post; Web; http://www.washingtonpost.com/business/capitalbusiness/topshop-to-open-first-washington-area-store--but-its-not-where-you-think/2014/02/05/f0e4b5ce-8eaf-11e3-b46a-5a3d0d2130da_story.html 2. Bourgeois Daily; (2013); TOPSHOP swot Analysis; Web; http://www.bourgeois-tokyo-london.com/apps/blog/show/35133353-topshop-swot 3. Jasuja, G.D.; (2012); Textiles and Clothing: a low tech sector? ; New Cloth Market; Web, http://www.newclothmarketonline.com/textiles-and-clothing-a-low-tech-sector/ 4. Kaye, L.; (2011) ; Clothing Industry Giants Launch Sustainable apparel coalition; Guardian Sustainable Business; Web; http://www.theguardian.com/sustainable-business/clothing-industry-supply-chain-coalition 5. Keane J. &te Velde, D.W.; (2008); The role of textile and clothing industries in growth and development strategies; Investment and Growth Program of Overseas Development Institute; Web; http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCYQFjAA&url=http%3A%2F%2Fwww.odi.org.uk%2Fresources%2Fdocs%2F3361.pdf&ei=jJ8tU9reFIaNrQfnqYGgBA&usg=AFQjCNG_HoyZdtEY1sOxJjyXbaABOKSpQg&sig2=Pu-FEHFiYtJxE1Zh_VFuTA 6. Nguyen N.; (nd); Topshop; Academia; Web; http://www.academia.edu/4000891/Topshop_cw 7. Sheppard, C.; (2013); Topshop Marketing Report; Web; http://charlottesheppard.wordpress.com/2013/03/05/152/ 8. Gaby’s Business Blog; (2011); TOPSHOP Swot; CDNIS; Web; http://sites.cdnis.edu.hk/students/063818/2011/02/20/topshop-swot/ 9. Ziv, Y.; (2010); How the fashion industry is using digital tool to increase ROI; Mashable Business; Web; http://mashable.com/2010/10/21/fashion-digital-tools/ Read More