Swot analaysis

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1.0 Introduction

New Directions (plc) is one of the high street fashion chain which was initiated in late 1950s.

Early twenty years of the company recorded a relatively slow growth compared to the rapid

development of fashion industry in the post second world war era. This almost flat growing

rate was suddenly interrupted by the appointment of the new managing director Thomas

Oakley in 1978. Company recorded an extraordinary growth within the next decade ending

up with 400 stores and becoming a major player in the young adolescent market.

With the leadership of new managing director, the company has refreshed itself to replace its

much older workforce with young and dynamic group whom have given considerably higher

freedom and salaries to balance out the above industry level performance demanded by the

company.

Due to the future wealth potential of this rapid growing company, it was acquired by a large

and cash rich conglomerate in 1987. This new ownerships approach to management was

significantly different from the practice the firm used to have. New ownership and the

groups main board was highly finance oriented while been risk aversive strategy towards

new opportunities.

Soon after the acquisition the senior management group in New Directions has identified that

with this new arrangement there was a hand above them that controls them in many ways.

They realized that the flexibility and freedom that they once had was no longer there and the

ability they had to pursuit short term opportunities with instinct reactions were almost

completely freeze due to rigid hierarchical structure and routine reporting structure. As a

result of failure of continuous struggle to change the situation, Thomas Oakley resigned after

two years of acquisition in 1989.

Thomas Oakley suggested many things like diversify the business demographically andgeographically which were ignored. Being a finance expert, Thomas Oakleys replacement

focused on cost driven approach which helped by the recession in early 1990s caused the

company to lose its revenue as well as its position significantly. The company was no longer

a considerable player in fashion industry merely after two years from the resign of their once

great leader Thomas Oakley.

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2.0 Underlining Theories

2.1 SWOT Analysis

According to Gerry Johnson, Kevan Scholes and Richard Whittington in their book

Exploring Corporate Strategy (Page 09), Strategy is the direction and scope of an

organization over the long term, which achieves advantage in a changing

environment through its configuration of resources and competencies with the

aim of fulfilling stakeholders expectations.

Hence strategy is the process of matching organizational strengths (capabilities) to

opportunities in the environment while considering the influence of potential

weaknesses and threats from the environment to weaken the outcomes. Hence SWOT

analysis was introduced by Albert Humphrey to identify Strengths, Weaknesses,

Opportunities and Threats related to a specific organization.

2.1.1 Strengths

Any resource or a competency which can either be unique or rare can be

considered as strength of an organization. Any resource or competency

which is inimitable, non-substitutable and valuable can be considered as

unique or rare. Another way of identifying strengths is to check the quality

and adoptability of resources or competencies to achieve goals compared

to the competitors.

2.1.2 Weaknesses

Any resource or competency which is either common or hindering the

achievement of organizational goals can be considered as a weakness. On

the other hand any resource or competency which is lacking in our

organization and essential to the success is also a weakness if our

competitors have mastered it.

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2.1.3 Opportunities

Any external environmental change or development which can be used to

achieve the organizational objectives will be an opportunity.

2.1.4 Treats

Any external environmental change or development which can be a

hindering factor or a barricade to achieve organizational objectives can be

considered as a treat.

2.2Critical success factors in becoming a giant in fashion industry

There are numerous articles written on fashion industry and its criteria for success.

Various cases brought various aspects in to light as criteria for success. Few of such

factors are have few middle men, buying in larger volumes, having a broad, in-depth

knowledge of design, fashion and textile, buying the right product from the right

market, being cost conscious in every stage, having efficient distribution, be

responsive and organic to response quickly. Anyhow by and large the critical success

factors can be identified and categorized as follows.

a. How strong the marketing mix compared to the competitors

b. How strong the brand

c. How strong and appropriate the management, mission, money, human resource

and machines

d. Appropriateness or the suitability of business development towards the strategy

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3.0 Analysis

3.1 SWOT Analysis for the period before acquisition

3.1.1 Strengths

3.1.1.1 Strong Brand name

It is evident in the case that the brand name of New Directions

was known for its presence in the fashion market from age fifteen

to twenty five.

3.1.1.2 Positive reputation from the market

They are known for an organization consists with ambitious,

design oriented and motivated employees lead by a charismatic

leader.

3.1.1.3 Skilled and Motivated workforce

Work force was young and highly motivated with above industry

level remuneration packages and freedom to achieve above

industry level individual and organizational achievements.

3.1.1.4 Strong visionary leadership

They had a leader who was strong willed and visionary to bind the

organization to one unit and guide towards success.

3.1.1.5 Timely business development practice

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Continuous and a rapid growth over a decade show that they were

able to match the product life cycles precisely to the market

changes.

3.1.1.6 Growth supporting, responsive Management structure

According to the case it is very common and regular practice to

capitalize upon short term opportunities successfully, which they

cant do unless they are highly responsive to market changes.

3.1.2 Weaknesses

3.1.2.1 No evidence of second level leadership

There was no enough evidence to prove that they had solid second

level leadership, otherwise the replacement may have been an

internal candidate who knows the business well than an outsider.

3.1.2.2 Management and leadership practices were bound to a person,

not to the structure

Any characteristic or specialty showed by the organization was not

due to the effectiveness and efficiency of the organization as a

whole or a system but due to the personnel capability of a singular

person, Thomas Oakley.

3.1.3 Opportunities

3.1.3.1 Demographic shift of age distribution

According to the case trend analysis of the age distribution of the

society, the relative percentage of older population in the society

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grows rapidly helped by 12% population growth in people who are

aged between 30 to 40 years.

3.1.3.2 Diversifying opportunities geographically and

demographically

There was an opportunity to diversify the business in to other age

groups as well as new geographical locations.

3.1.3.3 Shift in customer preference towards quality

Customers of highly fashionable clothes are becoming more

sensitive to the quality and have the opportunity of deriving the

advantage of being the first to reach that market requirement.

3.1.3.4 Development of overseas markets

There was a potential opportunity of expanding business to the

European market, especially to Spain.

3.1.4 Treats

3.1.4.1 Emergence of strong competition

There was evidence of the development of strong competition in

every aspect of the business which was not there in the early

stages.

3.1.4.2 Possibility of becoming the follower in to retail shopping

concept

Some competitors already initiated the movement towards newest

concepts like retail shopping to attract new customers, which was

not considered by the New Directions.

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3.2 SWOT Analysis for the period after the acquisition

3.2.1 Strengths

3.2.1.1 Backing of a group of companies which has a solid financial

strength

The group of companies acquired the New Directions is financially

a strong company which can tolerate and fund the company to run

even under a loss for few years until it start earning substantial

profits without shutting it down.

3.2.1.2 Owns a well placed and established retail shops chain

Owns 400 odd well established retail chain to strengthen the

distribution channels.

3.2.2 Weaknesses

3.2.2.1 Lack of visionary, appropriate and strong leadership

The leadership which replaced Thomas Oakley do not display the

same sense of urgency and understanding of the content and the

context of the fashion industry.

3.2.2.2 Lack of expertise in technical aspects of fashion industry and

managing fashion market

Financial expertise of the new leader tends to take decisions giving

more priority to financial aspects than what demands by the

fashion industry.

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3.2.2.3 Non availability of skilled, experienced and well motivated

workforce

Most of the experienced and well trained employees left the

organization after the replacement and to make the things worst

joint the competitors of New Directions.

3.2.2.4 Lack of responsiveness

Rigid and time consuming policies and constraints from the

groups senior management board on approval procedures of new

strategies reduce the responsive speed considerably.

3.2.2.5 Weaken Brand image

According to the newest market research, the brand image of the

company among its core market segments were weaken

significantly to drop from strong loyalty to confusing.

3.2.3 Opportunities

The analysis of the given case indicates that the opportunities presented at

this stage are quite the same as two years before. But with the economic

recession the strength of those opportunities may have reduce slightly and

immerged new opportunities like the emergence of cost conscious markets

and / or cost and quality conscious markets.

3.2.4 Treats

3.2.4.1 No longer the market leader, hence huge competition from the

competitors

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The position of market leader, the company once enjoyed was no

longer there. It allowed the other companies to capitalize on it and

develop strong market attractiveness which is quite difficult to

penetrate thus pose a huge threat.

3.2.4.2 Economic recession

Fashion clothes being a luxury item, economic recession place a

major role in diminishing the demand.

3.2.4.3 Competitors armed with left employees whom knows the

company inside out

Most important market and inside intelligence of the company was

passed out to its competitors through the employees whom have

left this organization to join the competitors.

4.0 Conclusion

Analysis of the case clearly shows that the time has changed the context the company has to

perform in a significant manner. Sources of once much strength become the key source of

both weaknesses and treats.

Major shift in Socio-cultural, technological and economical environments are creating the

major opportunities where the main opportunity lies with the production of highly

innovative, high quality but low cost garments for diverse groups in quick sessions.

5.0Recommendations for Marketing Plan

It is evident that diversity of requirements in different age groups with respect to fashion do

not allows the company to develop same type of products to the whole market. But all groups

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prefer high quality, low cost and quickly renewing range of garments. Hence developing

different market mixes for different sub groups may be the better way forward.

Expectations of pleasant shopping experience leads the company to think about refurbishing

the appearance of the retail shops to have a new looking and attractive supply chain.

6.0 References

a. Exploring Corporate Strategy, Gerry Johnson, Kevan Scholes and Richard Whittington,

7th Edition

b. http://en.wikipedia.org/wiki/SWOT_analysis; viewed on 10 / 02 / 2010 at 10pm

c. www.exampleessays.com/essay_search/key_success_factors.html; viewed on 10 / 02 /

2010 at 10pm

d. www.fibtex.lodz.pl/63_07_13.pdf; viewed on 10 / 02 / 2010 at 10pm

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Swot analaysis