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Case Analysis
Trent Halverson, Aaron Kinning, Erin Moller, Alyssa Nelson
Harrington Collection
+Internal Analysis
Overall Objective: To provide preeminent brands for women desiring elegant, high-end fashions.
Overall Strategy: Differentiation
+Internal Analysis
Target Market: Affluent, fashionable, college-educated, professional women ages 25-60. Each division focused more narrowly on a specific TM.
Positioning: Lifestyle branding strategy, wearing the label is a sign of status
+Product
Objective: To provide the highest quality clothing that offers a lifestyle of prestige and status
Strategy: Product Differentiation
Tactics: All 4 divisions include: Harrington Limited, Sopra, Christina Cole, and Vigor. No private label brands.
+Price
Objective: To increase market share and profit margins
Strategy: Skimming
Tactics: Offer premium prices to support status of brand. Harrington Limited: $500-$1,000 Sopra: $400-$800 Christina Cole: $300-$700 Vigor: $150-500
+Promotion
Objective: To provide convenience to retailers, and help them obtain and sell the brand
Strategy: Push
Tactics: Retail sales force well trained; Offer channel partners more support and incentives than most manufacturers; Offer retailers valuable inventory and sales advice.
+Channel
Objective: To provide convenience to both retailers and final consumers by offering the Harrington collection at only the best retailers or directly through e-commerce
Strategy: Dual channel strategy
Tactics: Company owned retail stores (20% sales); upscale department stores (60% sales) and specialty stores (40% sales); e-commerce
+Performance
Sales
$2,433,900,000 in retail sales
Total revenue: $1,344 million Manufacturing Group: $538 million Retail Group: $806 million
Total Profit before tax: $118 million
+Performance
Market Share: 2007 women’s apparel industry = $133 billion in
retail sales Harrington Collection held approximately 1.83%
share of total women’s apparel market in 2007
Trends (CAGR): Average Growth Rate in U.S. retail sales of women’s
apparel 2002-2007: 4.66% (ex 1, p 240)
+External Analysis
Political/Legal/Regulatory: Textile import quotas from China eliminated in 2004.
Economic: The economic downturn that began in the early 2000s significantly impacted the industry for U.S. women’s apparel. Consumers had become very price sensitive- half of all apparel purchases were sold “on sale.”
+External Analysis
Technological: E-commerce.
Social/Cultural: Women were buying more casual clothing. More dollars were being spent on technology products, home design, and leisure-activities. Fast changing fashion product life cycles—consumers’ tastes constantly changing.
+Competitive Analysis – Porter’s Five Forces
Macro (5 forces)
Threat of New Entrants: High- Due to the ease of outsourcing production, low barriers to entry
Bargaining Power of Buyers: Moderate- Manufacturers integrating forward with company-owned stores; but department store mergers gave more bargaining power to suppliers
+Porter’s Five Forces (cont.)
Bargaining Power of Suppliers: Moderate- willing and cheap labor overseas. More retail outlets integrating backwards (providing margins of about 10-20% higher).
Threat of Substitutes: High- easy to imitate designs at lower costs
Intensity of Rivalry: High- many brands competing for shelf space and market share. The industry was moderately concentrated.
+Competitive Analysis
Micro
Leading brands: Jones Apparel Group, Liz Claiborne due to their diverse portfolios Both outsource production of apparel overseas Both involved in design, marketing, wholesaling, and
retailing of women’s apparel Jones: 396 specialty retail stores
Brands include: Jones New York, Nine West, Anne Klein, Gloria Vanderbilt, Kasper, Bandolino, Evan-Picone, Energie, Enzo Angiolini
Claiborne: 338 retail stores around the globe (201 in US) Brands include: Liz Claiborne, Mexx, Juicy Couture,
Lucky Brand Jeans, Ellen Tracy
+Market Segments
Women’s apparel products could be divided into six general categories based on quality and price:
1) Haute couture
2) Designer
3) Bridge
4) Better
5) Moderate
6) Budget
+Market AnalysisDivision Product
Line Focus
Product Classification
Retail Price Range
Target Customer
Competition
Market Share
Harrington Limited
Designer collection
Designer $500-1000+
Sophisticated Elegance; women 35-60
Donna Karan, St. John
20%
Sopra Evening Wear, Dresses and suits
Bridge $400-800
Status Seeker; women 35-60
Diane von Furstenberg, Kay Unger New York
5%
Christina Cole
Career wear
Bridge $300-700
Office Chic; women 30-55
Tahari, Dana Buckman
8%
Vigor Career Wear
Better $150-500
Trend Setter; women 25-50
Theory, BCBG Max Azria
7%
+Market AnalysisChannel Retail Sales
3%
11%
59%
19%
8%
Percent of Women’s Apparel Retail Sales
OtherDiscount or Mass MerchandisersSpecialty StoresDepartment StoresWarehouse Clubs and Supercenters
+Case Brief
Problem: How should Harrington Collection put forth their new active wear line?
+Alternatives
• Option A: “Better” pricing with same channels
• Option B: “Moderate” pricing and expand channels
+Criteria
Maintain sophisticated, high-class status
Increase margins
Break even in first year
+What is a unit?
Since active wear is sold as separates, the ratio of hoodies to tee-shirts to pants was not equal.
Therefore one “unit” = ½ hoodie + 1.5 tee-shirts + 1 pant
+Evaluation of AlternativesOption A
“Better” Pricing, same channels
Break Even = 269,255 units ($25,579,186.45)
Profit Margin = 18%
Brand image = High quality, fashionable merchandise with status branding ($220/unit)
Assumptions Higher prices consistent with desired brand image Smaller Market Size
15,000,000 X .4 X .07= 420,000 units Less distribution outlets (less promotion costs)
+Evaluation of AlternativesOption B
“Moderate” Pricing, more channels
Break Even = 390,069 units ($31,205,504.04)
Profit Margin = 15%
Brand image = Prestigious brand image at risk with lower prices ($187/unit)
Assumptions Larger market size
15,000,000 units sold X .6 X .07= 630,000 units Higher fixed costs More competitive market Might not receive 7% market share
Option A Option BContributionWholesale price "Unit" 95.00$ ($220 Retail) 80.00$ ($187 Retail)Less total Variable cost per "unit" 46.57$ 46.57$ Contribution per "unit" 48.43$ 33.43$
Breakeven:Fixed annual costs 13,040,000.00$ 13,040,000.00$ ÷Contribution per "unit" 48.43$ 33.43$ Breakeven "Units" 269255 390069X Wholesale price per "unit" 95.00$ 80.00$ Total Breakeven Dollar Sales 25,579,186.45$ 31,205,504.04$
Profit Margin:
Revenue 39,900,000.00$ 50,400,000.00$ Less fixed annual costs 13,040,000.00$ 13,040,000.00$ Less total variable costs 19,765,200.00$ 29,647,800.00$ Profit before tax 7,094,800.00$ 7,712,200.00$ Profit margin before tax 18% 15%
+Recommendations
Overall Objective: To introduce a brand new active-wear line in the Vigor division to increase margins and break even in the first year
Overall Strategy: Differentiation
Target Market: Women 25 to 50 seeking fashionable and comfortable active-wear
+Product
Objective: To provide comfortable and fashionable active wear with superior styling, fabric, and fit to consumers
Strategy: Product Differentiation
Tactics: Hoodie, Tee-shirt, and Pants
+Price
Objective: To increase margins to 18% and portray high quality active-wear via prices
Strategy: Price Skimming
Tactics: Hoodie = $100 retail Tee-Shirt = $40 retail Pants = $80 retail
+Promotion
Objective: To increase awareness of the new product line with both retailers and final consumers
Strategy: Push
Tactics: Personal selling, fashion shows
+Channel
Objective: To introduce the new active-wear line in Vigor’s current retail outlets
Strategy: Direct and Indirect
Tactics: Department Stores, Specialty Stores, Company Owned Stores, E-commerce site
+Evaluation and Control
Product Perceptions: Measure: With each receipt of an active-wear purchase the
consumer will be asked to fill out a survey about the product. Six months later they will receive a follow-up survey of performance
Implement: Based on the results adjust accordingly for next product offering
Margins: Measure: Overall profit margins for the first year Implement: If margins are not at 18%, look to decrease
production costs and increase sales training. If margins are above, consider expansion of line into new colors and styles and increase promotional efforts
+Evaluation and Control
Awareness: Measure: Survey TM consumers about product knowledge Implement: If awareness is low, consider placing more
emphasis on promotions and personal selling. If awareness is high, continue promotional efforts and consider cutting back
Retail outlets: Measure: Measure sales in each outlet. Implement: When sales are high with a certain retailer,
consider expanding into similar stores and vice versa.
+THANK YOU