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Strategic Positioning
Furness LT3, 12/02/2015, 12:00-14:00
Group 4
Chloe Bradley, Dan Ellis, Cheng Shi, Amanda Vainio, Minjae Kim, Daniyar Meimankhan, Jingjing Zhao
Overview
Porter’s Generic Strategies
Customer Segments
PUV analysis of Customer Segments
Bowman’s Strategy Clock
Bowman’s Strategy Clock
Identify how H&M and Zara are positioned
High Ability of Design High Quality of Product Changing product lines frequently The latest fashions (trendier) “Zara,
implement the strategy to suggest rational price while they reflect most recent fashion trend rather than opting the strategy to gain competitive superiority by low price simply” (Mikyung, 2010)
Low Price “These brands like H&M implements low price strategy in the way that they develops diverse products with the capability of swift planning and design by themselves, and manufactures the products by outsourcing in third countries, by which they induce cost reduction, and supply products in low price without mediating marginal prof it utilizing well established
distribution networks of themselves” (Mikyung,
2010)
Low cost of sale
E-commercial market
Zara H&M
Porter’s Generic Strategies
Industry wide
Single Segment
Source of Competitive Advantage
Low Cost Differentiation
Co
mp
eti
tive S
cop
e COST LEADERSHIP
H&MBROAD DIFFERENTIATION
Zara
COST FOCUS
• Asian market?DIFFERENTIATION FOCUS
• No focus
IDENTIFY HOW THIS IS LIKELY TO CHANGE IN THE FUTURE
Expected future changes in the position
Zara• Attempting to adopt local preference(e.g. America and China)
• Expend E-commercial market
• Adjust the price differences
• Improving the differentiation strategy/avoiding the risk of copycat
• More advertising
H&M• Improving the quality of product
• More cross-brand selling
• Invest Asian market by generating revenue from EU
• Expand its market no only by opening new stores but also by
upgrading their online shop
Customer segmentation
Both Zara and H&M cover two segments within their clothing ranges;
Women, 18-40, middle income
Men, 18-40, middle income
Customer segmentation
Zara’s products are more expensive on average and targeted to more mature customers
H&M’s key segment area is women who want variety of apparels at affordable price
Both have to change their marketing strategies in different market areas due to cultural and taste differences
PUV Analysis
New Trends
Fit
Quality
Store experience
Appearance
Fit
Quality
Low Price
Celebrity endorsements –David Beckham underwear
Zara H&M
Key Strategic issues
Entering Asia due to sales stalling in Spain (25% of revenue) (The Economist, 2012)
Struggling in America due to trendy cuts and slim fits (The Economist, 2012)
Higher price in Asia (likely due to transportation costs) “Zara’s clothes are far pricier than local rivals’, where as in Europe they are relatively cheap’’
Fast fashion is less of an option due to harsh economic situation in Europe
Singled out for poor quality by Chinese government. (The Economist, 2012)
Traditional countries- differing styles and marketing techniques
Entering Asia. “H&M expects to have opened 275 more Asian stores by the end of this year” (The Economist, 2013)
Send clothing made in Asia, back to base in Spain, and then back to Asia (cost inefficient) (The Economist, 2011)
Traditional countries- differing styles and marketing techniques
Only 3% of revenue in Asia (The Economist, 2011)
Asia is prone to Long Term Orientation (different management styles may slow down decision making and fashion regeneration)
Zara H&M
Competitive Strategic Options
STRATEGIC OPTIONS NEEDS/RISKS
Focused differentiation Perceived added value to a particular segment, warranting price premium
Success depends on:
existence of less price sensitive buyers – prepared to pay more for added PUV
and whether the added PUV can be easily imitated
Low price Maintaining value and cutting price
Risk of price war and low margins; need to be cost leader
Hybrid Adding value and cutting price.
Low cost base and reinvestment in low price and differentiation.
Successful when volumes can be achieved and when cost reductions can be found on dimensions not valued by customers
Competitive Strategic Options
STRATEGIC OPTIONS NEEDS/RISKS
Differentiation
(a) without price premium
(b) with price premium
Perceived added value by user, yielding market share benefits
Perceive added value sufficient to bear price premium
INTERNAL
EXTERNALStrengths Weaknesses
Opportunities
SO STRATEGIC OPTIONS WO STRATEGIC OPTIONS
Threats
ST STRATEGIC OPTIONS WT STRATEGIC OPTIONS
Use famous Asian
people to promote
branding (like in
Europe) for example;
Zhou Xun
Move the rest of
production for Asian
market to Asia to reduce
cost
Use the fact that Chinese
people hold foreign
brands in high esteem to
deter away from local
brands such as IT
By moving all Asian
production to Asia, this
would allow H&M to
speed up fashion
delivery times
TOWS Matrix H&M
TOWS Matrix Zara
Emphasise Western roots to
gain advantage over local
competitors
Expand online shopping
opportunities
Sizes and styles match
those of Chinese women’s
(Fleming, 2012)
Always have the
trendiest clothes
available because of
high turnover, this may
eliminate some
competition
Justify the higher price
by presenting their
clothes as luxurious
items
Or
Lower the price
Could move some of the
production to Asia to
lower the cost of products
Strategic Options & Recommendations
Using appropriate strategic analyses & TOWS:
Identify key strategic issue(s)
Identify strategic options
Forward recommendations (using TOWS Analysis)
Rank your recommendations
Strategy Evaluation: Lecture 9
ACCEPTIBILITY
Does the proposed strategy address the key opportunities and constraints the organisation faces?
SUITABILITY
Does the proposed strategy meet the expectations of stakeholders?
FEASIBILITY
Would the proposed strategy work in
practice?
Do the strategic options you have defined address the key strategic issues & industry
success factors? (Johnson et al., 2007)
SUITABILITY
Critical Reflection
Hard to arrange meetings for such a big group
Difficulties finding information on H&M, most the of the information is from comparison reports
Very marketing based, hard to find sufficient background information
References
• Anon., 2007. H&M Annual Report 2007. [Online] Available at: http://about.hm.com/content/dam/hm/about/documents/en/Annual%20Report/Annual_Report_2007_en.pdf
• Anon., 2012. Global stretch; Fashion for the masses. The Economist, p. 76.• Anon., 2013. China Average Yearly Wages in Manufacturing. [Online]
Available at: http://www.tradingeconomics.com/china/wages-in-manufacturing• Mikyung, K., 2010. Marketing strategy and the current status of Global SPA Brands. Journal of Fashion
Business, 14(3), pp. 35-51.• The Economist, 2011. Global stretch; Fashion for the masses. The Economist.• The Economist, 2012. Fashion forward; Inditex. The Economist, 402(8777), pp. 63-64.• The Economist, 2013. Asia/world: Fast fashion firms look for global domination. The Economist.