Competitive Advantage

Warby Parker, a new concept in eyewear was founded by four friends in business school who felt that the best businesses comes from creating solutions to accommodate real needs. Their objective was to create boutique quality, classically crafted eyewear at a much lower price compared to other retailers. Their glasses starts at $95 with prescription and for every pair of glasses sold, a pair is distributed to someone in need. By cutting down the middleman and selling directly through customers without the use of physical storefronts, they were able to offer high-end quality glasses at reasonable prices.

Warby Parker’s strategic approach is focused on governance and strategy as well as always making sure that they are in the right path to achieving their mission and vision that they had set out when they first started the business. The owners believe that it is important for young companies to create systems up front to ensure good governance of the business. They also feel that new entrepreneurs need to have a strong believe in the business that they are conducting and have their business grounded in strong data. Warby Park believes that they owe their success from careful discussions and friendly debates about every single contingency while pushing one another in a positive way. This leadership approach belongs to the Symbolic and human resource framework approach of leadership where leaders in the organization are empowering, supportive, inspiring and visionary.

Warby Parker’s currently targets the young and hip with its vintage inspired eye wear designs. In the next ten years they are hoping to widen their target demographic to cater to everyone who wears eyeglasses. Their products are mostly sold exclusively online or by appointment at their corporate headquarter in New York City. Customers are able to try on glasses online by utilizing facial recognition software on their website or have five frames sent to their home to try on with no obligation to purchase.

I believe as a young a company starting out that this is the most strategic market for this company. The approach to selling eyewear exclusively or majorly online is a fairly new concept and therefore the young and hip will be the best target market for such a concept. The young and hip demographic is also one that has the ability to drive change as well as the ability to generate acceptance of new concepts within the masses outside of their own demographic.

Warby Parkers strategy approach has helped them to create a sustained competitive advantage through the investment of corporate social responsibility to enhance customer value. Warby Parker business model shows how a for-profit organization should behave by being an engine for social change and positive impact as well as thinking about all the stakeholders that are involved in the process. Warby Parker partnership with VisionSpring to deliver glasses to somebody in need for every pair sold has created a sustained competitive advantage for the company as they are getting their customers involved in making a positive impact with them. Customers who purchase from Warby Parker will not only hip and cool with their new glasses but will also feel satisfied that their purchase is creating a positive social impact.

What kind of a platform business is the online personals market? What kind of network effects (direct, cross-sided, positive, and negative) does it leverage? How structurally attractive is it? The online personals market is a specific niche of social networking, and it is a sole-sponsor, proprietary platform business.

In terms of network effects, it could be seen as a one-sided network user can instigate an interaction, or can have someone else instigate an interaction with them, but is better described as a two-sided market with men on one side, and women on the other (with the exception of homosexual sites which are clearly one-sided markets). Within this, there are both direct and cross-sided network effects. For direct, there are small positive effects (as a man, you want enough men on your side to attract women on the other side), but primarily negative effects (the more people on your side, the more competition you will have found a match).

For cross-sided, there are positive effects (the more of the opposite sex there are, the more likely you will find a match), and negative effects (if there are too many people on the other side, it may be hard to search through the noise to find an actual match not to mention that there can be liars, frauds, and other undesirable people on the other side of the network). To examine the attractiveness of the industry structure, a five forces analysis will offer us insight.

First, we can consider buyers’ power. In this case buyers (prospective daters) do have some power in that there are a plethora of other options online (from Match to free sites), as well as any number of venues in the real world. However, since they are individual consumers, they do not have scale power and must accept prices. Further, there is an overall opinion that meeting the right person is very hard, and thus there is a significant willingness to pay for a quality service.

Second, looking at the competitiveness of rivals, it is clear that there is a significant amount of competition (though concentrated within a few main players). Match is trying to copy eHarmony with Chemistry, and they have been increasing spend on advertising. Yahoo! also boasts a strong installed base that they can funnel into their Personals site. In addition, free sites keep everyone in check in terms of the amount they can charge. Nevertheless, the main players have demonstrated price discipline, as prices have remained steady or even risen (in the case of the competition).

Third, the threat of new entrants is low/moderate. There are hundreds of niche sites starting up every year, but for the most part, the built-in network effects of the three main players, as well as multi-homing costs, have kept the three leaders consistent over the years, and each year the vast majority of new sites fail. The biggest threat would be for a behemoth like Facebook to activate its users on a proprietary site, but so far this has not materialized for a number of reasons.

Fourth, the threat of substitutes is always present. In addition to the numerous ways that people can meet partners in the real world, there are also real world match services that pre-date the internet (as well as the threat of new technology and innovations changing everything). However, for the time being, online personal sites are clearly the most efficient and affordable option for the masses. And lastly, there is really no bargaining power of suppliers. eHarmony controls all of its inputs.

Thus, the sum of these parts leads to a pretty attractive industry. It is not a winner-take-all market (multi-homing costs, while present, are not overwhelming, and the case mentions that many people are members of multiple dating sites), but the significantly strong network effects and stability of a few main players lead this to be a profitable industry ( primarily for the incumbent leaders). What is eHarmony’s competitive advantage? What differentiates it from its competitors? How does the company create value?

What is the value proposition to the customer? What kind of customer benefits the most? Can we calculate the company’s competitive advantage by relying on the equation of willingness to pay minus cost, as discussed in the Google versus Microsoft session? Is a competitive advantage sustainable? The main competitive advantages of eHarmony are in its ability to offer high-quality customers (which is really the “product” they are offering), and more accurate matches with superior ensuing relationships.

Just as Google’s research and continual adjustments give it an advantage in offering more relevant searches, eHarmony’s research department has created a match algorithm that greatly outperforms the results of its competitors (and arguably the traditional methods of meeting, as well). Further, their long initial setup process serves to self-select only the most serious of consumers, which leads to an increased WTP of everyone who makes it through (and additionally, this has led to more women than men signing up an extraordinary feat since women have been the hardest customers to acquire in the online dating world).

The company differs from its competitors in its guided matchmaking (though Match has recently tried to copy this). Rather than allowing free range for the users to search through the database of potential mates, eHarmony first weeds out the non-serious and non-desirable applicants with its extensive questionnaire, and then uses its patented algorithm to find the best potential match. It takes this even further by then scrutinizing each potential match with additional questions before an actual interaction can begin, and this has ensured a much more accurate product than its competitors.

The company creates value by doing a lot of the work for its clients. While the initial time investment (45 minutes) may be longer than the traditional model, it then provides the service of searching through the millions of potential matches. This not only proves to be a more accurate way to find dates but also saves a great deal of time (where most online daters spend 7 times as much time searching for a partner as they do interact). And for men, who are usually fighting over a scarcity of women, they benefit from the majority percentage of women who have become the core of eHarmony’s paid customers.

Thus the value proposition for the customer is better matches (and better quality people) with a much smaller time commitment. The customers who benefit most from this are people who are serious about finding a person for a long-term relationship (rather than those who are just browsing or hoping to have flings with as many people as possible). With eHarmony’s superior product, we can calculate that their competitive advantage?

In this case, eHarmony’s average price (of the four options) is $37. 45 versus $34. 14 for Chemistry, demonstrating the increased WTP of their customers. Further, their advertising strategy (avoiding costly broadcast networks in favor of more cost-effective national cable buys) has helped to keep costs down significantly in comparison to its rivals. By building up network effects and switching costs (including termination fees and the amount of time/information invested in their platform), this can be a sustainable advantage.

But as with all social media, creating insurmountable switching costs is never really possible, and there is always a risk of new competitors or a game-changing technological shift. And the uber-popularity of sites like Facebook pose a significant threat, as they could integrate a sophisticated dating platform into their current offering, and instantly have hundreds of millions of potential customers at their fingertips. How much of a threat is Chemistry to eHarmony? How could Chemistry break eHarmony’s network effects (direct and cross-sided)?

As with Google’s search versus Bing, eHarmony is in a very advantaged and enviable position versus Match’s Chemistry offering. The eHarmony product is clearly superior, with the eHarmony benefitting from years of learning and tweaking their algorithm (again, similar to Google’s position). Further, their ability to point to the number of successful relationships they have continues to grow, and thus feeds the virtuous circle by attracting new customers. That said, Chemistry cannot be taken lightly.

Match comes in with the deep pockets of IAC, and the ability to match any investment that eHarmony makes—and we have seen this recently with their increased marketing spend. As a latecomer, Chemistry comes in with the benefit of being able to ride on eHarmony’s coattails, learning from their success and mistakes and copying their offering. Further, most of what eHarmony offers while sophisticated, is not inimitable. In terms of ways that eHarmony can break eHarmony’s network effects, they can certainly subsidize some of the switching costs (leave eHarmony and your first month or two are free).

Since women are the hardest customers to attract (and wherever they go, the men will follow), they could selectively subsidize the women—e. g. – women pay half price, and once they have built up a vast network of women, they would be able to charge a premium for the male customers. They could also beef up their offering so that they not only cover meeting people, but weddings, having children, and other stages of life that would enable them to extend their customers’ lifetimes (as eHarmony has considered).

Another potential idea would be to create a network of niche sites all under the Chemistry banner where there would be sub-sites focused on a number of specific niches (based on lifestyle, religion, sexuality, etc. ) and allow people to join the main site, plus one or two of the niche sub-sites for free. However, most importantly Chemistry needs to dramatically improve its matching competency. As a latecomer facing a dominant incumbent, it has to offer better results than eHarmony if it’s going to break the network effects and challenge for the top position in the market.

That is not an easy task to accomplish, and it will cost a lot in research (to improve their matching skills), and then marketing (to let potential customers know about their improved product). Due to resource constraints (and need for strategic focus), eHarmony can only pursue one of the options: how would you go about ranking their relative merit? Once you have done that, choose your top-ranked option and evaluate it. To evaluate the four options on the table for eHarmony, we need to examine their merits on a number of key dimensions.

First, how does the strategy fit in terms of the company’s current competencies and competitive advantage? Second, how does it serve to bolster network effects and strengthen the relationship with the current core customers? Third, how well does it address the competitive threat? And fourth, how does it position the company for future growth opportunities? Upon consideration of these dimensions, it is clear to me that the best option is to grow the new business of handling life transitions. This is the most comprehensive strategy in terms of addressing the various needs of the business.

If this were a winner-take-all market, then defending the niche by rapidly increasing the number of paying members would be the correct strategy, but since multi-homing costs aren’t overwhelming, we’ve established that this is not a winner-take-all market. Expanding to medium-term relationships does offer the upside of immediate growth opportunities, but more importantly, it unravels the competitive advantage and value proposition of having top-quality, like-minded individuals who are willing to pay a premium for a better chance to meet a life partner (in some ways it is almost a different business).

Lastly, geographic expansion seems perfectly poised for disaster. While it would be the best opportunity for growth in both the near- and long-term, it also goes against the competitive advantage of offering the best matches based on detailed knowledge and understanding of their consumers. To do it properly, they would not be able to transplant the knowledge they’ve gained in the US, but would need to start again with new research in each country they wanted to expand into which is not an efficiently scalable model. Thus that leaves us with expanding into the new business of handling life transitions.

This offers the opportunity to have balanced growth—the lifetime of the customer grows from the “finding a partner stage” to a potential for many years or even life. It also allows the company to capitalize on and build on the goodwill that they earn from their customers when they provide a positive (and life-changing) match and diversify its revenue stream from purely subscription-based into a mix of subscription and advertising. Further, the ability to keep customers longer can help to bolster the network effects as the network becomes larger and offers more value.

It also increases switching costs the more that one invests in building up a personal eHarmony ecosystem. In doing so, it addresses the competitive threat by beating the competition to further innovate and lock in the customer base. And lastly, it builds on the current competencies and competitive advantages by leveraging the advanced research skills that are a large part of eHarmony’s success, with the collective R and knowledge serving as a barrier to entry for potential new entrants.

In order to successfully execute this strategy, there will be a need for additional resources. However, this will not be overwhelming and can all happen with internal investment. They will only need to build out and expand eHarmony Labs to continue the expanded focus from forming relationships to the ensuing events that occur in each relationship. With the project already underway and experienced research scientists already on the payroll, eHarmony is in a much better position to act on this than its competitors.

There will some additional marketing and sales investment needed to attract new customers who are already involved in committed relationships, but the majority of its growth will be organic in that they will be able to keep their “matching services” customers for much longer, and greatly reduce the churn rate. In terms of the competitive threat, I believe this will be enough to stay ahead of Match / Chemistry, and Yahoo! (as well as other new entrants). The name of the game is bolstering network effects, switching costs, and multi-homing costs to carve out a significant and stable market share, and this strategy accomplishes all three.

With more offerings, eHarmony should be able to capture more users (as well as keeping them longer) which will continue to feed its network effects. Additionally, having all of these services under the eHarmony banner will increase the amount of time and information supplied by the customers, and thus increase both switching and multi-homing costs. As a response, eHarmony can expect the others to copy, though eHarmony is far ahead and better positioned in this field, so this is not an immediate threat. Additionally, they may find pricing pressure as the competition resorts to more desperate measures of cutting price (since they will not be able to compete on the product). In regards to this, they need to be firm in their pricing, knowing that they have the superior product, and continue to build up switching costs to keep their customers captive for the long term. With a superior product and strong network effects in place, eHarmony can expect a profitable life in the near future.

The Memory Industry

Analysis of the Five Forces

The Five Forces is very important in the industry analysis. These forces determine the industry’s profit potential as well as its growth and development in terms of industry’s operations. These factors include the following: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of new products, and rivalry among competing firms.

In the case of Samsung electronics, their main problem is their tough competition with Chinese competitors in the memory industry

However, in order to examine the status of Samsung electronics in all aspects, the analysis of the five forces should be employed.

Threat of New Entrants

Given the fact that Chinese Competitors do not really have difficulty in financing their manufacturing semiconductor-products because they are being supported by outside bodies, Samsung Group has the reason to be worried about their market status in semiconductor industry. Because of a large pool of capital, Chinese competitors have the guts to compete in the market even if they are not really earning high profits. Thus they can sell their products in cheaper prices than other firms just to have greater share of market.

Also, the fact that other semiconductor firms and companies are also helping them in penetrating the market by having strategic alliances, joint ventures, and partnerships, these could really make Chinese competitors beat Samsung Electronics. They are really learning from those firms and companies about new technologies, superior designs, and competitive strategies in order to cope up with the change in the environment (i.e. customers’ demand).

All in all, it can be inferred based on the given situations that there is a high threat of new entrant in the semiconductor industry, particularly in the memory industry which Samsung should really consider in order to maintain their market status.

Bargaining Power of Suppliers

With regards to the bargaining power of suppliers by Samsung Electronics, it can be said that Samsung has still the power over the suppliers since its brand has already gained high-value in the market hence suppliers would not easily cut its supply with Samsung.

Yet, suppliers have the tendency to supply most of its products to other companies or firms if ever these firms would buy those products in relatively higher price than Samsung does. As mentioned in the case, China can really afford to sacrifice profit-earnings just to penetrate the market industry. Thus, it is not impossible that they would really try to buy most of the suppliers’ products.

By examining this force, Samsung has a high rate with regards to the bargaining power of suppliers given the fat that it has already established a great relationship with its suppliers. Nonetheless, if Samsung would really want to increase its relationship with its suppliers or secure sufficient supplies, it may consider increasing its orders from its suppliers or much better if it would do backward integration by acquiring its suppliers.

Bargaining Power of Buyers

As cited above, Samsung has already made its brand acquire high value. This means that buyers would really consider buying its products than other brands. This would also mean that they do not have to make much promotion hence there is a less cost in their marketing strategy.

Taking the point of view of a buyer, one would literally be hesitant to shift from one brand to another especially when his old brand satisfies him (i.e. good quality of products) even if the new brand is relatively cheaper than the old one. Samsung has been very good in producing high quality products. And its buyers do not really have complaints against its products’ prices. Thus, Samsung has still a high competitive edge against its competitors in terms of its buyers.

Threat of Product Substitute

There is a high probability that customers would try to consider purchasing products that have cheaper or lower prices. Nevertheless, if their purchased products do not really satisfy their taste (i.e. poor quality), then it is most likely that they would return to their old brands that indeed satisfy them even they are in higher price as compared to other brands.

Samsung still holds a high competitive advantage over its competitors, primarily China, since their products are high quality, and, at the same time, its brand is known, popular, and well-tested by its customers. Samsung has already started manufacturing DRAM-products. There would only be a high threat if its competitors would be able to maintain high-quality products while marketing them in cheaper prices.

Rivalry among Competing Firms

Obviously, there is a high intensity of competition among Samsung and Chinese competitors. The fact that Chairman Lee is really going through a serious planning of new strategies for the Samsung Electronics, entails that there is really a tough rivalry against Chinese Competitors.

Samsung Strategy

• Based on the given facts and information in the case, low cost of production is the principal advantage of Samsung Electronics against Chinese competitors. As presented in exhibit 6, in 2003, Samsung was enable to sell its manufactured more popular and more advanced memory chip which is 256Mbit for as low as $4.65 while the products of those new generation companies which also produced memory chips cost as high as $19.04. It is to be noted that such memory chips were even outdated (16Mbit chips). In addition, it even produced the 512Mbit chip and sold at low price.

On the other hand, Samsung has also the competitive advantage against its competitors in terms of differentiation wherein it also prioritizes its customers demand and is able to adjust with its customers’ requests. In exhibits 10a-10c, it shows how Samsung was able to innovate and advance the design of their memory products according to the demands of its customers.

As mentioned in the case, the low production cost of Samsung has really a great advantage to them because they can sell their products at low prices and at the same time earning reasonable profits. Yet, in 1994, Lee discovered the degeneration of the quality of their products. And so he ordered the burning of those low-quality products in front of the employees. He stressed that more than anything else, it is important that the company maintains the production of high quality products. Thus, in 1995 to 2003, Samsung became the one of the most reliable companies for their high-quality products. Popular cellular phone companies such as Sony Erickson and Nokia asked Samsung to be their supplier of flash memory chips. Read also under what circumstances should a company’s management team give serious consideration

In short, Samsung was sable to use cost-leadership strategy as well as differentiation strategy. Nevertheless, it prioritizes the manufacturing of high quality products and the production of products based on its customers’ requests.

• Tracing from their history, Samsung has only one Research and Development site which is also the main R&D facility of Samsung Electronics. This really lessened their cost of facility constructions while other competitors have high cost of constructions because their facilities are dispersed across the globe. Samsung has able to save an average of 12% on the construction of its facilities, as shown in exhibits 7a-7e.

In addition, the set-up of residence for research engineers and production engineers are also cost-strategized. They are settled in a place wherein they can still talk and discuss about their work. Yet, Samsung ensured that their workforce in their R&D site is properly treated.

Regarding technology, and design, Samsung was able to adapt and learn the technology for producing and manufacturing memory chips with higher and advanced conditions as compared with other competitors. Hence they did not have to make transactions with other firms for technology. They had also purchased the designs directly from Micron which adds to the high quality of their products. Due to superior Research and Development that Samsung has, it was able to design and develop DRAM products such as laptops and game players that could maintain the demand for DRAM.

Samsung had produced numerous product architectures on every production line. This greatly made the increase of production. Moreover, Samsung had really an efficient and effective workforce which really contributed to the growth of its profits and earnings.

Samsung invested on its employees. It hired and trained people who can easily and effectively function to the nature of the semiconductor industry. It supported and financed the studies of some of its employees who have great potentials. Samsung produced employees with MBA and Ph. D. degrees. Furthermore, Samsung attracted and welcomed different people from different regions of the world by applying a strategy called Samsung’s Global Strategy Group. Samsung did not promote singular culture within the workplace. As long as a person can effectively contribute to the development and growth of the company, the management is open to recruit and employ foreign employees and even place then on top managerial positions.

In 2003, Samsung attracted more skilled employees because of its high salary as well as several benefits and rewards that motivate employees. The average salary was $44, 000. Moreover, Samsung employed Performance-Based Compensation System in which the company gives incentives to the employees who show high technical skills. This really motivates the employees in doing their best on their works and tasks. Project Incentives were given to the project teams who performed excellently ($1 M per project team). Also, it promotes Productivity incentives which give 300% increase of annual base salary. Lastly, it has Profit Sharing Program which rewards 50% increase of annual base salary. Thus, Samsung was able to develop and maintain an effective workforce.

Dealing with the Threats of Chinese Entrants

• The strengths of the Chinese competitors include its high source of capital which enables them to pursue market share even if they do not really obtain high profits. Also, they were able to acquire technology and design and other manufacturing techniques by making strategic alliances, joint ventures, and partnership with other firms and companies. This gives them more knowledge on operating a semiconductor industry. Another advantage of Chinese competitors is that they have the support of their government which motivates them greatly and gives them more confidence in making business transactions across the globe. Lastly, in connection with the first competitive advantage, Chinese competitors attract high number of customers since their products’ prices are relatively low than other firms.
• The weaknesses of Chinese competitor include its limited scope of marketing. It is given in the case that United Sates and Taiwanese governments disallow the entry of Chinese products in their countries thus China loses potential buyers. Another disadvantage is that although Chinese had gained the technologies of other companies still such is insufficient to support their operation with the semiconductor industry. Lastly, by the fact that they are only new to the semiconductor industry, it is quite difficult for them to attract customers without selling their products in lower prices. Plus the fact that other brands have already gained high value, they are actually starting from scratch. Hence if they fail to acquire sufficient technologies in improving their products into high-quality products then their market career would not last that long.
• Chinese competitors are seeking for more advanced technology which can make their production lower in cost but manufactures high-quality products. This is their major goal in order to attract and maintain a larger pool of buyers. Only when they established a solid reputation in the semiconductor industry that they can really dominate the market.
• The most feasible options or alternatives for Samsung Electronics include the consideration on increasing the production of Flash Disks memory since it poses a high demand in the market. Second, in maintaining the market sales of DRAM, Samsung can also increase the production of DRAM products so that it could create high demands for DRAM. The Flash memory market was expected to grow at a double-digit rate for at least another five years. That growth was expected to keep Flash prices quite high relative to DRAM prices. Third, Samsung can apply Differentiation Strategy since it has enough capital to support the improvement and advancement of the quality of products – that can really ensure large market sales. And since Samsung has the advantage over technology, it can easily adapt itself in creating more advanced and more innovative products which can attract more number of buyers.   By doing so, Chinese competitors will lost competitive size of buyers which could lead to their exit.

For Chairman Lee, here are some recommendations in order to counter the threat of the Chinese competitors:

1. Samsung should maintain the production of high-quality products,
2. it should increase its promotion across the globe,
3. improve its relationship with its suppliers,
4. improve its technology so that it can create more efficient cost of production,
5. encourage the creation of innovative products that suit their company strategy, and
6. attract, develop and motivate an effective workforce by hiring applicants who have high technical and conceptual skills, by maintaining a performance-based compensation system, and by maintaining a good relationship with his labor force.

References

1. Siegel, Jordan and James Jinho Chang. Samsung Electronics. President and Fellows of Harvard College, 2005.

Voodoos is still improving on its network coverage with an investment of R 120 000 000 and a year technological advancement and an additional R 2. Mil for its skills development. In turn Voodoos can retain its existing customers and at the same time attract more customers that require the best network coverage like LET that was developed by Voodoos before its competitors giving it much more competitive advantage. Market development Extending existing products to a new market. Voodoos aims at reaching new customer segments, wants to increase sales by capturing new market area.

Voodoos is currently the giant mobile providers in South Africa at the moment they are a growing mobile industry which is owned by Britain Avoidance, they deciding to attract ore customers outside Brittany and South Africa, would need a market strategy from the marketing research, and the initial investment it needs to invest this also including the politics of different countries in Africa. Product development Developing new products for existing markets or new markets, making some modifications in the existing product to give value to the customers for their purchase.

Voodoos decision to invest in its quality of its network coverage has gave its brand image a boost in the market. Voodoos was the first mobile network in south Africa to cover G,G, and its latest G network which is LET from its competitors proving that its customers will get value for their money. It continues investment in its multimillion rand technological development keeps it ahead of its competitors. Diversification The purpose of diversification is to allow the company to enter new lines of business that are different from current operations. There are four types of diversification: vertical, horizontal, concentric and conglomerate.

Executive Summary

FJ Benjamin is a Singapore based fashion and lifestyle company. The company distributes major clothing brands and accessories, and is one of the leading fashion distributors in Singapore. Their success is derived from their ability to secure distribution rights from major brands. FJ Benjamin introduced it very own house label, Raoul, in 2002. Raoul was created to increase the company’s portfolio as well as to diversify away from distribution risk. Raoul contributes a large percentage of FJ Benjamin? s annual revenue.

With intensive competition in the fashion industry, Raoul must have it own identity in order to differentiate itself from the competitor. Analyses have been undertaken to determine what necessary strategies to be implemented to enhance the brand image so as to increase profits. Strategies are recommended by taking advantage of Raoul? s strengths and building on their weaknesses in order to take advantage of the available opportunities in the market and to defend it from threats. Studies of the internal and external environment had been conducted to be able to work with Raoul? core competencies to gain a competitive advantage over its competitors.

This report concludes that Raoul needs to make adjustments on its marketing strategies, and maintain some of its current strategies, in order to be more competitive in the fashion market. Hence, it is proposed that Raoul focus on a single-market strategy and focus on the local market as well as to create strong market commitment, to be able to serve customer better.  Introduce a new ecofriendly product line based on product improvement strategy, and offer product customization for current and new products, as well as enhance current product and services. Maintain current product pricing, and implement price skimming strategy on new product line. Maintain its efficient and cost effective distribution strategy. Changes are to be made on its promotional efforts in order to gain max exposure possible. Benefits of the proposed recommendations would allow Raoul to achieve the proposed objectives which includes increasing in sales revenue, repurchase rate, and introducing a new product line within the next three years.

It is there for proposed that the recommended strategies be implemented at Raoul to be able to reap in revenues as well as gaining a competitive edge in the fashion industry for a highly sustainable business.

Over the last 20 years, Singapore has taken a great leap in its fashion industry. Singapore is recognised as the second largest fashion apparel business and sourcing hub in Asia-Pacific after Hong Kong. Special fashion events such as Singapore Fashion Week and Singapore Fashion Festival are some of the impressive achievements made in the fashion industry. These events played a critical role in portraying Singapore as a major fashion hub in the whole of Asia Pacific region. This also gives both local and international designers a platform to showcase their talents to the fashion industry in this region.

Today, a total of 4,500 wholesalers, retailers, and manufacturers generate some $7 billion in operating receipts and $1. 2 billion in value added to Singapore economy. As Asian consumers become more affluent, they increasingly drive global demand. With Singapore? s strategic location, cultural affinity and connectivity with the region made Singapore an ideal place to serve as a test-bed to gather and analyse consumer insights, to develop products for the Asian market. This also made Singapore an optimum location for many companies to set a base in, managing and controlling their regional and global operations.

Corporate Background

F J Benjamin was founded in 1959 by Frank Benjamin, who came from a well-to-do family who have been in the fashion industry before World War 2. The company was initially FJ Benjamin and Sons but due to the nature of the business, where it positioned itself as a holding firm with subsidiaries, it was later renamed to FJ Benjamin Holdings Ltd in 1993 (Wang 2009). The company started of dealing with photographic equipment, and everyday novelties such as paper products as well as pots and pans.

However, in the 1960s, the company started to modernise its operations by entering into partnerships with many fashion labels, by importing and retailing designer jeans. The success motivated Benjamin to focus his business on the fashion industry. The company brought in brand names such as Lanvin, Gucci and Fendi in the early 1970s, and was a big player of the fashion industry in Singapore (Wang 2009). FJ Benjamin was listed on the SGX in 1996, before the Asian financial crisis, posting a net loss of over $40m in their first financial year; it was mainly due to high operating expenses and fixed cost.

The profitability of the company continued into the early 2000s, where they lost major brand names such as Gucci, Lanvin and Fendi. The company learnt to diversify away from distributorship risk by developing its own brand, thus the creation of Raoul.

Company Present Operation& Business Core

Today, FJ Benjamin has operations in eight cities worldwide, including Singapore, Sydney Australia, Jakarta Indonesia, Hong Kong, Vietnam, Kuala Lumpur Malaysia, Taiwan and Bangkok Thailand carrying over 20 brands and has over 180 retail stores in the Asia Pacific region.

FJ Benjamin focuses on 3 core business; fashion retailing and distribution, timepiece distribution, and licensing and design: (FJ Holdings Limited 2009). Fashion retailing and distribution core – Acquired rights to distribute major fashion labels across the South East Asia and the Pacific region ? Exclusive distributers of timepiece – Acquired rights to distribute timepieces in the South East Asia and the Pacific region? Licensing and Design – Has a design division to design for Guess Kids and its own house label, Raoul However, they also have their fair share of failures, one example was with the Manchester United brand and Devil? Bar that were unprofitable, which the company had a joint venture with CEO of St James Power Station, Dennis Foo. The company dropped the Manchester United brand name and closed all its retail stores and cafes. Current Developments FJ Benjamin is benefiting from Singapore? s healthy economic growth. With Singapore transforming into a tourism hub, and the opening of Marina Bay Sands (MBS), the company had took advantage of the influx of visitors and has opened four new retail stores at the MBS, including brands names like Guess, Banana Republic, La Senza and Raoul; totalling the number of stores in Singapore to 32.

The management was optimistic with its new stores as it was able to secure attractive rental rates at MBS and would be able to benefit from the ever growing number of tourist. The company also stand to avoid other competition with the opening of new shopping malls in Orchard Road and other shopping districts in Singapore (FJ Holdings Limited 2009). Future Developments FJ Benjamin had secure exclusive distributorship for high end brands such as Goyard, Givenchy and Dewitt, building the company? s brand portfolio to more than 20 reputable brand. The company success is evidenced by its ability to attain distributorship of French luxury giant Moet Hennessey Louis Vuitton’ s (LVMH) Celine and Givenchy; this is only the beginning of their collaboration with LVMH (FJ Holdings Limited 2009).

Company’s Milestones & Achievements

FJ Benjamin have made its mark in Singapore and have been contributing much to the fashion industry and providing various lifestyle products. Corporate Vision FJ Benjamin’s vision is to be a global company

• Dedicated to delivering their promise to their customers by fulfilling their lifestyle aspirations
• Committed to talent development Delivering sustainable and superior returns to their shareholders Corporate Mission FJ Benjamin’s mission is strive to lead in everything they do
• Implementing brand strategies with deep market penetration
• Delivering superior customer service with long-term customer loyalty
• Empowering employees to deliver value processes for phenomenal growth
• Pursuing best-in-class economics with strong margins Corporate Social Responsibility (CSR) FJ Benjamin has been committed to various charities in Singapore since the company was founded in 1959. The company believes that charitable giving is a necessary element of CSR.

The company’ s Charitable Giving Committee is made key employee of the company. The committee meets on a quarterly basis to review the company? s charitable initiatives and approves all charitable giving. The company sets aside up to 1% of its net profit for a fiscal year, in forms of monetary or in-kind gifts. FJ Benjamin’ s charitable objectives includes, supporting good causes relating to health, education, arts and/or the community in Singapore. The company also encourages and supports projects and activities that helps strengthen in which their employees work and live in. FJ Benjamin? Contributions to the society. Company Structure FJ Benjamin Holding employs a divisional structure that is divided according to geographical region and further subdivided into countries and product. In the South East Asian region, the company branch out to various countries such as Singapore, Malaysia, Thailand and Indonesia. Each country would then be fragment base on products, e. g. Timepieces, Investment and Concepts (FJ Holdings Limited 2009).

As of financial year end 2009, Douglas Benjamin is the Chief Executive Officer for FJ Benjamin Singapore. Mr. Douglas oversees the operation in Singapore, directs the international expansion of Raoul house label and heads the Raoul design team as a Creative Director. Douglas Benjamin has strong experience in brand management and development of retail distribution thereby allowing the company to expand quickly into various regions within eight years and having a diverse range of products (Star Creation 2010). The senior management board in Singapore includes Samuel Benjamin, Quah Kim Tong and Matthew Chan (FJ Holdings Limited 2009).

Samuel Benjamin is the Group Director of Timepiece and the Senior Vice-President of FJ Benjamin Fashion U. S. Inc. He joined the company Fashion division in 1991 and has more than 19 years of experience in the retail industry (FJ Holdings Limited 2009). Quah Kim Tong is the Director for Wholesale. He administers the logistic/ distribution center in Singapore, plus the distribution business of Sheridan and Guess Accessories. He started his career as a product manager in 1982 and steadily moved up the corporate ladder. Matthew Chan is the Divisional CEO of Fashion and Corporate Services.

He oversees the day-to-day running of the fashion retail in Singapore, as well as the managing the back end support services in the company. Mr. Chan joined the company back in 2006, providing strong organizational and financial knowledge from his past experience as Director for Head of Channel Acquisitions and Head of Acceptance with American Express. Key stakeholders FJ Benjamin key stakeholders are directly affected by the companys performance, which includes:

• Customers who purchase products from various SBU
• Employees – Management staff to salespeople
• Licensors who sell the distribution rights to FJ Benjamin
• Retail malls that leases out spaces for company s retail division
• Investors who own FJ Benjamin’ s corporate share
• Creditors – Banks Shareholders

Government agencies which may require the company to abide/ conform to accounting standards, taxation regulations and employees? CPF ? Trade unions which may certain framework that the company needs to work within; such as working hours and minimum wage 4 Financial Performance Financial Year Profits after tax and shares 2005 4. 26 million 2006 10. 17million 2007 1. 47millon 2008 14. 8 million 2009 (2. 66 million) Table 1 Financial performance of the past 5 years The growth from financial year 2005 to 2006 was mainly attributed by attainting the distribution rights for Gap and Banana Republic in Singapore and in Malaysia. During the same year, other SBUs, namely Raoul and Timepieces started its expansion into the Middle East and Thailand (FJ Benjamin Limited 2006). The significant growth from 2006 to 2007 was further encouraged by the optimistic economies and mainly by the conversion of warrants to share (FJ Benjamin Limited 2007).

The decline in profit for 2007 to 2008 was caused by the subprime crisis in America, the increasing inflation rate that reduced consumer spending power and the high volatility in the financial market. It was also noted that, FJ Benjamin exited from the Thailand market due to the political instability and shut down two timepiece shop in Hong Kong due to poor results (Leong 2010). On the other hand, the company reassured shareholders through their diversified portfolio of brands and vigilant cost discipline; the company business is still viable (FJ Benjamin Limited 2008).

As of financial year end 2009, FJ Benjamin had made a net loss of $2,661,000 compared to a net profit of $14,804,000 in 2008. The loss in 2009 was caused by the financial crisis. FJ Benjamin minimizes their financial risk by ensuring that there is sufficient cash reserves to meet any unforeseen circumstances and is committed to a low gearing ratio.

Although losses were made in 2009, the company has since been making steady progress in their quarterly financial results as show in Figure 1. 2009 Earnings per share (cents) 2008 -0. 47 2. 61 Table 5 Financial results – Earning/share Earnings per share serve as an indicator for the company? s profitability. Since in 2009 losses were made, it is accepted that the earning per share would decrease significantly as compared to 2008. Figure 1 Analysis of Financial Results Despites the losses made in 2009 due to the financial crisis, FJ Benjamin has since been making steady progression.

For first quarter 2010, a net profit of $459,000 was made, followed by the second quarter with a net profit of $1. 72 million and latest financial results for third quarter 2010 showed a net profit of $3 million. The company is financially sound; based on the breakdown of ratio, financial reports and third party recommendation for investors to invest in the company. FJ Benjamin has recently secured license for Goyard, a French luxury retail brand and has intention to introduce three other new brands in 2011 (Seow 2010). Currently the company has plans to expand into China and widen its existing market in US and Europe (Leong 2010). . 2 Strategic Business Unit Fashion FJ Benjamin? s fashion retailing includes prestigious line such as Guess, Celine, La Senza, Banana Republic, GAP and Raoul. It takes up two-third of its profit turnover through fashion retailing (Wang 2009). Timepieces F J Benjamin held exclusively rights to distribute timepiece brands such as Bell & Ross, GirardPerregauz, Guess, Chronotech, Victorinox Swiss Army, Marc Ecko, Rado and Nautica (FJ Benjamin Holdings Ltd 2009). Timepiece contributes about 30% or one-third of FJ Benjamin? s profit turnover through retailing (Wang 2009). Creative & Licensing

FJ Benjamin creative and licensing division has conceptualized and developed house brand Raoul and has licence to create original designs and manufactures merchandise, such as Guess Kids.

Dog Growth Cash Cow Relative Market Share Figure 2 BCG Matrix This shows that Raoul is considered a cash cow of FJ Benjamin? s business with high relative market share and average industry growth rate. Raoul is currently positioned under a maturity stage where growth rate and market share may decline into dog in the next few years. Therefore, new marketing strategies are needed to maintain the Raoul? s position by altering the product, price, distribution and promotional strategies to increase growth and maintain its current market share. 8 3. 0 SBU Raoul Situation Analysis

Raoul is the brainchild of creative director Douglas and Odile Benjamin (Raoul 2008). Currently Raoul is one of the most profiled fashion brands coming out of Asia. It is being known as a stylish, innovative fashion brand offering high quality accessible luxury products to their consumers. Raouls is designed, manufactured, and retailed under a corporate vertical marketing system with is solely owned by FJ Benjamin (FJ Holdings Limited 2009).

SBU Culture

FJ Benjamin believes that Raoul can help them move up a level from being a brand distributor to a brand owner.

Frank Benjamin claims that in fashion today, there is no shortage of brands and there would be market that Raoul can cater to (Sim 2009). Raoul has created a new history for Singapore by introducing luxury fashion-forward corporate wear at an affordable price to business executives in Singapore. Raoul has become a renowned homegrown label that is now known to many business executives that demands style in corporate wear. Raoul has such a strong influence in Singapore that local Prime Minister Lee Hsien Loong wore a pink Raoul tailor shirt during his National Day Rally Speech.

Therefore, with a strong culture and adequate support from the parent company and local government, Raoul culture can become part of the Singapore heritage brand (Jalal. 2010).

SBU Resources

Tangibles Resources Physical Physical refers to the equipments, furniture, retail outlet which can use to grow or sustain the business. With 24 Raoul flagship stores in Southeast Asia and Dubai, the company is still looking to expand its geographical footprint. Currently, FJ Benjamin occupies the second floor of the “The Alpha” at the Science Park. It is filled with show boutiques and workrooms.

It is used by the company’s visual merchandising team for training purposes and doubles as an impressive space for press samples (Simon 2009). This allows Raouls staffs to provide quality service to the consumers by using boutiques to train, giving them a chance to experience in a real life scenario. The availability of showroom allows Raoul to customize its concept layout before executing on the actual shop front. 9 Technological With the help of FJ Benjamin? s support in terms of finance and experience, Raoul is able to fully utilize technology to help Raoul perform more effectively and efficiently.

Raoul also has its very own Customer Relationship Management (CRM) system. CRM system is effective in increasing spending per customer, by tracking the spending patterns of customers, increasing the efficiency of marketing communication strategies. In addition, the front-end point-ofsales system has been upgraded to integrate with the CRM to improve in-store service quality (FJ Benjamin 2008). Sales Force Automation (SFA) is combined with CRM system to record stages of a sales process. It helps to manage customers? contact for future follow ups through contact management system.

SFA would increase productivity and allow salespeople to utilize their time efficiently and effectively. SFA can help increase customer satisfaction which leads to increased customer loyalty and in return, high profit margins. Technology used on Supply Chain Management has improved the efficiency of the back-end support. Having implemented a new auto replenishment system, Raoul has been able to make inventory distribution more efficient. This help to save time and labour cost to keep track on all the movement of stocks and can provide a more accurate prediction of the delivery time (FJ Benjamin 2008).

Financial FJ Benjamin achieved three consecutive quarters of earnings recovery in the first nine months of Financial Year Jun10. Earnings surged from a loss of $0. 1m for Financial Year Jun 2009 to a net profit of $5. 2m for Financial Year June 10 (Lee 2010). The outperformance in core earnings was driven by an improvement in gross profit margin, reflecting FJB? s strengthening brand portfolio and astute merchandising capability, as well as rising consumer demand (Lee 2010). In June 2010, the groups turnover from the fashion business was flat at $49. m, with the marginal increase in the Southeast Asia markets offset by the slide in the Australian market. Geographically, sales in Southeast Asia rose three per cent, with fashion up two per cent (Seow 2010). As economics begin to recover, consumers? confidence begin to rise so purchasing increases.

Organization

There are 9 directors on the board, consisting of Executive Chairman, Chief Executive Officer, Independent Director, Executive Director, Non- Executive Deputy Chairman and Non- Executive Directors.

In Singapore, there are 2 members on the senior management, consisting of the top management, such as Group Director and Wholesale Director FJ Benjamin adopt Traditional Organization Structure (Subhash and Haley 2009, 207), where different departments concentrate specifically in an area which they are an expert in it. Therefore, it helps Raoul to have a strong management team, which can grow Raoul to the next level and sustain a competitive edge.

Intangibles Resources Goodwill

As mentioned in section FJ Benjamin has been proactive in its CSR.

This helps project a positive image of FJ Benjamin to the public. Therefore, in the future they can do a combine sponsorship with Raoul to increase brand exposure and awareness. Goodwill are intangible assets, this includes the company being in a dominant market position by building a positive brand image, create a positive reputation and increase consumer confidence of the company (Reference for Business : Encyclopedia of Business, 2nd ed n. d. ). Under the context of Raoul, they continuously explore different strategies where they aim to ecome a global renowned luxury brand that is recognised both regionally and internationally. As shown in appendices [see Appendix 6], Raoul had participate in numerous fashion events where they are able to showcase its products with other major luxury brands in the world. This would create a perception that Raoul as an international luxury brand. In Singapore, FJ Benjamin also creates a positive image by supporting and grooming Asian talents to become professional designers. Raoul had also won numerous prestigious awards, portraying that Raoul is a prestigious brand to Singaporeans.

Innovation FJ Benjamins expertise and capabilities in original design manufacturing allows the company to create its own house-brand, Raoul. FJ Benjamin is committed to deliver innovative and differentiated products to the market. Raoul aims to create and deliver new value-added products and invest in research in order to respond to the ever changing needs of consumers. 11 Knowledge/Skills FJ Benjamin has rich experience in marketing and distributing luxury products. This makes FJ Benjamin an industry leader for building brands and management.

This can help Raoul has a clear directions and a strong strategy to grow the brand. FJ Benjamin place customer service top on their priority list, therefore, every year they will send their staffs for upgrading or training to increase their service quality. After years of hard work, in 2009 FJ Benjamin won “Best Service Provider in the Industry” award. In retail, FJ Benjamin has a rich experience in marketing and advertising campaign to expand its market share. They also have the capital to heavily advertise Raoul on traditional print such as fashion magazines, newspapers, posters and billboards (Wong and Lim 2009).

Singapore has very little political issues compared to neighbouring countries such as Indonesia, Malaysia, Taiwan and Thailand. Singapore is rank 1st in Southeast Asia as the least corrupted country and 4th worldwide. Low degree of social unrest, political sovereignty, conflicts and low government interventions, makes Singapore a safe place for any business operation. As indicate in the World Banks Doing Business Report, Singapore is the world? s easiest place to do business in the year of 2009 and 2010 due the political stability of Singapore. Economic Singapore economic growth, interest rates, exchange rates and inflation rates, consumer purchasing power and the standard of living in Singapore are part and parcel of the economic environment. In May 2010, Singapore topped the list of worlds most competitive nation in the World Competitiveness Yearbook. Singapore dethroned USA as from its 16 year reign (Lim 2010). Gross Domestic Product (GDP) Singapore? s GDP expanded strongly by 15. 5% in the 1st quarter of 2010, it exceeded the projected 13. 1% estimates. On a quarterly basis the Singapore economy grew 38. 6 %, 6. 5% more than the governments estimates (Howells 2010).

According to World Bank, Singapore GDP is worth 182 billion dollars or 0. 29% of the world economy (Singapore GDP Growth Rate 2010). Singapore has a highly developed and successful freemarket economy and it soared above 30% in the first quarter of 2010, the manufacturing sector growth was doubled as compare to previous quarter of the year recovering from a 2. 8% drop in fourth quarter of 2009. The growth of the manufacturing sector accounts for up to one quarter of the country? s economy. This would cause the projected forecast of the GDP to increase to up to 9% in 2010 (Adam 2010). Inflation Rates As of 2010, Singapore? inflation rate is 1. 6% (Singapore Inflation Rate 2010). Inflation is an increase of overall price level in the country. This would increase the cost of living as products/services would now cost more than previous years. It is interrelated to the Consumer Price Index, which will be further discussed in the next section. 17 Consumer Price Index The current CPI of Singapore is 1. 6%, it is the measures of inflation rate, where measures consumer prices that the price changes in a fixed amount of consumer goods and services that are commonly purchased over time (Singapore Department of Statistics 2010).

CPI is influenced by lifestyle, income level, household composition and consumer preference (Singapore Department of Statistics 2010) this also determines the quality of life of Singaporeans. This relates to the increasing trend in Singaporeans having higher spending power, where cost of consumer products are increasing; resulting in the increase in inflation rate. With the increasing cost of living and quality of life, Singaporeans have more disposable cash to spend on better quality products which would aid the sales growth of Raoul. Socio-Cultural Social Attitudes

Singaporean has a „fear of losing? attitude, which is frequently used to describe the social attitude of Singaporeans. This refers to people who desire to always want to be first, the best and never losing out. This could be a positive attitude that reflects the high standards of Singaporeans; however it could lead graceless image to the society. It also strongly reflects on the Singaporean work ethics and competitiveness. ‘Face’ This is an important value amongst Singaporeans. It refers to saving and maintaining „face?. Singaporeans typically are not expressive in their ehaviour and emotions and do not criticize others openly in public; to avoid losing face. Losing face will lead to damage to one? s reputation, credibility and authority in the social and working environment. Technological Factor Technological Infrastructure Broadband infrastructure in Singapore allows for better global networking for businesses that enables better customer support. With the support of such technology, Supply Chain Management (SCM), Customer Relationship Management (CRM), Sales Force Automation (SFA) and Point of Sales (POS) system are made easier.

Thus, allowing Raoul to operate more effectively and efficiently in Singapore. Furthermore, the government introduced the next generation high-speed fibre optic broadband (Next Gen NBN 2010). 18 Legal Factors Singapore Legal System Singapore? s legal system is English common law and has a strong regulation in place protecting consumer and company. Raoul, being a domestic brand would receive stronger support from the government. Singapore also has an additional Islamic law to cater to the Muslim community. Since, Singapore? economy is highly dependent on the revenue from import and export, it is important to implement proper regulations to protect the safety of Singapore. Also in terms of employment policies, firms need to consider the working hours and wages rate of the employees. Environment Factor Environmentalism There is an increasing trend green consumer in the global segment and since Singapore being one of the countries that is actively involved; environmentalism becomes an opportunity for Raoul to introduce environmentally friendly products as recommended in products.

Targeting environmentally conscious consumers, where they are more willing to pay for greener products. Green Movement Singapore is highly involved in going green and government bodies that are responsible include National Environmental Agency (NEA) and Environmental Challenge Organisation (ECO). The NEA signed the Singapore Packaging Agreement with 5 industry associations, 19 individual companies, 2 non-governmental organizations, the Waste Management ; Recycling Association of Singapore and 4 public waste collectors on 5 June 2007 that aims to reduce packaging waste over a 5year period.

It encourages the flexibility for the industries to adopt cost-effective solutions to reduce waste. ECO launched the „Million Acts of Green Singapore Campaign to spur a national green movement by getting Singaporeans to think and act green in their day-to-day lives. Million Acts of Green Singapore is targeted at both Singaporeans and businesses with the aim of getting them to register their green acts and sustainability ideas on the millionactsofgreen. sg website (ECO Singapore 2010).

Internal Analysis – SWOT Matrix Analysis

Thus, Raoul will be able to capture the market and better serve the customers, at the same time experiencing higher profits while keeping the cost down while prices are kept high. Market-Geography Strategy Currently, Raoul has existing plans for expanding its business geographically. However, this report recommends that Raoul should return to the most traditional form of local-market strategy. As a home grown brand by a local company, F J Benjamin, it can gain competitive advantage of serving a narrow geographic area within Singapore.

This can emphasis more interpersonal service with local consumers that can induce beliefs into consumers to motivate them in buying and supporting local produce. Market Commitment Strategy It is recommended that Raoul should create strong commitment with the potential consumers, where Raoul needs to create a firm foundation of operations within the market and amplifying its own economies of scales in promotion, distribution, manufacturing and promotion. This would in turn create high barrier to entry and competitors would have difficulties in challenging Raoul? s existing system.

Creation of strong commitment can also be enhance with development or new products, improving product quality and increasing budget for sales force personnel. Raoul can work its product line with a more environmental approach. Such as usage of organic cotton in manufacturing of the apparels and recyclable shopping bags, to promote the eco-friendly line, to the consumers that are committed in saving the environment. Allocating resources to train retail associates can create a wholesome retail experience for the patrons of the boutique and would increase product and brand loyalty. 22 5. 2 Product Strategies

New Product Strategy

Improvement ; Positioning The introduction of eco-friendly clothing aims to attract new consumers from the targeted segment. In Singapore context, organic cotton wear is still a relatively new concept. Currently there are not many fashion retailers providing formal wear made of eco-friendly materials. By being the first to introduce, Raoul could gain to attract a greater awareness for its own brand name and products. The eco-friendly clothing would help Raoul in attracting a larger number of potential consumers from the identified target segment. Quality +ve Price -ve + ve -ve

Figure 4 New Product Positioning Green: Eco-range positioning It is recommended that Raoul maintain its product positioning for the current clothing line. However, with the launch of eco-range, quality of product should be improved so as to differentiate the product from the competitors. Price of eco-range should increase so as to in-line with the new product pricing strategy (Price Skimming). 23 Value-marketing strategy: Product and Service Differentiation To differentiate its customer service from other fashion retailers, Raoul could offer complementary beverages for shoppers as well as offering image consultation service.

The image consultant would make recommendations to consumer based on their needs, based on their body contour, purpose of occasion and nature of job scope. The consultation service is an optional product aimed at building the brand image and is subjected to charges. Product-design strategy: Product Customization Raoul should adopt standardise customisation to gain the extra competitive edge and to maximise benefits. Product customisation would aid Raoul in showcasing itself as a quality provider thereby differentiating the brand and increasing consumers? commitment to the brand.

Standardise products refer to the clothing offered such as shirt, pants and blouse. Customisations could be done on various levels: At a basic level, clothing could be tailored in terms of length to meet basic expectations of consumers. At an intermediary level clothing could be tailored to meet specific needs of consumers, such as broadness of the lapel, thickness of shoulder padding in jackets, allow requests for particular colour and particular material for clothing like cashmere Lycra as well as embroidery of customers initials on clothing.

Price Strategies

With reference to the PESTEL analysis, Singapore has a stable economy; does not face drastic changes in the environment. It is recommended that company should maintain the current pricing strategy for current products and use price skimming strategy for the new eco-friendly clothing. Maintaining Current Pricing Strategy It would allow Raoul to maintaining its position in the marketplace and enhance public image. The benefit of maintaining price is appropriate when Raoul cannot anticipate the reaction of customers and competitors? price change. Furthermore, with this strategy it can further enhance the Raoul? public image New Product Pricing It is recommended that due to the uncertainty of consumers? demand and competitors? responds to the new eco-friendly range, that Raoul should use price skimming strategy to gain maximum revenue prior to competitors? respond with similar products.

It not only serves customers who are less price sensitive, while there are demands for eco-friendly clothing in the early stage of the Product lifecycle, but also recovers the high cost of R;D used to develop eco-friendly clothing, and high promotional cost incurred to education consumers on the need to go green.

New products designs shaped in Raoul? design centre at the “Alpha” as mentioned in section 5. 2. 1, and new designs 25 feed into Raoul? s manufacturing centres and is distributed directly to its retail outlets. This saves time, cost and keeps inventories low.

Communication Strategies

Raoul needs to further improve their current strategies and introduce new strategies to increase their market share and consumer base. Advertising A good advertising is able to stimulate interests and could lead to sales. It is able to influence customers? erception of Raoul and is able to reach out to more audience at a lower cost. Traditional advertising (Magazine) The use of traditional advertising such as magazines will be an effective medium for Raoul. Raoul could advertise in both male and female and luxury magazines such like HerWorld, Elle, Cleo, August Man, Prestige and L? Officiel, as these are the magazines that have readers that are similar to that of Raoul; targeted consumers get the latest information on fashion trends. Outdoor advertising and informative advertising

In order for Raoul to introduce eco-friendly clothing, they have to do informative advertisements to generate environmental awareness among the public. Raoul can portray a positive brand image by introducing an eco-friendly range of clothing, and informing the public of the need to protect the environment through sustainable means. For instance, they are could place advertisements along high end shopping districts like Orchard Road, Marina Bay as well as the Central Business District areas to be able to attract attention of potential targeted consumers.

However, special attention has to be made as not to place posters at cluttered environment as people may not notice the posters. Placing huge posters of bright green and earthy colours would draw consumers? attention, followed by a few informative words that explain the need for using organic materials which are biodegradable and pesticide free, such as organic cotton, to reduce environmental impacts. 26 Personal Selling strategy In retail line, personal touch and customer service is essential, and would differentiate Raoul from the rest of its competitors.

It is recommended those salespeople are trained to be able to interact well with customers, as a good salesperson would be able to close higher sales, and customers are usually loyal to the person who provides the service, and may not be loyal to the brand. Therefore, more resources should be allocated in training of salespeople. Building Relationship through Database Marketing and CRM Building up a relationship with consumers with aim to retain consumers and increase their level of satisfaction. Raoul can implement customer loyalty programs so as to have a long-term valued relationship.

This could be done by constantly sending update to their consumer through email or direct mail whenever there is any new launch or sales. Alternatively, Raoul could send birthday cards and offering birthday discounts to consumers on their birthday month. This will create a sense of belonging for the customer and further encourage return sales. Collaboration with designers In order to attract eco-conscious consumers, Raoul can collaborate with renowned designers to come up with a new series and designs made from organic materials.

By taking a proactive approach in saving the environment, it projects a positive image of the brand. In addition, they are also able to educate the public on the need to save the environment. Product Packaging To be line with the eco-friendly range and promotion, purchase of any clothing in stores will be packaged with recycled paper wraps and paper bags. In addition, with purchase of eco-friendly apparels, customers will be issued a specially designed recycled cloth bag with a green theme. Those special eco-bags should be able to attract potential buyers? ttention as well as raise awareness of the need to go green. 27 6. 0 Implementation Program An implementation table has been drawn up for the recommended strategies.

Outlet sales figure – close outlets that are less profitable due to customer traffic Measuring repurchase rate – if repurchase rate is low, $500,000 consider using market haversting strategy Product Reviewing current product to come Nov 10 – Jan 11 up with improvements to restore product to health 1. New Product Positioning 2. Value-Marketing – Product ; Service Differentiation Training and development of staff Work closely with customer to review the progress of the product until completion that meets customer’s specification.

An Overview of the FMCG Industry in India

What are Fast Moving Consumer Goods (FMCG)?

Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year.

Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars. A subset of FMCGs are Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops.

These are replaced more frequently than other electronic products. White goods in FMCG refer to household electronic items such as Refrigerators, T. Vs, Music Systems, etc. In 2005, the Rs. 48,000-crore FMCG segment was one of the fast growing industries in India. According to the AC Nielsen India study, the industry grew 5. 3% in value between 2004 and 2005.

The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13. 1 billion. Well-established distribution networks, as well as intense competition between the organised and unorganised segments are the characteristics of this sector.

FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33. 4 billion in 2015 from US $ billion 11. 6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge.

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income. The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9).

These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands: Hindustan Unilever Ltd., ITC (Indian Tobacco Company), Nestle India, GCMMF (AMUL), Dabur India, Asian Paints (India), Cadbury India, Britannia Industries, Procter&Gamble Hygiene and Health Care, Marico Industries.

The companies mentioned above are the leaders in their respective sectors. The personal care category has the largest number of brands, i. e. , 21, inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are 11 HLL brands in the 21, aggregating Rs. 3,799 crore or 54% of the personal care category. Cigarettes account for 17% of the top 100 FMCG sales, and just below the personal care category. ITC alone accounts for 60% volume market share and 70% by value of all filter cigarettes in India. The foods category in FMCG is gaining popularity with a swing of launches by HLL, ITC, Godrej, and others.

This category has 18 major brands, aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, chapattis by HLL, ready to eat rice by HLL and pizzas by both GCMMF and Godrej Pillsbury. This category seems to have faster development than the stagnating personal care category. Amul, India’s largest foods company, has a good presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100 FMCG brands, dominates the biscuits category and has launched a series of products at various prices.

In the household care category (like mosquito repellents), Godrej and Reckitt are two players. Goodknight from Godrej, is worth above Rs 217 crore, followed by Reckitt’s Mortein at Rs 149 crore. In the shampoo category, HLL’s Clinic and Sunsilk make it to the top 100, although P;amp;G’s Head and Shoulders and Pantene are also trying hard to be positioned on top. Clinic is nearly double the size of Sunsilk. Dabur is among the top five FMCG companies in India and is a herbal specialist. With a turnover of Rs. 19 billion (approx. US$ 420 million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Asian Paints is enjoying a formidable presence in the Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific, Caribbean, Africa and Europe. Asian Paints is India’s largest paint company, with a turnover of Rs. 22. 6 billion (around USD 513 million). Forbes Global magazine, USA, ranked Asian Paints among the 200 Best Small Companies in the World Cadbury India is the market leader in the chocolate confectionery market with a 70% market share and is ranked number two in the total food drinks market.

Its popular brands include Cadbury’s Dairy Milk, 5 Star, Eclairs, and Gems. The Rs. 15. 6 billion (USD 380 Million) Marico is a leading Indian group in consumer products and services in the Global Beauty and Wellness space. Scope Of The Sector| | | The Indian FMCG sector with a market size of US$13. 1 billion is the fourth largest sector in the economy. A well-established distribution network, intense competition between the organized and unorganized segments characterize the sector. FMCG Sector is expected to grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5-year period.

It has been estimated that FMCG sector will rise from around Rs 56,500 crores in 2005 to Rs 92,100 crores in 2010. Hair care, household care, male grooming, female hygiene, and the chocolates and confectionery categories are estimated to be the fastest growing segments, says an HSBC report. Though the sector witnessed a slower growth in 2002-2004, it has been able to make a fine recovery since then. | | For example, Hindustan Levers Limited (HLL) has shown a healthy growth in the last quarter. An estimated double-digit growth over the next few years shows that the good times are likely to continue.

Growth Prospects

With the presence of 12. 2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth.

And if the companies are able to change the mindset of the consumers, i. e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. It is expected that the rural income will rise in 2007, boosting purchasing power in the countryside. However, the demand in urban areas would be the key growth driver over the long term. Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption.

At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas. Indian Competitiveness and Comparison with the World Markets

The following factors make India a competitive player in FMCG sector:

Availability of raw materials

Because of the diverse agro-climatic conditions in India, there is a large raw material base suitable for food processing industries. India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits &vegetables. India also produces caustic soda and soda ash, which are required for the production of soaps and detergents. The availability of these raw materials gives India the location advantage.

Labor cost comparison

Low cost labor gives India a competitive advantage. India’s labor cost is amongst the lowest in the world, after China and Indonesia. Low labor costs give the advantage of low cost of production. Many MNC’s have established their plants in India to outsource for domestic and export markets.

Presence across value chain

Indian companies have their presence across the value chain of FMCG sector, right from the supply of raw materials to packaged goods in the food-processing sector. This brings India a more cost competitive advantage. For example, Amul supplies milk as well as dairy products like cheese, butter, etc.

Strategic Intent

We intend to significantly accelerate profitable growth. To do this, we will:

• Focus on growing our core brands across categories, reaching out to new geographies, within and outside India, and improve operational efficiencies by leveraging technology
• Be the preferred company to meet the health and personal grooming needs of our target consumers with safe, efficacious, natural solutions by synthesizing our deep knowledge of ayurveda and herbs with modern science
• Provide our consumers with innovative products ithin easy reach
• Build a platform to enable Dabur to become a global ayurvedic leader
• Be a professionally managed employer of choice, attracting, developing and retaining quality personnel
• Be responsible citizens with a commitment to environmental protection
• Provide superior returns, relative to our peer group, to our shareholders

Dabur India Limited

Dabur India Limited is India’s leading FMCG company with interests in health care, personal care and foods. Dabur has a history of more than 100 years and the company has carved a niche for it self in the field of Ayurvedic medicines.

The products of Dabur are marketed in more than 50 countries worldwide. The company has 2 major strategic business units (SBU) – Consumer Care Division (CCD),  Consumer Health Division (CHD), and 3 Subsidiary Group companies – Dabur Foods, Dabur Nepal and Dabur International. Dabur International has 3 step down subsidiaries – Asian Consumer Care in Bangladesh, African Consumer Care in Nigeria and Dabur Egypt. The origin of Dabur can be traced back to 1884 when Dr. S. K. Burman started a health care products manufacturing facility in a small Calcutta pharmacy.

In 1896, as a result of growing popularity of Dabur products, Dr. Burman set up a manufacturing plant for mass production of formulations. In early 1900s, Dabur entered the specialized area of nature based Ayurvedic medicines. In 1919, Dabur established research laboratories to develop scientific processes and quality checks. In 1936, Dabur became a full-fledged company with the name Dabur India (Dr. S. K. Burman) Pvt Ltd. Dabur shifted its operations to Delhi in 1972. Dabur became a Public Limited Company in 1986 and Dabur India Limited came into existence after reverse merger with Vidogum Limited.

In 1992, Dabur entered into a joint venture with Agrolimen of Spain to manufacture and market confectionary items in India. In 1994, Dabur raised its first IPO. In 1998, day to day running of the company was handed over to professionals. In 2000, Dabur achieved a turnover of Rs 1000 crores. In 2005, Dabur acquired Balsara. Dabur crossed $ 2 billion market cap in 2006. Some of the well-known brands of Dabur are: Amla Chyawanprash, Hajmola, Lal Dantmanjan, Nature Care, Pudin Hara, Babool Toothpaste, Hingoli, Dabur Honey, Lemoneez, Meswak, Odonil, Real, RealActiv and Vatika.

Home Depot, Inc. is the world’s largest home improvement retailer with sales last fiscal year topping $74 billion (Figure 1). Home depot sells a wide inventory of products ranging from building materials and home improvement products to lawn and garden products. In addition it provides various home improvement services including bathroom and kitchen installation. Its main consumer base consists of do-it-yourself consumers- those homeowners who do their own home improvement projects, do-it-for-me consumers- those homeowners who hire others to do their home repairs, and professional contractors.

Home Depot operates on a large economic scale in a highly competitive home improvement industry and competes in areas of customer service, price, store location and appearance, quality, and availability and assortment of merchandise. Its major competitor Lowe’s operates on a similarly large economic scale and provides a highly similar range of products and services. Lowe’s had revenues of more than $50 billion the past fiscal year (Figure 2). Like Home Depot, Lowes is a highly recognizable brand.

Other competitors include home improvement stores such as Ace and smaller regional and local hardware stores which operate on maller economies of scale and provide a similar but smaller range of products and services. Additional competitors including electrical, plumbing, and building supply houses, lumber yards, specialty design stores, showrooms, discount stores, mail order firms, warehouse clubs, independent building supply stores, and installers of home improvement products compete with Home Depot in specific product or service areas. Supply houses can sell directly to consumers due to low capital requirements for entry into the industry and directly compete with Home Depot.

Additionally there is growing competition from online and multichannel retailers as consumers increasingly shop online for home improvement goods. Consumers have many choices in the competitive home improvement industry which drives down prices as firms try to compete for business. In turn, businesses have differentiated to set themselves apart. Figure 3 illustrates the various forces at play in the competitive home improvement industry. The home improvement industry, as gauged by revenues of its two biggest firms, has experienced recent rowth the past 2 fiscal years after more than 2 years of decreasing revenues (Figures 1, 2).

These years of decreasing revenues are tied to the economic recession and corresponding slump in the housing market. The home improvement industry is intimately tied to the housing and construction market as consumers and businesses who cannot buy or build houses generally do not buy home improvement goods. However, the upswing in the housing market in recent years, as the economy recovers, has seen a corresponding increase in the home improvement industry. As overall economic conditions recover, the unemployment rate drops, inancing become more readily available, and people have more disposable income, the home improvement industry should continue to recover and see growth.

However businesses must still adapt to an increasing consumer focus on environmentally responsible products as well the trend toward online shopping as new online merchants enter the industry if they hope to remain profitable in the future. Figure 4 illustrates the various environmental forces shaping the home improvement industry. Home Depot’s core capabilities include its focus on customer service, product authority for home mprovement, disciplined capital allocation, productivity, and efficiency, and interconnected retail (Figure 5). To develop its customer service, Home Depot invests ten million hours a year in training for its associates. Additionally, it recently acquired Red Beacon website which helps do-it-for-me customers find professionals to help them complete home improvement projects. This move enables them to deliver on consumer expectations by making it easier to get projects done, helps professional customers find jobs, and builds relationships with customers.

Its online feature MyInstall allows customers to schedule appointments and track projects online. Finally, its financing options for consumers, through third party creditors, contributed to 22% of sales in the last year. These customer service measures, though imitable, are important for Home Depot to compete in the area of customer service. In fact, according to analysts their revenues have been growing faster in recent years in comparison to Lowe’s due in part to a better customer service experience (CNBC). Home Depot strives to be the product authority for home improvement by pushing product innovation, ssortment, and value.

It has enhanced the customer experience by ensuring the availability of products and information. It stocks 30,000-40,000 products a year including name brand and value brand products. It offers the latest technology as well as proprietary and exclusive brands. Through its global sourcing program it is able obtain high-quality products directly from manufacturers around the world. Also its EcoOptions program was launched to account for an increasing consumer demand for environmentally responsible and cost saving products.

While these initiatives have helped home depot become the industry leader in home improvement, it still faces competition from Lowe’s in being able to sustain that competitive advantage. Home Depot’s disciplined capital allocation, productivity, and efficiency are meant to keep down costs and maximize profits to keep themselves marketable in a competitive industry. Home depot invests a portion of its revenues to build competitive advantages in information technology and supply chain efficiencies.

Improved inventory management systems and mechanization of rapid deployment centers have also ontributed to efficiencies and cost saving. This internal process of efficiency may be hard to imitate by other home improvement businesses and should help Home Depot sustain a competitive advantage. According to analysts, lower costs have been the reason for Home Depot gaining market shares at Lowe’s expense in recent years (CNBC). Home Depot has recognized the importance of interconnected retail as more consumers shop online. It has leveraged technology to provide a seamless shopping experience to improve the customer retail experience nd provide better access to information and products. To this end it has upgraded its online platform, provided support for mobile devices, built new call centers, and provided new buy online initiatives.

Having an online presence is fairly easy to imitate but Home Depot’s competitive strength lies in its inventory of product and information not many competitors can match. Home Depot’s focus on its core capabilities has helped it become the leader in home improvement retail. It is currently positioned as a cost leader, operating with a broad competitive scope within the industry and ith its source of competitive advantage coming from a cost leadership model. This strategy seems to be working with Home Depot posting increasing revenues for three consecutive years and taking market shares from Lowe’s- its major direct competitor (Forbes). In addition, demand for home improvement products expects to see a 2-3 percent growth in the next few years (Forbes). Thus, Home Depot is currently in a strong position within the industry.

However, in order to sustain this position Home Depot must seek to ifferentiate itself by continuing to develop its online presence and improving upon its inventory of products and expertise. Its online site should be a one-stop shop for home improvement, from conception to fruition, with all necessary supporting information, goods, and services. Whether in-store or on-line, the consumer should be provided all the materials, guidance, and labor they need to complete all their home improvement goals in one setting. This focus on consumer convenience will differentiate them from other stores, supply houses, and online vendors and provide a model for success moving forward.