Bryan Kaetz | Winter 2018-19 RTL 4010: Retail Executive Decision Making

Dr. Laura Egeln

Contents

1. Team Cases1. Harrington Collection . . . . . . . . . . . . page 2 2. Classic Knitwear . . . . . . . . . . . . . . . page 15 3. The Fashion Channel . . . . . . . . . . . . page 26

2. Team Final Project1. Amaharo Burundi . . . . . . . . . . . . . . page 39

3. Individual Case – Final Exam1. Zara . . . . . . . . . . . . . . . . . . . . . . . . . page 57

4. Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . page 79

Case 1: Harrington Collection

Elena DeGeneste, Bryan Kaetz, Jessica Lovell, Frances Rebollo

RTL 4010: Executive Decision Making

13 December 2018

I. Situation Analysis

Harrington Collection was founded in 1960 by Ella and Steven Harrington. The company

started by designing and manufacturing formal dresses for specialty stores that were sold at a

high-end price and began to expand in 1970 to women’s work wear. These products were

extremely successful and the company continued to grow. In the mid-1980’s, Harrington sold

products in high-end department and specialty stores and had a line of company-owned stores.

During this time, Harrington acquired Vigor and Christina Cole. These divisions targeted

younger consumers looking for more fashion forward, lower-priced products. They took

advantage of the demand in the market for stylish work clothes. The target market was women

age 35-60 with an income of over $200,000 looking for professional and conservative designer

clothing (Tedlow and Beckham 3). A desire for reliable, high-quality products was one trait that

most of their consumers have in common, creating brand loyalty. This was also Harrington’s

focus in their marketing strategy; the clothes may be expensive but they are the best of the best.

The company reported in two operating segments. The Manufacturing Group provided

products for company-owned stores as well as department and specialty stores which accounts

for 50.3% of the companies profit. This group owned and operated manufacturing facilities

strictly in the U.S., Mexico, and the Caribbean. Having production located near the retail stores

as opposed to in China allowed for a quick distribution of trend-sensitive clothing. The Retail

Group operated 120 company owned stores, 50 of which were for the Vigor line while the

remainder carried a mix of Harrington Limited and Christina Cole (Tedlow and Beckham 4).

They also managed the online stores for each individual division. The company also made use of

technology that could track sales and inventory to prevent overstock. This group also focused on

training sales people because they believed it was a crucial part in the consumer’s decision.

Harrington Collection had to be informed on a large portion of the consumer market due to their

range of divisions.

There are a number of issues contributing to Harrington Collection’s decline in sales over

the past three years. Analysis of changing consumer wants and needs is imperative as customers

moved towards “stylish, sporty, casual attire” (Tedlow and Beckham 1). Harrington decided to

research the possibility of an activewear expansion within one of their brands, Vigor. Over the

next five years, the activewear market size is projected to increase over 30%, an estimated $57

billion (“Size”). Research suggested that customers wanted this category of stylish product from

Harrington as they are known for their quality. Manufacturing an activewear line within Vigor

could impact Harrington’s image of high-end, quality products.

The necessity of close manufacturing operations overall affected the profit of the

company. Harrington Collection committed to ensuring manufacturing and other production

pieces of the value chain are all in place within North America, and preferably within the US.

This maintained their quality assurance with easy control over the manufacturing process as well

as swift delivery of fashionable items to stores - which would also be required with an

activewear product launch. Distribution confusion was due to the divisional separations of

varying brand concepts within Harrington executing dissimilar distribution strategies through a

number of retail channels. Identifying where this activewear launch would be best executed

would be Harrington executives’ next step, from how to launch within their current assortment to

decisions about costing, manufacturing, and overall product considerations.

II. SWOT Analysis

Strengths:

● An advantage that Harrington Collection has is that they have updated technology that

can keep up with inventory and sales information. “This allowed the manufacturing

group to quickly react to market demands, improve productivity and shorten

manufacturing cycles” (Tedlow and Beckham 20). Because Harrington Collection has

cutting edge new technology, they are able to stay ahead of the product life cycle and

prevent overproduction and overstocks.

● Harrington Collection has good relationships with their affiliates. They offer more

incentives and support than other companies and stay efficient with their budgets in

inventory and sales. Aside from credibility, retailers can rely on them for deliveries and

help selling merchandise with their exceptional quality, knowledgeable employees and

loyal customers (Tedlow and Beckham 15).

● Harrington Collection includes a division called Vigor, a foot in the door to add in

activewear. Vigor is considered the “trend setter” brand and less traditional in that it

focused on fashion and comfort instead of career wear. With the help of advertising, it

can expose the new line to their loyal customers and attract new customers that are

looking for clothes with the latest trends.

● The company utilizes in-house production (in the United States or close proximity to the

United States) instead of outsourcing. Even though outsourcing is good for low costs and

mass production, in-house production guarantees better quality control, consistent

delivery, and a sense of ownership within the company. Since fashion is sensitive with

timing, having plants close-by will make it easier to transport items that need to go to

outlet store faster than transporting from China.

Weaknesses:

● Many retailers are manufacturing in China and other developing nations due to low labor

costs. In 2005, imports dominated the women's apparel market. Part of Harrington

Collection’s company values is to not outsource production. A survey revealed that 95%

of consumers were satisfied with the quality of outsourced product even though the

quality did not fit Harrington standards (Tedlow and Beckham 5). If Harrington was

willing to outsource production, they could save money and customers will still remain

satisfied.

● Harrington is a high status brand, targeted towards status seekers and customers have

certain expectations for the brand. While this is a great image for a company to uphold, it

can be an issue when integrating a new product or line. The activewear will fit in best

with the Vigor line, but it is still a very new direction for the company. The new active

line could damage Harrington’s image and the elegant lifestyle they represent.

● Numerous costs go into adding a new activewear line. There are fixed costs such as rent

and equipment which will depreciate, launch costs to market the new line, and variable

costs such as labor and raw materials. The yearly overhead cost would be $10.5 million.

The start-up costs estimate to a total of $16.2 million. The Vigor line would also need to

hire new management and design staff that would focus on the new line, this estimates $1

million per year. (Tedlow and Beckham 13) This project is a very big investment and it is

not guaranteed to succeed.

● Harrington puts forth a lot of effort to maintain relationships with their channel partners.

Upholding current relationships and new additions related to the new line will take

excessive attention. Keeping these partners happy will take not only time, but would also

expend resources and money. This is an aspect of the addition of the activewear line that

is easy to ignore or forget.

Opportunities:

● Activewear has seen a great increase in the market, selling approximately 7.5 million

units in 2007. (Tedlow and Beckham 5) A product extension in this category for

Harrington Collection would prove profitable.

● Numerous competitors, i.e. Tory Burch, Lululemon, Juicy Couture, have seen great

success with activewear lines. Lululemon saw an increase in gross profit of $179 million.

(Sherman) In order to properly compete with other retailers, Harrington should jump on

this opportunity to gain a greater market share.

● Customer demand for the quality of activewear product allows the cost to produce this

product at a better price point for Harrington Collection to be low. (Tedlow and Beckham

5) Harrington’s quality standards are generally higher than that of competitors’

activewear products, allowing them to meet customer demand in this category through

providing better product than competitors.

● The opportunity to meet consumer demand for lower-priced, stylish items could be best

met with an activewear line within the Vigor division of Harrington Collection.

Customers shop this as a trendy, more casual and less-expensive line (Tedlow and

Beckham 6) already so product expansion would likely not diminish the consumer’s

image of the brand as it is.

Threats:

● Pressures of Pricing: In the early 2000’s, consumers have become very price sensitive. In

the U.S women’s apparel, over half of all apparel was purchased “on sale.” (Tedlow and

Beckham 1)

● Labor Cost and Imports: “Focus on Apparel” has determined that “imports dominated the

U.S women’s Apparel market, accounting for 82% of total industry sales in 2005”

(Tedlow and Beckham 2). Within apparel manufacturers, other brands have been

branching out and started using China for their manufacturing to save money in other

areas, like lower cost in labor. Harrington chose to keep production within the US.

Keeping production in the US could spike their overhead and capital spending.

● Quality: If Harrington came out with a active-wear line for January 2009, they would be

considered late contenders. Other competitors have been established and running their

active lines way ahead of time. Research showed that customers of Harrington are willing

to spend the money on activewear if it were produced with high quality material.

Competitors have already produced activewear lines that are in the better quality price

zone.

● Competitors: Competitors outsourced activewear to China and other locations earlier in

the year of 2007, which gave them an advantage in cost. Those companies who outsource

with other countries have low labor and production costs, allowing them to price their

products at a lower retail. These retailers spent less on operational costs. By the time

Harrington releases their activewear line, the demand for activewear may have hit the

point of decline in the fashion cycle.

III. Problem Statement

Harrington Collection did not meet performance expectations during the fiscal year of

2007. This was due to their different divisions not addressing the needs of their consumers.

Consumers were looking for stylish, comfortable clothes that will fit into their lifestyle as well as

remain in their budget. Harrington has been a luxury lifestyle brand for many years and had

overlooked current trends, such as activewear, that could have resonated better with their target

market.

IV. Development of Alternatives

Alternative 1: Rebranding the image of the Vigor division.

Vigor is known to be the “trend setting, fashionable, yet comfortable clothing” (Tedlow

and Beckham 12) division of Harrington Collection. The executives of the Vigor line should

change the branding of this division and phase out the Vigor known to customers as “trend

setting and fashionable.” Doing so provides the Vigor division with the opportunity to embrace a

more casual and laid-back style. This would allow Vigor to introduce their activewear line easily

and effectively to their loyal consumers and a potential new customer base. If Vigor were to

become a more casual division of Harrington, this would allow Vigor the chance to introduce a

more well-rounded lifestyle brand from business casual to activewear. Research conducted by

Harrington executives indicated that this would not cheapen the brand, and customers would

“buy an active-wear set if one with superior styling, fabric, and fit was available” (Tedlow and

Beckham 5). This alternative would fit perfectly within Harrington’s overall commitment to

higher-end, quality apparel. Along with this, Harrington could leverage Vigor’s position as its

lower-priced, stylish brand in a more dramatic way.

Alternative 2: Develop an activewear brand as a new, separate division.

Noting the need “to hire a general manager, merchant, planning manager, and two design

staff members who were dedicated to the new product line,” (Tedlow and Beckham 7)

Harrington should move forward in pursuing an activewear line as an entirely separate entity, or

new division. Harrington would still be able to utilize their existing corporate support functions

as they do within all of their divisions, but maintain this business separately to achieve the

needed time, support, and focus of the new staff. If Harrington were to create this new product

under the Vigor division, there would be potential for Vigor to not be able to support the

activewear product separately versus other products under the Vigor label. Another issue would

be despite customer response on diminishing brand image, Vigor was not previously known for

this style of apparel and could further muddle the brand identity.

Developing a separate activewear brand under a new division would provide the staff

freedom to focus especially on this brand, even after the initial launch. This would also allow

them to create a new brand image for this activewear line. Under the Vigor umbrella, designers

would be forced to keep within the guidelines and aesthetic of the Vigor brand, which may prove

challenging and restrictive. Launching under Vigor has potential to blur the clear image of the

Vigor division as “trend setters” with a better price (Tedlow and Beckham 12). While activewear

fits within the trend setting concept, the activewear segment requires a lower price than usually

carried with Vigor. Launching as an entirely new division, a new price point line would provide

clear division from Vigor and the other Harrington Collection divisions overall.

Alternative 3: Outsource production to China.

Since 2004, China has been a major influence on retailers today. With low labor costs,

China has given an outlet to companies that allows them to eliminate overhead and capital

spending affiliated with manufacturing plants (Tedlow and Beckham 4). Harrington’s CEO,

Kathleen DuBroff, did not want to outsource production because in-house production was one

their competitive advantages, as it provided the quality control and turnaround agility Harrington

was known for. The drawbacks to in-house are high costs associated with human resources and

licensing requirements, as well as more administrative needs (Gaille 9). To maintain this

required working capital, Harrington Collection is paying more than what others are paying with

China and other countries. By outsourcing with China, it would help improve time management

by taking secondary activities away from the company and allow them to focus on other business

processes. One last key benefit of outsourcing is that it would grant a company access to

expertise and new technology allowing businesses to work with specialized vendors who work

on different levels of quality and service (“Benefits” 11). Outsourcing with China is a time and

money saving opportunity that provides the wants and needs of a company and its consumers.

V. Final Recommendation

The solution that is best fitted for the problem that Harrington Collection is facing would

be rebranding the image of the Vigor division. By using this solution, Vigor has the opportunity

to grow more into a “casual and laid-back style.” Vigor would be saving money if they

rebranded their image and did not add an entirely new subdivision to Harrington Collection.

Slowly pushing the casual feel of activewear into Vigor would show that Harrington is a well-

rounded company to shop and not just for business women. A key factor that provides the

opportunity for Harrington to introduce a whole new variety of merchandise without opening a

new division is the fact that Vigor already exists as a brand. This will help to save money and

maintain the brand’s normal foot traffic for new and existing customers.

By maintaining the overall Harrington promise of quality and retaining in-house

production, the company will keep its existing customers happy based on their commitment to

quality. The company was already aware that they are producing activewear later than most of

the competition. Despite this, consumers were in search of a better activewear brand, and

Harrington can deliver this. Adding activewear to Vigor will allow them to decide if they would

like to make activewear a short-term or long-term investment depending on how profitable it is.

Assuming an annual revenue of $39,900,000 based on the provided 7% market share of the

better activewear segment, Vigor would experience an overall profit margin of 16% before tax

(Tedlow and Beckham 13). This figure proves that the profit margin would initially be enough to

finance further support and development of the activewear line.

Works Cited

“Benefits of Outsourcing to China - Still Worth It?” SinoScan US, 22 Feb. 2017,

sinoscan.com/benefits-of-outsourcing-to-china/.

Gaille, Brandon. “8 Pros and Cons of Inhouse Manufacturing.” BrandonGaille.com, 14 Sept.

2015, brandongaille.com/8-pros-and-cons-of-inhouse-manufacturing/.

Sherman, Lauren. “For the Activewear Market, There's No Way But Up.” The Business of

Fashion, 15 Jan. 2014, www.businessoffashion.com/articles/intelligence/activewear-

Lululemon-nike-hm-sweaty-betty.

“Size of the Global Sportswear Market 2009-2017 | Statistic.” Statista, 2018, www.statista.com

/statistics/613169/size-of-the-global-sportswear-market/.

Tedlow, Richard S., and Heather Beckham. Harrington Collection: Sizing Up the Active-

Wear Market. President and Fellows of Harvard College. Harvard Business Publishing:

Boston, MA, 25 September 2008.

“What Next for Women's Activewear: Dispatches from the Denim Market.” Market Research,

Euromonitor International, 4 Feb. 2014, blog.euromonitor.com/what-next-for-

womens-activewear-dispatches-from-the-denim-market/.

Case 4: Classic Knitwear and Guardian: A Perfect Fit?

Elena DeGeneste, Bryan Kaetz, Jessica Lovell, Frances Rebollo

RTL 4010: Executive Decision Making

17 January 2019

I. Product and Company Analysis

The product fits well into the product differentiation strategy that Classic Knitwear is

executing. Classic Knitwear excels in the casual knitwear department and introducing an

innovative new apparel line could offer Classic new brand recognition without using the

company name and boost their gross margin. There is an untapped market of providing

customers with high-quality insect-repellent apparel in mass market channels when it seems to

be performing well in small niche markets (Quelch and Girardi 4). “Most industry analysts

believed Classic was the #2 player in this [screen print] sector, with 16.5% market share”

(Quelch and Girardi 2). Classic Knitwear competes in a high-volume, high-demand sector, thus it

is a sensible play to introduce an innovative new line of apparel when Classic is performing well

overall.

Classic’s new line with guardian has the chance to take advantage of a small niche

market. There is a nationwide issue of insect diseases like Lyme disease and the West Nile virus.

Current insect-repellent clothing items have already sold successfully as they have targeted

hunters and fishermen for this new category. Classic realized the need to sell to this target market

that its competitors in that small market developed for outdoorsy men and boys. Classic would

take advantage of the small market for insect-repellent clothing while it is still in its introduction

phase. This launch would give Classic a chance to collect revenue while in the rising phase of the

fashion cycle. Higher pricing makes this product a shopping or specialty product in that

customers will want to seek this product out. This is different than Classic’s previous product

offerings in that many of their knitwear products were very much convenience products such as

unbranded tees that were practically grab-and-go.

II. Product and Market Analysis

As a company, Classic does not have brand recognition among the customers they sell to,

leaving classic with little-to-no room to develop different products over the years. Classic

depending on screen-print channels over retail markets left them heavily invested in shirts versus

other products in the overall industry (Quelch and Girardi 2). Between 2005 and 2006,

technology in clothing such as insect repellent was not yet proven to be effective. If Classic were

able to provide such a line that gives product efficiency, this could allow them to own a small

niche market. Setting Classic apart from the competition in the smaller market of insect-repellent

clothing would be offering a “long-lasting protection” policy to their consumers. Allowing the

consumer a one-year guarantee to return products if unsatisfied with them.

According to surveys completed by Consumer.com, 38% to 44% of respondents stated

they would purchase one or more of the styles if offered at a high price-point (Quelch and

Girardi 7). By conducting this survey, Classic and Guardian were able predict the percentage of

people willing to try the clothing as well as the percentage that would make an additional

purchase the following year. This research provided Classic and Guardian with a rough idea of

how consumers will react.

Classic’s plan is to expand the merchandise to discount stores, general merchandise

stores, and sporting goods and apparel stores, which allows it to be exposed to the general

consumer as well as sport and outdoor fanatics (Quelch and Girardi 5). Classic also plans to

eventually sell the insect-repellent merchandise to their current wholesale clients, giving them

possible sales (Quelch and Girardi 5). Approximately 25% of Classic’s revenue comes from

mass retail channels, at $137 million, and with a current gap of insect-repellent knitwear in this

channel and Classic’s low gross income, there is potential to achieve success in this market.

Branding with a name like Guardian on their apparel could create greater awareness as 95% of

consumers have positive perceptions about Guardian (Quelch and Girardi 4). Even though

Classic generally focuses on t-shirts, the new styles of shirts are expected to be equally popular

based on their new target market.

III. Consumer Response to Marketing

Classic plans to implement new products with Guardian branding into sporting goods

stores (Quelch and Girardi 5). This is unfamiliar territory for the company as they do not

normally have products in stores with a target market this specific. The category of insect

repellent clothing is not only new to Classic, but it is also new to the mass market. Classic could

benefit from nearly no competition already in the trade. Pairing with Guardian will greatly help

them because they are a well-known and well-liked brand (Quelch and Girardi 4). Also, Classic

will be targeting a new consumer base of active males aged 18-35. The line will feature a short

sleeve tee, long sleeve tee, a polo, and a fleece (Quelch and Girardi 7). Starting with a few

simple garments is going to be their best option in order to see if the product will sell.

In 2006, Classic partnered with Consumer.com to conduct consumer research in order to

be more confident in the new project. A survey was created that asked men if they would buy the

product on a scale of definitely would to definitely would not, and which product they would

want the most. 1,000 males were invited to participate in the survey, of which 185 responded and

showed interest in the product (Quelch and Girardi 5). 38% of respondents said they definitely

would buy with the long sleeve tee being the most popular (Quelch and Girardi 5). While this

number seems low, the remaining respondents were mostly between might and probably would

buy. The results from the consumer research survey supports that the product will sell well.

Consumers in this target market know what they want and will pay more money for a functional

product such as this.

IV. The Marketing Program

An initial issue that is apparent when analyzing Classic Knitwear’s proposed marketing

strategy for the new Guardian Apparel product is the cost of the cardboard displays they will be

utilizing for retailers. With a minimum order of 10,000 cardboard display units, each unit would

cost $100, coming to a total of $1,000,000 (Quelch and Girardi 5). With an order of 36 dozen

shirts across the 4 styles of shirts, each retailer would receive a complimentary cardboard

display. The difficulty in this would be ensuring that retailers utilized this display piece rather

than displaying the product how they wanted to. While the proposed trade discount of 5% would

help with this, it does not guarantee the use of the display. The goal of 10,000 display units in the

introductory 2-year period may be lofty. Also, the lack of Classic Knitwear branding on these

displays puts Classic at a disadvantage for their own brand awareness, but allows the Guardian

Apparel line to stand alone as its own separate product line.

A significant issue is the lack of experience that Classic Knitwear’s internal salesforce in

selling to sporting goods stores as they did not have the relationships necessary to penetrate this

channel properly. The entire marketing plan hinges on the sales of Guardian Apparel and the

display to sporting goods stores as Classic goals to have 25% of this product’s overall sales in a

sporting goods store setting, as opposed to 25% at general merchandise stores, and the remaining

50% at discount stores (Quelch and Girardi 5). In order to support this push, Miller insisted on

the hiring of at least three new sales representatives with a salary of $85,000 each, accruing an

additional expense of at least $255,000 to hire these new representatives (Quelch and Girardi 6).

This additional expense was not originally accounted for in Classic Knitwear’s overall marketing

plan. The success of the entire Guardian Apparel launch depends on the salesforce.

The initial marketing investment of $1.2 million “required to garner 25% unaided

awareness of its Guardian product among its target market by the end of two years” (Quelch and

Girardi 6). Overall spending for marketing the new line will be $3 million, which is much less

than the original $8-$10 million required prior to any product licensing agreement with Guardian

(Quelch and Girardi 4). In order to achieve a break-even on this $3 million investment, Classic

Knitwear would need to sell Guardian Apparel products, specifically the cardboard display unit

and its required unit order, to just under 400 stores. Only if Classic is successful in penetrating

the sporting goods market to the extent they wish to (25%), will they achieve this level of sales.

Finally, the proposed trade promotion allowance and advertising allowance may prove

costly. While the combination of the 5% off-invoice trade promotion to entice retailers to set up

the cardboard displays with the 10% advertising allowance to ensure prominent advertising

placement may not be significant enough to drastically lower Classic’s gross margin percentage

under the goaled 20%, the addition of the 5% licensing fee to Guardian may make margins much

slimmer (Quelch and Girardi 6). With the average price of all products being $17.87 at

manufacturer’s selling price - or wholesale cost - the average 36 dozen order would total

$7,719.84. At this cost, discounts would be approximately $532.67 (5% trade allowance + 20%

of the 10% advertising allowance), and the licensing fee would be $385.99, totaling $918.66 off

the gross margin. Averaging this per the 432 units sold, this would take $2.13 off the

manufacturer’s selling price, bring gross margin down to $4.92 versus the reported $7.05

(Quelch and Girardi 8). This would still provide Classic Knitwear with a greater margin than

Miller’s goal of 20%. A saving grace of the advertising allowance is the estimated 20% of

retailers that would qualify for this allowance over every retailer that purchases units of Guardian

Apparel. The added benefit of advertising to support the product launch may also outweigh these

costs.

V. The Licensing Agreement

Advantages:

Guardian has positive brand awareness among consumers. Since Classic’s merchandise

has no branding recognition, Classic has a chance to have a well-known brand partner with them

to gain awareness of the company and in hopes of boosting their revenue. Consumers are most

likely to choose brands that they are familiar with over something unfamiliar even if they do not

know much about the familiar name. “The recognition and elevation that a strong brand builds

upon all lend to greater customer loyalty” (Agency). According to Millennium Agency,

consumers are drawn to brands they share values in. When introducing a new brand, it is

important that Classic conveys the consumer’s value to build an emotional connection and with

that loyalty comes future generations already aware of the brand. Guardian will boost Classic’s

credibility with their consumers, market and in the industry.

Guardian is a company that has developed a positive image from their consumer base and

how to be effective. Their target market is the outdoorsy hunters and fishermen between the ages

of 18 and 35, in the mass markets they have partnered to sell to (Quelch and Girardi 4). Classic’s

brand is known to manufacture and distribute products of unbranded casual knit apparel. (Quelch

and Girardi 1) The company's brand does not have the recognition from its customers, which

causes them little room to differentiate products away from what they already sell. Partnering

with Guardian could lead them into the branded knitwear market and differentiate them from the

non-fashion casual knitwear and screen prints they have become familiar for. Classic’s new line

could sell to chains like Bass Pro Shops, L.L. Bean, Orvis, and REI, leaving Classic with a new

outlet for their merchandise.

Guardian already pioneered a product that seems to be performing very well because

their previously-recorded sales were $100 million within four years. Classic would gain an

advantage by having the EPA rating labeled on the tags to connect with insect repellent sold in

the U.S and Canada (Quelch and Girardi 8). “Approximately 75 percent of Canada's exports are

imported by the United States, and 23 U.S. states name Canada as their number one source of

imports” (“Canada”). If Classic was to move forward with this licensing agreement, they can

utilize the connection Guardian has with the retail market in Canada to “jump” the border on

tariff taxing, and lower capital rates (“Licensing”). This method could give Classic a generous

return on their investments.

Disadvantages:

Classic is in the dilemma of deciding if they want to go forward with Guardian on the

new product launch. Creating the new deal with Guardian causes Classic to write up a contract,

stating that Classic is using Guardian chemical and branding on their products. Having a contract

between the two is no guarantee though Guardian will not pull out of the agreement, leaving

Classic without chemicals or a brand name.

The draft agreement states that Guardian can “terminate the agreement in 2007 if, in

Guardian’s sole judgment, sales of Guardian shirts are adversely affecting sales of Guardian’s

existing insect repellent products” (Quelch and Girardi 8). If Guardian were to pull out of the

contact, Classic would be in serious debt and produce less, causing their gross margin to drop

lower than the 18% that it is currently achieving. The licensing of Guardian is just a partnership

without a set expiration date because the invention of insect repellent was not a Classic product.

Also, the agreement mentions that any promotional material has to be approved by Guardian

before it can move forward. This could slow down the process of advertising if Classic needs to

get merchandise out quickly.

Classic is at a position where their gross margin is lower when compared to competitors,

leaving a smaller budget for operational manufacturing cost. Classic’s agreement with Guardian

stated advertising was a responsibility to be accounted for in Classic’s budget. Classic’s income

statement for the year end in 2005 stated that they had spent about 10%, or $55,337 on non-

production cost (Quelch and Girardi 7). This would possibly double if they went with Guardian

and there is no guarantee that they could break-even or gain any profit from the new line. Classic

giving their pledge of “using their best efforts” for their marketing campaign on the new line is

still risky. If sales do not meet projections, Classic still has to pay a royalty expense to Guardian

of 5% Net Sales (Quelch and Girardi 8).

VI. Long-Term Product Differentiation Strategy

The Guardian project will provide a long-term product differentiation strategy for

Classic. Apparel treated to repel insects is the solution to a problem that consumers will always

face, diseases from bug bites they may receive. As long as mosquitos are around, consumers will

want this product. The garments will be made to remain repellent after up to 70 washes (Quelch

and Girardi 4). If the consumers are happy with the product, they are going to become loyal

customers and continue to purchase new products after the 70 washes. Classic conducted surveys

that resulted in 50% of customers would repurchase the product (Quelch and Girardi 5). Classic

will also have the advantage of the Guardian name on their apparel. Consumer research showed

that 95% of customers are familiar and comfortable with the Guardian brand name (Quelch and

Girardi 4). Customers are much more likely to stay with a company that they know has a

successful history.

Branded product performs better in sales and gross margin percentages for manufacturers

and retailers than unbranded product (Quelch and Girardi 2) does. Thus, exploring options in the

branded category of knitwear is a good strategy for Classic Knitwear to pursue. Maintaining a

higher price point for this new product will raise Classic’s gross margin percentage as their

wholesale price to retailers will be higher while their cost of goods sold will be lower. As

previously stated, the results of the Consumer.com research showed that customers would still

buy at the higher price (Quelch and Girardi 5). With the technical fabric application, this price

would be a good fit for the new product.

Currently, sporting goods stores such as Cabela’s and LL Bean utilize No-Fly Zone

technology with permethrin-treated clothing (Sides). Similar stores such as Orvis, and REI utilize

BugsAway insect repellent-treated clothing (“Why”). Classic Knitwear will be pioneering this

segment in 2007, especially with a focus to similar sporting goods stores like these. Many

competitors had yet to hit the market with insect-repellent products. A licensing deal with an

already well-known bug spray product increases Classic’s likelihood of achieving their desired

sales figures and maintaining the license. The longevity of insect-repellent products still being

offered at sporting goods stores in 2019 shows this market will continue and prove to be fruitful

for Classic Knitwear and their overall gross margin, and thus profit numbers.

Works Cited

Agency, Millennium. “5 Major Benefits of a Strong Brand.” Millennium Agency, 16 Dec. 2013,

www.mill.agency/creative/5-major-benefits-strong-brand/.

“Canada - Market OverviewCanada - Market Overview.” Korea - Distribution and Sales

Channels, www.export.gov/article?id=Canada-Market-Overview.

Sides, Delores. “Fight the Bite This Year with Burlington's No Fly Zone® Technology.”

Burlington, 11 Jan. 2018, www.burlingtonfabrics.com/fight-the-bite-no-fly-

zone-technology/.

Quelch, John A. and Patricia Girardi. Classic Knitwear and Guardian: A Perfect Fit? President

and Fellows of Harvard College. Harvard Business Publishing: Boston, MA, 6 May 2013.

“Why Bugsaway Clothing?” ExOfficio, ExOfficio, LLC., 2018, www.exofficio.com/exofficio-

technologies/technology-bugsaway.html.

“Licensing Arrangements – the Pros and Cons | TCii Strategic and Management Consultants.”

TCii, 6 Jan. 2013, www.tcii.co.uk/2012/10/26/licensing-arrangements-the-pros-and-cons/

Case 6: The Fashion Channel

Elena DeGeneste, Bryan Kaetz, Jessica Lovell, Frances Rebollo

RTL 4010: Executive Decision Making

31 January 2019

I. Market Research

The Fashion Channel (TFC), a well-known television network, had an extensive amount

of demographic research to do, considering they did not have a defined target market up until

this point. Networks were beginning to be evaluated more on their ability to target a certain

demographic so TFC had to get to work. In exhibit 1 from the case, the demographics are set up

into age segments of 18-34, 35-54, 54-74, and greater than 74 (Stahl 8). They found that females

are prevalent in every age group, while males are scarce, especially in the older categories.

The attitudinal research was carried out by GFE Associates; they were hired by TFC in

order to collect valid information. They conducted a survey the previous month. The survey was

sent out to a panel of consumers and contained over 100 questions on how they feel about certain

aspects of fashion, and how they feel about TFC. The answers to the questions were run through

a statistical correlation program to analyze patterns in answers. This allowed them to place

consumers in specific clusters based on their attitudes and responses. The groups are

Fashionistas, Planners & Shoppers, Situationalists, and Basics. The Fashionistas seemed to show

the most interest in TFC, their demographic was 61% female, aged 18-34. The Basics were very

disengaged and they were 55% male (Stahl 10).

Now that the attitudinal research was completed, TFC needed to come to a conclusion on

who they wanted to target that will in the end bring in the greatest revenue and loyal viewers.

The whole idea of a target market for a TV network went back to advertising. TFC would have

to budget for changes or additions in programming, but the main portion of the budget will go

toward a marketing and advertising campaign. Depending on which option was chosen, said

budget could range from $15 million to $20 million in additional programming spending. We see

the results TFC found as very promising, they have the Fashionistas cluster that they know was

interested and excited about their channel and the Planners & Shoppers, who also show great

interest. They could begin to add programming and ads to not only attract these viewers, but

achieve a level of brand loyalty. A key phrase to keep in mind is that “if you try to reach too

broad of an audience, you likely end up reaching nobody” (Hallbrooks). This data can be

interpreted as valuable information that TFC has needed for years. The research shows that the

network does have consumers that want to watch their channel. This means they have a loyal

customer base, they just have not figured out how to target them yet. If TFC focused on a smaller

segment of their viewers and gets them to stay with the network, they will be very successful.

II. Segmentation Options

Option 1

Wheeler’s first option is to maintain an extensive, broad appeal to three clusters;

Fashionistas, Planners & Shoppers, and Situationists. The Fashion Channel can expect

reasonable awareness and views by investing in a major marketing and advertising campaign

along with programming. All three clusters having the interests of shopping, two-thirds enjoy

value options, and find fashion both entertaining and practical (Stahl 10).

Option 2

The second option is to focus more on the Fashionistas segment, the smallest group.

These are the viewers that are highly engaged in fashion, maintain current trends, and find

fashion entertaining (Stahl 7). “This segment was strong in the highly valued 18-34

demographic” (Stahl 7). With the focus on a strong, younger, female-oriented segment, Ad Sales

can offer a CPM of $3.50. The Fashion Channel would invest in new programming to attract and

maintain the interest of the Fashionista segment. Wheeler estimated that she would spend an

extra $15 million per year with the option of focusing on the Fashionistas cluster (Stahl 7).

Option 3

The last option is to target two segments, the Fashionistas and the Planners & Shoppers.

The Planners & Shoppers segment is the largest size cluster in households at 35%, and the

Fashionista segment has the highest interest in fashion on television (Stahl 7). Wheeler estimated

that by targeting these two segments, the rate over time could go from 1.0 to 1.2 with a possible

CPM of $2.50 (Stahl 7). This option would require an additional spending of $20 million on

programming to make sure that their program options are aimed at both segments (Stahl 7).

III. Advantages and Disadvantages of the Segmentation Options

Option 1

Advantages:

● The potential for guaranteed views is increased simply due to the number of

viewers the network would market to.

● This broad viewership potential includes many demographic segments that are

valuable to advertisers. “In television, most producers would like to reach people

ages 18-34, 18-49 or 25-54. The reason is those are the groups most coveted by

TV advertisers. Sure, the TV networks want to create a hit show. But they also

want to be able to sell commercials within the program” (Halbrooks). This

scenario provides TFC with a greater breadth of viewership potential.

● The risk of TFC losing their current audience would be lowered if they were to

move forward with this first scenario. The three clusters would appeal to the new

and old generations, eliminating any age gap conflict, along with cluster

difference. Using this method would create a large audience mix for their

network.

Disadvantages:

● The lack of focus on one segment does not give an opportunity for very specific

marketing or advertising due to the need for a broad appeal.

● Television viewership is fragmenting, that is networks have to create

programming that is specific to the viewers that are watching (Olenski). If they

fail to do so, their network will not do well.

● Fragmentation of television viewers allows advertising to be much more targeted.

“Because of fragmentation, advertisers can target specific demographics in a way

that was once only possible with digital ads” (Olenski). TFC needs to define their

best segment, which this scenario does not support.

Option 2

Advantages:

● By focusing on the Fashionistas, TFC can strengthen the value of the audience to

advertisers which would increase their overall CPM (Stahl 7).

● Viewers may become loyal to the network and brand as fashion is a part of their

everyday life and they will want to keep up with TFC.

● Rebranding TFC to a singular target market would give it the opportunity to

create original programming to focus on this market. Original programming has

seen great increase in bringing in dedicated viewers (Holloway). Finding the right

programming for this market would provide TFC the option to develop its own

specifically-branded content.

Disadvantages:

● The Fashionistas are the smallest segment from the cluster (15% of households),

so only focusing on them would likely lead to a decrease in the number of

viewers. (Stahl 7)

● This is the first scenario that requires additional programming investment costs, at

an additional $15 million, for a total programming expense of $70 million (Stahl

7).

● If potential viewers were to tune into TFC programs and have no interest, they

will be discouraged to see what other programs TFC offers. This would decrease

potential viewer acquisition.

Option 3

Advantages:

● Both segments have similar interests, meaning that the same advertising and

programming will appeal to them both.

● Defining the viewer segment of TFC in such a positive manner will provide

TFC’s advertising partners with greater potential to reach certain demographics

with their advertisements. Using this demographic data to thinly slice audiences

provides advertisers with greater targeting of desired viewers (Olenski).

● The Fashionistas, along with Planners & Shoppers, are all categorized for the

same attitude-driven markets (Stahl 10). This will create a simple adjustment for

TFC to add Planners & Shoppers into the demographic target mix versus starting

over; if they only target the Fashionistas and were disappointed with the outcome.

Disadvantages:

● The cost of additional programming is greatest with this scenario, at an increase

of $20 million for an overall programming cost of $75 million (Stahl 7).

● Changing the focus of TFC to such a great extent may garner criticism from

current advertisers and critics alike. Many other networks have had to redefine

themselves. In her article about TLC facing challenges in redefining their

branding, Danielle Douglas explains that there is potential of backlash. Disrupting

the current environment may prove challenging in TFC also redefining their

brand.

● In 2007, men were not considered in the Fashionistas or the Planners & Shoppers

demographics of the households (Stahl 10). If TFC was to focus on this group,

they could miss out on a potential new market that could cost them ratings,

viewership, and thus revenue.

IV. Financial Summary

Ad Revenue Calculator

Ad Revenue Calculator Current 2007 Base Scenario 1 Scenario 2 Scenario 3

TV HH 110,000,000 110,000,000 110,000,000 110,000,000 110,000,000 Average Rating 1.0% 1.0% 1.20% 0.8% 1.2%

Average Viewers (thousand) 1,100 1,100 1,320 880 1,320

Average CPM $2.00 $1.80 $1.80 $3.50 $2.50 Average

Revenue/ Ad Minute $2,200 $1,980 $2,376 $3,080 $3,300

Ad Minutes/Week 2,016 2,016 2,016 2,016 2,016

Weeks/Year 52 52 52 52 52 Ad

Revenue/Year $230,630,400 $207,567,360 $249,080,832 $322,882,560 $345,945,600 Incremental

Programming Expense $0 $0 $15,000,000 $20,000,000

Basic Fashionistas F + S/P 80% 15% 50%

TFC Estimated Financials for 2006 and 2007

2006 Actual 2007 Base Scenario 1 Scenario 2 Scenario 3 Basic - 80% Fashion - 15% F + S/P - 50%

Revenue

Ad Sales $230,630,400 $ 207,567,360 $ 249,080,832 $ 322,882,560 $ 345,945,600 Affiliate Fees $80,000,000 $81,600,000 $81,600,000 $81,600,000 $81,600,000 Total Revenue $310,630,400 $289,167,360 $330,680,832 $404,482,560 $427,545,600

Expenses Cost of Operations $70,000,000 $72,100,000 $72,100,000 $72,100,000 $72,100,000 Cost of Programming $55,000,000 $55,000,000 $55,000,000 $70,000,000 $75,000,000 Ad Sales Commissions $6,918,912 $6,227,021 $7,472,425 $9,686,477 $10,378,368 Marketing & Advertising $45,000,000 $60,000,000 $60,000,000 $60,000,000 $60,000,000 SGA $40,000,000 $41,200,000 $41,200,000 $41,200,000 $41,200,000 Total Expense $216,918,912 $234,527,021 $235,772,425 $252,986,477 $258,678,368 Net Income $93,711,488 $54,640,339 $94,908,407 $151,496,083 $168,867,232 Margin 30% 19% 29% 37% 39%

Option 1

While the average rating and ad prices as “cost per thousand” (CPM) for this scenario are

the highest, the average ad spend is much lower as there is no guarantee that the quality of

viewers will translate into revenues for the advertisers (Stahl 4). This is due to the demographic

the advertiser wants to target versus the demographic this option would actually target. The basic

customer is only 20% of all viewers (Stahl 10). The Fashion Channel would not be able to

provide programming for each of these customer bases without losing more specific categories

of viewers to competitors, such as Lifetime and CNN programming. This scenario would not

increase programming spending as TFC would continue with the same programming,

maintaining their viewership without targeting a specific market. This is how TFC has always

done it - meaning that any issues in staying the same would continue, such as decreased gross

margin in comparison to 2006 performance.

Option 2

This scenario focuses greatly on a very narrowly-defined segment, the Fashionistas who

have a great interest in fashion programming with a professional slant. This is the ideal segment

in regard to the premium demographic of females between 18 and 34. Despite this, the net

income and overall margin are not the highest of the three scenarios, at $151,496,083 and 37%,

respectively (Stahl 12). Unfortunately, TFC would receive lower ratings and thus lower

viewership due to it being such a smaller segment. This decreases the overall advertising revenue

potential despite the higher CPM. As the average rate per minute is affected by the viewership, a

lower viewership - despite higher CPM - means a deflated advertising revenue in comparison

with a segment that has a higher viewership.

Option 3

This is the best scenario option, as the overall margin received is 39%, with a Net Income

of $168,867,232.00. “As industry executives explain it, that's because though there is dedicated

viewership in the fashion space, the content is decidedly more niche” (Cills). This option is

geared toward not only the niche 18-34 Fashionistas demographic, but also a slightly more broad

demographic to include the Planners & Shoppers as well as the Situationalists, all of which

include a good percentage of the premium 18-34 demographic, ranging between 25% to 50%

(Stahl 10). This explains the increased viewership in comparison to all but the first scenario. The

increased viewership in combination with the greater CPM, due to a higher percentage of the

premium 18-34 demographic, explains why advertising revenue from this segment is so much

greater. Despite a greater cost of programming, the overall revenue from this scenario more than

accounts for the increased expense.

IV. Managerial Issues

Members of the leadership team need to understand the potential risk of TFC’s failure to

evolve and compete with Lifetime and CNN networks. The CEO, Jared Thomas, let his senior

team know in June that Dana Wheeler would be taking charge of marketing the channel in July

and build its brand in order for TFC to grow (Stahl 2). Many of the senior team members did not

want to change the network’s operations because of their perceived rate of success; they seem to

believe in the saying “don’t fix something that isn’t broken.” If the team does not start to target a

specific demographic market or build this brand image, there could be other network competitors

that will take TFC’s viewers and potential revenue from advertising dollars (Stahl 2-3).

The networks Lifetime and CNN began to offer more than just fashion advice and

information in their programming. CNN offered fashion news and celebrity-focused

programming, in turn causing the supporters of these celebrities to tune into their network as well

as appealing to a male demographic. Lifetime offered fashion news and information, but is

appealing to a specific demographic that is interested in fashion: they target females in the age

segments of 18-34 and 35-54 (Stahl 8). Lifetime’s targeting of this specific market provided

them with the option to provide content for these demographics. Their competition pushed

relevant content for their subscribed customers, bringing their rating up along with viewership.

The TFC network is not keeping up with the other channels like CNN and Lifetime; they never

determined a target market for the network, leading it in a direction in which they attempted to

provide programming for everyone like their slogan “Fashion for everyone.”(Stahl 2) These

competitor networks offered programming for male viewers, celebrity lifestyle interest, and other

new shows that target different spectrums of fashion television viewers, slowly closing in on

TFC’s viewership.

As of 2007, TFC lacked in comparison of usage of marketing tools. TFC is now bringing

in Wheeler that will give the network an insight of what marketing looks like, and the possible

benefits of having a particular segment audience. In the GFE Associates national consumer

survey, it is shown that consumers want to be up-to-date with fashion, as well as work and

special event apparel; are value-conscious; and need a network to shop from. Having a network

to shop from does not mean that TFC should offer shopping opportunities to the elder age group.

In the GFE survey, they showed that TFC is looking at the fashion cycle between

generations all wrong. The management team should have realized that the younger audience,

fashionistas, and planner/shoppers are the ones they need to appeal to and gain the loyal from.

These groups are willing to spend more money to watch these programs that will give them a

great look ahead of the trends; they are business people looking for work apparel, as well as

planners and shoppers looking for an outfit for an event. The senior team needed realize that

changing their demographic from “something for everyone” to these targeted segments, they

could provide the network an advantage in using internet sources available at this time. The

younger portion of these demographic segments were using technology in 2007. If TFC

positioned themselves to take advantage of the increased usage and dependendency on the

technology market, they could maintain a brand presence with always-available information.

This focus, in turn, could lead to increased viewership and ratings for the network.

Works Cited

Cills, Hazel. “Why Fashion TV Has Flopped.” Racked, Vox Media, Inc., 6 May 2015,

www.racked.com/2015/5/6/8548307/fashion-tv-americas-next-top-model-project-

runway.

Douglas, Danielle. “Change or Die: Is TLC Approaching a Tipping Point with Its Reality

Shows?” The Washington Post, WP Company, 17 Aug. 2012, www.washingtonpost.com/

lifestyle/magazine/change-or-die-is-tlc-approaching-a-tipping-point-with-its-reality-

shows/2012/08/16/541066f8-c9df-11e1-a740-17536be91cc6_story.html?noredirect=on&

utm_term=.a97eade0b627.

Halbrooks, Glenn. “Demographic Data Is Critical for Media.” The Balance Careers, Dotdash,

www.thebalancecareers.com/demographic-data-is-critical-for-Media-2315179.

Holloway, Daniel. “NBCUniversal to Shut Down Esquire Network Cable Channel, Relaunch

Brand as Digital Platform.” Variety, Variety Media, LLC, 18 Jan. 2017,

variety.com/2017/tv/news/esquire-network-1201962261/.

Olenski, Steve. “How CMOs Can Use Advanced TV Advertising Strategies To Reach Target

Demographics.” Forbes, Forbes Magazine, 27 Feb. 2018, www.forbes.com/sites/

steveolenski/2018/02/27/how-cmos-can-use-advanced-tv-advertising-strategies-to-reach-

target-demographics/#38e20bf82055.

Stahl, Wendy. The Fashion Channel. President and Fellows of Harvard College. Harvard

Business Publishing: Boston, MA, 1 June 2007.

Final Project: Empower for Hope

1. Case Framework . . . . . . . . . . . . . . . . . . . . . page 40 2. Case Study Assessment . . . . . . . . . . . . . . . . page 42 3. Works Cited . . . . . . . . . . . . . . . . . . . . . . . . page 55

RTL4010 EXECUTIVE DECISION MAKING PROJECT – 100 POINTS Dr. Egeln Objective:

To work with an existing Fashion/Retail business (Client) to asses, analyze and provide recommendations to their current business situation.

Procedure:

• Research the existing business situation of the Client. • Create an assessment of the existing business situation. • Complete Checkpoint #1 • Analyze the assessment of the existing business situation. • Prepare recommendations for the existing business situation. • Complete Checkpoint #2 • Present project to the Client

Format:

• The final project is to be written using the RTL4010 Case Framework. • At least 5 acceptable research sources are to be utilized and cited. • Correct MLA format is to be used in all written submissions. • Final project is to be submitted in Turnitin.com via Ulearn

DUE IN ULEARN NO LATER THAN THE BEGINNING OF CLASS ON THURSDAY 2/7

RTL3150 SPECIAL TOPICS PROJECT GRADING SHEET – 100 POINTS Dr. Egeln Summary of the project (10 points)

Clear justification for the project (5 points)

Goals/objectives (at least 3) are clearly stated and relevant (10 points)

Were the goals/objective of the project achieved (10 points) Was the project detailed and thorough (25 points)

Checkpoint #1 (4/13) (10 points) Checkpoint #2 (4/27) (10 points)

If working in a team, task assignments were completed (10 points) Presentation (10 points)

Final Project Case: Empower for Hope - Amahoro Burundi

Elena DeGeneste, Bryan Kaetz, Jessica Lovell, Frances Rebollo

RTL 4010: Executive Decision Making

7 February 2019

I. Situation Analysis

Christin Boone is the founder of Empower for Hope, which is a non-profit organization

that is set up to support and empower the women of Burundi, Africa. For about eight years,

Christin has been selling handcrafted goods like purses and dolls that are made from one-of-a-

kind African prints to people in the United States. All profits made from selling the handcrafted

goods benefit the women in Burundi, from labor compensation to medical procedures. Under the

umbrella company of Empower for Hope, Christin developed the non-profit Amahoro, which

means peace in Burundi. Empower for Hope handles the logistics, such as the operations and

finances to support Amahoro. As a subdivision of Empower for Hope, Amahoro tells the story of

women who live in a vulnerable part of the world through handcrafted goods. Today, Christin

has expanded the business past handbags by adding clothing items such as skirts and dresses still

made with the African prints but produced in Charlotte, North Carolina in partnership with a

local charity organization called Project 658.

Christin is looking to further expand her organization in the United States through brick-

and-mortar, ecommerce, and craft shows or pop-up shops, all of which are channels that she

currently sells these products through. Christin wants to gain a larger customer base and generate

more profit without losing sight of their mission, “Our goal together is to empower women, give

them dignity, and support to help lift them and their families out of extreme poverty. We do this

by teaching them the skill of sewing and sharing God's love building a community of peace and

hope” (Boone). Christin is providing an income and wares for the women of Burundi while

support them in life, health, and other issues.

From the start, Christin has been the one handling the logistics and social media for both

businesses. This has caused Christin to take on many roles that would otherwise require multiple

people in a normal business setting. Without a business plan, Christin ran into obstacles with

staffing, communication, sales, and marketing. Seeing that she was running the business by

herself, it was difficult for her to wear multiple hats and be in charge of every division. For

example, Christin has expressed that there has been no proper system to identify the physical

inventory on hand to what is advertised on their website. This causes a conflict when a customer

has purchased an item only to receive an email that there was a mistake on the company’s due to

inventory shortage.

Christin took on all roles in the organization to be the head of operations, social media,

sales, amongst others, and has started to have a negative effect to its potential customers and the

business overall. Pricing has been done by merely guessing the value versus relying on any

market research, causing a loss in profit. Little social media following and poor marketing tactics

combine for her to lose the correct target market that she could potentially sell to. Sound

business operations are almost nonexistent seeing that she visits Burundi to pass and receive

supplies or has a supplier and delivery service that is too expensive and unreliable. Christin

partnered with local contacts to establish an executive board that will be meeting after the New

Year to narrow Empower for Hope’s focus into the future.

II. SWOT Analysis

Strengths:

1. Christin formed a seven-member board to help her grow Empower for Hope. She was

previously responsible for all aspects of the business and was unable to successfully keep

up with every aspect. Christin will have each board member take on a specific role to

focus on one aspect of the company’s operations. Having more team members will be

beneficial.

2. Empower for Hope operates as an umbrella company for a number of projects, including

the bags with Amahoro Burundi, as well as the garment production partnership with

Project 658 in Charlotte, NC. This company set up provides Christin with a way to

provide for the women in Burundi to support her mission as well as an opportunity to

explore extra revenue channels (Boone).

3. Christin helped with the African-Print Fashion Now! A Story of Taste, Globalization, and

Style currently exhibit at Mint Museum Randolph (“African-Print”). This exposes her

business in a large public setting and provides the opportunity of potential sales as

Amahoro Burundi merchandise is sold at the museum gift shop.

4. The Amahoro Burundi and Project 658 merchandise has great potential with a millennial

audience. There is great demand amongst this group for African-print fashions, especially

from brands that promote awareness of social issues such as the conditions in Burundi

(Chiénin). Christin and Empower for Hope have a great strength in this branding

potential.

Weaknesses:

1. The company’s products have no ideal customer. This leads to an incohesive variety of

products and the consumer being unaware of what the company specializes in. There is

no consistency, which results in customers that are rarely loyal because they may love

one product but dislike the next as it could be targeted toward a entirely different

demographic.

2. The social media utilization for Empower for Hope and Amahoro Burundi is confused in

differentiating the two organizations. There is not an obvious focus on either of these two

social media accounts - both Facebook and Instagram - to determine which channel

markets which brand identity (Boone).

3. Christin does not price the merchandise based on a set markup. She uses a method known

as “value-based pricing”, which is basing a product price on how much she believes it is

worth (Campbell). As she explained the class, Christin’s pricing strategy is based on her

personal opinion and can reflect poorly when maintaining profit. It does not reflect a

truthful representation of what their pricing should be.

4. Christin is not sure where to move forward with Amahoro Burundi as she does not have a

formal business plan or strategy. The current goal is to produce enough revenue to

provide a sustainable life for the women in Burundi. This strategy will pull the business

in too many directions. Christin could be losing revenue rather than gaining it without a

proper business strategy.

Opportunities:

1. Demographic profiling - “Knowing to whom and when to market your product or service

can result in much higher rates of return, and it involves implementing systems, rather

than relying on indiscriminate marketing” (Cohn). A company that targets a specific,

niche market sees greater return on investment versus a company that attempts to market

to the masses.

2. Social media engagement is still on the rise with brands continuing to explore options

with social media tactics through a number of networks (Popali). Many brands utilize

influencers to grow their brand awareness; some also utilize their own marketing team to

drive brand image. For a brand to under utilize their social media to provide a clear,

distinct brand image to compete in the marketplace is a clear path to failure in today’s

environment.

3. There are different methods that the company use in order to mark their merchandise at a

reasonable price. One was is to use the “cost-plus pricing” method, which means

evaluating all variable costs and adding a markup percentage to establish the price as it is

simple and will cover all costs (Campbell). Another method that can be used is the

“competitor-based pricing” method, which is utilizing competitor’s pricing as a

benchmark rather that setting the price based on costs or customer value (Campbell).

4. Generally, companies consist of a number of people who have specific expertise in

various focuses or areas of the company. With competitors have a number of

professionals working together, they have better opportunities to expand certain parts of

the business than others. Having a different insight to look upon the company can bring a

new sense of techniques that could potentially give a chance to make a higher gross

margin or even revenue.

Threats:

1. There are constant communication issues with Burundi. Burundi is a small, third world

country. Burundi has little-to-no technology to use to maintain contact with the outside

world. When picking out fabrics in Africa, a producer must rely solely on the judgments

and knowledge of their local contacts, which can be very risky, especially when there is a

time-sensitive order.

2. Transportation and shipping issues to and from Burundi are challenging. The country has

limited transportation infrastructure, thus making it difficult to maintain a dependent

shipping option for companies to receive goods created in the country. The nation is also

landlocked, making it difficult to get goods into and out of the country as there is

dependency on ports in Kenya and Tanzania (“Shipping”).

3. In Burundi, law enforcement will often do home inspections and take the women’s

belongings. There are risks of law enforcement confiscating fabric and other materials

that are needed to produce the handbags and possibly getting the women into legal

trouble.

4. Amahoro prices are lower than needed to be; Christin and her team are not paying close

attention to their competition and what they are offering. Competitors are offering a

wider range and higher price point, earning them a greater profit; stabilizing them to

produce more products out of African prints. The competitors are gaining more traffic

and revenue with their price points.

III. Problem Statement

Empower for Hope has little to no marketing efforts focused on their products made in

Charlotte, North Carolina. With an unknown target market, the demographics are not clear and

concise. While one of Christin’s strengths is the branding of the company, her weaknesses

consist of sales and marketing research along with media planning. Empower for Hope bypasses

identifying the underlying components to advance the sales and exposure of the apparel made in

the United States.

IV. Development of Alternatives

Alternative 1: Social Media

Christin Boone and her team can develop a strong online presence and take advantage of

the opportunities to market their products to the 2.77 billion social media users and thus drive

brand awareness. “Learning how to use social media really well on a couple valuable platforms

is much better than knowing little about how to use social media across several platforms”

(Jones). There is confusion on both of their Instagram accounts, as they operate separate

accounts for Amahoro Burundi and Empower for Hope. Creating one recognizable platform to

build instant branding would help explain their company mission and business biography. Also,

Christin should have content that not only sells her products but captures the audience to keep

them following their social media pages. When they learn how utilize social media, Christin and

her team will learn that consistency is key. “There should be a mix of selling your company in

general and then sharing information about specific products and services, so your followers

know more about what you offer” (Jones). Adding posts such as background stories of the

women, quotes, and videos of manufacturing the handbags will provide the audience with a

better idea of their company in a relatable way.

Building relevant followers is just as important when learning how to use social media.

The two brands currently follow more accounts than the number of actual followers they have,

which is a sign of having little-to-no engagement. Christin should research their competitors and

engage with their followers. Doing this will ensure that they are following relevant and engaging

users. When these users receive follow requests, they will look into the requesting profile and

possible follow back; this would provide Empower for Hope with a more even follower to

following ratio. Christin and her team should utilize two major platforms; Facebook and

Instagram. According to Lyft Marketing, Facebook happens to be the biggest platform with 50

million small businesses connecting to their customers. Kristin can set up a “page-like”

campaign that creates pop-up ads to their target audience newsfeed that prompt users to like the

page (Jones). Instagram is an efficient way to experiment with captions. “Captions can pique

people’s interest and encourage engagement, giving a sort of taste to readers before they click

through” (Barnhart). By updating their Instagram page, they can be creative with their captions

as they are prime real estate to connect with current and future followers.

Alternative 2: Demographic Segmentation

Christin Boone and the rest of the board members for Empower for Hope need to

determine a fitting demographic or target market on which to focus their selling and marketing

efforts toward. This definition of a target market is especially important for their main effort with

Amahoro Burundi. Currently, products are sold to anyone and everyone who could possibly buy

them, and Christin attempts to engage with every potential customer - with trade shows in

numerous areas, wholesale efforts specifically with museums, an emerging online marketplace,

and selling bits and pieces here and there to friends and others. Once Empower for Hope defines

their target customer, they will know where and when to sell to them.

In order to home in on the correct target market, Christin and the board members should

follow a number of steps. These include compiling current customer data on demographics,

psychographics, and other behavioral characteristics; utilize social media and website analytics;

consider what their competition is doing; clearly define their purpose and offerings; imagine or

define a specific customer that fits; test marketing on this customer; and finally, redefine their

audience as needed as it will evolve over time (Newberry). All of these would allow Empower

for Hope to target their marketing efforts toward their base consumer after defining their

customer. It would not alienate other potential customers, as they could still make purchases, but

allow for a better understanding of “how and where to reach their best prospects” (Newberry).

This will allow for a data-driven understanding of their customer versus basing decisions upon

any gut feelings.

A great place to begin the process would be to look at current African print

manufacturers or designers and their target demographic. Another city that sees great success

with African designs and prints is Atlanta. Here, business such as Afro-Centric, The Bombchel

Factory, and Suakako Betty bring African prints and purpose to their specific customers, defined

by the area they locate their business, and who they market to (Khouri). Finally, if Christin and

the board for Empower for Hope focuses on the up-and-coming millennial audience, “a

conscious and responsible generation that wants to contribute, in its own way, to a renewal in

how the world sees Africa” (Chiénin). Turning around the marketing direction for Empower for

Hope, Christin will see greater success with a clear brand image and target market.

Alternative 3: Pricing Strategy

Empower for Hope needs to evaluate the market; they need to figure out how much

customers are willing to spend and how how competitors charge for their African-print

handmade goods. Boone’s best pricing technique to use for her products would be a cost-plus

pricing as this method allows her to add the markup percentage to the cost of the products and

make a steady revenue. Christin’s team needs to communicate with the Burundi women that

create the product to see how many units they can produce and in what increments. Having a set

number of units to expect at a time provides the opportunity to calculate a cost and revenue goal.

Setting the cost would provide for the operational, materials, manufacturing, and shipment costs,

as well as taking into account the special tools that are not available to the women in Burundi.

Amahoro’s products are not the only African-print handcrafted items in the marketplace,

as they have a number of competitors. The company’s competition includes individuals who sell

their own handbags, home and gift products, and other goods made from similar materials and

prints as Amahoro. Some competitors sell via the marketplace Etsy to sell their products for a

higher price without similar production and operational costs. Competitors sell their handbags at

prices between $30 and $68, depending on the size of the item. Boone sells her products between

$20 and $54; once production costs are factored in, Empower for Hope is basically giving their

product away. Pricing their products lower than competitors could be an advantage, but the target

market is not established well enough to take full advantage of this opportunity.

VI. Final Recommendation

Christin Boone and her board members’ best solution for growing the Empower for Hope

organization is to determine a target market that will allow them to focus their marketing efforts.

“A target market is a set of individuals sharing similar needs or characteristics that a company

hopes to serve” (Hubbard). A specific target customer is arguably the most important aspect to a

retailer being successful. This process will consist of market research, followed by specialized

marketing and selling tactics. Empower for Hope will achieve their ideal demographic by

referencing other companies with similar African-printed clothing, which would be targeting

similar consumers, researching current consumer data, and utilizing social media. Once Christin

and the members have homed in on an ideal consumer, they will be able to test their marketing

efforts through social media as well as their website. In an article on the importance of defining

your target market it is stated that, “Once you have your problem and solution defined and your

target audience clarified, you’re more than halfway to success” (Kelly). As represented by this

quote, a defined target market is going to be the key to success for Empower for Hope.

By creating their ideal customer, Christin will see great growth in Empower for Hope and

Amahoro Burundi. This growth will not only be an increase in sales, but it will create a loyal

customer base. Christin will now be set up for success with this final recommendation and a

strong board to support her. What must never be forgetten is why Empower for Hope was

created; which is to support the women of Burundi and their beautiful, handmade products.

These women will be able to live a comfortable, safe life and that is thanks to Christin and the

Empower for Hope organization.

Works Cited

“African-Print Fashion Now!” The Mint Museum, 2019, mintmuseum.org/exhibitions/african-

print-fashion-now-a-story-of-taste-globalization-and-style/.

Barnhart, Brent. “12 Ways to Boost Brand Awareness on Social Media.” Sprout Social, Sprout

Social, 13 July 2018, sproutsocial.com/insights/brand-awareness/.

Boone, Christin. “Empower For Hope | Fair Trade | Ethical Fashion | Empowering People.”

Empower for Hope, 2018.

Campbell, Patrick. “3 Types of Pricing Strategy (and Why You Need Value Based Pricing).”

Pricing Strategy Driven by Data, Price Intelligently, 13 Sept. 2017,

www.priceintelligently.com/blog/value-based-pricing.

Chiénin, Chayet. “African Fashion Is Taking A Generation By Storm.” The Huffington Post,

Oath, Inc., 12 Mar. 2015, www.huffingtonpost.com/chayet-chienin/african-fashion-

trend_b_6850124.html.

Cohn, Chuck. “Steps To Identify Your Target Market.” Forbes, Forbes Magazine, 6 Feb. 2015,

www.forbes.com/sites/chuckcohn/2015/02/06/steps-to-identify-your-target-

market/#3683747b229d.

Hubbard, Lori. “Why Is Identifying the Target Market so Important to a Company?” Small

Business - Chron.com, Chron.com, 26 June 2018, smallbusiness.chron.com/

identifying-target-market-important-company-76792.html.

Jones, Taylor. “How To Use Social Media To Drive Massive Brand Awareness.” Digital

Marketing Blog, LYFE Marketing, 19 Sept. 2018, www.lyfemarketing.com/blog/

how-to-use-social-media/.

Kelly, Finn. “The Importance of Defining Your Target Market.” SmartCompany, 7 Aug. 2014,

www.smartcompany.com.au/finance/wealth-management/the-importance-of-defining-

your-target-market/.

Khouri, Michelle. “Atlanta's Best Boutiques for African-Inspired Fashion.” WhereTraveler,

Morris Media Network, 12 July 2017, www.wheretraveler.com/atlanta/atlantas-best-

boutiques-african-inspired-fashion.

Newberry, Christina. “How to Define Your Target Market: A Guide to Audience Research.”

Hootsuite Social Media Management, Hootsuite, Inc., 31 Oct. 2018, blog.hootsuite.

com/target-market/.

Popali, Sunny. “What Is the Impact of Social Media on Your Marketing.” Ron Sela, Ron Sela, 18

Sept. 2017, www.ronsela.com/impact-of-social-media-marketing/.

“Shipping to Burundi.” Africa Shipping Logistics, 2017, www.africashippinglogistics.com/

export/shipping-burundi/.

Final Exam Case – Zara: Managing Stores for Fast Fashion

Bryan Kaetz

RTL 4010: Retail Executive Decision Making

Dr. Egeln

14 February 2019

I. Supply Chain

Evaluation

The supply chain at Inditex, and specifically Zara, is phenomenal and should

act as a model for other retailers in a vast number of ways. The first being the lead

time from design to production to in-store availability. With drastically lessened

lead times of 2-3 weeks versus the industry average of about six months, Zara

leads the industry in fast fashion (Zynep, Corsi, and Dessain 4). Initial designs are

created in-house by the design team at Zara’s headquarters in A Coruña

approximately six months prior to the selling season. At this time, Zara commits to

about 15-25% of the production (Team). This limited commitment releases Zara

from investing capital that would otherwise be tied up in manufacturing expenses

before the garments are produced or ready to ship to stores. This strategy is cost-

productive and allows Zara to focus more on the current season and respond to

immediate customer demands.

Zara also utilizes an underground high-speed monorail system that connects

most of its factories with a manufacturing center near A Coruña as well as a central

logistics hub in Zaragoza (Hugos). This system provides for quick transfer of

manufactured goods for quality assurance. The centralized logistics hub in Zaragoza

supports swift ground transportation of goods across Europe and air transportation

to other locations in order for these goods to arrive at stores in a timely manner.

Finally, the centralized logistics centers also permit fast reordering,

replenishment, and delivery of styles to stores. Twice a week, warehouses provide

stores with an offer of items they have in inventory (Zynep, Corsi, and Dessain 5).

By the end of that day, the stores send their orders in for the warehouses to begin

processing. The warehouse, in partnership with commercials (officials responsible

for managing product flow), determines which stores have better opportunity to

perform with the products chosen and prioritize distribution (Zynep, Corsi, and

Dessain 3-4). Automated systems process orders for quick distribution to stores.

While there is a challenge for stores to receive their full orders, this system allows

for superior inventory control and increased potential for sales.

Advantages

• Responsive supply chain with the ability to quickly deliver collections of highly

fashionable products (Zynep, Corsi, and Dessain 1).

• All merchandise is coordinated through logistics centers in Spain, assuring

greater quality control as well as improved inventory control (Zynep, Corsi,

and Dessain 4).

• Quick turnaround time of three weeks from creation of a new product to that

product being on the sales floor. This is in comparison to the average six-

month turnaround period for a traditional fashion retailer (Zynep, Corsi, and

Dessain 4).

• 12 inventory turns per year compared to 3-4 per year for competitors

(Hugos).

• “Factories can increase and decrease production quickly, thus there is less

inventory in the supply chain and less need to finance that inventory with

working capital” (Hugos). This is due to their flexible manufacturing systems.

Disadvantages

• The fact that all products are sent to the logistics centers in Spain prior to

being sent to stores could mean increased expenditure in shipping costs,

which is also increased by continuous replenishment of inventory (“Zara”).

• Short production runs, while also an advantage, make ecommerce challenging

for Zara in that no fashion product is ever in inventory long enough to

maintain a consistent ecommerce situation (Roll). “Because their clothing

designs change often, it is harder for people to see them clearly on the

Internet and thus they are encouraged to come into the stores instead and try

on the unique fashions that Zara offers” (Hugos).

• A supply chain such as Zara’s that is vertically integrated requires constant

attention in order for it to continue running smoothly. There is a need to

retain employees to constantly watch demand and make adjustments in

manufacturing and overall operations – whether they be big or small (Hugos).

Recommendations

The recommendations mentioned by Zynep, Corsi, and Dessain include

outsourcing certain store operations to third parties; and standardizing store

processes, especially logistics operations. If a third party processed deliveries, this

would make up for “approximately 5% of all time employees spent at the stores”

(Zynep, Corsi, and Dessain 10). The same company that provides transportation and

unloading the merchandise from the truck into the store could also process the

deliveries in-store, permitting a fluctuation in the focus on labor productivity. Also,

standardizing processes from country to country would greatly increase productivity

if a proper process could be rolled out to all stores. These standardized processes in

delivery processing and logistics operations would also change management of

stores, to be explored further in a later section.

Another recommendation would be to have centralized procurement or

merchandising operations, either at the headquarters location or on a country-by-

country basis. Providing greater oversight of the in-store replenishment process

would allow sharpened inventory management in regard to expected deliveries. If

commercials and country heads partnered with section managers and the

warehouses in a greater capacity, store deliveries would be more consistent and

offers sent to section managers would be more transparent. Zynep, Corsi, and

Dessain explain that Zara “had developed an algorithm for allocating inventory at

logistics centers to stores.” Giving greater insight into realistic inventory levels and

sales potential throughout the company would provide section managers a more

accurate understanding of the product that would actually be delivered to their

stores versus the product that they had originally ordered.

A final recommendation would be to provide inventory systems to more

suitably track actual inventory, expected inventory, and the location of that

inventory. This strategy, in partnership with the previous recommendation, would

heavily rely on analysis of sales and inventory reporting. Currently, Zara utilizes

RFID technology to track products by analyzing which items are picked up by

customers, tried on, and purchased or especially not purchased (Bjork). Utilizing this

technology is a key to future sales. If these items are tracked in real time, Zara could

more effectively support their ecommerce site by providing customers with accurate

unitss of inventory. This strategy could even be broadened in the future to support a

“buy online, pick up in store” offering that would prioritize convenience and deliver

exactly what the customers want, and exactly where they want it to be (Pincott).

II. Stores

Evaluation

While supply chain management is the area of business operations in which

Zara truly shines, they also operate their stores in an efficient manner. Each store is

given a level of autonomy with their inventory control and store setup, while

corporate has overall control of the brand image. There is a “triangle of information”

between store managers (or section managers), DTs (regional or country operations

managers), and commercials (product flow and sales managers) that provide a

safety net in store operations (Zynep, Corsi, and Dessain 2). Section managers split

the store into three categories: women’s, men’s, and children’s; and the women’s

section manager acted as the overall store manager (Zynep, Corsi, and Dessain 3).

Each section manager was responsible for their own staff to work on logistical

duties, inventory control, and presentation.

Section managers within a store are responsible for all inventory and

merchandising processes. They consistently work the sales floor to maintain their

knowledge of the inventory in their sections. With their biweekly offers, section

managers ordered quickly that same night – sometimes this provided challenges in

ordering items that did not yet have time to resonate with customers or that the

section managers had yet to receive feedback for. Another issue would be the

potential for a store to not receive every item that they ordered due to that item not

truly being in stock at the warehouse once orders were shipped out to stores. With

stores being the only place for customers to see the Zara merchandise, this

inventory issue proved challenging for section managers as they could not always

provide a full assortment or representation of Zara with every order.

Advantages

• Strong management structure provides autonomy due to differing local needs

yet good communication throughout each country that Zara operates in

(Zynep, Corsi, and Dessain 2).

• Low employee turnover rates due to company investment in employees, from

training to promotion opportunities (Zynep, Corsi, and Dessain 7).

• “The brand has no fear in giving responsibility to young people and the culture

encourages risk-taking, as long as learning happens, and fast implementation

– the mantra of fashion” (Roll).

• Zara’s target customer includes women 24-35 years old. They reach this

market by locating their stores in town centers and places with high

concentrations of their target market (Hugos).

• Daily replenishment is managed on an hourly basis, ensuring consistent

checks on inventory levels of the merchandise in each store by consulting unit

sales reports (Zynep, Corsi, and Dessain 10).

Disadvantages

• Competitors are moving into or cutting below Zara’s price advantage, such as

H&M and Forever 21 (Roll).

• The stores, especially the window displays, are the company’s sole channel

for marketing (Roll). Zara does not spend capital on typical marketing

strategies and are at a disadvantage in comparison to competitors.

• Stores often do not receive the exact items they ordered, thus making it

difficult to plan for discrepancies, changes, and sales forecasts (Zynep, Corsi,

and Dessain 5).

• Storage of low-selling items or broken sizes (Zynep, Corsi, and Dessain 9)

means product is not exposed to customers in order to create sales.

• Lack of hours for employees – many employees are working part-time, but at

two locations to make up a full-time schedule (Zynep, Corsi, and Dessain 7).

Recommendations

The recommendations made by Zynep, Corsi, and Dessain include changing

the store manager’s compensation regarding bonus structure by tying it to payroll or

labor hours productivity. Tying a store manager’s compensation to payroll

performance has been a strategy for a number of companies in the retail industry.

This strategy provides incentive to produce results while also performing efficiently.

A drawback to this would be the constant feeling of payroll crunch, unless Zara

provided ample payroll hours to produce results. From experience, companies often

do not analyze the exact labor necessary to complete the workload.

Another recommendation would be to change the overall store manager

position from women’s section manager as this person is responsible for the vast

majority of sales (Zynep, Corsi, and Dessain 6). An overall store manager should be

aware of every section’s operations, not just the biggest section of a store. Thus, it

would be preferable that an entirely separate manager would perform the job duties

of a store manager, such as overall operations. With the current role of overall store

manager falling upon the women’s section manager, things could get missed or

overlooked as this person has high expectations to perform as not only the highest

grossing section manager, but also as the store manager.

A final recommendation would be to revamp the clearance pricing system so

that Zara would not be afraid of markdowns as they are a necessary part of the

retail business. Zynep, Corsi, and Dessain mention that CEO Pablo Isla Alvarez de

Tejera “was now trying to optimize clearance pricing.” Not removing broken size

runs would help nudge sell-through of more units of inventory without the store

appearing disjointed or approving a smaller sale section. Another option for this

would be to continue consolidating all similar items to a single store for further

sales.

III. Evaluation

Evaluation

The relationship between Zara’s supply chain and its current stores is an

intricately interwoven one. The initial delivery of new products each season is an

average of 25,000 units chosen by commercials (Zynep, Corsi, and Dessain 4).

Following this, the section managers decide on replenishment product at an average

of 12,000 units per week and provide customer feedback to their DTs and others in

the chain of command (Zynep, Corsi, and Dessain 5). Each delivery, the section

managers or their assistants arrive at the store to open boxes, prepare the product

for the sales floor, and place the presentations.

Recent improvements to this system by Isla included hiring third-party

logistics specialists to deliver the merchandise to the stores. They would also place

the product on the sales floor so that the store team would not also be responsible

for unloading delivery trucks (Zynep, Corsi, and Dessain 5). Another improvement

was to automatically replenish basic products (Zynep, Corsi, and Dessain 5). These

basic products are easier to forecast, and this system gives section managers the

time to focus on fashion merchandise, which provides greater profit margins.

Despite the phenomenal supply chain, there are inconsistencies with orders

that stores make and the products that truly end up on their sales floor once

deliveries are made. This provides a challenge for section managers to accurately

predict sales based on the items they ordered. There is potential for missed sales

with different inventory received or a mass of inventory of items that the section

manager ordered in precaution. Greater oversight in this area by country managers,

commercials, and even management at the headquarters would provide a top-down

overview to more competently predict inventory needs.

Effect of Recommendations

Outsourcing delivery processes would affect stores and the supply chain.

While this would reduce labor costs at the store level, it would also negatively

impact a section manager’s awareness of inventory received and autonomy in setting

the store merchandise based on their sales forecast. If a third-party logistics

company took over this part of merchandise handling, it would also affect orders

placed by the section managers. They may have reduced knowledge of inventory

they did not interact with or place.

There would be fewer negatives of standardizing store operations, especially

for in-store logistics processes. It may cause a feeling of reduced autonomy in that

not every store would have as much say in their own specific processes. If Zara

partnered with each country manager to receive data about each location’s current

processes, they would be able to consolidate this into a single process that provided

greater labor and time efficiencies. Also, having a standard process would allow for

standardized training across the board for new employees coming into the company.

With many managers working in different locations across the globe (Zynep, Corsi,

and Dessain 3), having set standards of operating procedures would greatly benefit

the company as a whole.

Two other recommendations that would work hand-in-hand are centralized

merchandising or procurement and improved inventory management systems,

overall having the greatest potential impact on Zara’s store supply chain. As

previously discussed, a centralized allocation strategy would enhance consistency in

inventory planning at the store level. This strategy would improve accuracy in

delivery planning and reduce section managers’ penchant for over-ordering due to

lack of consistency in deliveries. A drawback to this strategy would be reduced

autonomy for stores and management. Zara would need to maintain a feedback loop

and require increased involvement and communication between stores and any

centralized allocation.

Finally, an expansion of current RFID technology utilization is key to Zara’s

future. There would be an increased expense in purchasing RFID tags, but with

Zara’s vertical integration of the manufacturing process, it would not be difficult to

implement (Bjork). RFID would allow for constant monitoring of an item’s location

in-store or in warehouses, granting improved inventory management. Not only

would this be good for inventory management, but it would also help Zara in

supporting an ecommerce site. If Zara utilized these better inventory controls, they

would be able to maintain automated systems for a true omnichannel customer

experience.

Works Cited

Bjork, Christopher. “Zara Builds its Business Around RFID.” The Wall Street

Journal, Dow Jones & Company, Inc, 16 Sep. 2014.

https://www.wsj.com/articles/at-zara-fast-fashion-meets-smarter-

inventory-1410884519

Hugos, M. “Zara Clothing Company Supply Chain.” SCM Globe, SCM Globe, 26 Jan.

2015, www.scmglobe.com/zara-clothing-company-supply-chain/.

Martin, Roll. “The Secret of Zara's Success: A Culture of Customer Co-Creation.”

Martin Roll, Martin Roll Company, Mar. 2018,

martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-

culture-of-customer-co-creation/.

Pincott, John. “Retailers must embrace in-store pickup.” Retail Dive, Industry Dive,

2019. https://www.retaildive.com/ex/mobilecommercedaily/retailers-must-

embrace-in-store-pickup

Team, CeMAT. “CeMAT Insider.” 4 Key Facts about Zara’s Supply Chain Success,

Deutsche Messe, 11 Nov. 2016, blog.cemat.com.au/4-key-facts-about-

zaras-supply-chain-success.

“Zara: Changes Are in Store, but What Will They Mean for the Retail Chain?”

Knowledge@Wharton, Wharton School of the University of Pennsylvania, 18

Apr. 2012, knowledge.wharton.upenn.edu/article/zara-changes-are-in-

store-but-what-will-they-mean-for-the-retail-chain/.

Zynep, Ton, Elean Corsi, and Vincent Dessain. Zara: Managing for Fast Fashion.

President and Fellows of Harvard College. Harvard Business Publishing:

Boston, MA, 19 January 2010.

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REVIEW ASSIGNMENTS: Final Exam

RTL4010: Retail Executive Decision Making C01 22313 My Grades

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uSucceedmy ulearnBryan Kaetz

RTL4010EXECUTIVE DECISION

MAKINGDR. EGELN

Supply Chain

� Evaluation of current supply chain (effectiveness and profitability)

� Pros/cons of current supply chain� Recommendations for improvement/changes to

supply chain

Stores

� Evaluation of current stores (effectiveness and profitability)

� Pros/cons of current stores� Recommendations for improvement/changes to

stores

Supply Chain vs. Stores

� Evaluation of relationship between supply chain and current stores

� How will the recommendations you have made effect the other (i.e., a recommended change to the supply chain will impact stores how)

Final Case Guidelines

� Make sure that you have gone deep enough with the information and it reflects 4 years of course work in the program utilizing correct terminology.

� Think outside the box for recommendations.� Use examples/references to support your ideas, don’t quote

the case for support.� Must include AT LEAST 3 additional references using MLA

in-text citations.� Case submission is to be 6-8 pages plus a works cited page. � This is an individual case and is NOT to be discussed in your

group.� Case is due in ulearn NO LATER than 11:30 am on Thursday

2/14. Submissions emailed will NOT BE accepted.

Appendix

1. Case Framework . . . . . . . . . . . . . . . . . . . . . page 80 2. Rubric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 82 3. Case Template . . . . . . . . . . . . . . . . . . . . . . . page 84

How to analyze a case All cases must follow this format. Cover Page

a. Title b. Full Names of all group members (put in alpha order) c. Course d. Date

I. Situation Analysis “Synopsis” – briefly summarize the case in your own words –

No more than 2 pages Make sure that you read the case and outline the important events; this will ensure that you have a strong situation analysis.

a. Set the scene: background information, relevant facts and identify the most

important issues. b. Identify two to five key problems.

i. Why do they exist? ii. How do they impact the organization? iii. Who is responsible for them?

II. SWOT Analysis – in bullet format • Strengths • Weaknesses • Opportunities • Threats

a. Identify the strengths and weaknesses internal to the organization. b. Identify the opportunities and threats external to the organization.

i. Remember that threats are not competition but what competition is doing.

III. Problem Statement “WHY?” Keep it brief, make sure that you are presenting the actual problem and not symptoms of the problem. Challenge yourself to be concise but brief. This should be written as a statement not a question.

Demonstrate that you have researched the problem in the case study.

a. Does the problem or challenge facing the company come from a changing environment, new opportunities, a declining market share, or inefficient internal or external business processes?

b. Is it a management problem, a technology problem, an organizational problem, or a combination of them?

Internal

External

IV. Development of Alternatives – at least 3. Your alternatives are derived from your opportunities outlined in your SWOT. Strategic alternatives should identify basic directions the firm might go with. You must develop advantages and disadvantages for each alternative. a. Outline possible alternatives based upon solid business practices. What actions

will be impactful for the organization. b. Explain why some alternatives would not be the correct choice at this point in

time. i. What constraints would prevent this alternative from being chosen? ii. Why are some alternatives not possible at this time?

c. Support the development of your alternatives with outside research. i. What has been successful for other similar organizations

V. Final Recommendation – Evaluate each alternative with a well thought out

analysis and pick the best choice based on the company’s strengths and opportunities. Based on the evaluation of the alternatives, present the groups recommendation. The recommendation needs to be justified with a thorough analysis and additional supporting material (resources using proper MLA in-text citations). An overall case conclusion is the final paragraph of the paper.

Other pointers for working on your cases…. • Must include at least 3 additional references (in addition to the case itself) using MLA in-

text citations and a works cited page. • All cases are typed, contain a cover sheet, sections are labeled and are double spaced

and printed in a 12-point font. Don’t forget bullet points can help the reader (professor) to follow your points. Bullets should be utilized in the SWOT analysis. Do NOT use paragraphs for this section.

• All cases MUST be turned in through Ulearn/Turnitin.com and will not be accepted via email.

• Suggested Reading – Read the case at least 3 times. Yes, 3 times. If you only read it once, you will only be able to detect surface problems.

• Each group member receives the same grade. Choose your groups carefully.

RTL4010 RETAIL EXECUTIVE DECISION MAKING FINAL CASE Dr. Egeln This term, we will be evaluating the following outcome to assist in the overall evaluation of your fashion merchandising and retail marketing program – Apply creative and advanced analytical competencies necessary for careers in fashion merchandising and retail marketing.

This outcome will be evaluated by utilizing a case study from the Harvard Business Review (HBR). The case chosen will be reflective of the Fashion/Retail Industry. Your professor will review the steps necessary to analyze a case study, which includes developing a plan of action for the situation presented to you.

A rubric will be used to evaluate individual submissions. A copy of the rubric is attached and your professor will review the rubric and explain each rating area.

The reader of your submission will be evaluating the following – identification of the main issues/problems, analysis of the issues, proposes effective solutions/strategies to the problems presented in the case, and professional application (demonstrates links to course content, additional research, and current market trends).

The case study for this term is “Zara: Managing Stores for Fast Fashion” and is available in the Harvard Business Review (HBR) course pack.

Your submission must follow the MLA Guidelines and all submissions must be reflective of your senior status.

Your submission of this case study is due at the end of class Thursday February 14th, 2019 in Ulearn.

RTL4010ExecutiveDecisionMakingCaseStudyEvaluationRubric

Teamcases=50pointsFinalindividualcase=100points

Excellent AboveAverage Acceptable Unacceptable # IdentificationoftheMainIssues/Problems(10pts)20pts

Correctlyidentifies&interpretsallofthemainissuesinthecasestudy(10-9pts)(20-17pts)

Correctlyidentifiesandinterpretsmostofthemainissuesinthecasestudy(8pts)(16-15pts)

Identifiesandunderstandssomeoftheissuesinthecasestudy(7pts)(14-13pts)

Identifiesandunderstandsfewoftheissuesincasestudyordidnotsubmitwork(6-0pts)(12–0pts)

CreativeandAdvancedAnalysisoftheIssues(15pts)30pts

Providesinsightfulandthoroughanalysisofalltheissues(15-14pts)(30-27pts)

Providesthoroughanalysisofmostoftheissues(13-12pts)(26-23pts)

Providesasuperficialanalysisofsomeoftheissuesinthecase(11-10pts)(22-19pts)

Incompletelyanalyzesissuespresentedinthecaseordidnotsubmitwork(9-0pts)(18–0pts)

Proposeseffectivesolutions/strategiestotheproblemspresentedinthecase(15pts)30pts

Welldocumented,reasonedandpedagogicallyappropriatecommentsonsolutions,orproposalsforsolutions,toallissuesinthecasestudy(15-14pts)(30-27pts)

Appropriate,wellthoughtoutcommentsaboutsolutions,orproposalsforsolutions,tomostoftheissuesinthecasestudy(13-12pts)(26-23pts)

Superficialand/orinappropriatesolutionstosomeoftheissuesinthecasestudy(11-10pts)(22-19pts)

Littleornoactionsuggested,and/orinappropriatesolutionstoalloftheissuesinthecasestudyordidnotsubmitwork(9-0pts)(18–0pts)

ProfessionalApplication(10pts)20pts

Excellentresearchintotheissueswithclearlydocumentedlinkstoindustryspecificfactors.Demonstratesextensiveuseofdecision-supporttoolsandcompetenciesforcareersinfashionmerchandisingandretailmarketingtoguiderecommendationsandconclusions(10-9pts)(20-17pts)

Goodresearchanddocumentedlinkstothematerialread.Showcasedindustryspecificfactors.Demonstratessomeuseofdecision-supporttoolsandcompetenciesforcareersinfashionmerchandisingandretailmarketingtoguiderecommendationsandconclusions(8pts)(16-15pts)

Limitedresearchanddocumentedlinkstoindustryspecificfactors.Demonstrateslittleuseofdecision-supporttoolsandcompetenciesforcareersinfashionmerchandisingandretailmarketingtoguiderecommendationsandconclusions(7pts)(14-13pts)

Incompleteresearchanddidnotrelatetoanyindustryfactorsordidnotsubmitwork.Failstousedecision-supporttoolsandcompetenciesforcareersinfashionmerchandisingandretailmarketingtoguiderecommendationsandconclusionsordidnotsubmitwork(6-0pts)(12–0pts)

Team/50 _______ Individual/100 ______

I. Situation Analysis

“Synopsis” – briefly summarize the case in your own words – No more than

2 pages Make sure that you read the case and outline the important events; this will

ensure that you have a strong situation analysis. Set the scene: background

information, relevant facts and identify the most important issues. Identify two to

five key problems. Why do they exist? How do they impact the organization? Who is

responsible for them?

II. SWOT Analysis

Strengths: (internal)

1. Strength + explanation

2. Strength + explanation

3. Strength + explanation

Weaknesses: (internal)

1. Weakness + explanation

2. Weakness + explanation

3. Weakness + explanation

4. Weakness + explanation

Opportunities: (external)

1. Opportunity + explanation

2. Opportunity + explanation

3. Opportunity + explanation

4. Opportunity + explanation

Threats: (external)

1. Threat + explanation

2. Threat + explanation

3. Threat + explanation

4. Threat + explanation

III. Problem Statement

One paragraph. “WHY?” Keep it brief, make sure that you are presenting the

actual problem and not symptoms of the problem. Challenge yourself to be concise

but brief. This should be written as a statement not a question. Demonstrate that

you have researched the problem in the case study. Does the problem or challenge

facing the company come from a changing environment, new opportunities, a

declining market share, or inefficient internal or external business processes? Is it a

management problem, a technology problem, an organizational problem, or a

combination of them?

IV. Development of Alternatives Your alternatives are derived from your opportunities outlined in your SWOT.

Strategic alternatives should identify basic directions the firm might go with. You

must develop advantages and disadvantages for each alternative. Outline possible

alternatives based upon solid business practices. What actions will be impactful for

the organization. Explain why some alternatives would not be the correct choice at

this point in time. What constraints would prevent this alternative from being

chosen? Why are some alternatives not possible at this time? Support the

development of your alternatives with outside research. What has been successful

for other similar organizations.

Alternative Options:

1. Alternative

Alternative 1: Description

Alternative and development or explanation.

Alternative 2: Description

Alternative and development or explanation.

Alternative 3: Description

Alternative and development or explanation.

VI. Final Recommendation

Evaluate each alternative with a well thought out analysis and pick the best

choice based on the company’s strengths and opportunities. Based on the evaluation

of the alternatives, present the groups recommendation. The recommendation needs

to be justified with a thorough analysis and additional supporting material

(resources using proper MLA in-text citations). An overall case conclusion is the

final paragraph of the paper.

Works Cited

Citation

Citation

Citation