Strategic Positioning

Furness LT3, 12/02/2015, 12:00-14:00

Group 4

Chloe Bradley, Dan Ellis, Cheng Shi, Amanda Vainio, Minjae Kim, Daniyar Meimankhan, Jingjing Zhao

Overview

Porter’s Generic Strategies

Customer Segments

PUV analysis of Customer Segments

Bowman’s Strategy Clock

Bowman’s Strategy Clock

Executive Summary

Task

Action

Recommendation

Identify how H&M and Zara are positioned

High Ability of Design High Quality of Product Changing product lines frequently The latest fashions (trendier) “Zara,

implement the strategy to suggest rational price while they reflect most recent fashion trend rather than opting the strategy to gain competitive superiority by low price simply” (Mikyung, 2010)

Low Price “These brands like H&M implements low price strategy in the way that they develops diverse products with the capability of swift planning and design by themselves, and manufactures the products by outsourcing in third countries, by which they induce cost reduction, and supply products in low price without mediating marginal prof it utilizing well established

distribution networks of themselves” (Mikyung,

2010)

Low cost of sale

E-commercial market

Zara H&M

Porter’s Generic Strategies

Industry wide

Single Segment

Source of Competitive Advantage

Low Cost Differentiation

Co

mp

eti

tive S

cop

e COST LEADERSHIP

H&MBROAD DIFFERENTIATION

Zara

COST FOCUS

• Asian market?DIFFERENTIATION FOCUS

• No focus

IDENTIFY HOW THIS IS LIKELY TO CHANGE IN THE FUTURE

Expected future changes in the position

Zara• Attempting to adopt local preference(e.g. America and China)

• Expend E-commercial market

• Adjust the price differences

• Improving the differentiation strategy/avoiding the risk of copycat

• More advertising

H&M• Improving the quality of product

• More cross-brand selling

• Invest Asian market by generating revenue from EU

• Expand its market no only by opening new stores but also by

upgrading their online shop

Customer segmentation

Both Zara and H&M cover two segments within their clothing ranges;

Women, 18-40, middle income

Men, 18-40, middle income

Customer segmentation

Zara’s products are more expensive on average and targeted to more mature customers

H&M’s key segment area is women who want variety of apparels at affordable price

Both have to change their marketing strategies in different market areas due to cultural and taste differences

The Customer Matrix

Perc

eiv

ed U

se V

alu

e (

PU

V)

Perceived Price (PP)

H&M

Zara

Bowman’s Strategy Clock for H&M

Bowman’s Strategy Clock for Zara

PUV Analysis

New Trends

Fit

Quality

Store experience

Appearance

Fit

Quality

Low Price

Celebrity endorsements –David Beckham underwear

Zara H&M

Key Strategic issues

Entering Asia due to sales stalling in Spain (25% of revenue) (The Economist, 2012)

Struggling in America due to trendy cuts and slim fits (The Economist, 2012)

Higher price in Asia (likely due to transportation costs) “Zara’s clothes are far pricier than local rivals’, where as in Europe they are relatively cheap’’

Fast fashion is less of an option due to harsh economic situation in Europe

Singled out for poor quality by Chinese government. (The Economist, 2012)

Traditional countries- differing styles and marketing techniques

Entering Asia. “H&M expects to have opened 275 more Asian stores by the end of this year” (The Economist, 2013)

Send clothing made in Asia, back to base in Spain, and then back to Asia (cost inefficient) (The Economist, 2011)

Traditional countries- differing styles and marketing techniques

Only 3% of revenue in Asia (The Economist, 2011)

Asia is prone to Long Term Orientation (different management styles may slow down decision making and fashion regeneration)

Zara H&M

Competitive Strategic Options

STRATEGIC OPTIONS NEEDS/RISKS

Focused differentiation Perceived added value to a particular segment, warranting price premium

Success depends on:

existence of less price sensitive buyers – prepared to pay more for added PUV

and whether the added PUV can be easily imitated

Low price Maintaining value and cutting price

Risk of price war and low margins; need to be cost leader

Hybrid Adding value and cutting price.

Low cost base and reinvestment in low price and differentiation.

Successful when volumes can be achieved and when cost reductions can be found on dimensions not valued by customers

Competitive Strategic Options

STRATEGIC OPTIONS NEEDS/RISKS

Differentiation

(a) without price premium

(b) with price premium

Perceived added value by user, yielding market share benefits

Perceive added value sufficient to bear price premium

INTERNAL

EXTERNALStrengths Weaknesses

Opportunities

SO STRATEGIC OPTIONS WO STRATEGIC OPTIONS

Threats

ST STRATEGIC OPTIONS WT STRATEGIC OPTIONS

Use famous Asian

people to promote

branding (like in

Europe) for example;

Zhou Xun

Move the rest of

production for Asian

market to Asia to reduce

cost

Use the fact that Chinese

people hold foreign

brands in high esteem to

deter away from local

brands such as IT

By moving all Asian

production to Asia, this

would allow H&M to

speed up fashion

delivery times

TOWS Matrix H&M

TOWS Analysis

Strategic Options ranking

TOWS Matrix Zara

Emphasise Western roots to

gain advantage over local

competitors

Expand online shopping

opportunities

Sizes and styles match

those of Chinese women’s

(Fleming, 2012)

Always have the

trendiest clothes

available because of

high turnover, this may

eliminate some

competition

Justify the higher price

by presenting their

clothes as luxurious

items

Or

Lower the price

Could move some of the

production to Asia to

lower the cost of products

Strategic Options & Recommendations

Using appropriate strategic analyses & TOWS:

Identify key strategic issue(s)

Identify strategic options

Forward recommendations (using TOWS Analysis)

Rank your recommendations

Strategy Evaluation: Lecture 9

ACCEPTIBILITY

Does the proposed strategy address the key opportunities and constraints the organisation faces?

SUITABILITY

Does the proposed strategy meet the expectations of stakeholders?

FEASIBILITY

Would the proposed strategy work in

practice?

Do the strategic options you have defined address the key strategic issues & industry

success factors? (Johnson et al., 2007)

SUITABILITY

Critical Reflection

Hard to arrange meetings for such a big group

Difficulties finding information on H&M, most the of the information is from comparison reports

Very marketing based, hard to find sufficient background information

Critical Reflection

Strengths and weaknesses of our strategic stance:

References

• Anon., 2007. H&M Annual Report 2007. [Online] Available at: http://about.hm.com/content/dam/hm/about/documents/en/Annual%20Report/Annual_Report_2007_en.pdf

• Anon., 2012. Global stretch; Fashion for the masses. The Economist, p. 76.• Anon., 2013. China Average Yearly Wages in Manufacturing. [Online]

Available at: http://www.tradingeconomics.com/china/wages-in-manufacturing• Mikyung, K., 2010. Marketing strategy and the current status of Global SPA Brands. Journal of Fashion

Business, 14(3), pp. 35-51.• The Economist, 2011. Global stretch; Fashion for the masses. The Economist.• The Economist, 2012. Fashion forward; Inditex. The Economist, 402(8777), pp. 63-64.• The Economist, 2013. Asia/world: Fast fashion firms look for global domination. The Economist.