Case analysis-Harrington Collection Essay

Problem identification In 2008, Harrington Collection, a large manufacturer and retailer of U.S. high-end women’s apparel, was facing opportunities and challenges whether to launch of active-wear products to meet the market and customers’ needs. But according to the macroeconomic environment, the target market, competitors and its own financial condition, Harrington needed to take careful consideration and then make the best decision for their own development. The U.S. women’s apparel industry Market trends From the data of U.S. Apparel Market Sale (2002-07), we could find out that, even when subjected to the impact of the economic downturn, the U.S. women’s apparel industry remained in a mature and stable state and held by continued growth momentum. The Retail Sales increased from $106 billion in 2002, to $133 billion in 2007. The average annual growth rate is 4.7%. It showed that the total sales of the women’s apparel industry did not receive the macroeconomic impact. Consumers still had a high desire to go shopping. At the same time, analyzed the data from U.S. Apparel Market Units, influenced by the economic downturn, consumers were more interested in less than $100, low-priced women’s apparel. From 2005 to 2007, the growth rate of units sold in more than $200 is 3.4%, the product growth rate of between $100-200 is 1.4%, and $50 to 100 product growth rate is 14.3%, while less than $50 low-priced products have the highest growth rate of 16.1%. The low-cost market has a great opportunity for manufacturers. Characteristics and competition The value chain of the women’s apparel industry is about: (1) branding; (2) design; (3) buying; (4) production; (5) channel marketing; (6) distribution; and (7) retailing. In the era of apparel products are relative homogenization, price war seems to become a common method to erode the market share of each other between brands. Each brand need to face how to  effectively reduce costs. Many brands established overseas plants or outsourced to overseas factories. This could reduce their cost of production and labor. Through effective monitoring, the overseas factory’s products also have a good quality. This makes the increased competition on the market. Women’s apparel retailers included department stores, mass merchandisers, specialty stores, and warehouse clubs/supercenters. Among them, the specialty stores got the 1st position, 58.6% share of channel, changed 11% from 2005 to 2007. The 2nd place is department store, 19.0%. Mass merchandisers got the 3rd position with 11.4%. In the retailing women’s apparel for the U.S. market, the most important distribution channel is specialty store. Harrington Collection Company’s background As a nearly 50-year history of the women’s apparel brand, Harrington Collection has a clear market positioning. Targeted at the high-end market is the original intention of Harrington Collection. The 1980s, the Harrington Collection expanded Vigor and Christina Cole brands, the product line aimed at the younger customer market. Because of their superior quality, knowledgeable sales staff and designer styles, they have a group of loyal customers. Four product lines Harrington Collection targeted affluent, fashionable, college-educated, professional women from 25 to 60. This company has four product lines, covered three classifications (Designer, Bridge, and Better) of the women’s apparel market. They targeted women of different ages, different background, and different family income. The Harrington Limited, as the â€Å"Designer† classification. This product line focuses on the Designer Collection, targets the customer as â€Å"Sophisticated Elegance†. Their age is from 35 to 60, an average household income is more than $200k. The retail price range is $500-$1000+. And it has 20% of Market Share, as the â€Å"Cash Cow†. It shows Harrington Collection’s market position is a high-end brand. Harrington Limited is the company’s most important product, and as a high-end brand, the products could show the strength of Harrington Collection. The Sopra, positions as the â€Å"Bridge† classification. This product line focuses on the Evening Wear; it targets the consumers of â€Å"Status Seeker†. The retail price  is about $400-$800. Most of the customers are 35-60; household income is more than $150k. The market share of Sopra is the lowest among the four product lines, only 5%. It is the â€Å"Dog† product, but the Evening Wear means the high-end position of a company, Harrington Collection needs to keep this product line. The Christina Cole, positions as the â€Å"Bridge† classification. This product line focuses on the high-end Career Wear; it targets the customers of â€Å"Office Chic†, with the price from $300-$700. The average information of the customers is 30-55, with more than $100k household income. The market share is 8%. The market positioning of this classification’s products are very competitive, so 8% is acceptable. It is the â€Å"Star†. The Vigor, â€Å"Better† classification’s product line, focuses on the Career Wear. Targeted customers are â€Å"Trend Setter†. They are from 25 to 50, with more than $75k household income. As the targeted age of the customers is younger than the others product lines, this line is full of fresh and flexible. It is able to adapt to the needs of the market to react and change, the â€Å"Star†. Manufactory strategy Harrington Collection does not set up overseas factories in Asia or outsourcing, for two reasons. First, they expected of high-quality women’s apparel products, good quality make their products to attract high-end consumers. Second, they hoped to catch up with the fashion, the close plants will have a high speed to deliver their product to the retail department, it could be able to help the brand issue season’s trend styles with the fastest speed. This strategy improves the cost of product, but it will help to enhance the brand image. Active wear In recent years, more and more of the company launched its own active wear products, just like hoodie, pants, and tee-shirt. Consumers buy active wear’s aimed not just in gym, but worn in everyday life. Consumers believe that active wear is very comfortable, very fresh, and very casual. There is also a very important reason, active wear is relatively cheap. In 2007, the â€Å"moderate† and â€Å"budget† classifications got 80% of market share on the apparel market and sold 7.5 million units in that year. But in 2009, many brands started to transform at the level of the â€Å"better† active wear. The average selling price was just below $100.By such changes in the market, we  can see that the consumer’s demand of high-grade active wear was increased. And consumers are willing and able to buy high-end active wear. Active wear of Vigor Division To Harrington Collection, in 2007 and 2008, the active wear market was not suitable for them to locate a high-end brand. Their brands, Vigor, the lowest level of the product line, but also achieve the â€Å"Better† classification. At that time, the consumers were more interested in the cheaper products. But the Market trends had a sudden shift in 2009, so Harrington Collection got an excellent opportunity to join into the active wear market. Harrington Collection’s Vigor brand is the most suitable for the introduction of active wear products. In the minds of consumers, Harrington Collection is a high-end brand, if Vigor was able to launch active wear products, would be favored by the consumers of high-end brands. Vigor’s styles were much more flexible than the others brands of Harrington Collection. And the core styles of active wear were about fresh and lifestyle. As a brand of Harrington Collection, Vigor continued the strategy of their company, provided the hi gh quality and agility products to fix the consumers’ needs, wants, and demands. This would attract the existing customers of Harrington Collection to purchase Vigor active wear products, because they believed that these garments were high quality and fashion. The Vigor team made decision about pricing. That hoodie, tee-shirt, and pants would be $100, $40, and $80, it seemed not a very high price, the working-class even could afford for them. It could help Vigor to get shares in the market of â€Å"moderate† classification. However, the establishment of a new product line requires the purchase of new equipment, the new plant, equipped with the appropriate staff. Harrington Collection needed to build a management team, design team. However, even the prospects of the market were perfect, but it still had a high risk to invest. Because of the market was full of uncertainties. But as a very promising project, Harrington Collection should carry out investment and development. Potential retail trade Because of the Vigor has laid a foundation, with a number of loyal customers. The active wear’s released as a new product sold in the present  market. Consumers can purchase the Vigor products from company-owned stores, upscale department and sociality stores. Company-owned stores’ sales and units are about 20% of the other two kind’s stores. Company-owned stores As the retail group of the Harrington Collection, they operated 120 stores, 50 of them were dedicated solely to the Vigor division. As the advantages of these stores that belong to the same forest senior enterprise distribution strategy can be effective implementation. Harrington Collection can avoid large retailers control, independent development and implementation of the marketing strategy. In these stores, Harrington Collection can be unified planning, unified propaganda, to help establish and enhance brand image. The stores’ management can be more direct contact with the market, and is easy to understand the changes in market demand, and at first time to adjust the marketing strategy. But with the high operating costs, many involve the management of business, need to invest a lot of manpower, material and financial resources. Upscale department and sociality stores As another two very important sales channels, they sold 80% of the Harrington Collection’s products. Both the two storefronts implement the same plan and strategy, with a certain degree of stability and integrity, and at the same time are able to avoid the vicious competition among the channel members. However, in this distribution channel, the prices of the previous link directly decide the latter part of the cost. Vigor’s active-wear The Vigor active-wear’s pricing relative to other products is relatively low, less than $100. This series is a strong attraction for consumers. In the initial launch, Vigor would be vigorously publicized. With Harrington Collection’s brand awareness, it was estimated that due to the current market demand is relatively large, and will soon get a valid response. The pricing strategy of Vigor active-wear is market skimming prices. Although these prices are lower than the other products of Vigor. But the variable costs of these products are only $20.55 (Hoodie), $7.50 (Tee-shirt), and $16.40 (Pants). The pricings are $100.00 (Hoodie), $40.00 (Tee-shirt), and $80 (Pants). Even with other related variable costs, and the fixed costs as  well as the construction of the plant, the purchase of equipment, and the administrative expenses of the management. The total cost of the product is much lower than the pricing. This pricing strategy can maximize profits of each single product. And it will not affect their own brand positioning to consumers buying enthusiasm. These products as same with other products of Vigor, will perform the same sales strategy; simultaneous promotion. The active-wear will not become a special product, which will affect the attitude of consumers to Vigor, that the active-wear of lower grade, or a decline in sales situations. Vigor’s competitors’ reaction â€Å"Better† level Positioning â€Å"Better† level the active-wear market is very competitive. Liz Claiborne’s Juicy Couture was one of the early leaders in this market. The leading companies, such as Jones Apparel Group and Liz Claiborne, both of them had a high share in the women’s apparel market. Even more, most of their products positioned in the â€Å"Better† classification. After Harrington Collection released Vigor series active-wear, the two companies will certainly respond. These two competitors in the overall grade lower than Harrington Collection, but because they build factories in the third world, their cost is lower than Harrington Collection, so they can drive down prices, establish a price war in this â€Å"Better† classification. At the same level, the relative homogenizations of active-wear products make it difficult to get a breakthrough in the design. So the price seems to have become a major factor in many consumers’ choice. Each company will be fully developed characteristics of their own company’s products, in order to attract more loyal customers, and seize the market share of other companies. Other levels Competitors with the same grade of the Harrington Collection will seize this opportunity to enter the active-wear market. They will not have a distinct advantage in the price, even in the presence of a disadvantage. But their quality may be higher, more innovative style design; fabric selection will be more comfortable. These products will attract high-end consumers’ details. The low-end brands will not impact on the formation of Vigor. They target different customer groups, both the customers will not be  influenced by each other. There is no direct competition, but would impact overall active-wear market share. Potential financial impact of Vigor active-wear manufacturing group The establishment and promotion of a new product needs to Harrington Collection invest. As the Vigor active-wear manufacturing group, this part of the investment is very high. The pants’ equipment costing was about $2 million and plant start-up cost estimated at $1.2 million. This program’s cost estimated $3 million. The hoodie and tee-shirt’s equipment costing was about $2.5 million and plant start-up cost estimated at $2.5 million. This program’s cost estimated $3.5 million. The expenses of national advertising and public relations campaign were estimated at $2 million. The carrying of active-wear line for every company-owned store was $50000 per store. The total carrying expense was about $2.5 million for 50 company-owned stores. The other data will be calculated in the form at the end of this part. In the end, the profit before tax in 2009 was $6,304,590. The profit margin before tax was 15.8%. Make decision A mature company should be good at discovering market opportunities, and seize the opportunity. Every investment has its risks, and identifies real opportunities for each company is very important. As people increasingly focus on practical demand for clothing, active-wear has good market prospects, and Harrington Collection has an advantage for the development of this product line. Even though the initial investment is huge, but this product is also huge gains. These products sale for a period of time then  the early investment will be recovered form earnings. Harrington Collection should let Vigor add this product line.