TMA 02: BRANDED LIFESTYLE HOLDINGS LIMITED: STRATEGIC TRANSFORMATION IN CHINA
The primary purpose of this case is to teach students about the key strategic planning frameworks used in strategic management, including those used in external analysis (industry, suppliers, customers, and competitors) and internal analysis (resources, capabilities, and firm value chain). This case outlines the strategic planning process in order to enhance students’ ability to develop appropriate business strategies from Units 3 and 4. After working through the case and assignment question, students should be able to:
1. Discuss the major activities in the strategic management process.
2. Conduct strategic analysis using various analytical frameworks for external analysis (political, economic, socio-cultural, and technological analysis and Porter’s Five Forces) and internal analysis (resource-based view analysis, firm value chain, and core competence analysis).
3. Develop a comprehensive business-level strategy based on sound strategic analysis.
Word limit: 2500 words.
This assignment is based on the case study Branded Lifestyle Holdings Limited: Strategic Transformation in China. This TMA will contribute towards the achievement of BB835 Learning Outcomes 7A2, 5, 6; 7B2; 7C2; 7D3. There are two tasks that you must perform to complete this assignment. The tasks involved in this TMA have been designed to provide you with practice in answering the types of questions you will face in the BB835 examination.
Task One: General Environment and Industry (1750 words, 60 marks)
1. Shivkumar must carefully evaluate the general consumer trends in China. What are some opportunities and threats facing an apparel retailer such as Branded Lifestyle Holdings Limited?
2. Is the Chinese apparel retail industry attractive? What should an apparel retailer do to succeed in this market?
Task 2: Creating and Sustaining Competitive Advantage (750 words, 30 marks)
3. What are Branded Lifestyle’s key resources, capabilities, and weaknesses? Analyse the company’s performance, and compare it to key competitors.
Notes on answering TMA 02
Your assignment should be prepared in a report format.
This assignment builds upon skills you have developed from the activities in the units of BB835 that you have studied so far. As you prepare your answers for this assignment, ensure that you make use of the concepts you have read about and used, as well as the insights you have gained, during your BB835 studies up to this point. All of the units that you have read so far are relevant. However, in this assignment you should demonstrate a particular understanding of Units 3 and 4, which focuses on the internal analysis of an organisation and all aspects of resources and capabilities of the organisation and their relevance to strategy is discussed.
This TMA specifically tests strategic thinking skills and the ability to apply module concepts to understand the situation facing the case organisation, developing insights in the process and then using those insights to offer your perspective on what the case organisation should do and why. This aspect of the TMA task, offering your own view on how the case organisation should act, is an important measure of your ability to think strategically and construct a supported argument.
You are required to draw explicitly on relevant BB835 models, concepts and theories to support your analysis, conclusions and recommendations. In answering the tasks, it is important that you draw upon all of the information provided in the case study, including appendices and any statistical and financial data that is relevant to the assignment.
Your assignment should not exceed 2500 words in total. The 2500 words exclude appendices, which should not be excessive; your application of frameworks should not be presented in appendices.
A CASE STUDY OF BRANDED LIFESTYLE LIMITED.
Daily, new businesses rise to occupy different levels within the market, going as far as the global market. On the other hand, other companies that might have once held the world stage fall into oblivion, never to recover. Some even experience stunted growth for several years. The survival and growth of a business are usually dependent on various factors. These factors, both external and internal, have significant sway on an organization. These factors are what can make or break a business within any industry. Any business should, therefore, consistently take them into account and consider what should be improved on and what should be done away with.
Various tools can be used to do these analyses. Two of these are the Porter’s Five Forces model and SWOT Analysis. This document intends to make use of these two tools to analyze the apparel company, Branded Lifestyle Limited, and the general apparel industry in China. The article begins with a brief history of the company and how it has evolved to its current state. It then looks deeply into the Chinese apparel industry; this will be done using the Porter’s Five Factor model, before getting to look into Branded Lifestyle using SWOT analysis.
Overview of Branded Lifestyle Holdings Limited
Branded Lifestyle Limited is an apparel retail company that was founded in 2011. This was after the acquisition of Hang Ten Group Holdings Limited by Fung Retailing. Fung Retailing Limited is the retailing branch of Fung Holdings Limited. Fung Holdings, which is the parent company, was established in 1906 as a family business, transformed into a trading company in the 1970s, and later on, in the next decade, expanded into logistics, distribution, and retailing. They offered these services throughout the Asia-Pacific region. The decision to move into designing, developing, and distributing branded apparel and footwear in 2005 was based on their experience in supply chain management. During its acquisition in 2011, Hang Ten had 792 stores across six countries. These countries, China, Taiwan, Hong Kong, Singapore, Malaysia, and South Korea, form the six markets in which Branded Lifestyle currently operates. The company has five apparel brands which it sells to these markets. They include Hang Ten, H: Connect, Arnold Palmer, LEO, and Roots. Out of all the brands, Hang Ten has taken the majority of the share in Branded Lifestyle’s business. These brands have remained profitable in most of the company’s Asian markets, except for China, where it has been struggling.
Overview of the apparel industry in China.
The emergence of Asian apparel brands in the 1980s catapulted the growth of the apparel industry in the region. The contribution of these brands, Giordani, Uniqlo, and Metersbonwe to the growth of the Asian market, further led to the influx of other international clothing brands like Gap, H&M, and Zara.
In the decade between 2003 and 2013, the Chinese apparel industry has grown at a steady rate of over eleven percent each year. It was a $122 billion industry as of 2013. The market comprises more than six thousand brands, which makes it very competitive. This competition has made even the most prominent brands have a tiny share of the market. The top brand, Metersbonwe, has only been able to gather less than two percent of the market share. A majority of the apparel brands in China outsource their production to apparel manufacturers, some of who made their brands. Other manufacturers, especially the small scale ones, chose to sell their none branded products online.
The Chinese market consists of both the online retail stores and the traditional brick and mortar stores. The major cities like Beijing, Guangzhou, and Shanghai had more retail outlets in comparison to other smaller cities. This made online retail more vibrant in smaller cities, in contrast to the larger cities.
Consumer Trends in China.
With China being named the second-largest economy in the world by 2014, a fete it achieved over a two-decade period of constant economic growth, there has been a rise in disposable household income. Coupled with its large population of over 1 billion people, it is a retailer’s paradise for a wide variety of products and services. There are four classes into which Chinese consumers can be placed, depending on one’s disposable income. An individual is either a poor, a value, a mainstream, or an affluent consumer. Value consumers make up the most significant percentage of the market (82%), while affluent consumers take up the smallest share (2%).
The most significant expenditure on clothing was attributed to those between the ages of 20 and 30. They considered fashionable products with reasonable price tags. These preferences, however, varied depending on the regions. Most garment purchases were made in department stores and particular retail stores. There was also an upsurge in e-commerce in the preceding few years. The largest share of the market was occupied by casualwear for the mass market. Luxury wear took the least share but had witnessed a steady spike recently, making it the fastest growing apparel segment.
The attractiveness of the Chinese Apparel Industry.
While considering the attractiveness of the apparel industry in China, the Porter’s Five Factor model was the best fit for its analysis. It was determined to be the most ideal in discerning the competitiveness and whether the industry is profitable or not.
Suppliers in the Apparel Industry.
Owing to the massive number of apparel brands in China, six thousand brands, there is an equivalently large number of suppliers to meet this demand. The suppliers are manufacturers who are contracted to make the apparel for the various retail companies. Several manufacturers make non branded clothing. Anyone willing to get into the industry has a wide variety of suppliers to choose from. Those who are already in the industry can also easily move from their current supplier to a cheaper alternative.
The population in China, 1.36 billion people, is a vast market for a retailer. These people are divided into four consumer categories; poor, value, mainstream, and affluent. The value consumers make up the majority of the potential purchasers and, therefore, can easily sway the prices within the industry. This population prioritizes fashionable garments that are reasonably priced. They can, therefore, effortlessly shift to a rival retailer who is offering a cheaper alternative of the same or higher quality. The large customer base limits the power of the customers to dictate the terms of service to the retailers.
The threat of Substitution.
The apparel industry cannot be threatened by substitutes since clothes have no replacements. The competition from rivals is, therefore, the only main threat. The threat of substitution for apparel retailers like Branded Lifestyle in China is the major apparel manufacturers. Apart from supplying garments to retailers, they also manufacture their brands. These manufacturers can easily sell their brands to consumers at a lower price, thereby undermining retailers.
The threat of New Entries.
The entrants into the Chinese apparel market have been international brands that have captured the changing consumer preferences. These brands have taken up significant market share with their fashionable clothing that comes at a relatively lower price. These brands also can set up shop in various locations within a short time hence having a broader reach in the market compared to those that have been in the market for a more extended period.
Competition within the clothing industry in China is very stiff, with over six thousand brands of clothing that are all potential rivals within this market. The most significant competitors, however, are international brands like Zara and Uniqlo. These brands can design and come up with finished products within a month; this is a fast rate that most local brands cannot catch up with. The standard rate of work for the local brands entails the designing and production of new items of clothing within six months and three months, respectively.
The use of SWOT analysis was implemented in the case of analyzing the performance of Branded Lifestyle Limited in the apparel industry in China.
Branded Lifestyle had a minimal advantage over its competition when Shivkumar took over as managing director of global brands. There is nothing new that they offered that their rivals did not. However, they had several international apparel brands within their portfolio, which were trendy. This was an advantage over the other 6000 brands within the market. Their Hang Ten brand was reminiscent of the Californian lifestyle, something that the younger Chinese population would be drawn to. The H: Connect brand, on the other hand, represented the Korean popular culture, which had attracted some interest from the Chinese market. Owing to the variety of brands they had in their portfolio, Branded Lifestyle could easily direct their resources to the one that was in trend at a particular time.
The few selling points by Branded Lifestyle acted as an advantage to them. They could quickly expand into various regions without necessarily having to close down many shops if any. The new strategy they could develop could, therefore, easily fit into the current minimal expenses, overheads
Previously, the marketing team for Branded Lifestyle’s Chinese market had all come from Taiwan. They tried to replicate the success they had in Taiwan in the Chinese market without considering the needs of the local market. The trends in Taiwan were simply considered for the market in China without considering the widened disparities. There was minimal strategy that had been put in place to expand the Chinese operations. The person in charge was more concerned with the daily activities of the firm rather than scaling the business.
The management team was aware of the inconsistency between what they offered and what the consumers needed, but they had very little authority to make the relevant changes. The resources allocated to them were also very meager and could hardly do anything in terms of change implementation. They simply operated on the mantra of reducing losses while keeping the business afloat for as long as they could. The lack of ambition by the employees also played a significant part in weighing down the business.
The lack of a vision for the Hang Ten brand in china resulted in the making of an inferior brand awareness strategy. Besides, the lack of resources only made the situation. The management did their branding on a ‘one-fit-all’ basis. There were no branding campaigns that were tailored for the Hang Ten brand in the Chinese market. The china operations simply assumed that the brand was well known, and opening up stores without creating awareness would drive in customers. The result of this was more inventory and minimal sales, hence more losses.
Branding Lifestyle had just a little over one hundred shops in China, most of which were in the tier 1 cities of Shanghai and Guangzhou. The operational costs in these cities were very high while sales remained low. The continued losses experienced by the company forced them to move to locations with less foot traffic, which deepened the sales further.
As much as there are many brands in China, Branded Lifestyle still has a lot of opportunities it can grab. There is still a lot of market for their goods in tier 2, 3, and 4 cities where most of the value consumers are located. These cities have also witnessed a spike in online purchases due to insufficient brick and mortar stores in those areas. The company should, therefore, consider expanding its retail distribution to these prime locations.
In the top tier cities, it has been observed that most foot traffic is found in new shopping malls. With the boost in commercial real estate in these areas, there are several malls from which Branded Lifestyle can choose from. They should keep in mind that the perfect location is the popular ones. They can quickly move up their operations from the current lesser-known areas to these locations.
With the rise in smartphone users all across china, Branded Lifestyle should consider moving some of its operations online. Opening up an e-commerce store will enable them to cover a wider geographical area and more customer base. This is less expensive, considering the cost of real estate in China and will help them keep their operational costs low while maximizing their profits.
The operational costs in tier 1 cities of Shanghai and Guangzhou are quite high while the sales are meager. Keeping up with their current trend of opening up stores in these cities will only deepen Branded Lifestyle’s losses. There has been a significant rise in the entry of international brands into the Chinese market. This has been fueled by the shift in consumer preferences to these brands. Even though the company sells international brands, it should strive to raise itself to a level playing field where it can compete fairly with these brands.
The Chinese apparel industry has experienced exponential growth fueled by the increased disposable household income by consumers due to the improved economy. The high population has enabled the clothing industry to become very diverse with shifting trends. The most recent trends in the Chinese market have been towards international brands. There has been an upsurge of setting up shop by these global brands. These brands have come into the scene with the ability to design and manufacture clothes at a fast rate, which the local brands cannot sustain. There are over six thousand apparel brands in China, most of which outsource their production to manufacturers within the country.
Branded Lifestyle Limited is an apparel retail company with several international brands within its portfolio. It has not been performing profitable for quite a while now. A new management team has been put in place to turn the situation around. Upon analysis of the business, they realized that the company had no strategic vision, and there could not tailor their operations for growth. The resources allocated to them were also very minimal. The previous team had also concentrated most of their services in the tier 1 cities where the operational costs surpassed the sales. However, the business was still positioned in a way that it could leverage some of its strengths and resources to achieve profitability.
Branded lifestyle holdings limited: strategic transformation in china (2018). Ivey Publishing.
Warning, this is an example paper that was written by a novice writer. It is posted online because the writer did not get paid for a similar task.