Workshop 2 presentation (1)

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
CompetitiveScope
COST LEADERSHIP
H&M
BROAD 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
PerceivedUseValue(PUV)
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
EXTERNAL
Strengths 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
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_20
07_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.

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