The environmental analysis


External Analysis


In keeping with the trends in other Asian countries, Sri Lanka is also showing greater urbanization trends. Statistics have demonstrated that Sri Lanka's urban population will double over the next several years. With greater urbanization comes a greater demand for identity and individuality which for the fashion industry can mean a greater demand for specialised products. Geographically Lilly Trotter will not be limiting itself to one area but will be addressing the urban population in general. At present it is limited to the urban centres where ODEL has setup its businesses.

The proposed market segments are the young adults (Ages 20 - 27) and advanced teenagers (Ages 16 - 19). The first group, the young adult females in their first few years of employment, is eager to experience their independence and want to be seen and noticed in social circles. Being introduced to the business environment for the first time they would be keen to present a fashion statement at social occasions. The next group, the fashion conscious advanced teenager, does not have independent means of her own but desires to appear adult and confident. This group would be looking to the first target group for fashion ideas and trends

Economic and political

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Due to the war in the country the political situation was volatile for a long time. With the ending of the conflict stability has come back to the Country. It is anticipated that the demand for exclusive fashion items will appreciate due to more affluent lifestyles. However, with global recession, lending interest rates may escalate. This will have an impact on the business expansion plans.


More people are using internet and online purchase has become popular among locals too. Hence the possibility of web marketing is an option to look at. Internet banking has made life easy giving greater ease of purchasing.

Social Environment

As stated above, with globalization society has become more and more westernised. Latest trends in Western fashion is seen as more and more acceptable and even sought after. This can be particularly seen in the increase of celebration of events such as Valentines and Christmas by various sectors of society.

Operational Analysis


The market that these products seek to occupy is a niche market which has not been fulfilled by the local fashion industry. As stated above there is limited fabric up market fashion bags presently in the market catering to the market segments under review. Therefore the business is trying to gain the first mover advantage herein. Access to television and with lifestyles becoming more and more affluent, the younger generation in particular is demanding trendier up market products. With more and more studying abroad, this trend has been steadily increasing but not met with by Sri Lankan fashion industry requiring foreign imports that are getting more and more costly.


The Company has studied this niche market for high priced high quality upmarket bags out of fabric. There are a lot of branded and non branded high quality fashion bags in the market made out of leather or PV material but none out of fabric other than the more ethnic line by businesses such a Paradise Road and Barefoot. However, these cater to a different market and to different occasions. Therefore, the business can be considered to be operating in a Blue Ocean (Chan,2005) situation, particularly in the area of purchase for personal use while there will be some competition in the area of gift purchasing from manufacturers of other gift products. However, this is not seen as significant. Therefore Lilly Trotter has decided to concentrate on this product and the two market segments aforesaid. The fabric selection, the design of the bag etc., would take into account the small but significant differences in the two segments.


In view of the fact that the products are marketed in department stores particularly ODEL, close collaboration will be required with these stores. The products are sold in the fashion section in these stores and therefore, it is necessary to understand the current fashion tends being promoted by these outlets.

Internal Analysis

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As a business that has been engaged in the design, manufacture, marketing of fashion accessories and particularly of bags the business has with it a pool considerable expertise and skills in this subject. Over the several years of its existence the company has been slowly improving its product line and therefore it is now in a position to deliver high-end well manufactured, trendy fashion bags. The business has also acquired three latest machines for stitching which gives a clear competitive edge over others in the area of stitching. It has also over a period of time developed a network of suppliers through whom the business will obtain exclusive fabric and other accessories for the purpose of this manufacture.


Rivalry amongst competitors

Where competition is irrelevant it is considered to be a Blue Ocean strategy. This is the ideal environment in which to operate.

Supplier bargaining power

Bargaining power is high on the items where the quantity of purchase is low. With suppliers who supply larger quantities, the supplier bargaining power is low.

Threat of substitution

Very few substitute products are available on the market at present. The unrelated gift items of other manufacturers and importers which fall within the same price range are a possible substitute.

Buyer bargaining power

In view of the fact that competition is less; bargaining power of the buyer is minimal. In any event, the business nominates its prices keeping in mind the final consumer and the marketable price in the open market.

Threat of new entrants

Threat of a new entrant is always present. However, the long term specialisation and uniqueness of design has provided the business with a curve effect. Therefore it would be difficult for a new entrant to effectively compete with this business immediately.

The five forces need to be analysed critically. These are elements which are external and are therefore less under the direct control of the business. Proper internal adjustments could enable manipulations of some of these factors. In addition to Porter's five forces, the PEST analysis could also be carried out to further analyse the external macro environment


After the analysis of the vision and mission statements now we analyse the strengths, weaknesses, opportunities and threats relating to the organisation. The strengths and weaknesses are internal to the organisation and within the control of the management to manipulate whilst the opportunity and threat are external to the organisation and the management has limited control to manipulate.


  1. Having own copyrighted brand names
  2. Proprietary knowledge on product know-how
  3. Skilled labour
  4. Creative designs
  5. Positive customer feedback
  6. Price competitiveness
  7. Uniqueness of designs.
  8. Quick response to changing trends.


  1. Distribution is primarily confined to one reseller
  2. Limited access to suitable Fabric in the local market.


  1. Growing internet capabilities
  2. Increase of import taxes on fashion bags
  3. Changing fashion trends
  4. Product line expansion
  5. Improvement in the tourist industry in Sri Lanka


  1. Substitute products such as other gift items coming into the market
  2. Retailer's backward integration
  3. Change of merchandisers of the purchasing
  4. Banks increasing loan interests and Over draft interest

Through the SWOT analysis, the business was enabled to come to a realistic assessment of its position and to steer a course towards its goals and objectives in keeping with the strengths and minimising the impact of its weakness. Every attempt has been made to convert weaknesses to positions of strength.



As an ongoing successful business, the functioning of Lilly Trotter will depend on the following critical factors:

  • Maintaining its momentum as the leader in the niche market.
  • Developing the new line of products without compromising its present market segment. In particular, managing growth in such a way that in meeting the increased demand, one does not compromise on quality and customer satisfaction.


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The primary assumptions are as follows:

  • Continued market stability.
  • Limited impact due to global recession.
  • Continuing fashion trend.


Company is planning to increase around 15% sales value from 1st to 2nd year. From 2nd year to 3rd year they hope to increase around 50%.


Target market for this product will be teenage girls and young adults.


1ST Year

  1. Creating awareness of the product is the main objective in year one. The brand name is one that is already in the market and is well known. Trial and error will take place during this period. Emphasis will be on advertising, particularly in association with ODEL, and in fashion magazines such as "Hi Magazine". Research has demonstrated that even young adults and teens look up to Hi magazine for new trends. One week prior to the launch it is proposed to have a fashion show at ODEL in collaboration with other fashion garment manufacturers to introduce the product.
  2. Market penetration will be done though advertising as set out above. This strategy applies to both segments.

2nd Year

  1. Company hope to increase the sales value by 50% which will help to increase the market share.
  2. With increased production, it will also be possible to reduce the fixed cost per unit, thus enhancing profitability.

3rd Year

  1. Market share maintenance. It is anticipated that at this time there will be some competitors starting up and competing products being available. Hence the brand name will be an important tool in maintaining market share. For this purpose, the business has also obtained intellectual property protection for its brand names.
  2. Cash flow maximisation

Differentiating and Positioning

Position is based on focus marketing under Porter's three Generic Strategies. Thus the market is a narrow market segment or identified niche.

Under Kottler's Specific Positioning Strategies, it would utilize category positioning claiming to be the leader in its category.

Positioning will be done under the theme 'Be Seen, Be Notices, Be Remembered".

An alternative theme for the teenagers is "Growing, Growing, Grown", signifying their eagerness to mature into fashionable young women.

As stated above, differentiation will be achieved by using expensive silk or cotton fabric which would differentiate it from the other manufacturers. Another feature that would enable differentiation is in design and in utility such as shoulder bags and wrist bags.


Not required for this assignment.


Not required for this assignment.


  • Kotler, P, Keller, K.L, et al , 2009, Marketing Management 5th Edition, Singapore, Prentice Hall.
  • Holzner, S, 2006, How Dell Does it, New Delhi, Tata McGrow-Hill.
  • Chan Kim, W, Mouborgne, R, 2005, Blue Ocean Strategy, Harvard Business School Publication Corporation.
  • Wikipedia website [Online], Available: [Accessed on 22nd February 2010]
  • Wikipedia website [Online], Available: [Accessed on 22nd February 2010]
  • Marketingteacher website [Online], available: [Accessed on 25th February 2010]
  • Collection of slides website [Online], Available:,1, Chapter 8 Market Segmentation, Targeting and Positioning [Accessed on 26th February 2010]