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Managing Resources for Competitive Advantage

Paper Type: Free Essay Subject: Marketing
Wordcount: 1836 words Published: 1st Jan 2015

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Country Road is an Australian based company in the business of designing and retailing a wide range of products, from apparel to homeware and related accessories. It operates all across Australia, New Zealand and South Africa, through an excess of 60 retail outlets and 80 concession outlets. The Company employs more than 2000 personnel and just recently launched its new brand under the name of Trenery. Country Road is committed to high quality and value. It sources the world’s finest raw materials, fabrics, woollen yarns and crisp Italian cottons. Country Road’s clothing and accessories are priced at the high end of the designer market. Through a combination of the top design trends with its signature tailoring and attention to detail, Country Road aims to create simply stylish products reflecting an authentically Australian way of life. The Company has an extremely strong presence in the Australian retail and fashion industry.

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Country Road was founded in 1974 by Stephen Bennett initially as a niche women’s shirting business. During the 1980s and 1990s the Company opened a number of stores in Australia, expanded its wholesale business and entered into the US and Asian markets. Country Road then introduced its innovative superstore concept, offering Australians with all four key product areas: womenswear, menswear, accessories and homeware, all in a single integrated lifestyle destination. The Company was later purchased by Myer Emporium Ltd in 1981. In 1984 it diversified into Menswear and started exporting outside Australia. Country Road floated on the Australian Stock Exchange in July 1987. In 1990s the Company’s US business failed and they were forced to close its US operation to focus on the Australian market. Woolworths Holdings, a South African retailer giant, secured an 88% interest in Country Road in 1998, which allowed them to re-build their business and brand identity.

Between 2000 and 2001 Country Road entered into the eyewear and childrenswear business. The Company retails in stand-alone stores and also concession stores in David Jones and Myer. Country Road is a subsidiary of Woolworths Holdings Limited and its registered office is in Richmond, in the state of Victoria. The Company competes with a diverse range of upmarket apparel designers and retailers, as well as other high-end brands within Myer and David Jones. Country Road’s issuer code on the Australian Stock Exchange is CTY and its classified as being in the retailing industry. Their official website on the internet is www.countryroad.com.au. Country Road’s current executive management committee members are as described: Simon Susman, Chairman Non-Executive Director; John Cheston, CEO/Director; Sophie Holt, Director; David Thomas, Director/CFO; Ian Moir Non-Executive Director; Norman Thomson, Non-Executive Director.

Industry Background

The Australian Fashion Retail industry has faced radical transformation in the past decades. Relaxation of trade tariffs has seen production lines shift overseas, assisted by technology such as computer aided design, production and ordering. Today it is possible to send patterns and orders around the globe in minutes. Due to the reduction in tariff levels, and the increase in costs of domestic production and manufacture, many of the more labour intensive textile clothing and footwear activities have moved offshore over the past decade. An increasing number of Australian firms are developing links with manufacturers abroad who provide contributions to Australian production or provide finished goods to compliment the Australian made ranges of fashion articles.

The apparel sector of the Australian fashion industry is characterised by a mixture of a few large and many small establishments. The larger establishments tend to concentrate on low end fashion, long run production items, while the smaller establishments tend to be geared to respond to changes in the market for their garments, with short runs at the top end providing the “exclusive” feel. Shorter run production structures have evolved in answer to the demands of the marketplace. The demand for fashion, flexibility and product variety has ensured that manufacturers of fashion clothing, susceptible to rapid change, do not over commit in their production runs, leaving themselves exposed to stock obsolescence.

As a growing proportion of Australia’s production in the fashion industry has moved offshore, Australia’s recent success in the fashion industry centres on the Australian designers. Given the seasonality differences between the northern and southern hemispheres, many of Australia’s designers base their fashion on world trends arising out of fashion shows in the northern hemisphere and using the natural fibres which originate in Australia, being primarily wool and cotton. Other natural fibres gaining success on the world stage emanating from Australia include Cashmere, Mohair, and Alpaca fibres. Leading Australian designers try to pre-empt the northern hemisphere’s designs, not always being a season behind.

The showcase of Australian fashion is presented annually at the Mercedes Australian Fashion Week. The event gives international exposure to promising and prominent fashion designers in Australia such as Charlie Brown, Lisa Ho, Saba, Marcs and Collette Dinnigan. Although the Mercedes Australian Fashion Week only commenced in 1996, the quality of the production and designs exhibited has catapulted Australia’s international reputation as one of the world’s leading fashion industry events. Gross export sales resulting from the exhibitions have increased significantly due to the greater international exposure to the event.

The 2001 Mercedes Australian Fashion Week showed a 45% increase in the number of international media representatives and fashion buyers visiting Sydney during the event. The event represents a key component in the market strategies of designers and exhibitors alike and is responsible for a significant percentage of participants, spring and summer wholesale sales. The level of domestic consumer demand in the Australian fashion industry is valued in excess of $10 billion per annum, with greater than 40% of this demand accounted for by direct imports. The level of raw materials imported into Australia for the production of finished goods is well in excess of the level of imported finished goods, although in many cases the raw materials used in the production of the imported fibres originate from within Australia.

The Australian Government has increased its support to the Australian Textile and Clothing industry designed to boost international awareness of the industry and increase global competitiveness of the participants in Australia. The ongoing and limited assistance programs initiated by the Federal Government are designed to capitalise Australia’s growing success in the international marketplace for Australian designed and produced fashion goods by targeting market awareness, promotion and access. Other initiatives designed to promote excellence are education and training. Investment in innovation and technology development has been developed by the Government to reduce costs associated with production in Australia and increase demand, not only from within Australia but on a competitive international basis.

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Main Competitors

Country Road does not have a single direct competitor within the Australian market. Instead they compete with a large range of upscale apparel designers and retailers that can go anywhere from small establishments, such as high end boutique stores, to big superstores like Myer and David Jones. Given that Country Road has managed to achieve the manufacturing of high quality clothing and other items in a large scale, it is fair to assume that their competition is also as vast as their product line.

Porter’s Five Forces Analysis

Porter’s five forces model is a guideline for industry analysis that shows that five forces determine competitive intensity and attractiveness of a given market or industry. Based on the idea that competitive advantage came from the ability to earn a return on investment that was superior than the average for the industry sector, Porter established a framework of five forces: the rivalry between existing sellers in the market, the power applied by the customers in the industry, the impact of the suppliers on the sellers, the potential threat of new sellers entering the market and finally the threat of substitute products becoming available in the given industry.

As Porter’s 5 Forces analysis deals with factors outside an industry that influence the nature of competition within it, the forces inside the industry that influence the way in which firms compete and so the industry’s likely profitability is conducted in Porter’s five forces model. A business has to understand the dynamics of its industries and markets in order to compete effectively in the marketplace and sustain a competitive advantage against its competitors.

During the establishment of Country Road in the early years of the Australian market, they encountered little competition. Only with the reduction of tariff barriers over time, did foreign competitors enter the domestic market and Country Road began facing its first real competitors. With their expansion into the US market, Country Road had to move into a new marketplace with well-established labels such as GAP and Banana Republic and unluckily this proved to be challenging as Country Road entered a market with no concrete research and precaution where competitors were industry leaders and had a strong customer base previously established.

Country Road had little bargaining power of customers since Banana Republic and GAP already sold the same type of products offered by Country Road. Possibly they rushed too fast into their expansion to the US market and failed to previously analyze its marketing strategy and product placement. Needless to say that its US wing failed and crashed a few years later down the road. External industry forces such as rivalry from competitors and threat of substitute products cost Country Road its US market division.

A business has to understand the dynamics of its industries and markets in order to compete effectively in the marketplace and be better able to sustain competitive advantage. The intensity of rivalry, which is the most obvious of the five forces in an industry, helps determine the extent to which the value created by an industry will be dispersed through face-to-face competition. This force is located at the centre of the diagram is most likely to be high in those industries where there is a threat of substitute products; and existing power of suppliers and buyers in the market.

 

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