Pumpkin Patch Was Established Marketing Essay

Pumpkin Patch was established in 1990 as a provider of children wear through mail order. Since then it has expanded into 4 countries. The organization works in apparel industry which has favorable conditions to grow with healthy rate as of 2005 except the demographics which are inclined towards developing countries. The industry is also highly competitive. Pumpkin Patch as a player of this industry has great core competencies like its design capabilities and brand recognition of being a niche player. The organization can further maintain its long term profitability if it can expand its logistics capabilities in developed markets and create brand recognition for itself in emerging economies which will help it in long run.

Introduction

Pumpkin Patch is an organization which is into business of children wear. Pumpkin Patch was established in 1990 in New Zealand and since then has expanded into other countries including Australia, UK and USA by the end of 2005. The organization has established itself as a brand which is known for great designs, large range, good quality and reasonable price of products. Though Pumpkin Patch is a small player if compared to major established players in the business but these features have helped grow at a high rate for all these years. In order to understand the organization, it’s functioning and the factors leading to it in a better way, this report will try to analyze its external environment, its internal environment, its current strategy. On the basis of the analysis finally the recommendations will be provided which can help it grow further in future.

External Analysis

The organization is basically into apparel industry but the organization majorly caters to a specific set of customers (children). Thus on more microscopic level, Pumpkin Patch is a part of children wear industry. The industry has been rapidly growing all these years and thus has been attractive to the players in this industry.

It is also important to understand the general environment in which the industry works. The economic conditions in 2005 are pretty good which suggest that the industry will see a healthy demand from the customers in coming years and thus the industry will see observe a healthy growth rate in coming future. The global conditions in 2005 suggest that the globalization is further going to increase in the world which presents a very good opportunity for the players of the industry to expand in new markets and increase their revenue as well as profits. The technological conditions tell that though the conventional retail sales are preferred by the customers, the organizations are moving towards online sale as it is easier to maintain the catalogs and cater to the demands of customers who are in remote locations. From the political and legal conditions it can be seen that the import duties are going down in many countries which are helpful for those players of the industry which are not present in these countries but export their products and thus expand their market (Thomas 2006, pp. 13-14). From demographic point of view, the future of children wear industry is not very bright in developed countries in long term, where the average age of population is higher than the emerging economies and this population is soon going to mature. Thus the industry has more opportunities demographically in emerging economies in long term.

To understand the industry environment better it is also important to analyze the forces which operate in the environment. The major suppliers of the industry include the manufacturers of apparels in China, India and other Asian countries which manufacture the products on demand from players like Pumpkin Patch. The suppliers don’t have significant clout over the industry players as there are many manufacturers who can provide the same products. Due to presence of large number of such manufacturers and the competition between them, their power is less. The competitors include major brands like GAP and discount stores like Wal-Mart. The competitors have captured a large market share across the world in terms of children wear and have a brand loyal customer base. Due to the sheer size and the brand, the competitors have great power over smaller players. The buyers also have a significant clout over the industry players as they have got a lot of choices from different players. With a lot of brands to choose from, the customers can move to some other brand if they are dissatisfied with the quality, price or designs of the apparels of one player. There are no exact substitutes of children wear, though customers who just buy the apparels for fun and not exactly need them can switch to other stuffs which can entertain children like games, etc. Thus there is no significant power for substitutes in the industry. Potential entrants also have a significant influence on the industry as it is lucrative at present and has healthy profit margins, especially on designer ranges. This means that the industry is attractive for new players to enter and make the environment more competitive. (Freeman & McVea 2001, pp. 102-108)

There are mainly three types of strategic groups in this industry. In the first group competitors like GAP are present. Players in this group compete on the basis of quality and brand recognition. The second group includes players like Mark & Spencer’s and Wal-Mart which compete on price and discounts. The third group includes players like Pumpkin Patch which compete based on the number of designs, variety and quality of the products. The fourth group includes players like JK which compete based on the variety, design and price. Looking at the analysis on the industry it can be seen that the industry has good opportunities in emerging economies and has substantial threat from the competitive players which will eventually pull down the profit margins of the industry.

Internal Analysis

Pumpkin Patch has had sufficient resources which has enabled it to reach at the point it has reached till 2005. The organization has about 1700 employees who work for it in various departments including its design, warehousing, marketing and selling. Its resources dedicated to come up with new designs have done great job to create brand awareness among the customers (Reichheld 2006, pp. 5-7). As far as warehousing is concerned, the organization has one warehouse at Auckland which supplies the products to various locations. This has also helped it in reducing its inventory costs and channeling the products more smoothly. But organization lacks in having a proper supply chain abroad where still mostly the orders are sent through mail orders directly from Auckland. Further if the financial statements of the organization are observed, it can be seen that the assets of the organization have been increasing. In 2005, the current assets of the organization which determine the liquidity available at hands stands at NZ$ 72 million while the assets related to property and plant stand at NZ$ 35 million which is tiny as compared to its bigger competitors but tell the story of high growth of the organization since its start.

The organization has done justification to the capabilities it had and capabilities it developed in order to achieve the growth. For example, Pumpkin Patch gave special emphasis on designs which are liked by the customers. By combining its own capability to prepare attractive designs with buying other good designs from outside made its designs as its core competency. More over focus on majorly children wear gave the organization edge over the others as the whole potential and energy of the organization was directed towards providing the products for children wear. The analysis and research of the market is another capability which has helped improving the profitability of the organization as through it, it could regularly remove the failed designs and promote the successful designs. Similarly product sourcing from quality manufacturers of Asia was one of the major capabilities as it helped in reducing the cost of the product because of cheap labor cost in Asia. However, cheap product sourcing is not a competitive advantage as it is available to every competitor in the market. Pumpkin Patch also has good quality control in its supply chain where there is continuous monitoring of quality at each and every step. This capability also has helped the organization to build a brand for its products. But this is also not a core competency as other manufacturers like GAP and Benetton are known for equal if not better quality control. The organization also lacks in a more coordinated and smoother logistics as all the products have to be sourced from warehouse at Auckland which increases the time to respond and puts constraints on making use of the opportunities which it’s expanding customer base at abroad provides (Thompson & McHugh 2002, pp. 37-43). Also the retailing capability of the organization is limited to New Zealand and Australia and has no significant presence in its other major markets like US.

The value chain of the organization includes primary activities like R&D for preparing designs for its new products. This activity adds the maximum value to Pumpkin Patch’s products. It also includes product sourcing from manufacturers in Asia. This is also an important step as it helps to keep the product price lower and competitive. The quality control is another value addition which is done within the organization and outside organization as well. Here the products are checked for quality at every step. This also helps in adding value to the product as the lower quality of product can severely damage the brand image of Pumpkin Patch. With the current scale of operations, the next value adding activity of warehousing has provided good value to the organization as it has reduced the losses due to higher inventory (Barroso & Galan 2006, pp. 54-56). But with increased scale of operations, this warehousing activity will cause a major constraint for the organization. Retailing is another major value adding activity as the stores give an image of the trendiest children wear providers. Retailing also provides substantial value to Pumpkin Patch as it helps to bring more customers for it and also in increasing its brand recognition as the retail stores are designed and prepared in such a way to communicate the brand of the organization. The organization also has some weaknesses such as limited logistics capability to cater to the demands of customers from northern hemisphere, smaller size and financial power to compete with major brands like GAP and Benetton.

Looking at the analysis above it can be said that the organization has strengths in its design capabilities and building brand through retail stores. The weaknesses of the organization include the lack of capable logistics to manage higher growth in northern hemisphere and smaller financial resources to compete in other established markets. The organization has more opportunities in expanding itself in Australia, New Zealand where its brand has good recognition and in emerging economies where there is thin presence of its established competitors. The threat to the organization is majorly due to its limited logistics capabilities because its competitors like JK can eat up its markets if Pumpkin Patch fails to act on it.

Current Strategy

The strategy currently followed by the organization is of ‘differentiation focus’. This means that the organization has a select category of customers to which it caters and also provides a differentiated product to the customers (Hoskisson & Hitt 2006, pp. 23-27). In this case Pumpkin Patch is mostly catering to the children and pre-teen customers thus it has a focus approach or niche market. Also the organization is providing a great range of designer products to the customers thus it is also differentiating itself from the competitors on the basis of the varieties and range of designs it offers to its customers. The current strategy has been quite successful up till now when the organization has only expanded itself into selected markets. The success of this strategy comes from the fact that there are many players in the apparel market but only few have a complete focus towards children wear which is an all-weather market and provides great opportunity for profitability. By focusing itself towards this niche market, Pumpkin Patch was able to create a brand image of it which has complete focus towards children wear. On top of that the organization’s high range of designs keeps it apart from the other players. Even GAP and Benetton don’t have so many varieties of designs when it comes to children wear.

Recommendations

The organization must look into following recommendations and try to implement them in order to remain a profitable organization even in future.

Pumpkin Patch must increase its capacity, especially logistics capacity in US and UK where due to these constraints the organization hasn’t been able to establish itself in these markets. These two markets are too large and lucrative to be ignored thus it must try to increase its retail presence here. Even if the organization can capture a small share of market of these markets from GAP, Benetton or Wal-Mart, it will be a huge boost to its current revenues.

Pumpkin Patch must also look at the markets in emerging economies like China, South Korea and South Africa where the disposable income is increasing for the people and demographically they will have a large number of their population as children. Thus for maintaining long term profitability the organization must also look at ways for entering these markets. Initially the organization can start with online selling and whole selling in departmental stores selling because that will require the least investment. (Jeannet & Hennessey 2001, pp. 20-25)

Pumpkin Patch must completely abandon its print catalogs as they consume a lot of resources (finances, time and attention). Anyhow the print catalogs are no more relevant with ever decreasing mail order selling. Instead for mail orders organization can have better and more detailed online catalogs. The customers who can’t reach the retail stores can go to website and select the product they want.

Conclusion

Pumpkin Patch is operating in apparel industry but is mostly catering to children wear market. The industry in 2005 is operating in a good external environment but the demographics suggest that the children wear market will shift towards emerging economies in next few years. The environment also sees fierce competition among various players thus it is important for Pumpkin Patch to maintain and extend its presence by use of its competitive advantage of great range of designs and brand associated with children wear. In order to do that organization must strengthen its presence in countries like UK and US which hold lot of potential for its growth. Also it must try to start catering to customers from emerging economies which will help it in long run.