This individual report is given with an intention to give out the importance of value chain analysis for A&F and how it will help in achieving a competitve advantage over its competitors. It also dissucses how value chain plays an effective role in strategic planning of an organisation. It starts of with a brief discussion on value chain analysis and how it can be applied to A&F. After this there is a discussion on how internal relationships in an organisation between various departments is so vital. A demonstration is given to brief about the importance of external relationships of an organisation with its end users(customers), suppliers and intermediaries. Some of the startegic analytical models are used in order to analyse the ways the organisation can improve itself at various levels. Marketing environment is discussed so as to find the areas the organisation has to perofrm stronger. There is a conclusion to give A&F a cutting edge owing to its value chain principles to obtain competitive advantage.
2. Value Chain Analysis
Generally Value chain discusses the various activities happening in an organization and connects them to analyze the competitive strength of the business. The theoretical discussion on value chain is done in Appendix 1.
They are three sequential steps into which value chain can be broken into to understand any business and identifying the ways for competitive advantage. Applying them to A&F we can get an analysis how exactly the organisation works accordingly to value chain.
a) Inbound Logistics: A&F doesn¿½t depend much on the external sources for production as most of their products are made from their factories in United States. The main advantage of this is even if any small companies tries to duplicate A&F products or try to manufacture them at cheaper prices from countries like China or Bangladesh, the A&F customers will know how genuine the products they are buying.
b) Operations: When a company it operates such a way its operations are carried out worldwide efficiently without any disruption in its sales or services. As A&F sales are spread out over the world wide over internet its very necessary to carry out operations effectively. In the stores they have an effective hierarchy of employees who smoothly carry out the operations. To deal with Internet sales, Using the Cisco integrated services router as its platform, the company cost-effectively improved performance of existing applications and created a platform for continued innovation.( Cisco powered, 2005).
c) Outbound Logistics: Moving products from a manufacturer’s warehouse to a retailers distribution centre in a timely, efficient manner is tough when all the setup is located in United States. A&F depends on the Shipper solution. This new system will track each product from a manufacturer¿½s facility to the retailer¿½s centre. This application is exception driven, so that the retailer can be via email if there are shipment problems. (Retail Tech, 2010).
d) Marketing and Sales: A&F conducts marketing strategy analysis of organisations to support sales managers in formulating and implementing successful marketing strategies. (Global Knowledge, 2010). Marketing and sales of A&F is monitored by using market segmentation, this is done by dividing the customer market into segments and identifying the potentially profit making areas.
e) Service: Proper advertising campaign helps in making an impact on the customer and helps the brand in getting connected with the customer. Services offered in store and online are excellent in A&F which appear to provide a cutting edge from its competitors. Be it the material, uniqueness of brand coupled with excellent services has helped A&F achieve a unique status in retail market. (Ivy thesis, 2008).
a) Procurement: As it is concerned with how resources are acquired for business,it has a wholly owned subsidiaries. By 2007 the company owned 950 stores located in U.S,Canada and U.K. Adding to this they sell their products through web-based products.(Linkedin, 2010).
b) Infrastructure: Infrastructure of any organisation holds the financial and business units together. A&F has a strong infrastructure built up which carries out it various operations thus providing enough backup for all its primary activities. The team partners with various areas of business provide daily support to their domestic and international store expansion and other strategies.(Abercrombie, 2010).
c) Human resource Management: Human resource management team of A&F tries to maintain a smooth functioning of the whole Business units. It involves in recruiting and selecting employees who are comitted to the work of giving best to the organisation.
d) TechnologyDevelopment: The IT department of A&F is dedicated in upholding technological standards, processes and audit methodologies based on retail technology trends to support business strategies (Abercrombie, 2010).
3. Value chain for Competitive Advantage
Linking Value Chain to Competitive Advantage:
According to tutor2u, all the activities a business undertakes is directly proportional to how it achieves it competitve advantage.A business which desires to achieve a competitive advantage by outperforming its competitors through ¿½differentiating¿½ itself by providing higher quality have to perform its value chain activities better than the opposition. Any product with a varied differentiation will attract consumers. This helps companies to fix their prices for a good price and better margins. Using differentiation A&F not only holds its segmented markets of youth which generates higher profits but also able to concentrate on newer areas of business segments. (2010).
The value chain of A&F can be used the following ways to achieve a competitive advantage:
a) Being a brand which is made out of its own factory without being outsourced like other competitor brands.
b) Effective operations within the store and to the retailers bringing a circle of trust within the buyers and organisation.
c) Product sales are rightly advertised and are delivered at right times because of the strong network which connects the warehouse to the retailer.
d) Marketing and Sales are the essence of this brand which can be termed as one of the strongest point for this organisation. It uses sexuality and physical beauty in marketing.
e) They have aimed at customer¿½s formidable weakness, ¿½desire¿½ to sell their product.
f) Strong infrastructure, technological skills, procurement capabilities and human resource management act as a back bone for the primary activities. Thus they give the organisation a very strong, formidable base to sell their products. (Cacoogi, 2009).
4. Value chain for Strategic Analysis and Planning
Value chain in strategy helps in analysing where the organisation can actually improve itself with the help of strategic planning.
There is actually no threat of substitutes for A&F from other products because of their unique appeal. The clothing retail industry is one of the most competitive industries and companies have to look out for ways in offering superior products than their competitors (Dibb, Simkin, Ferell and Pride, 2006).The traditional shopping of looking into the stores catalogue is rather getting older and is giving way to the already very influential online shopping. And A&F has already made a mark as one of the most sought after online shopping brands. When a SWOT analysis is carried out on A&F based on the information obtained from its value chain data, the following things can be observed.
Strengths: Its experience over 100 years in clothing sector and being able to influence the customer¿½s choice of buying.
Weaknesses: Companies core strategies don¿½t portray the idea of comfort and casual life style. The company is too much focussed on portraying ¿½sensual images¿½ and has thus deviated from its core idea.
Opportunities: Men and women are more and more interested in fashion than what it was a decade ago and are ready to buy products which are unique and have high brand value.
Threats: Rapidly increasing UK clothes retail sector.
1) Need for planning online sales in markets other than US and Canada.
2) Have more focus on the core brand and overcome the issues of deviating from it.
3) They can use the branding ideas and experiences which have made them stand unique in newer markets.
4) Uniqueness of products should be kept intact. (Michelle Robert, 2010).
5. Importance of Relationships in an organisation
When an organisation works worldwide the strategies differ from country to country. The internal relationships hold key between the various departments within a country and they are often used to formulate strategies and policies for pricing and promoting products within a particular country.
The basic agenda of A&F is to sell their products. But then it might not be as simple as it looks as there are numerous support activities and inter departmental strategies which will help the company reach its targets. There is every possibility of the brand being duplicated because of the growing popularity. When IT keeps a track of this, it is the task of people working under external logistics to keep a check on this and being able to convince the end users (customers) about how the original brand is unique.
And also various divisions or departments in A&F should be able to contact from time to time about the employees who will be recruited from time to time.
So a smooth functioning between various internal departments of an organisation will always make the brand famous and the profits really high because of the product sales.
6. Relationship between suppliers, intermediaries and end-users
When talking about the relationships with suppliers, intermediaries and end-users in an organisation two things should be taken into criterion:
a) To use self reports, customer feed backs, and supplier reports to test organisations market orientation and its business performance.
b) To investigate the existence of potential gaps between the supplier, intermediaries and end-customers. (Langerak Fred, 2001).
When concerned with the relation of A&F with its suppliers, it maintains a high end emphasis on the quality of the raw materials. And also it uses the up to date supply chain management techniques to send the stock out to the intermediaries. All the retail outlets are maintained from one warehouse and efforts are made to the highest level to keep up the stock levels.
And also when compared with company/customer relationship,A&F individually answers each of the 2,000-plus monthly e-mails it receives from its public. To maintain the high standards of customer service the website reads ¿½Every e-mail received is read and considered as a real person¿½. And to further build a positive relation with its customers, there is a liberal return policy: ¿½No sale is ever Final¿½. This not only helps the customers switch on their choices but also brings a positive feeling on the brand. And there can¿½t be a better advertisement for any company rather than the customer himself who gives a positive feedback without even any charge.(Novelguide,2010).
7. Marketing Environment
Analysing the current situation in Microenvironment
A&F forms to be a unique luxury brand, the chances of consumer sales going down can occur if there is an economic downturn. Space expansion within the markets is predicted to slow down as because of the recovering world economy.
This is because of higher amount of stocks are expected in the market but the buying power of the customer seems to come down. There is a steady growth in population and is expected that population of youth from ages 18-24 will be growing more number. As A&F products target such customers there is likely to be rise in sales of A&F over the period of years.
The development of technology has been a boon for the retail companies which have already gone online. Having a strong information technology system which is backed up by well designed inbound and outbound logistics with effective operating procedures will help A&F to meet up with the ever changing customers choices.( Article base ,2010).
8. Marketing Strategy Explanation
According to Kotler, after choosing the value, strategist ¿½proceeds to segment the market, select the appropriate market target and develop the offer¿½s value positioning. STP is the essence of strategic marketing (Kotler, 1994).
Product differentiation of product should be the base of marketing strategy. While kids, youngsters and college goers will be the primary targets and men and women of other age groups should be made secondary targets. Western countries will form the primary business targets at places where it is developed and places where it is budding new. And then secondary target will be Middle east and Asia where there is lot of scope for organisation to potentially grow.
Newer products should be introduced to different demographics, so as the customer can be satisfied with the tagline of ¿½comfort and style¿½.
Target customers should be identified and their advice on choice of fashion can be identified. With this customer is not only getting involved but will be ready to pay any price for products offered.
A&F should be made available on various clothes catalogues and websites.
An application on Facebook can be created talking about the brand and its new releases and pricing options.
Surveys, feedbacks from customers should be taken from customers just to keep note and observe the changing choices of customers.
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