- Bauer’s performance in apparel industry
- Core competencies and source of competitive advantage.
Bauer Company operates in the apparel industry with its main business line being sportswear production. (Bauer, 2012) A business’ core competency determines its ability to establish a competitive brand which also depends on several factors. (Fred, 2011) In that respect, the sources of Bauer’s competitive advantage as well as its core competencies are as follows.
Core competencies
- Favorable brand positioning and image that makes it a brand that customers would want to identify with hence earning customer loyalty.
- Adequate finances that enable the business to design and develop products that seek to keep up with market needs and trends.
- Innovation also plays a key role in designing and developing brands that are tailored to serve specific customer needs. (Bauer, 2013a)
- Differentiation through delivery of products that fits and serves needs that are not served by other market products. Such products include its sticks, skates and under protective equipments sold under the NEXUS brand. (Bauer, 2012)
Sources of competitive advantage
A competitive advantage is the competency that a business has over its competitors in that it is capable of competing for a significant market share. The sources for such capacity for Bauer are
- Skilled manpower that enhances innovation in design and development of products which positions the business as relatively competitive.
- Technological application which is a key focus of the business seeking to enhance service delivery through technology based systems like online marketing and sales. This helps in reaching international and global markets relative to competitors.
- Strategic partnerships with key stakeholders in the market help the business in achieving strategic capabilities in terms of market reach and products development. (Bauer, 2013b)
- Strategic location and positioning also serves a great purpose in that the business’ operations are positioned in areas where there is ease access to customers.
- Suitable customer targeting through delivery of products that seek to deliver expected value to the right customers. Through this, the business is able to charge a suitable price for its differentiated products compared to the competitors. (Keller, 2012)
- Business and product portfolio.
Bauer is a global leading designer, manufacturer and developer of roller hockey, ice hockey, lacrosse equipments and related apparel. In its operations, the company has a collection of products delivered by different business lines which defines its business and products portfolio. With that, the business’ portfolio comprise of lacrosse, hockey equipments and related apparel production and sales. On the other hand, the product portfolio comprise of brands marketed under the names of Mission, Maverik, Bauer, Cascade, Combat and Inaria falling under different business lines. (Bauer, 2012)
- Corporate and business strategies.
Strategic management requires identification of a business’ prospects, environment, strengths, weaknesses and threats as well as devising of suitable strategies to address all the aspects in a manner that enhances its competitiveness, performance and sustainability. In that respect, there are strategies set at several levels depending on the focus and scope hence classification to corporate and business level strategies. (Fred, 2011) In that consideration, Bauer’s corporate and business strategies include:
- Corporate strategies that seek to achieve synergy by utilizing and planning the organization’s maximization of resources. One of such strategies applied by Bauer is diversification strategy that is supported by innovation and creativity and has significantly contributed to growth. (Bauer, 2013c)
- Business level strategies that focus on achieving a competitive advantage for the business including differentiation through which the Bauer seeks to deliver products that serve needs which are not served by competing brands. (Keller, 2012)
- Current marketing strategies.
Marketing strategies have a focus on achieving a competitive advantage in order to enhance performance. In that respect, a business should have strategies focused on positioning its products and services in the market addressing the marketing P’s; product, pricing, promotion and place to deliver suitable products at the right price, place as well as provide necessary information to customers. (Kotler & Armstrong, 2012) To achieve the objective, Bauer applies several marketing strategies with the current ones including
- Promotion through advertising that seeks to inform and persuade customers to buy its products. This is done with application of technology’s enabled means like online advertising and promotions through its websites as well as partners and affiliates’ sites.
- Suitable pricing is applied in order to deliver products that reflect value to the target segments.
- Product differentiation is done as a strategy of value delivery through added products attributes and differentiated functionality. This can be identified in the differentiated products sold under the NEXUS brand.
- Suitable brand positioning through effective distribution channels is also a marketing strategy that enhances ease of products’ access. (Kotler & Armstrong, 2012)
- Corporate finance performance.
With a suitable brand positioning and brand equity that is reflected through customer loyalty, significant market share and the brand being relatively competitive. Bauer has improved its financial performance over time to achieve what can be described as great performance by the industry standards. In that respect, the business’ performance is summarized as below
Source: (Bauer, 2012)
- Sales revenue had been increasing since the year 2008 from $220 million to $375 million in 2012 which is a reflection of improving performance.
- The gross profits have also been improving from 2008’s value of $86.2 million throughout 2012 to $145.1 million as an indication of enhanced performance in both sales and cost management.
- EPS grew from $0.45 in 2012 August 31 to $0.57 in 2013 August 31 which was a 27% growth. (Bauer, 2013c)
- Market share improved with ice hockey equipments and apparel bolstering growth for the business to be the number one business with a 52% share of the global hockey market. (Bauer, 2012)
- Key issues facing the corporation.
A business’ operations are usually subject to several factors that determine the issues that it faces. In that respect, the dynamic business world presents Bauer with several issues including
- Competition issues like the new entrants threat where technology advance presents opportunities for innovation and cost effective production means hence an urge for new businesses to enter the market with competing products. (Keller, 2012)
- Environment regulation issues as regulators seek to enhance environment conservation by advocating more costly manufacturing and production methods that are environment friendly. This poses a cost burden for the business in its production.
- The business also faces a challenge in its sourcing for raw materials as environment regulators pressure businesses to seek more environment friendly produced raw materials. In addition, there is an increasing concern over the ethical conduct of the raw materials’ producers like child labor which requires careful consideration as the business could hurt its brand image by partnering with suppliers who do not meet the environment and ethical standards expected in the market. (Wrinkle, Lee & Eriksson, 2012)
- Apparel industry analysis
- Size and growth rate of the industry.
Apparel industry has a global reach and entails manufacturing of apparels including professional uniforms, sportswear as well as women, men and children clothing. The industry has been experiencing a decline over the past five years owing to cotton price volatility and a reduction in consumer spending that was induced by the 2008 global recession. However, the industry’s performance in terms of revenue is expected to improve in the next five years bolstered by an increase in disposable income as well as an increase in population. The industry statistics indicates a -2% annual growth since the year 2008 to the year 2013 with a current revenue value of $578 billion. In addition, the industry serves around 153,276 businesses with over 9,213,000 employees. (IBIS World, 2013)
- Key industry participants.
The industry is marked by significantly large firms hence operating like an oligopolistic market where a few large firms have significant market share. In that respect, the global key industry participants include Bauer, Abercrombie & Fitch, Adidas, Aeropostale and American Eagle all of which are globally known brands with significant market share. Other key industry players include Alta Gracia, Arc teryx, Bluer, Aramark, Bob Barker, Disney and Armor Holdings. (Wrinkle et al, 2012)
- Competitive environment.
The apparel industry’s competitive environment is defined by several factors that can be summarized by the Porter’s five forces’ model which considers existing rivalry, new entrants, substitutes as well as buyers and suppliers bargaining power as follows. (Hooley, Nicouland & Piercy, 2011)
- Existing rivalry: The industry experiences high competition between the few large businesses including the Bauer, Adidas, Abercrombie & Fitch, Aeropostale and American Eagle among others who control significant market share. To address this, businesses seek to develop a competitive edge through strategies like differentiation.
- New entrants: The industry faces increased new entry with technology enhancing cost efficiency in design, development and manufacturing. However, the existing businesses uses practices like acquisitions to increase entry cost and barriers by enjoying economies of scale.
- Substitutes: The industry does not face much threat from substitutes due to the differentiated nature of its players ‘products. (Bauer, 2012)
- Buyers bargaining power is not significant since the products are much differentiated hence less alternatives for the buyers. In that respect, businesses are capable of attracting and retaining customers with their niche targeted brands.
- Suppliers’ bargaining power is low compared to the industry’s firms since the suppliers have limited market for their raw materials that are mainly produced for the apparel industry. In that respect, the firms are able to establish cost effective partnerships with suppliers as a means of enhancing their competitiveness. (Wrinkle et al, 2012)
In light of the above competitive forces, each industry player seeks to enhance its competitiveness by addressing each force through application of suitable strategies. (Hooley, Nicouland & Piercy, 2011)
- Environment factors affecting the industry.
The apparel industry is one that attracts global participation hence is subject to different factors ranging from local to international as well as from industry specific to global factors. In that respect, competition analysis and the PEST model analysis are used to summarize the key environment factors that affect the industry operations as shown below.
- Political factors including government policies like the free trade related policies have an effect on the industry with free trade policies allowing free flow of products from one market to the other hence determining competition. In addition, political stability in key business locations determines businesses’ sustainability.
- Economic factors including inflation, unemployment levels and disposable income levels determine the customers’ purchasing power hence determining the businesses operations and performance. In addition, factors like exchange rate presents uncertainty and international business value fluctuation threats given the increased international trade and global businesses reach in the current business world. (Keller, 2012)
- Social factors like changes in customers’ lifestyles and preferences determine the type of products that businesses should offer in the market. In that respect, businesses are required to remain innovative in designing new brands that serve the new customer needs.
- Technological factors including technological advance that presents new opportunities for the industry players to market their goods like use of social media for advertising use of online sales platforms. In addition, technological advances enhance innovation, designing as well as production means hence affecting the way organizations operate. (Baltzan & Philips, 2011)
- The high competition in the industry also affects the way businesses operates with a few dominant business having a significant market share hence increasing entry barriers through economies of scale. (Baltzan & Philips, 2011)
- Industry operating practices.
Each industry has some specific practices that mark its operations depending on its specific factors. (Fred, 2011) In that respect, the apparel industry is marked by the following practices
- Integrated operations with businesses being involved in several levels of operations ranging from production and manufacturing to sales and marketing of the apparel products. This is applied as a strategy of enhancing market synergies with which the businesses can easily identify market needs and design products that are tailored to serve them.
- Niche market focus as businesses provide brands that are specifically targeted at niche markets that are well defined. The industry players rarely focus on mass markets.
- Partnerships between the industry players and key market partners including distributors as well as raw materials suppliers is also a key practice in the market as businesses seek to enhance efficiency through ease access to customers as well as raw materials. (Bauer, 2013b)
- Acquisitions with example of Bauer’s acquisition of Maverik Lacrosse in 2010 and Cascade in 2012 both of which were meant to enhance brand growth and develop a competitive edge. The acquisitions made Bauer the leading brand in global lacrosse market. (Bauer, 2012)
- Challenges for industry participants.
With an industry being subject to several factors, there are threats that present challenges which have to be overcome for the industry players to achieve success in terms of performance and sustainability. In that respect, the apparel industry has numerous challenges including
- Increasing environment concerns over production methods as well as raw materials’ sourcing poses a challenge as businesses are required to adapt more ethical sourcing and environment friendly production.
- International trade challenges including free trade policies tend to increase competition by opening up markets for new entrants.
- Slow industry growth poses a challenge to businesses owing to the decline in demand that can be attributed to a fall in disposable income, rising inflation and the 2008 aftermath of the 2008 global recession. (Keller, 2012)
- Raw materials’ sourcing also pose a challenge to the industry players since the key raw materials are agriculturally produced hence subject to seasonal fluctuation. (Wrinkle et al, 2012)
- Bauer’s brand and competitors
In its operations, Bauer has created a global brand that is defined by its core values and traits that include operations as more of a technology based company that relies on extensive research and development to deliver suitably tailored brands. The business also focuses on unique customization of its brands in pursuit of quality delivery to customers through quick turn-around, value and superior quality. (Bauer, 2012) However, the business faces stiff competition from equally competitive global brands including Adidas and Abercrombie and Fitch. In that respect, Adidas operates with a focus on two main segments which comprise of sport style and sport performance. Through the segments, the brand seeks to serve by focusing on innovative, authentic, commitment and inspirational operations that aim at driving trends, fashion and performance. (Adidas, 2013) On the other hand, Abercrombie and Fitch have a focus on the classic American Lifestyle which they compliment with high quality merchandise. The business relies on its brand strength to drive its business revenue and growth that is reflected on their relationships with customer. (Abercrombie & Fitch, 2013)
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