TRUE RELIGION CASE STUDY
True Religion Brand Jeans industry is a company that manufactures and sales jeans, usually of denim brand. The company began in 2002 by Kim and Jeff Lubell. It started selling its jeans in upscale departments’ stores and later changed to retail stores, opening several branches in the country. The company recorded a high financial performance but its actual profits graph showed that it was not stable; full of booms and recessions. The profits were affected by various factors such as the consumer moves and the rise of costs of the supplier of raw materials. Despite all these problems, the company still thrives in a competitive premium denim market that it is operating under. The company had certain competitive advantages that enabled it to maintain its numbers in the market.
Strategic issues faced by the company
Strategic issues affect a company in several ways. They can either make a company improve or destroyed. If a company takes the strategic issues positively and works on their weakness, it would do well and vice versa. In the case of True Religion Industry, Stock performance was going like that of a roller coaster, meaning it was not stable. It made investors worry about the future of the business as they felt that the premium jeans designers are bound to relocate to other fashion trends. Also, the company was experiencing the effects of economic weaknesses that raised the ‘bargaining price’ of the jeans making consumers. They shifted from the rich expensive products that True Religion produced to Stalwarts products from competitors like Lee and Levi’s jeans. As much as the industry tried to reduce the jeans price, it experienced changes in the supply price. The denim labels were under costs pressures due to the hiking cotton prices which were on the hit, following the post-civil war effects in 2010. Consumers were also shying away from embellished fashionable jeans that would last for several years and turned to low quality with less value jeans, claiming that one would hardly differentiate the two. This made True Jeans advertisement for ‘good quality and jeans with value’ useless. The shift of consumers to lesser brands and the tight consumers’ disposable income made it difficult for the industry to transfer the rise of supply cost to the overall customers buying price.
Elements of true religion strategies
An industry or any business strategies are what the firm does to give it competitive boosts against their competitors. The strategies are supposed to be unique, creative and better compared to what the competitor are doing. The initial strategy that the company’s management undertook was to distribute their denim jeans in wholesales stores. Later, they decided to distribute the products in retail stores and ended up opening several retail stores in the state. True Religion Industry produced jeans for women above forty years and above and for women with curvy shapes, something that Levi and Gap premium Denims hardly considered. In 2009, the company began producing jeans for young consumers who were slim and very fashionable. These jeans gave the True Religion brands such as Not Your Daughter Jeans (NYDJ) to the premium market. The company also strategized to quit being only denim jeans producing industry and be a diverse, hence, supplying different types of jeans. This new strategy was emphasized by an advertisement that was propagating the slogan ‘diverse with style’.
Effects of potters five models on True Religions profitability
Threats of buyers-; buyers can affect a firm’s performance if their bargaining power is strong enough to put the firms under pressure. If the price changes, they will easily move to other firms with lower prices. In the case of True Religion Brand Denim Jeans industry, buyers have a great influence to the firms’ profitability. Later in 2009, the customers started moving to other denim producing companies because they could not put up with the high prices that True Religion was selling their products. This affected the firms’ profitability. Not just on the average level, but on a high scale.
Threats of suppliers-; the bargaining power of the suppliers is in terms of raw materials and labor. It affects a firm profitability if there are only few substitutes in the market that the firms could turn to. In the case of True Religion Industry, the suppliers had a very big influence on the firms’ profitably. Taking the illustration of the cotton suppliers, they controlled the supply force. This is because the firm had only one supplier for the cotton products. An increase in the cotton prices, greatly affected the industry profitability level as they could not shift the burden to the buyers. The company had to cover up for the increased prices with their profits, showing profits were highly affected.
Threat of substitute-; Existences of other products that buyers can easily shift to, have massive effects on a firm’s profitability level. At first True Religion Industry started as a Denim producing Company. Later, jeans made of fewer value materials by companies like Gap, made consumers shift to them as they were much cheaper. The industry lost several customers that later affected the firm’s profitability level. However, the profitability level was just on a medium scale, as the firm responded to this threat by producing jeans with much lesser quality.
Threat of competitors- True Religion had several competitors, mainly smaller industries. Industries like Gap and Levi gave True Religion competition, because they offered cheaper jeans than those sold by them. During that period, the state was experiencing economic recessions; they lost much customer to the competitors. However, this did not last for a very long time as immediately the economy stabilized people still went back to having jeans with value. Therefore the profitability level affected was low.
In summary, we see that almost all the five force models affected True Religion. The effects were due to the consumers shifting to other firms and the increase of the cotton prices. Also, the existence of cheaper jeans acted as denim substitutes and the competition that Gap and Levi gave makes the industry not attractive.
Competitive advantage
Despite the firm going through several challenges, it still has some competitive advantages that enable it to compete favorably. The ability of the firm to maintain their demand level during economic recessions, gave it a competitive advantage. They were able to provide different brands even at their lowest financial times therefore, satisfying their customers’ wants. This was something that their competitors, would hardly manage. It was later strengthened when consumers readily accepted their diverse products. Afterwards, they invested in producing products both for young and all old customers, therefore serving a wider premium market. There are competitive advantages show that the company can sustain its advantages to a certain level.
Key lessons learnt
True religion is an industry that majors in producing denim jeans for the premium market. The industry had good attractive financial reports showing the large profits it was making. However, the firm had some strategic issues that the firm needed to work on. Also, the industry experienced a decrease in profits when it began having problems with the customers moving to cheaper sellers, high costs of material and threats of substitutes and competitors. Despite these challenges, the industry had several competitive advantages that made it thrive in a competitive market.
