Vertigo case study
- Situational Analysis
- Strategic analysis
Mission
Vertigo Chain Stores is devoted to providing an exceptional fashion environment, which gives the customers distinctiveness. The outlet is committed to excellent customer service, which keeps every customer on the cutting edge of fashion. Besides, the business is dedicated to operating at a profitable rate through minimizing costs and sound economic decisions.
Strategies
The Chain Stores will constantly change its appearance to stay in the step with the modern fashion trends of the global market. In addition, the business will always strive to provide real value and great service to our clientele and business partners. Moreover, we will always try to offer a fair, diverse, and pleasant environment, allowing our acquaintances to develop in their careers besides experiencing constant enhancements in their lifestyle. Furthermore, Vertigo Chain Stores will strive to exceed its customers’ anticipations in terms of safety, reliability, convenience, costs, and satisfaction.
Objective
Our objective is to provide a diverse collection of brands through establishing multiple distribution channels and expand the target age group to accommodate consumers below 35 years.
Competencies
Vertigo Chain Stores will develop and deliver customer -led service through responding to their needs and providing outstanding services. In addition, we will focus on our desired outcomes as well as how best to realize them. Additionally, every employee will have to manage his/her own priorities and time to accomplish our objective. Thirdly, the company has built constructive working relationships distinguished by a high level of cooperation, acceptance, and mutual respect (Frazelle, 2002) Moreover, Vertigo Chain Stores partners with customers to both identify and resolve the sensitive issues. What’s more, the management enables the co-workers to both grow and succeed by instruction, feedback, and encouragement. Last but not least, Vertigo Chain Stores enforces government regulations, rules, and laws besides initiating the enforcement actions in a method, which the public identifies as objective, fair, and reasonable.
- PEST Political, environment and legal factors
Political stability of the country and the surrounding region is a key determinant in the logistical environment of the company. Vertigo Company should consider the political status in India, Asia and Europe before venturing in sourcing it products from there. According to Taylor, external business environment is a key factor in the logistics performance of the business. Vertigo management should the import and export tax duties that accrue in sourcing products from India and Asia. Moreover, trade unions such as the European Trade Union in the European market that offer free and lower tariffs for imports. The environmental factors include the environmental laws that focus on protecting the environment from degradation. Environmental laws vary from country to country and, therefore, the management should focus on laws that safeguard the environment (David, 2005). The logistics managers should observe the climate change to facilitate decision of which products to import. For example, leisure wears would be preferable during the summer while the company could concentrate on supplying heavy foot wares during the winter season. In addition, legal factors include the business or trade permits and labor laws. The management should be conscious and compliant with these laws to facilitate smooth trading of its products.
Economic and market factors
The exchange rates are factors that determine the price of imports and the retail price of the company’s products (Frazelle, 2002). For example, the company’s intention to diversify its sourcing from Asia and India should be driven by the exchange rate. For example, they can import products from India when the exchange value has stabilized. Inflation rate is another factor whose rise escalates the cost of import. High inflation rate escalates the oil price thus leading to increase in the cost of producing and importing vertigo products. For example, the cost of oil has increased rapidly thus pushing the import cost high. The management could consider importing goods in bulk through train because the jet fuel is high. The strategy shall reduce the cost of import and eventually lower the wholesale and retail prices. The logistics managers should consider the price mechanisms of DJ and Bond, who are their main rivals. Factors to consider including durability of its wears, raw materials used and the cost of importing the products. Additionally, the company should diversify its products to the city center to match its rival’s strategy and tap the youthful consumers below the age of 35yrs and mainly reside in the urban regions. Another market factor is the consumer behavior that includes the manner in which consumers respond to the availability of certain wears in the market.
Social and demographic factors
The social factors include the age distribution of consumers, cultural behaviors, and population growth rate. Taking the lead from Bond and DJ companies, it is evident that the youths form the majority of the consumer population. Therefore, vertigo logistics proposition to venture in supplying leisure wears is valid, and Vertigo logistics should consider importation of leisure wears and diversifying its distribution points. In table 2, statistics reveals that formal suits form the bulk of the company’s sales and thus indicate that a significant majority are the career consumers. The statistics indicate that the career consumers are the majority and the company should focus on the different cultural behaviors of consumers especially in its venture in Asia and Indian market. The company may include female wears to rival the market share of Bond and DJ companies.
Technological and change factors
Vertigo’s major challenge is to stabilize its distribution and storage process as well as a challenge to match its rival in wears. Research and development activity (R&D) is paramount in competing for market share (Frazelle, 2002). The management should adopt an electronic supply chain system that monitors the movement of goods and enables consumers to access a variety of wears and order them electronically. The approach would challenge the rivals and establish itself with significant market share. The online-platform will boost its intended venture to stock leisure wears that are favorable to the youths. Additionally, it may reduce the number of distribution shops and save on logistics cost.
- SWOT
Strengths
Vertigo Chain Stores can source imported products in countries where the products are cheap. The other strength enjoyed by the company is the separate warehouses that are used for the similar range of products, as it owns three warehouses namely London, Leeds, and Glasgow. The fact that the organization was launched in 1962 implies that the company’s logistic and supply chain employees have vast experience and skills giving the Vertigo an edge in the industry.
Weaknesses
The weaknesses associated with the Vertigo are the failure to increase the capacity of its storage facilities overtime and failure to source their stocks elsewhere around the world. In addition, the warehouses storage capacities are relatively small and old. Moreover, the warehouses are operating in their full capacity but still fail to match the peak sales demands before Decembers. The global sources of the Vertigo imports are significantly few in comparison to those of its competitors. Furthermore, Vertigo’s stores have been inefficient for a long time, and no appropriate measures have been taken to rectify the problem.
Opportunities
Increased demand from the customers during the Decembers is a potential opportunity for the company to widen its supply base to meet the client’s inventory and delivery requirements. Another opportunity available to the company is the existence of new markets that enable it to employ different logistics approaches. There is a variety of new distribution channels available both locally and regionally for the Vertigo that can help cut transportation expenses.
Threats
The customers’ dissatisfaction is a threat to the Vertigo supply chains and logistics. (David, 2005). The inability to meet the Decembers increased demand cause dissatisfaction due to running out in inventories because of the relatively small warehouses. Inefficiency in the warehouses may result to unnecessary costs, mishandling, and dissatisfaction in the logistics and supply chain. Failure to update the current logistics in the warehouses may cause the loss of the loyal customers, the suppliers and even the competitiveness of the company.
- Strategic options
Firm Strategy
Use of a multi-channel in the Vertigo logistics will help it to optimize the inventories across channels through a chain of distribution facilities sustaining the replenishment of the store as well as directly fulfilling the consumer. The other firm strategy is making the logistics flexible, and multi-customer oriented to meet the seasonal needs of the customers.
Competitive Strategy
Reducing the logistics costs relative to those of its competitor will give the company a competitive edge. In addition, improving the customer service by ensuring a reliable delivery will be instrumental in gaining the customers' loyalty.
SBU Strategy
The company will integrate cost leadership and differentiation strategies instead of relying on a particular approach so as to adapt quickly as well as learn the new technologies.
Control
Understanding the point of view of the top management of the supply chain through doing thorough assessment is vital in the successful planning of the Vertigo activities. Also managing of the inventory by using an inventory control approach will ensure that company monitors the inventories levels.
- Porter’s ‘Five Forces’ model Potential entrantsRivalry among industry competitors
The Company’s main competitors are DJ and Bond. The three companies are balanced in terms of strength, and thus they engage in competitive battles as they struggle for market leadership. To gain a competitive advantage, the two competitors have overhauled their supply chains where DJ has established a new distribution center whereas Bond has expanded its original distribution center. Secondly, the two competitors have already engaged in the global outsourcing where DJ presently source 44 percent and Bond source 55 percent of their clothing from the countries with a low cost labor. In addition, the competitors have invested in the new generation of bigger “off-center” outlets than Vertigo Chain Stores. All the above strategies by the competitors have enhanced their sales, and the table below is an indication that Vertigo Chain Stores is no longer a market leader in the industry.
Suppliers
Vertigo Chain Stores operates in producing industry and thus it obtains raw materials from various suppliers. However, it has the least number of suppliers as compared to its competitors as illustrated by the following table.
Buyers / Distributors
According to Michael Porters, the bargaining power of buyers or distributors increases when they have a variety of products, price variations and product information. According to table5, Vertigo has concentrated its distribution centers to the city center and should thus diversify the centers to the off-centers in order to match its rival’s capacity. Expanding the warehouse storage capacity, it will deny customers the chance to shift to the rivals due to increased availability of products. The company operates on an in-house distribution center while Bond and DJ use third party strategy. As a result, Bond and DJ sales revenue is high due to reduced operation cost and easy availability of parties. Therefore, Vertigo should incorporate third party in its logistics operation.
Table3: Distribution center (DC) data
The above statistics indicate that Vertigo Company is challenged by its rivals and, therefore, needs to review its logistics operations to match its rivals and reduce the tendency of the buyers or distributors’ power to shift their loyalty.
Substitutes
Substitutability occurs when consumers have easy availability of products, variety of products and lower prices (Murphy & Wood, 2008). Vertigo Company is challenged by Bond and DJ, who are the main competitors. Rational consumers would prefer to purchase all the products from the same shop. For example, the supply of leisure wears gives Bond and DJ an advantage over Vertigo. Moreover, Bond and DJ use third party distribution strategy that enables lower operation costs and quantity prices. Thus, consumers will shift their loyalty to Bond and DJ. Vertigo customers have a substitutability power to purchase products from Bond or DJ. Vertigo logistics should adopt cost-effective approaches such as third party distribution strategy as well as venture in supply of leisure wear to match its rivals and seal substitutability gap. Vertigo should boost its suppliers’ percentage by sourcing products from countries with low labor cost in order to cut the cost price of the wears. The approach will reduce the consumers’ switching cost.
Table4: Percentage distribution of sales between product groups
The statistics reveal that the substitutability power of the consumers is high in favor of Bond and DJ because the consumers may utilize the advantage to purchase all their products form one point. These facts are manifested in the sales data that portrays Vertigo as lagging behind its rivals in terms of sales revenue.
- Main Issues and Problems
Vertigo’s main problem is the logistics process where the distribution centers are small in size thus unable to accommodate all the products. Further, about 48% of the company’s supplies are channeled through small and traditional warehouses such as London warehouse that is 2200sqm, Glasgow whose area is 1200sq.meters and leads which is 1400sq meters. Another problem is that Vertigo has been importing three-quarter of its products from high labor cost countries contrary to their rivals thus incurring high operation cost and low sales revenue. In addition, Vertigo Company’s target group has been limited to male aged between 35 and 55 years contrary to its competitors whose target market has a wide target group that includes even the youths who are large in numbers in the population compared to children and older people.
- Alternative solutions
The company should expand the size of its distribution centers and warehouses to match increasing demand globally. The company should adopt modern structures with modern technology to enhance the effectiveness. In addition, the company should minimize its production cost through importing its products from low labor cost nations. The company should also consider diversifying its target group to accommodate female consumers and customers below 35 years so as to counter the competition. All these strategies are equally important for Vertigo chain stores to enhance its logistics operations.
- Implementation
All key departments shall be responsible for implementing the above alternative solutions. The benefits of the proposals shall be conveyed to all concerned stakeholders, departments and groups through workshops and seminars. The cost of the implementation process will be high because the company will re-structure its entire supply chain. However, future benefits will outweigh the implementation cost (Taylor, 1997). For full implementation of the above solutions, the company will require a period of five years for the full outcome to be realized. The appropriate sequence will involve diversifying the target group, minimizing the costs and finally expanding distribution centers and warehouses. The implementation process will be monitored on a cost-benefit approach on a quarterly basis.
Bibliography
David, F. R. 2005, Strategic management: Concepts and cases. Upper Saddle River, N.J: Pearson Prentice Hall.
Frazelle, E. 2002, Supply chain strategy: The logistics of supply chain management. New York: McGraw-Hill.
Murphy, P. R., & Wood, D. F.2008, Contemporary logistics. Upper Saddle River, N.J: Pearson Prentice Hall.
Taylor, D. H. 1997, Global cases in logistics and supply chain management. London: International Thomson Business Press.
