SITUATIONAL ANALYSIS

BUSINESS OPPOTUNITY; BRIEFING

DesignerWear (DW) is a new Sri Lankan SME that is involved in importing branded clothing items for 1.5 years. It features many world renowned brands such as Abercrombie and Fitch, and French Connection. DW has recently entered into a contract with Reebok International to import the innovative Reebok PlayDry line of t-shirts (with cooling fabric design) to Sri Lanka for the purpose of retail selling.

Figure 1: Reebok Play Dry Fabric Technology IllustrationFeasibility Study

1. Organizational feasibilityHR Marketing department: Sufficient; Employees are capable to handle promotional campaigns. Training need analysis: Hiring new retail staff that are competent in the English language (Training needed after selection)Risk: Primarily, this is a low risk project as it is an existing product in international markets. This matches the managements risk averse policy. Financing for marketing campaign: A section of the annual budget is allocated for each brand; to introduce at least one new line of clothing to the local market. The budget will be explored in depth later in this report.

2. Industrial feasibility Nature of the branded clothing Market in Sri Lanka: Oligopoly Few main players (Nike, Puma, Adidas) High capital investment to enterIntensity of competition: High Reeboks competition in is not with local brands in Sri Lanka however with global competitors like Nike (alternatives within the local market).

3. Product feasibility

Special attributes: Innovative fabric technology of the PlayDry range of clothing, Elegant design, Durable material Demand analysis: Need analysis: Sri Lankas western provinces have a hot climate; there is an unmet need for clothing that evaporates sweat Ability to purchase: Disposable income is sufficient.

4. Market feasibility

Key segments: young adults, Market demand: the demand for branded wear items is in a growth stage. Purchasing power: moderate to high (disposable income level: 15,000 upwards) Value proposition: Similar to the international markets Reebok has a competitive advantage in price, making it affordable than the alternatives. Loyalty: brand loyal Need level sought: esteem, social

Internal and external analysis

The following SWOT analysis summarizes the findings from both the internal and external audits done via the Porters 5 Force (P5F) and the PESTLE framework. (Appendix 1)Strengths Globally renowned brand reputation Reebok is a globally recognizable trademark with high brand value. Affordability relative to competing brands; Compared to its competitors (I.e. Nike), Reebok delivers unique value proposition (greater value for lesser cost). Innovative and unique product line in terms of design, and cooling technology via specialized fabric Prominent and suitable store locationWeaknesses Human resource issues; Language barrier of retail staff Retail staff with low English language competency may potentially deter a high profile consumer base Low market share in SLOpportunities Political and economic stability; Sri Lanka is experiencing public infrastructure development during the post war period which has the potential for economic growth. Relatively low interest rates This could facilitate business development investments An increasingly educated population

Globalization of culture; aspects of western culture are increasingly visible in the local context Need for individualism, External conformity, Staying fit(Discussed in depth in Appendix 1; Cultural factors)Threats Increasing popularity of online purchasing mediums; Site like EBay/Amazon allow customers more alternatives than retail stores Depreciation of the LKR currency As DWs inventory depends on importing from international distributors; this increases costs Higher dependency rate Threat of new fashion brands entering the market Due to favorable government and trade policies

OBJECTIVES SETTING

ORGANIZATIONAL OBJECTIVES1. To increase revenue by within 18 months from product launch.

2. To gain a 30% increase in brand awareness ensuring survival in a dynamic marketMARKETING OBJECTIVES1. Attain a 25% growth of the existing customer base ensuring market survival within 18 months from launch

2. Ensure a marketing orientation is prevalent resulting in a minimum customer satisfaction rate of 80% in the annual survey

3. Retain 25% of total Reebok customers ensuring customer retention and brand loyalty resulting in a lower churn rate within 18 months from launch

MARKETING STRATEGYSegmentation

Segmentation baseSegment 1 Segment 2 Segment 3

Demographic

Social grade (NRS) 1A,B, C1B, C1C2, D, E

Age;21-3919-2935-59

(Refer Appendix 1: Social, for; central bank statistics)

Disposable income [LKR]20000+15,000+5000 or less

EducationUndergraduates/Post graduates/ Professional Undergraduates/ Vocational/After ALs No formal education/ secondary education only

Geographic

ClimateWarmWarm/ temperate Cold

Population density Urban, suburbanUrban, suburban, semi-ruralRural, semi-rural

Psychographic

LifestyleCorporate, activeFun loving, socialConservative

Loyalty typebrand loyalshop loyal/ brand loyalshop loyal

Need Level 2Esteem, SocialEsteem, Social Security

Behavioral

Type of product purchased

branded clothingbranded clothing/ unbranded clothingUnbranded items

Desired attributesstyle, brand value, design, materialstyle, brand value, design, materialFunctionality, low cost

External conformity3Conformist ConformistRitualism

(Refer Appendix 2: Segmentation Notes for; explanation of superscripted bases)

TargetingA single segment concentration strategy is used where a firm concentrates on one market. (Kotler & Keller, 2006)DW should concentrate its resources on satisfying the needs of 'Segment 2' as it matches the criterion it is looking for. Middle class with sufficient disposable income Reebok does not target the ultra-high end segment as it is covered by Nike; however the middle class represent the type of segment that wishes to wear branded clothing without spending their half their salary on it. Thus the affordability aspect is leveraged.

Buyer behavior: Shopping is a social experience as they (I.e. likely university students) prefer to do so with their friends (fun loving, adventurous).

Branded clothing gives them a sense of self confidence, individualism and esteem(Discussed in cultural factors: Appendix 1)

An active lifestyle. In hot climates; The products features would not be useful in cold areas. PlayDry t-shirts are designed to offer cooling via air vents in the fabric. Students who play sports (i.e. tennis, cricket etc.) can utilize the PlayDry features more Whereas Segment 1 would not have an opportunity to wear these items as they are involved in more corporate lifestyles, thus needing office wear. PositioningPositioning is the act of designing the company's offering and image to occupy a distinctive place in the mind of the target market. (Kotler & Keller, 2006)Brand essence:

Positioning statement; "Global brands. Local reach"

Explanation: The statement communicates that DW provides access to a collection of the worlds most renowned brands to the local market.

(Detailed analysis in Appendix 3: Positioning)

Growth Share MATRIX STRATEGY

In a market development strategy "the organization moves beyond its immediate customer focus into attracting new customers for its existing product range". (Lynch, 2007)Which strategy is used in DWs case depends on perspective. From Reebok's perspective (as an international firm) the introduction of clothing with PlayDry features is a market development strategy; as it is an already existing product (In foreign markets) which is being introduced to a new market (Sri Lanka). From the DW perspective (as a retail store) it is a product development strategy; as the t-shirts with PlayDry technology (new line of clothing) are being targeted at the existing market. This product development strategy is justified by DW's move towards an increasingly sustainable market advantage that aims to exploit opportunities while retaining a more loyal customer base.Competitive stance

Essentially a differentiation strategy is adapted by DW with the aim of targeting customers that are prepared to pay for quality and brand value aspects of clothing. However the Generic strategies model has its loopholes; it fails to recognize that in the real world firms may use a combination of strategies. Further it assumes that differentiated products are higher priced. There is now empirical evidence that companies do pursue differentiation and low cost strategies at the same time. (Lynch, 2007, p. 491)This holds true in DW's case as well, Reebok's t-shirt line is lower in price compared to its competitors, however still differentiates in terms of quality attributes like brand, material, technology used, style etc. Thus it is evident that strategy formulation cannot occur within 'airtight' like containers as specified by the model; however a more dynamic approach is needed according to the capabilities of the firm.Marketing Mix

1. ProductStage in PLC: In the Sri Lankan context the Reebok Play Dry range of t-shirts is at an Introduction phase; thus, promotion expenses would be high with low market share. However internationally the Play dry range has reached maturity level, and is not promoted aggressively. (Kotler & Keller, 2006)

Figure 2: Product Levels(Detailed explanation of innovation type; Appendix 3)2. PriceDesigner wear would be contractually obligated to use Reebok's pricing strategy for its PlayDry range of clothing as it needs to display price equity (or parity) in terms of international markets. This is primarily a cost plus strategy.Due to information restrictions Reebok's production costs (I.e. fixed/ variable/ overheads) are unknown, however the following is known about production process. Reebok outsources its production to developing countries including Sri Lanka (Apparel manufacturing firms like MAS). Resulting in massive savings in terms of production costs, a strict contractual policy prevents release of any finished product to the local market; it is exclusively for foreign markets.

Thus DW needs to import the product from Reebok suppliers in India. Reebok's production cost cannot be controlled however a markup can be maintained by DW to ensure a profit is made on each unit. The tactic would be to target potential market that has the purchasing power required.

Through a strategic viewpoint Reebok's pricing for Dry Fit t-shirts is competitive in relation to Nike which is premium. Thus, the cost plus strategy ensures the following Achievement of profitability objectives to the firm. Matches the price elasticity of demand in the Sri Lankan market. Customers that compare prices with premium brands i.e. Nike would chose Reebok's product due to the higher value for cash spent.

3. Place/ Distribution ChannelProduction of Reebok clothing is outsourced to emerging markets including India and China. (See figure for channel members) Wholesalers or else distributors store this production in large quantities and perform the role of sending shipments to retailers (I.e. DW). Import taxes like excise duty, PAL would be charged on shipments in Sri Lanka.

Figure 3: Distribution ChannelSource: (Solomon, et al. 2012)The key focus is to ensure a smooth flow of stocks within the supply chain from distributors, wholesalers and final retail stores. This would ensure that DW effectively responds to demand in the local market. Prior agreements would have to be drawn up with distributors in India.

4. PromotionAn integrated marketing communications (IMC) approach is adapted by DW to promote the PlayDry range using multiple elements of the promotional mix.Advertising:These methods promote sales by raising awareness, persuading, reminding and reassuring customers on the authenticity of Reebok's products. Billboards in prominent locations (i.e. in high street fashion store areas in Colombo). This needs to feature a simple message capturing the brand identity (logo as well as tagline).

Social media: Facebook's ad service could target the specific demographic needed (i.e. youth) which are highly active users of social media. Further this is a relatively cheaper medium of advertising. Public relationsSponsorships: Sri Lankan player uniforms for International Cricket matches are sponsored by Reebok which increases brand awareness as well as relates to the local culture. (Detailed analysis of IMC; Appendix 3)5. PeopleThis element of the marketing mix recognizes that front line employee competency and emotions can have an impact on customer satisfaction. DWs retail staff needs to be friendly and helpful while giving the customer the freedom of choice in product. Importantly retail staff should be competent in the English language as dealing with a higher end segment. Selection of competent staff that have the right attitude, providing on the job training, reinforcing and motivating staff can have a positive impact on customer satisfaction. 6. ProcessEffective business processes are needed to retain a customer base (and facilitating positive word of mouth). DW can minimize the customer waiting time when purchasing Reebok items by using ICT systems like Point of Sales (POS) ones that automate the sales transactions to great extents. Getting the item information via bar code recognition and generating sales receipts faster. Support for credit and debit card payment methods with a fast response time is also important.

7. Physical evidenceAs DW is acts as a franchisee to Reebok maintaining high standard of interior store design is important. The store design needs to reflect the brands personality. This can be achieved by using the brands logos, theme colors as a color scheme both internally and externally. Even though these are smaller details elegant colors (that are not too bright) can help evoke that unique emotional experience provided by the brand image.

IMPLEMENTATIONControl Mechanisms

Balance Scorecard Sectorbased on; (Kaplan & Norton, 2007)Measures for DW

Financial Result in a consistent gross profit margin of 35% Achieve an ACID test ratio greater than 1.0

Customer Receive a customer satisfaction rate of 80%

Increase social media engagement resulting in a minimum of 3000 likes on the Reebok Sri Lanka Facebook page

Increase brand awareness by 30% via promotion

Operational Ensure smooth inventory control

Learning Provide a minimum of 3 training hours to retail staff per month

Schedule

Figure 4: Gantt Chart ViewBudget

ActivityUnits (if applicable)Amount [LKR]

Market research and planning

Secondary research agency150,000

Supply chain activity

Reebok contract 3 year contract300,000

Initial order150 units Play dry t-shirts 440,000

Store design500,000

Taxation132,000

Assembling store components30,000

Promotional

Graphic design firm50,000

Printing billboard ad15,000

billboard leasing150,000

Facebook Ads cost150,000

Implementing

Recruitment ads18,000

Administration expenses300,000

Maintenance costs 15,000

Contingency cost15,000

2,265,000

Works Cited

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