|CeeCee Case Study Analysis
School of Business & Humanities
Institute of Technology Blanchardstown
Bachelor of Business Studies
Strategic Marketing Management
1. INTIAL OBSERVATIONS
* Fashion Industry
* The fashion retail industry has grown rapidly. It is reported in the case study that sales revenue in the European clothing market has increased by almost 20% over the last decade.
* There has been substantial price deflation caused by the increasing market share of value retailers and the reduction of production costs as manufacturing is moved to cheaper wage countries such as Asia
* Increasingly competitive markets as large grocery supermarket retailers are now offering non food products including clothing. (e.g. Tesco’s F&F fashion line)
* Current trend in the industry is the introduction of online shopping
* Innovative Business Model
* The company’s business model uses product exclusiveness to encourage recurring customer visits and impulse spending.
* CeeCee utilises a fast fashion concept
* CeeCee prices its clothes in a competitive way in each of the countries in which it competes, instead of using the cost plus principle.
* The company has established a long term working relationship with its suppliers
* Extreme IT Reliance
* CeeCee invests heavily in IT systems.
* The company uses advanced technology to allow its Just in Time (JIT) fast retail model to work.
* The company uses a fully integrated
IT system known as CCIPL to manage inventory, productions and logistics. An IT system known as CCF is also used to control and manage company accounts.
* All shop managers uses a handheld Personal Digital Assistant (PDA) to review sales data and amend orders, an upgrade which costs the company over €40 million.
* The company has also invested over €10 million in the launch of a website which will offer online shopping to its customers.
* Marketing Strategy
* Marketing is not an essential business component at CeeCee therefore only 0.5% of sales revenue is allocated to marketing.
* CeeCee does not market its products through the mediums which its competitors would use such as TV and fashion magazines; instead the company uses store locations and display of few clothing items in shop windows as advertising.
* CeeCee has a successful marketing strategy as it has more customer repeat visits when compared to its competitors.
* The company operates in an intensely competitive environment
* Customers are more likely to switch to ‘value’ retailers due to the current economic downturn which resulted in less disposable income
* CeeCee is most comparable with competitor 3 in the case study in terms of number of stores and sales area. In comparison to competitor 3, CeeCee is performing better as its sales revenue is 8% higher.
* Financial Performance
* The company is in a solid financial position
* Revenue in 2008 grew by 14.05% and
operating profit for 2009 increased by 2.92%
* As of December 2009, share price has decreased by 25% but dividend payout rate is still the same as 2008. Keeping dividend payout rate consistent is essential, mainly because investors do not like surprises.
* Consumer Familiarity
* CeeCee is responsive to trending consumer behaviour
* European surveys of ‘consumer wants’ shows that consumers do not associate cheap with quality. The company responds to this by carefully pricing their clothes to avoid appearing as low quality.
* The survey also shows that consumers are increasingly turning to online shopping. CeeCee invested over €10 million in the launch of its website which would offer online shopping to its customers.
2. KEY ISSUES FACING MANAGEMENT
i. Expansion: CeeCee has approved a five year expansion plan. The company plans that its expansion would include new shops opening outside of Europe. A key management issue which would be faced would be the handling the risks which are associated with operating on a global scale. Such risks include fluctuations in foreign currency exchange rates, unfavourable economical or political factors or less developed infrastructure. CeeCee would also need to decide on which mode of entry it would utilise when entering into a foreign market in order to reduce risks. Entry options include contracting, strategic alliances, joint ventures e.t.c.
ii. IT Systems: As mentioned earlier, CeeCee invests heavily in Information Technology systems to support
its fast fashion business model. Any problem with the IT systems would create a major setback for the company, in terms of inventory management. The major issue here for management is identifying possible IT risks and understanding, monitoring and controlling of those risks, mainly because their business rely heavily on IT and New and innovative technologies are introduced frequently therefore creating new risks.
iii. Suppliers: CeeCee’s suppliers play an important role in the company’s fast fashion model. The company has a list of criteria’s for selecting its suppliers and audits its suppliers on a regular basis because they are a vital component to the success of their business. A major issue for managers here is carrying out supplier risk management because should supply chain disruption arise, it could jeopardize the company’s strategy.
iv. Maintaining Success: CeeCee is a successful corporation and another important challenge which its management would face is maintaining its success and growth in a declining economy and increasingly competitive market. The economic downturn which led to high levels of unemployment and lower disposable income made trading conditions difficult for many businesses. The collapse in consumer spending and failing demand saw some clothing retailers cease trading and some experienced revenue decrease by 20% while CeeCee’s revenue decreased by just 2%. This is a major achievement during such harsh conditions and maintaining this achievement would be a challenge for management.
v. Competitive Advantage: Maintaining competitive advantage during this difficult time would prove difficult especially as traditional retailers such as Next are now adopting parts of the fast fashion concept. The availability of latest fashion at an affordable price is no longer exclusive to CeeCee. Another important issue facing CeeCee is the rise of value retailers gaining market share and improving the quality of their clothes as seen with Tesco’s F&F fashion line. Online shopping is now a major trend with consumers, not only would CeeCee have to compete with other fashion retailers selling online, the company would be competing with online only stores such as ASOS.com and Very.co.uk.
vi. CeeCee Personnel: There happens to be some personnel issues in the company which if not dealt with by management could interrupt operations in the company. The most important personnel issue is the fact that Roberta Downs (IT Director) intentions of staying with CeeCee for a maximum of 5 years before setting up her own IT consultancy business. Should this happen, it could be dangerous for the company due to the likelihood of Roberta passing on vital CeeCee intelligence to other competitors. Other personnel issues which should be taken into consideration include Juliette Lesperre (Sales and Marketing Director) and Carla Celli (CEO) conflicting views on the importance of marketing.
3. PERTINENT CONCEPTUAL FRAMEWORKS, MODELS & PERSPECTIVES
Porter’s 5 forces
Threat of Entry * Decreasing customer
loyalty led to increased competition in the industry which further attracted new entrants into the industry such as grocery supermarkets (e.g. Tesco) introducing clothing products. | Threat of Substitution * Generally there isn’t a substitute for clothing. Instead what could be substituted is how consumers purchase products especially with the rise of online retailing which suits consumers who have less time for shopping. |
Competitive Rivalry * Fashion retail industry is very competitive mainly because the industrial lifecycle is at its maturity stage and the economic recession has caused a slowdown in growth. competition comes from existing competitors and potential entrants like supermarkets diversifying into clothing |
Supplier Power * Suppliers have moderate bargaining power in the fashion retail industry; this is mainly because of limited suppliers. | Buyer Power * In the fashion retail industry, customers have very little bargaining power as they are unable to influence the price which retailers sell at. |
Continuing Improvement Strategy
Continuing improvement is linked in with total quality management and comprises of 14 Demings point and kaizen. CeeCee can look at improving its online services by benchmarking other companies in their strategic group. CeeCee can adapt Dell’s philosophy by customising its furniture products as it seems to be one of the slowest moving items among its offerings.
* Benchmarking strategic pricing
CeeCee should consider one of the most noticeable trends “homogeneity”.
Customers nowadays are becoming global customer regardless of their geographic location. CeeCee in this scenario do not have to open shops in every part of world but they can increase their offerings. This begins by improving their website. E.g. jeans are now becoming a need.
Another issue CeeCee should be considering is bi-racial and Muslims, due to migration, as percentage is rapidly increasing, this could possibly serve as a barrier if they do not identify culture as a factor.
As maintaining existing customers is far cheaper than acquiring new customers. Customer retention is cost effective, so CeeCee should consider offering loyalty card to build a positive relationship.
Capital structure measures how a company finances itself, i.e. the proportion of equity to debt. It is measure through a capital structure ratio which is; long term debt / (shareholders equity + long term debt). The following is the capital structure of CeeCee:
2008300,000,000 / (1,128,000 + 300,000,000) =0.99 | 2007300,000,000 / (920,000 + 300,000,000) =0.99 |
This calculations show that CeeCee has a higher proportion of debt to equity.
McKinsey 7s Model
* Strategy: CeeCee gains competitive advantage over its competitors through the use of their innovative business model, the fast fashion concept and the heavy importance placed on Suppliers who support the success of their fast fashion concept.
* Structure: The Company’s board consists of six non-executive directors, 1 non-executive chairman and 1 CEO which is Carla
Celli. Other key personnel include the head designer, head of logistics, human resource director, operations director, finance director, IT director and a Sales and Marketing director who all report to the CEO Carla Celli.
* Systems: each key personnel are skilled and committed to carrying out their own tasks in accordance to the CEO’s permission.
* Shared Values: core concept of CeeCee’s business model is to offer latest fashion styles at affordable styles and to achieve this while making a profit and gaining an edge over their competitors.
* Style: CeeCee adopts a bureaucratic style of leadership where each key personnel have a degree of freedom to come up with suggestions and these suggestions would be taken into consideration.
* Staff & Skills: CeeCee employs individuals who are well experienced and their capabilities cannot be questioned. For example the sales and marketing director graduated from a world class university and has worked as a marketing manager for various companies before staring at CeeCee. This is common amongst all key personnel
Hackman & Oldham’s job characteristic model
This model comprises of two key factors core dimension and psychological states. With the current economy CeeCee have undergone an undesirable transformation resulted in the part-timer worker being made redundant. CeeCee have to consider redesigning work to suit employees, so as to eliminate the notion or act of being bore at. Due to such situation employees may face a psychological breakdown,
the onus is on the employers to rebuild believed that employee’s job are secure. In most case employees tend to have less confidence in management and result in less productivity. CeeCee should consider career succession plan because as they could be lost some valuable employee.
They should adapt SAS style to acquire the best talented people with in the industry. By identifying the skill variety, different designers and employees that carry out various tasks in the company. At they same time creating autonomy and ensure they provide feedback.
Political Factors * This factor refers to how government policies and legislation can impact business decision making. CeeCee would need to know the trade system of any country they operate in. | Economical Factors * CeeCee needs to be aware of economical factors which can impact the company’s success. These include interest rates, taxation changes, economic growth, inflation and exchange rates |
Social Factors * Social trends such as changes in generation preferences can impact on the demand for CeeCee’s products. The company would have to work according to the trend and satisfy customer’s demand. | Technological Factors * Advanced and innovative technology systems are introduced regularly. Integrating advanced technology with business model can reduce costs and improve quality. |
4. EXTERNAL ANALYSIS
Political / Legal Environment
* Conforming to laws in the countries which the company operates in
* Trade barriers which are
in place on imports from Asia
* The recession has put a lot of pressure on how companies set prices
* Consumers are switching to value retailers
* Currency fluctuations
* The shift in style preference in generations
* Customers now expect more from retailers such as better stock availability & better services
* Awareness of corporate social responsibility
* Consumers now perceive low cost clothing as low quality
* Taking advantage of online shopping
* Keeping up to date with technological trends
* Threats which technology could pose (security)
Natural / Physical Environment
* resources to setup their shops in high street areas as new shopping centres are being built
* level of infrastructure in the country of operation
* Older people are living longer and CeeCee isn’t considering targeting these groups
* Religious issue as people in different countries wear clothes according to their religion.
Five Force Analysis
Intensity of Rivalry [High]
* Competition is very intense due to the increasing market share of value retailers and grocery stores such as Tesco who are now entering the clothing industry
* The weak economic climate has resulted in an even deeper competition amongst retailers
Supplier Power [Medium / Low]
* CeeCee’s business model depends on long term relationships with suppliers which increases supplier power
* IT outsourcers have a higher
* There are a variety of international suppliers therefore weakening the power of suppliers
* Suppliers need CeeCee as a business more as they are a big corporation
New Entrants [Low]
* Very competitive industry
* Substantial amounts of capital is needed to start up
* Experience is needed to build a business that would be able to compete against dominant players
Buyer Power [Medium]
* Plenty variety for consumers to choose from therefore giving them some power
* Easy for customers to switch between retailers
* Generally individual customers have very little power on influencing hoe retailers set their price
* There is no substitute product for clothes
5. COMPETITOR ANALYSIS, STRATEGIC GROUP ANALYSIS AND COMPETITIVE STRENGTH GRID
* Competitor Analysis
CeeCee’s direct competitors include Zara, Mango and H&M because these companies are similar to CeeCee in the sense that they are also European based companies that offer good quality latest fashion styles at an affordable price and also have international expansion plans. On the other hand, CeeCee’s indirect competitors who are targeting the same market and offer products which are close substitutes include Penneys and Marks & Spencer (M&S). Below is an analysis of all the mentioned competitors.
Objectives | Zara is a brand owned by Inditex. It is a Spanish clothing retail group which opened in 1975 in Spain. Since then the group has expanded into 77 countries with 1,483 stores in upscale locations
in the world’s largest cities. Zara’s core fashion philosophy is that creativity and quality design together with a rapid response to market demands will yield profitable results. The group has been able to yield profitable results through their business models which incorporate three goals. These goals are: to develop a system that requires short lead times; decrease quantity produced; & increase the number of styles available. |
Strength | One of Zara’s biggest strength is their business model which is hard to replicate. This gives the group an edge over their competitors. Zara is the only clothing retailer that has one manufacturing site and that tracks and follows consumer trends instead of creating them |
Weaknesses | A weakness of Zara is its Euro-Centric model. There is an expected over saturation of Zara stores in Europe by 2013, which would mean that running the store would actually cost more than their revenue. |
Financial Strength | Zara is in a strong financial position. In terms of its revenue, the group reported figures of €11,000 million in 2009, a 6.73% growth from 2008. |
Product line | Zara offers men’s and women’s clothing & accessories. The company’s product range also includes children clothing. |
Product Quality | Zara produces their clothes with quality as a major component. The company ensures their products are of great quality. This degree of quality is reflected in the prices of Zara’s products. |
Customer Loyalty | Zara produces in small batches and therefore creates a culture
of product scarcity, which results in customer repeat visits into Zara higher than industry average. |
Length of Time in Business | 36 years |
Marketing Activities | Zara uses an unusual marketing strategy. The company has a policy of zero advertising. The company preferred to invest a percentage of revenue in opening new stores instead. This strategy is very effective because of its affordable prices and unique response to market demands. |
Supply Sources | Zara is a vertically integrated retailer. Unlike most fashion retailer in the industry, Zara controls most of the steps on the supply-chain; it designs, produces, and distributes itself. |
Objectives | Mango is an internationally famous brand. The company designs, manufactures and markets clothing & accessories for women & men. One of Mango’s aims is to be present in every city in the world. The company opened its first store in Barcelona in 1984; they currently have 1223 stores in 92 countries. Mango has been able to achieve this goal by expanding internationally through franchising. The chain offers its franchise system to the European union and to the major world capital and cities. This franchise system covers all aspects relating to product marketing and franchise management. |
Strength | According to the company’s official annual report 2009, their principal strengths are: adopting a policy of improving brand positioning; consolidating design and styling; and continuing to expand until gaining a presence in 100 countries. |
Weaknesses | By
using a franchising system to expand internationally, there is a possibility that the company could lose lack of control over the business and especially with the brand image overseas. |
Financial Strength | The company has maintained a steady growth in turnover over the past years. Total turnover for 2009 increased by 4.04%. Likewise the net profit for 2009 increased by 3.2%. |
Product line | Mango offers hip and modern clothing for women. The company offers men apparel under a different line called HE (Homini Emerito) by MANGO. The company also offers fashion accessories for both men and women. |
Product Quality | Mango differentiates itself for having a highly defined concept. This concept involves making sure that the products on offer are of exceptional quality. This is also reflected in the price of their products as it is not cheap but yet still affordable. |
Customer Loyalty | Mango claims that one of the main reasons for its existence is its customer’s satisfaction and loyalty. Well designed, large stores stocked with goods selected to allow customers to choose & combine garments with ease in addition to specialised service makes purchasing the company’s products a pleasant experience therefore encouraging loyalty. |
Length of Time in Business | Mango has been in existence for 27 years. This makes the company a very experienced Fashion retailer. |
Marketing Activities | Mango invests heavily in advertising. Since its early days Mango has worked with top models to build its brand image. Top models such as
Claudia Schiffer, Naomi Campbell & Christy Turlington have all featured in a Mango campaign. Internationally famous actress Scarlett Johansson currently stars in the new campaign. The company uses this campaign to advertise on their website, city streets and fashion magazines. |
Supply Sources | Mango has a team of designers who designs the products, but manufacturing is outsourced. The suppliers are in charge of buying all the primary materials for production. The company refers to its suppliers as manufacturers. |
Objectives | H&M is one of the world’s largest clothing retailers and was found in Sweden in 1947. Its name comes from ‘Hennes & Mauritz AB. The company operate in 38 different countries and has 1,500 stores worldwide, Europe, Asia, Northern America and the Middle East. The company has more than 700 designers, buyers, and pattern makers to create H&M’s collections for women, men, teenagers, and children and also sells cosmetics under its own brand name. H&M aim is to boost sales in existing stores; another aim is to expand the number of retail stores by 10-15% annually. The growth will be entirely self-funded, will proceed with an emphasis on quality and continued high profitability. H&M’S Organic cotton range increases. The aim is to setup up the use of organic cotton by at least 50% per year from 2008 until 2013 based on the previous year’s target. So far the company have exceeded the target, using 3,000 tons in 2008 and 8,500 tons in 2009. |
Strength | The company is producing at a low economies of scale,
has many independent designers, continuous improvement in product offering and continuous increase in sales, etc. |
Weaknesses | H&M doesn’t make its own products and relies on independent designers. By using franchises to sell its product the company may lack control over the business in major areas. |
Financial Strength | In 2009, H&M’s sales including VAT amounted to SEK 199 billion; profit for the year was SEK 16.4 billion and the number of employees around 76. |
Product line | H&M offers clothes and accessories for woman, men, teenager and kids. The company also sell its own branded cosmetics. Products are sold in shop, via catalogues and through the internet. |
Product Quality | H&M customers expect their products to be practical, durable, well made, well fitting, functional, safe and free from harmful chemicals. To meet these expectations H&M continuously develops methods and processes to improve the quality and design of products. The company have a strict quality assurance process in place that starts early in the product life cycle. H&M’s product quality standards meet or exceed the strictest regulations in any of the countries where products are sold. |
Customer Loyalty | The company believe the reason for customer’s satisfaction and loyalty are attractiveness of the layout which attracts clients to learn from the collection offered. They had given an idea of the different variety and price range of the products. Price and discounts, Affordable fashion and stylish products make clients fall in love with
their collections along with convenience & accessibility of the stores. |
Length of Time in Business | H&M has been in existence for 64 years. This makes the company a very experienced Fashion retailer |
Marketing Activities | To promote its products the company is using video advertisement, e-marketing, catalogues, etc. The company also use celebrities to build its brand image, celebrities such as singer and model Tamyra Gray was featured in a short film and promotion campaign for the new denim jeans for women. H&M is co-operating with Stella McCartney and introduced a line with her in the autumn 2005. |
Supply Sources | H&M does not own or operate any factories. The company has around 700 suppliers to manufacture their products and many of them are located in Asia |
Objectives | M&S is one of the UK’s foremost retailers of clothing, home ware, food and financial services boosting a weekly customer base of 10 million in over 300 UK stores. The company operates in 30 countries worldwide. It has a specific value, mission and vision. Its vision is to be a standard against which all others are measured. The mission is to make aspirational quality accessible to all and the company’s main values are quality, services, innovation, and trust. M&S strives to be a leader in its market space. Ensuring all business related activities is in compliance with its mission, vision, and value. As much as the company intend to maximise shareholders wealth management look beyond exceeding these obligations in fulfilling it social
corporative responsibilities. In the business world the most noticeable word nowadays is “green environment”. Companies recognising their responsibilities to the society, the British giant Mark & Spencer seem to be the first fashion brand to take the matter into creativity especially because it seems management has assume the target of becoming a suitable retail representative until the beginning of 2015. |
Strength | M&S is not a predominantly clothing business allowing the company to have large economies of scale. For instance the company is able to spend big budgets on its marketing strategy. Also the company also has loyal customers obtained from its grocery markets. |
Weaknesses | A major weakness is the company’s inability to be proactive. Marks & Spencer is usually faced with a situation where by management tend to be reactive. Instead of leading the way they are the one to follow. |
Financial Strength | M&S reported 4.9% sales growth in clothing for 2009. The company recorded revenues of £9022 million of which clothing & home ware sales accounted for 49%. |
Product line | M&S is popular for its women’s wear under the brands Per Una, Portfolio, Autograph and lingerie in the UK. The company is rapidly gaining market share in menswear and kids wear. |
Product Quality | M&S makes sure that its products are off premium quality and the company is known for not compromising on quality. However recently the company has had to reduce its prices in order to compete with discount retailers, but the quality of some products
had suffered. |
Customer Loyalty | Unlike other companies M&S realized that employing a differentiation strategy requires a lot of advertising and relationship building. The company uses a loyalty card to keep track with customers. This Enables them to monitor customer behaviour and transactions. Customers are also offered incentives in order to maintain loyalty. |
Length of Time in Business | Mark& Spencer have been in business for over 25years. |
Marketing Activities | M&S uses the TV, fashion magazines as mediums to advertise their products. The company also involves celebrities such as world renowned model Twiggy and musician Danny Minogue, to raise the company’s profile. |
Supplier Source | M&S uses an open supplier to source their products. |
Objectives | Primark is a retail group in the value sector, recognised in some well-developed European countries. First established in 1969 as Penneys in Mary St (Dublin), Primark Stores Limited is a subsidiary of Associated British Foods (ABF). Its key business goal is to provide what the public needs in a 'good quality, low price' way. They plan to achieve this goal by:Providing good quality products for the public; they want the public to realise they are a good company and just because their products are cheap, it doesn't mean that they are rubbish. They will achieve this by having their products made by people that know what they are doing and test them to check that they are good quality.Selling goods at reasonable prices; they want the public to have
a wide range of options, so they offer them good quality products at reasonable prices; this will be achieved by looking at other stores, selling similar products, and making their prices lower than other places.Being friendly and helpful towards customers and staff; the public need to view the company as a friendly one; this will make them want to shop in the store if they feel welcome. They will achieve this by greeting customers as soon as possible and make them feel welcomed.Treating everybody the same; the public needs to be treated equally, making them feel special. |
Strength | TNS ranks Primark as Great Britain’s second largest clothing retailer by Volume in terms of market share. This is because The company's success is based on sourcing supply cheaply, making clothes with simple designs and fabrics, and only making them in the most popular sizes, buying stock in huge bulks and varieties. |
Weaknesses | Primark has little in terms of expression and communication as it does not advertise which is an advantage to its competitor’s. Other issues were with poor working conditions and disvaluing workers’ rights. |
Financial Strength | There are almost 40 Primark outlets in Ireland, and retail experts here have claimed the group is probably poaching some business from Dunne’s stores. In total, there are 215 Primark stores all across Europe. Over the past couple of years there has been a decline in the financial prosperity in the fashion retail industry but the reverse has been the case for Penneys. Rather than declining with
the profits, they are opening new branches. Overall Primark have been profitable. |
Product line | Primark offers clothes, accessories, cosmetics and home wear for women, men, young adults and kids. Their products are sold mainly in shop but they have a website that is running in the United Kingdom. |
Product Quality | Primark has a wide range of stock, specially made for them with their brand names and the quality of their clothes has improved over the years. Primark’s brand is being recognised on a global scale and they are now using recycled products, giving back to the community and helping the environment. |
Customer Loyalty | With the low cost strategy they use, their customers are always loyal to them. On a scale of 1 to 10 Primark’s customers would get n 8. |
Length of Time in Business | In June 1969, the first Penneys store opened in Mary Street, Dublin. Therefore Primark has been in business for 42 years. |
Marketing Activities | Primark is not big into advertising but they do have their ways of gaining recognition in the market. Public Relations (PR)Public Relations (PR) is a function of planning and maintaining two - way communication between an organisation and its audience and is critical to its success. PR can perform a variety of functions. It can make people more aware of a company, it can change people’s minds, it can spread information to a wide target population and it can give organisations a competitive advantage. Penneys maintains a media presence throughout the year and displays its collections
at fashion shows prior to each season. AdvertisingThe image and profile of Penneys is carefully managed so that a consistent message is communicated to its target customer. Advertising imagery plays a key role in this strategy. Radio is used as the primary advertising vehicle for Penneys because it can deliver benefits that other media cant. |
Supplier Source | Mostly they get their products from India. |
* Strategic Group Analysis
The strategic groups within the fashion retail industry has been analysed using a strategic group map. This map would illustrate the competitive forces within the industry, CeeCee’s competitive position along with its competitor’s position. Two important competitive forces in this industry have been identified to be ‘International Exposure’ (in relation to how many countries the company operates in) and ‘Product Line Mix’. These two factors are variables on the X and Y axis of the map. The strategic groups which would be plotted on the map as well as the map are as follows:
1. Zara (Direct)
2. Mango (Direct)
3. H&M (Direct)
4. M&S (Indirect)
5. Penneys (Indirect)
* Competitive Strength Grid
Key Success Factors | CeeCee | Zara | Mango | H&M | M&S | Penneys |
Right store locations | | | | | | |
Takes advantage of Technology | | | | | | |
Fashionable stock | | | | | | |
JIT manufacturing | | | | | | |
Friendly atmosphere | | | | | | |
Secondary Success Factors | | | | | | |
Exposure | | | | | | |
Brand Recognition | | | | | | |
Financial Capability | | | | | | |
Marketing Activities | | | | | | |
Quality of Service | | | | | | |
6. INTERNAL APPRAISAL
* The organisation values and culture
Short Lead time- Keeping up with Fashion – This has been possible through their supply chain and their designers. Information Technology has become a culture- Their IT Systems are absolutely vital in managing the business processes, it integrated many of the business function from designers, to the management, etc.
* A prime location for all of its shops, and in some city centres CeeCee has seized the opportunity to use historic buildings in key shopping areas.
* Spacious shops which use sophisticated architectural details and designs to make shops appealing to customers to browse and to provide a comfortable environment in which to shop.
* Carefully designed shop window displays which are changed at least once each week, allowing the latest clothing designs to be showcased to prospective customers.
* Careful and visually appealing layout of clothing displays, so as to attract customers to choose coordinating clothes and accessories and to maximise sales revenue.
* Zero policy on advertising
* Knowledge & technical skills
* They have been in the industry since 1989.
* They have multiple of designers- in Europe and Asia
* Their ability to reduce cost-through control supply chain
and inventories, their ability to react quickly to fashion terns, and to meet lager demands.
* The ability to still be successful without regular advertisement- zero policy on advertising and their ability to communicate between the different business units.
* Role of people as Key success factors
* The company has over 44,000 employees, and most of their employees are part-timers.
* Excellent customer care.
* CeeCee carefully recruits and trains all of its employees to ensure that the customer is put first.
* CeeCee has very strong knowledge base personnel for example Non-executive chairman- Frank Bartoli- he has worked in senior positions for leading global fashion bran for many years.
* Sources of Finance
Businesses have many sources of finance available to finance their business; they are usually short-term and long-term sources of finance. However these sources can be external or internal. Example of internal sources of finance can be profits from operation, sale of assets, etc. External sources of finance are loan, bank overdraft, shareholders, long-term loan, etc. From the case we observe that CeeCee is using more external sources of finance and we assume that it is using a little of internal sources. The company currently has two long-terms loans, totaling of €300 million, with a total of €32 million payable in finance cost each year on these loans. One of the loans is €200 million at 12% interest per year, and it is repayable in October 2014. The second loan is for €100
million, at 8% interest per year and is due for repayment in July 2016. We also observe that the company also uses shareholders to finance it business, the company has 100 million shares in issue and the majorities are held by institutional shareholders. We assume that the CeeCee might be using profit at as internal source of finance to finance other areas of the business which is not measure in the case.
* Cost of Capital
The cost of capital includes the cost of debt and the cost of equity. In the case of CeeCee the cost of debts amount to 12% interest on the loan of €200 million and 8% interest on the loan of €100 million and the earning per share in 2008 result to €4.16 per share and in 2009 earnings per share was €4.24, a growth of 1.9%.
* Capital structure
The capital structure is how a firm finances its overall operations and growth by using different sources of funds; this can be long-term debts and short-term debts. In the case of CeeCee the company uses more of long-term debts to finance it business. Example of this is CeeCee expansion plan which is finance by some of its long-term debts.
* Global competitiveness
In the case of CeeCee the company prices its clothing in a different way from traditional retailers. Instead of using the cost plus principle, CeeCee prices its clothes in a competitive way in each of the countries in which it competes and the marketing director is aware that if the clothes are priced too cheaply, they will appear as if the quality is low. Therefore each product
price is based on an element of exclusivity which ensures that the price is competitive but at a premium to that of lower quality competitors.
The impact on competitive advantage (efficiency, speed of response, quality etc.) CeeCee operations system has a very huge impact on it competitive advantage over it competitors. For example the quick response to customer needs using it fast fashion concept and also it well manage supply chain-it takes CeeCee only 10 to 15 days from the time they design new clothing until it arrives in stores. A move from the traditional form of operation to be more efficiency and response to customer needs. CeeCee produce some percentages of it clothing in Eastern Europe and Asia to gain competitive advantage over it competitors. (Seeking low-cost of production to minimise cost).
* Technological change
CeeCee IT systems CCIPL which integrated inventory, production and logistics system has recently undergone upgrading at a cost of over €40 million to enable all shop mangers to be able to review sales data and amend orders using a handheld PDA (Personal Digital Assistant).
CeeCee had also invested over €10 million in the launch of its website to offer online shopping to its customers.
CeeCee’s finance systems, CCF, interface directly with the CCIPL system, which enable the CCF system to produce a monthly management accounts and annual statutory accounts and with the ability to generate weekly and daily sales revenue and margin information management to monitor actual against planned.
* CeeCee brand strength is successfully built around it unique management system, design sources, their premium location and supply chains. Unlike other fashion brands, it takes CeeCee only 10 to 15 days from the time they design new clothing until it arrives in stores. The fast fashion concept and operation allow CeeCee to response positively to their customer and help build brand loyalty as customer always expect something new. Communicating brand image through it premium location and fast fashion concept.
Excellent customer care-CeeCee carefully recruits and trains all of its employees to ensure that the customer is put first. This philosophy is behind all aspects of the work in all CeeCee’s shops. The emphasis is put on providing an uncrowned pleasant shopping experience where the customer is not approached by shop staff unless asked, but shop staffs are constantly available if required.
* Knowledge base
CeeCee company was founded 1989 and still in operation up to date. Been operating in the fashion industry for so long that is highly competitive shows that the company has acquire a lot of knowledge over the past years and the company has design in different part of the world who has different experience and knowledge in the fashion world. Also CeeCee employed some of the most talented people in the industry that has year of experience, for example Non-executive chairman- Frank Bartoli- he has worked in senior positions for leading global fashion bran for many years.
7. VALUE CHAIN AND
VALUE SYSTEM ANALYSIS
* shift to Asian market in order to benefit from the cost of production and labour
* use of air craft to get product across speedily in meeting the need of customers
* items are kept in the warehouse for approximately 10- 14 days before taking off to final destination
* use of a range of clothing manufacturer both in Europe and in Asia who are contracted to work exclusively for CeeCee
* CeeCee philosophy is built upon the fast fashion model.
* The fast fashion essentially replicating the principle of manufacturing technique of JIT
Marketing & Sales
* The company uses locations, and stores to market their products
* Hierarchal structure with a board of management in place.
* IT support system works in such a way that it’s able to get some new products into its shops within just 10 to 15 days.
* The supply chain also includes complex logistics to enable the correct level of inventory to be delivered to shops at the right time.
* CeeCee ensured that all their shops are rented with an exception to Head office and the distribution centre.
* The fast fashion model allows CeeCee to regularly change their retail stock.
* CeeCee prices its clothes in a competitive way in each of the countries in which it competes.
Human Resource Management
* CeeCee employs its own staffs but it also outsources some
* Over 80 designers, all of whom are young (average age of 27).
* By the end of 2009 the majority of employees are part-timers.
Value Enhancing Linkages
* Operations & Technology Development: these two link with one another because they have to do with the company’s inventory management. We believe that if they’re linked together, uncertainty regarding customers demand may be minimised or better still avoided. It also helps in enhancing customers’ service; in terms of time, delivering of products and just the way business is run all together.
* Sales and Marketing, Procurement &Human Resource Management: all of these three factors have to do with generating and maximising profits. If combined, brand awareness will increase and the company’s profile will be enhanced. Marketing plays a vital role in the company and the way HR is directed is in some way dependent on the marketing activities CeeCee decides to go with. With effective flow of information between these three variables, the supply chain management is enhanced.
8. COMPARATIVE ANALYSIS
* CeeCee-versus- ZARA
Both are similar in many areas especially as they both adopt the same marketing strategy model, while this is the case still they are slight differences in the way both operate in the sense that Zara has the edge when it comes to knowledge and expertise as well as the great management team it’s been able to put together over the years as a result of the acquisition of new markets into its portfolio. While
on the other hand it can be suggested that CeeCee might have a strong female consumers following particularly young professionals as those were their key demographic at their initial start-up.
Looking at this two CeeCee assumes the role of student while Zara the teacher as they both have strong similarities in their approach.
Verdict: Zara triumphs in this battle mainly due to the fact that it was the first to adopt this strategic model of fast –fashion which has worked so well for it and also its affiliation with Inditex Group makes it a big power to contend with. It will be very hard for another company to come and try and beat it at its own game, this would be very much impossible but that is all dependent on Zara ability to stay competitive and continue being market leaders. Also a key note is that the people at Zara did not define their target by segmenting ages and lifestyles as traditional retailers do, Zara's global target market is a young, educated one that likes fashion and is sensitive to fashion, but is price-conscious.
Unique Deliverable: Being part of the Inditex Group a superpower fashion house, expertise and years of useful knowledge, offerings and physical presence.
* CeeCee -versus-Mango
Both originated from fashion capitals, Mango from Spain and CeeCee we are assuming from Italy. While mango is a mass market produce chain CeeCee does not mass produce leading to more frequent visits from customers.
Over the years they have both branched out of their domestic market but Margo is leading CeeCee
in store per area as its available in over 90 countries with 1,223 stores and has even made a presence in Africa something CeeCee have not done nor look like they will be doing in the future.
They both have the same pricing strategy and place importance on the quality of their products and avoid being seen as a value retailer in relation to the price of their goods. While Mango outsources its manufacturing its counterpart holds its manufacturing close to its heart, CeeCee manage their suppliers and have a great supply chain that enables feedback from the manufacturing process to the time it reaches the store. Mango have a limited product range as it only serves women and men.
Verdict: Mango would be more ideal due to its strong marketing mix, they invest heavily in marketing so would have more of a presence and its affiliation with models in the industry thus cements their place as a high street fashion retailer and enables them to charge high prices. They have a strong market presence in many countries in and outside of Europe due to franchise deals.
Both originally started from Europe but since then H&M have branched out into other continents. They are one of the oldest clothing retailer which transfers into great knowledge and expertise as well as strength. Their clothing are very similar except for the fact that CeeCee would probably have more of a professional image and feel compared to H&M in terms of their clothing.
H&M lag behind in their ability to react to fashion trend with which CeeCee
are evidently great at which begs to question H&M’s ability to utilise and efficiently manage its portfolio of 700 designers compared to CeeCee’s 180.
The clothing market is always in evolution and CeeCee have an advantage in that their stores would have more of the latest brands quicker in comparison to H&M and also most of the manufacturers in CeeCee are from Europe the quality of their product would be better than that of H&M who source all their produce from Asia.
Verdict: CeeCee H&M are the same kind of stores and their targets are very similar. They propose fashionable products with low prices and they have stores which are very well placed in the different towns where they are present. Both are closely matched but CeeCee in our opinion has the higher advantage in comparison to H&M’s strategy. They are innovative and are good at meeting the consumer needs which is perfect as this is a consumer driven market and demand dictates everything. CeeCee are able to cater to changing fashion trends and need to invest in marketing to overtake H&M.
* CeeCee-versus- Penneys
The distinct difference between these two is that they are quite opposites in the sense that CeeCee is considered a high street retailer and the other a value retailer. Value retailers have seen an increase in businesses lately due to the economic climate; this has helped as customers of its rival are starting to shop there more frequently and some even switching in rare cases.
Both have good brand awareness and they both are not involved in marketing.
The distinct core message in the brand differs though, while Penneys is viewed as cheap CeeCee would be seen as affordable fashion, this plays a part in the mind of the consumer as most people are shopping for an image to personify.
Verdict: Overall CeeCee has a huge advantage over this rival. Value doesn’t always mean quality, Penney mass produce their products with little definition and less designs as would their counterparts. Seeing as their generate ideas from producing items made by other clothing retailers their overall approach is bad in the sense that retailers like CeeCee would get ideas from fashion cat walks and the high end fashion houses, Penney would be getting its ideas from stores like CeeCee and others, this is bad in the sense that it has no core value or ethos of its own. It strategy is being cheaper than its counterparts and we can’t help but state being cheaper always leads one to think quality is lacking in the product which leads to consumers placing less value on the brand.
* CeeCee-versus-Marks & Spencer
Marks & Spencer have the edge at being a hypermarket, while their overall stores are catered to normal groceries and household shopping by having clothing stores in there as well it gives them the ability to play to consumer’s impulse buying actions furthermore allowing consumers to satisfy all their shopping needs in one place.
Both are highly aware of the importance of the supply chain and work hand in hand with their supplier. While this is the case CeeCee still seems to be the leader
especially in the clothing market in relation to Marks & Spencer. Marks & Spencer’s main service is in the food industry the introduction of the clothing section are just a subsidiary to add value to its name and boost sale so on that we conclude that it does not depend on the money generated from them for its survival while the same cannot be said for CeeCee which is devoted to the clothing industry.
These two brands are also competitors in the textile and apparel industry.
Verdict: CeeCee has the advantage as it’s focused primarily on the clothing industry and with their fast market response they have the edge.
There is something very unique about the store, the thing that makes it a retail version of crack cocaine, is that they get new stock every week which keeps the consumers coming back for more, that itself is an advantage in comparison to most of its rivals as more visits tends to translate to more spending by consumers.
Technology: Both Zara and CeeCee have utilisation of IT functions in their organisation and that is evident in the reaction speed and process of getting new products to their stores. In the fashion industry trends change and companies must be aware to this.
Customer Relationship Management: Zara might not be the best at this but these are areas which even they are growing increasingly aware of as stated in the Inditex Annual Report 2009. They are creating a new card to watch over customer spending create rewards schemes.
9. SWOT ANALYSIS & STRATEGIC IMPLICATION
* Successful business model: the fast fashion concept employed by the company has been successful as it encourages a feeling of scarcity within customers which therefore produces a very fast turnover rate of products. The model also results in CeeCee’s stock being constantly changed with new designs, which would satisfy customers.
* Financial Capability: CeeCee is in a strong financial position. During the year 2008, the company reported revenue growth by 14.5%, profit increase by 16.8% and a reduction in operating expense by 14.2%.
* Customer repeat visits: in comparison to its competitors, CeeCee’s customers visit its shops more frequently. According to a recent survey, it was revealed that retail customers went shopping for clothes at CeeCee 13 times more in a year than at high street retailers.
* Advanced IT systems: the company has access to different types of advanced information systems which plays a very effective role in delivering its successful business model.
* Supplier Relationship: CeeCee has developed long term working relationships with its suppliers. This is an important criterion as the company’s suppliers play such a crucial role in delivering the fast fashion concept.
* Store locations: from the beginning, CeeCee has always located its stores at prime locations such as were historical buildings were once located. This is a weak strategy for the company as their competitors are now located in modern shopping centres which incurs greater footfall than were
CeeCee locates its stores.
* Marketing strategy: CeeCee relies on its shops to market the business and only allocates 0.5% of sales revenue to marketing. The company would not be able to generate brand awareness which is up to its potential without advertising.
* Part time employees: due to the economic recession, the company had to reduce the number of its employees. The majority of employees which were retained work part time with an average of only 12 hours. Having an excessive proportion of part time workers has its disadvantages such as higher absenteeism rates.
* Heavy reliance on IT: the whole business model which is used by the company can only work with the support of IT. The disadvantage to this is that should anything happen to the IT systems, it would cause a major setback for the business especially with stock availability.
* Infiltrating markets outside of the EU: entering markets outside the EU would increase the company’s international exposure & generate more revenues. CeeCee already has a plan, which includes expanding outside of Europe. This could be done through a variety of international entry modes.
* Launch of online retail: dominant players in this industry are all engaged in the on-line business. This is a major opportunity for CeeCee to take advantage off since the business already utilises advanced IT systems. Operating online would enhance this company’s brand image and allow them to reach more customers.
* Collaborating with other designers: in order to increase
the appeal of their products and attract more customers, an opportunity exists for CeeCee to work with other famous designers to design their products. This has been successfully carried out by dominant players in the fashion retail industry. For example in 2007, H&M launched a collection by Italian designer Roberto Cavalli. The collection was reported to have sold out very quickly.
* Advertise using celebrities & models: CeeCee could take advantage of advertising using celebrity endorsements. It has worked for their competitors mainly because of its familiarity aspects. The average person often recognizes most famous celebrities. The celebrity could be endorsed in commercials, print campaigns and promotions.
* More advertising used by competitors: the company’s direct competitors are using more advertising than CeeCee. This poses a major threat to the company as this strategy could help direct competitors enter new international markets more easily.
* Weakening economy: the economic climate is putting a lot of pressure on many businesses including retailers. This economic condition has also led to failing demand from consumers. This is most evident in the company prediction of revenues increasing in 2009 by just 3%.
* Increasing market share of value retailers: the rise of value retailers pose a great threat to CeeCee. This rise is likely to have a negative impact on the company’s revenue. The likes of Penneys are now optimising their supply chain and also improving the quality of their products
to levels which customers are willing to accept.
* Departure of key personnel: CeeCee is vulnerable to a number of key staff leaving the business. This departure would disrupt the business operations and is more than likely to worry shareholders in terms of the company’s future direction.
* Consumer Preferences: the European survey of consumer wants identified four key trends in consumer behaviour, which included ‘better stock availability’. CeeCee’s business model which uses scarcity to encourage repeat visits and impulse purchasing, contradicts current consumer preferences.
Strategic Implications of SWOT Analysis
* Leverage the Strengths
The company has maintained a good relationship with its suppliers. The company can maintain this strength by proactively managing supply chain risks which can arise from a number of situations such as a natural disaster. These risks can seriously disrupt the business. The impact of the risks can be reduced by preparing ahead through identifying the risks and creating mitigation strategies which would reduces potentially negative effects.
* Improve on Weaknesses
The company’s strategy of locating its stores in historical locations is a weakness. CeeCee can improve on this strategy by moving its shops into better locations such as shopping centres. Shopping centres are big enclosed buildings which houses a variety of stores. Consumers today desire a combination of comfort and suitability, which these centres cater to. They create better shopping experiences for customers.
CeeCee’s shops would also have a better chance of being noticed by more customers because shopping centres generates more footfalls. This is primarily due to the inclusion of amenities like restaurants and car parks which attracts more and more crowds into shopping centres.
* Exploiting Opportunities
If CeeCee decides to exploit the opportunity of infiltrating markets outside the European Union, the key issue which is likely to arise would be how to enter these markets. Factors which need to be considered when deciding on modes of entry would include associated risks & how to avoid them and the level of costs & how it can be reduced. Management could consider the following options for overseas expansion:
i. CeeCee as a company could set up overseas independently
ii. The company could lean towards a franchising model as seen with MANGO
iii. The company could look to taking possession of a retailer which already exists in the market.
* Minimising Threats
A significant threat facing CeeCee is that of Roberta Downs (IT Director) leaving the company. The departure of key personnel could have an adverse effect on the company’s operations and performance. In order to minimize this adverse effect, the company needs to be involved in succession planning. Succession planning helps a company prepare for the departure or retirement of key personnel. CeeCee could begin by identifying potential candidates within the company several years before Roberta’s possible departure to give the new candidate plenty of time to
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(2011, 03). Ceecee Case Study Analysis. StudyMode.com. Retrieved 03, 2011, from http://www.studymode.com/essays/Ceecee-Case-Study-Analysis-621270.html