harrington collection

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+ Case Analysis Trent Halverson, Aaron Kinning, Erin Moller, Alyssa Nelson Harrington Collection

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Case Analysis

Trent Halverson, Aaron Kinning, Erin Moller, Alyssa Nelson

Harrington Collection

+Internal Analysis

Overall Objective: To provide preeminent brands for women desiring elegant, high-end fashions.

Overall Strategy: Differentiation

+Internal Analysis

Target Market: Affluent, fashionable, college-educated, professional women ages 25-60. Each division focused more narrowly on a specific TM.

Positioning: Lifestyle branding strategy, wearing the label is a sign of status

+Product

Objective: To provide the highest quality clothing that offers a lifestyle of prestige and status

Strategy: Product Differentiation

Tactics: All 4 divisions include: Harrington Limited, Sopra, Christina Cole, and Vigor. No private label brands.

+Price

Objective: To increase market share and profit margins

Strategy: Skimming

Tactics: Offer premium prices to support status of brand. Harrington Limited: $500-$1,000 Sopra: $400-$800 Christina Cole: $300-$700 Vigor: $150-500

+Promotion

Objective: To provide convenience to retailers, and help them obtain and sell the brand

Strategy: Push

Tactics: Retail sales force well trained; Offer channel partners more support and incentives than most manufacturers; Offer retailers valuable inventory and sales advice.

+Channel

Objective: To provide convenience to both retailers and final consumers by offering the Harrington collection at only the best retailers or directly through e-commerce

Strategy: Dual channel strategy

Tactics: Company owned retail stores (20% sales); upscale department stores (60% sales) and specialty stores (40% sales); e-commerce

+Performance

Sales

$2,433,900,000 in retail sales

Total revenue: $1,344 million Manufacturing Group: $538 million Retail Group: $806 million

Total Profit before tax: $118 million

+Performance

Market Share: 2007 women’s apparel industry = $133 billion in

retail sales Harrington Collection held approximately 1.83%

share of total women’s apparel market in 2007

Trends (CAGR): Average Growth Rate in U.S. retail sales of women’s

apparel 2002-2007: 4.66% (ex 1, p 240)

+External Analysis

Political/Legal/Regulatory: Textile import quotas from China eliminated in 2004.

Economic: The economic downturn that began in the early 2000s significantly impacted the industry for U.S. women’s apparel. Consumers had become very price sensitive- half of all apparel purchases were sold “on sale.”

+External Analysis

Technological: E-commerce.

Social/Cultural: Women were buying more casual clothing. More dollars were being spent on technology products, home design, and leisure-activities. Fast changing fashion product life cycles—consumers’ tastes constantly changing.

+Competitive Analysis – Porter’s Five Forces

Macro (5 forces)

Threat of New Entrants: High- Due to the ease of outsourcing production, low barriers to entry

Bargaining Power of Buyers: Moderate- Manufacturers integrating forward with company-owned stores; but department store mergers gave more bargaining power to suppliers

+Porter’s Five Forces (cont.)

Bargaining Power of Suppliers: Moderate- willing and cheap labor overseas. More retail outlets integrating backwards (providing margins of about 10-20% higher).

Threat of Substitutes: High- easy to imitate designs at lower costs

Intensity of Rivalry: High- many brands competing for shelf space and market share. The industry was moderately concentrated.

+Competitive Analysis

Micro

Leading brands: Jones Apparel Group, Liz Claiborne due to their diverse portfolios Both outsource production of apparel overseas Both involved in design, marketing, wholesaling, and

retailing of women’s apparel Jones: 396 specialty retail stores

Brands include: Jones New York, Nine West, Anne Klein, Gloria Vanderbilt, Kasper, Bandolino, Evan-Picone, Energie, Enzo Angiolini

Claiborne: 338 retail stores around the globe (201 in US) Brands include: Liz Claiborne, Mexx, Juicy Couture,

Lucky Brand Jeans, Ellen Tracy

+Market Segments

Women’s apparel products could be divided into six general categories based on quality and price:

1) Haute couture

2) Designer

3) Bridge

4) Better

5) Moderate

6) Budget

+Market AnalysisDivision Product

Line Focus

Product Classification

Retail Price Range

Target Customer

Competition

Market Share

Harrington Limited

Designer collection

Designer $500-1000+

Sophisticated Elegance; women 35-60

Donna Karan, St. John

20%

Sopra Evening Wear, Dresses and suits

Bridge $400-800

Status Seeker; women 35-60

Diane von Furstenberg, Kay Unger New York

5%

Christina Cole

Career wear

Bridge $300-700

Office Chic; women 30-55

Tahari, Dana Buckman

8%

Vigor Career Wear

Better $150-500

Trend Setter; women 25-50

Theory, BCBG Max Azria

7%

+Market AnalysisChannel Retail Sales

3%

11%

59%

19%

8%

Percent of Women’s Apparel Retail Sales

OtherDiscount or Mass MerchandisersSpecialty StoresDepartment StoresWarehouse Clubs and Supercenters

+Case Brief

Problem: How should Harrington Collection put forth their new active wear line?

+Alternatives

• Option A: “Better” pricing with same channels

• Option B: “Moderate” pricing and expand channels

+Criteria

Maintain sophisticated, high-class status

Increase margins

Break even in first year

+What is a unit?

Since active wear is sold as separates, the ratio of hoodies to tee-shirts to pants was not equal.

Therefore one “unit” = ½ hoodie + 1.5 tee-shirts + 1 pant

+Evaluation of AlternativesOption A

“Better” Pricing, same channels

Break Even = 269,255 units ($25,579,186.45)

Profit Margin = 18%

Brand image = High quality, fashionable merchandise with status branding ($220/unit)

Assumptions Higher prices consistent with desired brand image Smaller Market Size

15,000,000 X .4 X .07= 420,000 units Less distribution outlets (less promotion costs)

+Evaluation of AlternativesOption B

“Moderate” Pricing, more channels

Break Even = 390,069 units ($31,205,504.04)

Profit Margin = 15%

Brand image = Prestigious brand image at risk with lower prices ($187/unit)

Assumptions Larger market size

15,000,000 units sold X .6 X .07= 630,000 units Higher fixed costs More competitive market Might not receive 7% market share

Option A Option BContributionWholesale price "Unit" 95.00$ ($220 Retail) 80.00$ ($187 Retail)Less total Variable cost per "unit" 46.57$ 46.57$ Contribution per "unit" 48.43$ 33.43$

Breakeven:Fixed annual costs 13,040,000.00$ 13,040,000.00$ ÷Contribution per "unit" 48.43$ 33.43$ Breakeven "Units" 269255 390069X Wholesale price per "unit" 95.00$ 80.00$ Total Breakeven Dollar Sales 25,579,186.45$ 31,205,504.04$

Profit Margin:

Revenue 39,900,000.00$ 50,400,000.00$ Less fixed annual costs 13,040,000.00$ 13,040,000.00$ Less total variable costs 19,765,200.00$ 29,647,800.00$ Profit before tax 7,094,800.00$ 7,712,200.00$ Profit margin before tax 18% 15%

+Recommendations

Overall Objective: To introduce a brand new active-wear line in the Vigor division to increase margins and break even in the first year

Overall Strategy: Differentiation

Target Market: Women 25 to 50 seeking fashionable and comfortable active-wear

+Product

Objective: To provide comfortable and fashionable active wear with superior styling, fabric, and fit to consumers

Strategy: Product Differentiation

Tactics: Hoodie, Tee-shirt, and Pants

+Price

Objective: To increase margins to 18% and portray high quality active-wear via prices

Strategy: Price Skimming

Tactics: Hoodie = $100 retail Tee-Shirt = $40 retail Pants = $80 retail

+Promotion

Objective: To increase awareness of the new product line with both retailers and final consumers

Strategy: Push

Tactics: Personal selling, fashion shows

+Channel

Objective: To introduce the new active-wear line in Vigor’s current retail outlets

Strategy: Direct and Indirect

Tactics: Department Stores, Specialty Stores, Company Owned Stores, E-commerce site

+Evaluation and Control

Product Perceptions: Measure: With each receipt of an active-wear purchase the

consumer will be asked to fill out a survey about the product. Six months later they will receive a follow-up survey of performance

Implement: Based on the results adjust accordingly for next product offering

Margins: Measure: Overall profit margins for the first year Implement: If margins are not at 18%, look to decrease

production costs and increase sales training. If margins are above, consider expansion of line into new colors and styles and increase promotional efforts

+Evaluation and Control

Awareness: Measure: Survey TM consumers about product knowledge Implement: If awareness is low, consider placing more

emphasis on promotions and personal selling. If awareness is high, continue promotional efforts and consider cutting back

Retail outlets: Measure: Measure sales in each outlet. Implement: When sales are high with a certain retailer,

consider expanding into similar stores and vice versa.

+THANK YOU