Strategic Fashion Management

Concepts, Models and Strategies for Competitive Advantage

Ranjit Thind

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351662215
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Industria de la moda y textil

Strategic Fashion Management: Concepts, Models and Strategies for Competitive Advantage is a highly accessible book providing a unique look into the strategic drivers of the dynamic and ever-growing fashion industry. Derived from the knowledge gap in quality strategic fashion management literature, this book blends theory with a variety of examples and uses 18 case studies to help bring to life contemporary topics faced by senior executives.

The analysis is highly global in nature and aims to accelerate the strategic skills required to navigate the industry and contribute to a firm's growth. Using copious examples from across the world, this book provides in-depth discourse and progressive theoretical concepts and strategies which readers will be able to apply immediately to their studies or practices.

The book is particularly suitable for final-year undergraduate and postgraduate students studying fashion management or marketing, as well as those on MBA and international business courses who wish to understand more about the fashion ecosystem. It is also designed to serve as an important reference for executives who are interested in conceptualising strategic issues that are pertinent to the industry.

1The business environment

Industry dynamics and value drivers

Chapter goals

This chapter explains how the firm can utilise the ELIPSE framework to navigate the macro business environment and the forces that shape it. This chapter also covers some of the key drivers that form the engine of growth in the industry. The key areas covered are:

•Contextualising the role of fashion

•Introduction to the macro business environment

•Industry value drivers

Contextualising the role of fashion

Fashion must be amusing, modern and fun. (Yves Saint Laurent, fashion designer).¹

Clothing is one of humanity’s basic needs and its primary function has been to protect the body from the elements. As the centuries progressed, this rapidly evolved into material artefacts used to present human beings as clothed, adorned and gendered individuals. Accordingly, in the nineteenth century clothing took on a new meaning and through gender, appearance and the circumstances of different lifestyles and cultural influences, it symbolised membership to a certain stratum of society.² As this movement became ever more popular, the term fashion was embodied as a means of self-expression, emotion, identity and ethnicity. Deriving its origins from the Latin word ‘fasoun’, which translates as the ‘physical make-up’ of artefacts, and in French ‘façon’, which means ‘appearance’ and ‘construction’, fashion can be defined as a phenomenon that is identifiable by the wearer or viewer when being consumed. Consequently, fashion has become incredibly diverse and is a global industry which is influenced by the world around us. Trends often generated by celebrities, media, art, religion, culture and science have become the industry’s currency and continue to nourish each other. The customary Spring-Summer (S/S) and Autumn-Winter (A/W) collections have been rethought to incorporate constant deliveries of ‘seasonless’ merchandise on a weekly and monthly basis. Coupled with the rise of fashion immediacy and the merging of men’s and women’s catwalk shows, a newly emerging fashion system continues to counterweight the traditional S/S and A/W platform and calendar. Subsequently, fashion requires constant reinvention through a restless rotation of patterns, colours, logos, fabrics, textures and shapes. This has led consumers to seek products, sometimes regardless of quality and price, that are cool, fresh and relevant, and those that match their own unique tastes and lifestyles. Because of this, firms endeavour to create trends that seize the moment, whether they are conspicuous in nature or obscure in sensibility. Therefore, to capture maximum value, the link with consumption has become strategic. The effects of these trends are further exacerbated as fashion never tires of being observed, scrutinised, exaggerated, applauded or abused. Attraction and repulsion. Passion and indifference. Sensual and abrasive. Expensive and cheap. Visible and discerning. Traditional and modern. These are just a few of the dichotomies that the world of fashion infuses into the everyday lives of consumers as the battle for the hearts, minds and wallets of shoppers intensifies.

According to the management consultancy McKinsey & Company, in 2014 100 billion items of clothing were manufactured for the first time, more than double what was produced in the year 2000. This equates to nearly 14 items for every person on earth, of which 60 per cent ended up in a landfill site within the same 12 months.³ As a result, the fashion industry can be classified as a creative and high velocity environment where fashion is rapidly adopted, diffused and discarded. This causes ramifications in terms of supply and demand, and equates to the industry being characterised as highly resource-intensive, having short life cycles, high volatility and low predictability. The industry continues to be under pressure as increasing consumer choice diverts expenditure away from traditional fashion (clothing, footwear and accessories) to other consumer durables. Smartphones and leisure activities such as fine dining, adventure holidays and well-being, which fall under the rubric of ‘experience’, ‘entertainment’, ‘indulgences’ and ‘self-discovery’, are increasingly major threats to the industry. That said, in today’s context fashion encompasses a wider sociological and cultural significance beyond the economic and technical relationship between producer and consumer. From trendy clothes, fast cars and chic hotels to luxurious travel, hip food and stylish technology, the term ‘fashion’ in its broadest sense touches everyone’s life in some form or another. Subsequently, fashion has become a form of cultural entertainment, spectacle and even hysteria. Astute firms maintain the consumer’s desire for more diverse experiences and immersive-based pursuits. Consequently, never before have we had more people interested in fashion and style than we do today.

Introduction to the macro business environment

Though history can be a prologue to the future, its usefulness is becoming progressively limited as today’s world is increasingly unpredictable and advancing at a faster rate than most firms can adapt. The oscillation of the macro business environment has increased in turbulence since the beginning of the Industrial Revolution and continues to disrupt markets. According to the 2017 Global Risks Report by the World Economic Forum (WEF), factors including governance failure, rising urbanisation and geographical mobility, a degrading environment, shifting consumer attitudes, and advances in science and technology are just some of the pressing forces that all firms must rapidly navigate to remain relevant, regardless of their size or stage of growth.⁴ Keeping pace with these drivers ensures that the firm operates in a tumultuous and complex environment. This has led to increasing market rivalry as tectonic changes in products, processes and business technologies have an impact on the firm’s costs, prices and profits. The general trend is towards dynamic, diverse, complex and hyper inter-connected environments. This is leading to virtually every firm having to come to terms with sharply changing market conditions, as their scope, structure and relationships are radically redefined.⁵

In a similar manner to checking a radar screen, firms that scan the business environment to detect patterns of change and form trend lines are better equipped to take action against the competition. Importantly, this aids executives in developing a capacity for systemic thinking so that they ‘connect the dots’ by separating the noise and everyday activities from the fundamental shifts that are taking place in the industry. Figure 1.1 depicts the ELIPSE framework and is a mnemonic to the changing reality of the business environment and the conditions that senior executives and stakeholders must understand and respond to in their formulation of strategic choices for the firm. This is a crucial skill for executives to develop, as being able to determine how quickly changes in the environment are going to impact and which movements require an immediate response versus those that require a less urgent response can mean the difference between survival and death. Subsequently, with the luxury of time, understanding the scope, significance and speed of these shifts can help executives prioritise the resource allocation process and become comfortable with these moves so that opportunities are not missed or the firm is not paralysed by inaction.

Figure 1.1The ELIPSE macro business environment

The economic environment has become ever more unpredictable. The early 1990s to mid-2000 saw a prolonged period of global economic growth with low inflation. Progress faltered with the start of the global financial crisis of 2007–2008, which originated as a credit risk problem, and low confidence led to the meltdown in the sub-prime mortgage market in the United States. This caused shockwaves throughout the world and was the tipping point for several trends that led to profound changes in both the competitive landscape and consumer behaviour. This crisis particularly affected international firms operating in multiple geographical locations and product categories, as executives faced a slowdown in cross-border capital flows, a sharp drop in consumer confidence and a decrease in national productivity. Disruption caused to global supply chains by a reduction in reliable suppliers, increases in raw material costs and changes in the price of borrowing, along with intense fluctuations in exchange rates, piled pressure on disposable income, sales and the cost of goods, which provided fresh discourse on the ability of firms to compete. Other macro economic challenges that further heighten the complexity of navigating the environment include volatility in energy prices, severe income disparity and infrastructural neglect. Therefore, the focus remains on economic stability and creating a sustainable growth platform to ensure that firms are not over-exposed.

Legal issues vary nationally and understanding this plays an integral part of a firm’s forward-looking global strategy. This is because legal technicalities frequently gravitate to the top of the management agenda, but are often an afterthought and a costly response to structural change in the industry. Lobbying pressure from non-governmental organisations (NGOs) such the Fair Wear Foundation or the Better Cotton Initiative can also wield strong influence in shaping legislation and regulation. These responses affect the entire spectrum of the firm’s operations, from functions such as production and marketing to sales and human resources. Prominent topics span regulatory issues such as taxation challenges in dealing with the digital economy as firms lobby for tax reform, false advertising and protecting intellectual property (IP) rights, and introducing new minimum wage levels. Other examples include how legislation can be used to combat parallel trade, including importing goods into free trade zones like those in Dubai and South Africa, and conducting due diligence on business partners and suppliers to increased compliance, such as the Sarbanes-Oxley Act of 2002, which stipulates expanded financial reporting and audit requirements to protect investors from the possibility of fraudulent accounting activities. Moreover, good progress has been made in countries such as Brazil and Chile, which have made major strides in reforming the law, although others such as Africa, Colombia and Russia still have a long way to go. However, legal issues usually take time to implement and because of the dynamic business environment, the employed reforms are often outdated and backward-looking.⁶ Therefore, firms should ensure they not only stay close to changes in legislation but also help shape it through active participation with governments, NGOs and industry bodies.

Breakthroughs in innovation in terms of research and development have been profound and continue to influence the entire spectrum of a firm’s operations and business strategy. Innovation in Information Communications Technology (ICT) has progressed rapidly since the primitive punched card system used in the early nineteenth century to control textile looms. Today, new technology and methodologies including nanotechnology, electronic wallets, stem-cell leather as produced by the biomimicry firm Modern Meadow and silk proteins from Bolt Threads continue to evolve the industry. The price to store, process, retrieve and distribute information has decreased dramatically and this has made ICT widely available to the masses. This has rendered existing tasks more efficient and is also revolutionising the way business is conducted. For example, mobile communications have moved on from the simple phone call or text message to touch-screen smart devices and using near-field communication (NFC) is capable of scanning a quick response (QR) code and instantly putting the consumer in touch with a firm’s portfolio of products and services. Video messaging, voice and facial recognition, instant notification and the thousands of available apps has meant that ICT has further added another layer of interaction. Spurred on mainly by Generation Y, also known as Millennials (those aged approximately 18–34), and particularly Generation Z (those approximately aged 19 and under), social media platforms such as WeChat, Snapchat, Pinterest and Instagram have put the consumer in direct control 24/7 and with a global audience. As the digital consumer is ubiquitously connected, the traditional channels and methods of marketing communication are being transformed into a new paradigm of connected business and a proliferation of interested parties, each with its own set of opportunities and challenges. This implies that consumers are changing the value equation through the way they shop, how they are informed and how they seek to be entertained. A case in point: in 2012 there were 2.7 billion people connected to the Internet. By 2018, that number is expected to be 3.8 billion, a growth of nearly 40 per cent.⁷ This has caused firms to drastically re-allocate their budgets and how much they spend across online marketing, like search advertising, which was barely invented 10 years ago, from traditional media such as print, radio or television.

With the rise in online inter-connectivity, masses of data is being generated, captured and analysed for business use, which is creating new methods of data analysis. The application of data to business management has moved firmly on from market research to data analytics and risk management as a more scientific dimension is being applied. For example, real-time dynamic pricing, where mathematical algorithms and predictive formulas rather than human beings turn large amounts of data sets into rules and decisions, is being conceived. Firms like Amazon with its millions of customers hold a deluge of ‘big data’ on the type of products viewed and bought. This can be analysed to inform factors such as the likelihood of purchasing, cross-selling opportunities, price sensitivity, communication preferences, behavioural changes and to assess customer lifetime value. Nonetheless, they are yet to fully extrapolate the power of this vast data to help them further analyse and predict future sales through, for example, personalised pricing. This is partially due to the legal framework, security issues and the cost of mining the data. Moreover, it is important to note that data is based and limited to the customers you have, but not to whom you do not have and is not a substitute for deep understanding, experience and intuition, which only humans can provide.

Political perspectives include keeping abreast of changes in government and publi...