Market and Industry Analysis
Introduction of Identified Markets
Ralph Lauren is a fashion company that is involved in the design, marketing, and distribution of a wide variety of lifestyle apparel. The products of Ralph Lauren include clothing for men, women, and children. It also offers a whole range of accessories: hats, belts, bags, watches, jewelry, eyewear, etc. However, offerings are not limited to outfits. The company successfully implements a diversification strategy and has market segments in wholesale, retail, and licensing.
It extends to home products, among which: furniture, wallpapers, paints, lighting, products for bath, textiles, etc. Approximately 48% of the revenue is attributed to wholesale, 50% – to retail, and around 2% – to licensing segment of the market. More than 35% of the revenues are received from North American, European, and Asian markets. The markets occupied by the company are highly competitive. Core companies dominating the markets include specialty boutiques, department stores, and internet shops (Kapferer 233).
Size of Market/Industry
Since Ralph Lauren is an international company, it is a part of the global apparel market, which is now estimated at around $3 trillion (2% of the worldâs GDP). Ralph Lauren is included in the fashion industry sector not specializing in clothing that has a target audience of a specific gender or age. The major demographic group the industry addresses are the audience consisting of individuals from 20 up to 65 years old of any gender.
Besides, there are sub-industries that specialize in products designed for kids, luxury goods, and sportswear. Womenâs apparel accounts for more than 60% of the industry, menâs apparel â app. 30% whereas childrenâs clothes have only around 8% of the market (Mattern and Lauren 13).
PEST Analysis
In order to perform successfully in the market, companies must be aware of the macro environment, in which they have to operate. PEST analysis (which highlights political, social, economic, and technology aspects) allows the company to choose the most effective strategy to stay afloat (Mullins 52). For Ralph Lauren, the analysis gives the following results (Plunkett 128):
Political aspect
In general terms, policies of a country limit the scope of the companyâs operations and shape the market where it is going to perform. In the present-day business world promoting globalization, practically all the governments have already allowed foreign organizations to enter their markets and enjoy a lot of opportunities (Robbins, et al. 91). Since the protective economic strategies are no longer commonly applicable, Ralph Lauren can comfortably operate in a lot of countries without any considerable restrictions.
Economic Aspect
In recent years, developing economies have shown a tendency of moving from poverty to middle income, which implies the growing purchasing potential of their populations. Thus, Ralph Lauren should expand the market introducing its products to India, Brazil, and African countries.
Social Aspect
Since more than half of the population attracted by the industry consists of young people, it would be reasonable for Ralph Lauren to design products that would be appealing for the youth.
Technology
Technology is a powerful tool that affects the quality of products as well as distribution and marketing outcomes. Ralph Lauren actively uses social media and internet opportunities to reach its customers through advertisements.
Industry Trends
The next five years are going to be favorable for the industry as the disposable income restricted by the slowdown in population growth will be increased. The basic trend is the customerâs orientation to luxurious clothing (including childrenâs apparel) and high-quality branded products and services. The input cost for fashion companies will be lowered due to the decreasing prices for cotton. However, profit margins are going to be affected negatively by the growing wages (Plunkett 57).
Growth Potential and Opportunities
Ralph Lauren has been behind its competitors recently (4% stock decline). Despite this, the current strategies of the company in the context of the existing industry trends give it a number of real opportunities for growth. There are several basic development directions: the company is going to go beyond its retail market, attract new customers, and expand merchandise categories. Besides, Ralph Lauren is likely to take advantage of its luxury goods orientation.
The company has a well-established brand name and identity. Its products are currently available through the app. 13,000 wholesale channels, 501 retail stores, 589 shops-in-shops, and ten internet sites. Such a strong infrastructure also promises the growth of income in the nearest future. The assessment of the external factors shows that the major chance for the company to improve its performance is connected with the increase of its internet sales since online shopping continues to gain popularity. The next promising idea is to develop private labels in department stores (Mattern and Lauren 25).
Barriers and Threats
The attempts of the company to improve its poor performance can be counteracted by a number of existing barriers and threats. First and foremost, Ralph Laurenâs 30% of styles (created by only three core brands) make up more than 70% of the whole business whereas almost 70% of styles are unproductive (one-third of which has been cut back during this year). The company spent a lot of resources on products that were not popular and did not focus enough on its core brands.
Moreover, Ralph Lauren has problems with its lead times (15 months on the average) that result in supply not meeting the demand. The absence of centralized control over the inventory largely accounts for this problem. The inventory growth has far exceeded the growth in sales (25% to 7%) (Mattern and Lauren 31).
The most dangerous threat Ralph Lauren encounters is its dependence on the licensing agreement. Since the company has a lot of international transactions, its revenue is considerably affected by fluctuating exchange rates (Mattern and Lauren 32).
Key Success Factors: Basis of Competition
The strongest success factor of the company is the influence of brand status. At present, Ralph Lauren is one of the leaders in the luxury product market. It manages to stay competitive as it continues to expand all over the globe opening shops in a new country every year. Another factor allowing the company to stay afloat is its selection of products: it started with clothes for men and gradually expanded to turn into a diversified brand. Besides, Ralph Lauren has basically two different divisions, each targeting a specific audience. The one, which can be found in department stores, presents clothes and accessories that a wide range of customers can afford.
The other division is hard to access as it sells high-fashion products that are not available for the average customer. This policy allows the brand to be competitive in both markets (Mattern and Lauren 36).
Potential Competitors
Competition Profile
Product and Service offered
Target Market Profile
Current Marketing Strategy
SWOT Analysis
Strengths and Weaknesses
The company is a well-established brand that meets the interests of a wide variety of customers. Besides, its presence in three market segments (wholesale, retail, and licensing) helps Ralph Lauren constantly increase its target audience. However, the prices the company sets are much higher than those of its competitors. As a result, it loses middle-class customers, who prefer more affordable goods (Mullins 55).
Opportunities and Threats
The biggest opportunities for the company are connected with the expansion of the global market. A lot of countries that are traditionally considered inaccessible for luxury goods (as the population is too poor to afford them) are now on the rise. Thus, there are more consumers with considerable purchasing power (Johnson, et al. 52). However, the threat of entering new markets appears because of the high price the company charges based on the social status of its customers. The middle class may get scared away and opt for high-quality goods for more affordable prices offered by the company’s competitors.
There have also appeared a lot of small and middle-sized companies that can succeed in local markets because of their low prices. Moreover, Ralph Lauren requires large quantities of supplies in order to operate successfully. This means that the company is going to deal with the high bargaining power of its suppliers, which will impede its price policy (Johnson, et al. 58).
Core Competencies and Competitive Advantages
Works Cited
Johnson, Gerry, et al. Fundamentals of Strategy. Pearson Education, 2009.
Kapferer, Jean-NoeÌl. The New Strategic Brand Management. Kogan Page, 2008.
Mattern, Joanne, and Ralph Lauren. Ralph Lauren. Chelsea House, 2011.
Mullins, Laurie J. Management and Organisational Behaviour. Pearson education, 2007.
Plunkett, Jack W. Plunkett’s Apparel & Textiles Industry Almanac 2008. Plunkett Research, 2008.
Robbins, Stephen P., et al. Fundamentals of Management, Global Edition. Pearson Education Limited, 2014.