Executive Summary
The apparel industry is one of the most competitive sectors in the U.S. and global markets. The industry’s revenues are projected to increase rapidly, which is beneficial to investors and other interested people in the sector. While the sector is dominated by luxurious brands such as Louis Vuitton, casual clothing companies such as Macy’s are slowly taking over the industry.
However, there are gaps in the market that the existing brands have failed to fill in the past decades. Although casual clothing brands produce quality apparel, their prices are too high for most U.S. citizens and the global community. Moreover, most apparel companies have failed to meet the cultural needs of their clients.
S.A.M. is a private limited liability company that intends to offer sustainable, quality, and affordable clothes to Americans and the global market. The business targets individuals from various generations due to their unique characteristics and needs. Given the firm’s size, the estimated units to be sold annually are about 12 million pieces of clothing. Therefore, the company will adopt effective product promotion and advertising activities. Social media platforms such as Facebook, TikTok, and Instagram will be used.
Meanwhile, in-line inspection will be the primary quality control approach used by the company. The quality control measures allow the company to remain focused on its operational mission. The company will utilize value-based and price-skimming methods to determine product price credit policies. Given its lucrative nature, investors can invest in S.A.M. by buying a share in the stock market. Investors who intend to exit the company can use share buyouts and stock offerings.
Company Introduction
Business Overview
Clothing is a basic human need, attracting more companies to invest in the apparel industry. Technological developments and rapid societal changes have necessitated more comfortable and luxurious clothes. At the global level, companies such as Nike, Evarlene, and Amour Vert, among others, have dominated the industry. While the apparel giants have focused on sustainability and quality, S.A.M. will put more emphasis on quality and affordability.
Mission and Objectives
Organizational success is anchored on activities and goals that conform to the social needs of a given community served. S.A.M.’s casual clothing business intends to be a distinguished apparel company that meets consumer needs to the very end. Unlike existing companies in the industry, the business’s mission is three-pronged. The company intends to satisfy its clients by offering affordable casual clothes. Moreover, S.A.M. views itself as a leader in the circular economy and environmental sustainability. Furthermore, the company intends to inculcate cultural diversity in its products and services.
Company
History
Every corporation has a history that defines its future endeavors and reasons for being in the market. The idea of S.A.M. casual clothing was conceived when the founder realized that apparel giants like Nike and Adidas provide their clients with quality but expensive products. Consequently, in 2019, the founder started a small casual clothing start-up that provided college students in Tennessee with culturally diverse, affordable, and quality clothes. The initial business operated online, and one could make orders through S.A.M.’s social media platforms.
Company Objectives
S.A.M.’s business is a unique company that meets society’s financial and cultural needs. The company’s primary objective is to provide clients with apparel consistent with their budget and culture. Additionally, the company aims to create a sustainable business environment that aligns with the circular economy. Furthermore, S.A.M. intends to revolutionize the apparel industry by ensuring that clients’ quality needs are met through unique clothing designs.
Nature of Business
The nature of business is a multidimensional corporate characteristic since it involves aspects such as organizational setup, type, and operational sector. S.A.M. will be initially set up in three U.S. states: Tennessee, Mississippi, and Alabama. The organization will operate as a private company with liability limited to shareholders. The investors will be involved in raising the initial organizational setup costs and capital. S.A.M. will operate in the apparel industry as a manufacturer and distributor.
Primary Products and Services
S.A.M.’s primary products are classified into three major categories, each attracting different targeted customer segments. The first category is women’s wear, which includes dresses, shirts, t-shirts, skirts, pullovers, and jeans trousers, among others. The women’s wear category focuses on current trends with a touch of unique cultures, depending on the client’s choices. The second category is men’s wear, which consists of casual male clothes such as shirts, t-shirts, jeans, and sweaters. The last category is kids’ wear, which includes clothes for children aged one to fourteen.
The company will also offer a variety of services to its clients. S.A.M. offers clothes label services, especially to clients who make bulk purchases. Clothes labeling will attract clients who are attending unique events such as weddings and cultural festivals. Moreover, the company will offer clothes design services. The latter services will benefit companies and celebrities who intend to have unique clothing designs that are attractive to their fan base. S.A.M. intends to secure sophisticated machines that will help produce quality products and attractive services.
Current Status
Given the large amounts of initial capital required to run and operate S.A.M., the company adopted a high-risk but high-rewarding buyout approach. The organization is financed through a leveraged buyout (LBO): bank debt finance. The company’s current assets act as collateral through LBO, as some of the profits are used to repay the debt.
The buyout approach is beneficial since S.A.M. can maintain its excellent performance while paying off the debts. However, the company intends to invite shareholders and other interested investors. The investors will be significant for planned expansion activities to other states in the U.S. and the global market at large.
Legal Form
S.A.M. has transitioned through various legal forms as the demand for its products increased. The business started as a sole proprietorship, which was entirely run and operated by the founder. However, with increased demand for S.A.M. products and services, the founder partnered with two business people from Tennessee. S.A.M.’s partnership lasted for two months before the organization was transformed into a limited liability company (LLC). The organization’s legal form is consistent with the Model Business Corporation Act and Tennessee corporate laws. Consequently, the liability of S.A.M. is limited to investors’ shares and profits shared proportionally (Suryati et al., 2022). As an LLC, S.A.M. enjoys various industry and country of operations benefits.
Industry
The U.S. apparel industry is multifaceted since it deals with sportswear and business attire products. The industry has been evolving as social needs and technological advancements take place. S.A.M. specializes in the casual clothing line of the apparel industry. The firm is one of the few casual clothes companies focused on culturally acceptable wear.
The industry has remained lucrative for the past decade due to the increasing demand for clothes. For instance, in 2021, the revenue of the global apparel market was estimated at $1.5 trillion (Papamichael et al., 2023). The revenue is projected to reach $2 trillion by 2027, with the U.S. remaining the most significant market (Papamichael et al., 2023). Therefore, the S.A.M. industry of operations is promising and profitable.
Target Customers
Generational Segmentation
Children Aged 1 to 15 years
S.A.M.’s first customer segment includes children aged 1 to 15 years. The group consists of clients who depend on their parents and caregivers to purchase clothes and other basic needs. With every caregiver wanting their kids to look bright and adorable, the target population boosts the company’s sales. Moreover, children aged one to fifteen are attracted to fancy clothing and can easily convince their caregivers to make a purchase (Arora & Diwan, 2022). S.A.M targets about 20% of its products to benefit this market segment.
Generation Z and Millennials
A mix of millennials and Generation Z consists of the most significant percentage, 55%, of the S.A.M. target market. The population includes youths aged 16 to 40, born in the late 1980s. This segment is composed of individuals who are in college and those in their early years of careers.
Unlike other segments, the mix of Gen Z and millennials is more concerned about their looks and clothes choices (Brand et al., 2022). The segment wants to conform to current fashion trends with unique designs that are better than their peers (Arora & Diwan, 2022). Therefore, S.A.M. takes advantage of the peer pressure of the market segment.
Baby Boomers
The baby boomers are the second largest targeted market segment: 25%. This segment consists of adults aged 53 to 71 years with families. Although baby boomers are not attracted to trending fashion designs, they like culturally fit apparel (MorganMyers, 2021). Additionally, baby boomers are key in making purchasing decisions for their children and other family members (MorganMyers, 2021). Due to their significant influence on families and society, S.A.M. utilizes this segment to attract others.
Niches
Although the apparel industry is competitive at the U.S. and global levels, S.A.M. plans to compete in three U.S. states. The company intends to set up its primary operations in Tennessee due to its recognition by most college students. Additionally, the company will operate in Alabama and Mississippi. The targeted competition niches have various advantages, such as diverse culture, high population, many colleges, and friendly state laws for S.A.M.’s operations.
Competitor Analysis
Major Competitors
Many organizations have invested in the casual clothing business, attracting more competition. While the industry is dominated by giant corporations such as Nike, S.A.M. intends to compete with local retailers in Alabama, Tennessee, and Mississippi. In Tennessee, the competitors include J. Michaels Clothiers, Dillard’s, Ann Taylor, and Macy’s. In Alabama, some of the competitors are DXL, Kohl’s, Cato Fashions, and Lane Bryant. Meanwhile, in Mississippi, the competitors are George Sherman Clothiers, Maison Weiss, and Belk.
Competitors’ Strengths
The apparel industry in the U.S. is highly competitive due to technological developments and effective strategies businesses adopt. S.A.M.’s competitors have various strengths that may work to the detriment of its growth and development in the sector. Firstly, most competitors, such as Dillard’s and Kohl’s, have excellent brand reputations (Sinra, 2023). Consequently, extra efforts are needed to convince their clients to prefer S.A.M. over them. Secondly, the competitors have strategically partnered with recognized brands such as Nike and Louis Vuitton. The partnerships have positively marketed the competitors’ products in the international market.
Thirdly, competitors like Dillard’s operate in many U.S. states, attracting more profits and brand recognition. Competitors’ sufficient finances help them adopt modern technologies and strategies for business expansion (Giantari et al., 2022). Lastly, the competitors have excellent customer service backed up by friendly employees. Good customer service is crucial for recording high client retention and attraction rates. Although the competitors enjoy various strengths, S.A.M. has adopted strategies to overpower them.
Competitors’ Weaknesses
The competitors exhibit various weaknesses that can work to the benefit of S.A.M. operations. Firstly, the competitors have ignored product and service diversification, limiting their profitability (Giantari et al., 2022). Unlike S.A.M., the majority of the casual clothes businesses target specific genders. Lack of product diversification encumbers increased annual revenues and a broad consumer base (Tseng et al., 2022). Secondly, the competitors have put more emphasis on quality, but sell products at expensive prices. Therefore, the majority of middle and lower classes shun competitors.
Thirdly, S.A.M.’s competitors largely depend on reputable brands such as Nike and Adidas to supply them with products. Consequently, they sometimes fail to meet clients’ needs since their inventory systems are at the mercy of their suppliers. Lastly, there has been increased customer dissatisfaction with services and products offered by competitors such as Dillard’s and Kohl’s (Sinra, 2023). The competitors’ weaknesses can be taken advantage of by S.A.M. Therefore, the business will develop an intense customer attraction approach to maximize the competitors’ weaknesses.
Products and Services
Product Description
S.A.M. manufactures and sells clothes of various designs and qualities. S.A.M. clothes are made from 100% natural fiber and cotton. However, some clothes, such as shirts and t-shirts, are synthetic.
The choice of using 100% natural fiber and cotton is to promote the quality of clothes manufactured and sold by the company. Meanwhile, synthetic clothes have unique designs and are made in such a manner that they are consistent with environmental sustainability measures and the circular economy. Therefore, the products are made and designed to be recycled or reused for other purposes.
Services Description
S.A.M. offers design and clothing labeling services to customers who need bulk clothing for routine occasions. The services attract companies, educational institutions, and other business entities with many employees. The company’s expert designers offer design services, using complex technologies to create unique business clothing, theme colors, and art. The labeling services are done using sophisticated machines and water-resistant ink. Overall, S.A.M.’s products and services are centered on durability and affordability.
Customer Benefits
Shopping at S.A.M. offers clients a wide range of benefits that meet their needs. The clients will benefit from cheaper, quality clothing alternatives to big brands such as Nike and Louis Vuitton. Additionally, the clients will benefit from unique apparel designs consistent with their specific cultural needs.
The company has a team of experts and researchers who collaborate with different traditions to design clothes. Furthermore, S.A.M. has a variety of customer loyalty programs intended to allow clients to maximize their budgets. Therefore, S.A.M. benefits its clients while maintaining increased profitability in the U.S. apparel industry.
Marketing Plan
Market Strategy
Marketing strategies are crucial for business organizations to promote products and services. An effective strategy informs the target market and the methodology of leveraging business risks (Quansah et al., 2022). S.A.M., given its organizational size, adopts a business-to-consumer (B2C) strategy.
The B2C strategic approach allows S.A.M. to sell its products and services directly to consumers (Agnihotri et al., 2021). Consequently, S.A.M. will engage the final consumers through product promotion activities such as print and digital marketing. The adopted strategy is crucial since the company can understand the unique needs of its consumer base.
Identifying and Attracting Customers
S.A.M targets customers of both generations in the U.S. and its operational areas. The firm adopts a practical plan for identifying and attracting customers to its business. The plan involves using major social media platforms like TikTok, Facebook, Instagram, and Twitter to attract clients.
Moreover, the organization uses traditional approaches of physically visiting potential clients such as universities, colleges, companies, and other institutions. Adopting digital and traditional approaches is significant since S.A.M. reaches out to most potential clients (Quansah et al., 2022). The attraction approaches will be augmented by intense market research activities that identify the target customers and the most effective channels.
Selling Approach
S.A.M. prioritizes two selling approaches to maximize the sales volume: premium and prescriptive. The premium sales approach offers prospective customers giveaways and gifts (Choi et al., 2022). The giveaways will be given through discounts and sample apparel, especially for big corporate customers.
A premium sales approach will attract hesitant clients (Quansah et al., 2022). Meanwhile, the prescriptive sales approach will ensure that the clients are provided with sufficient information, allowing them to make informed purchase decisions (Choi et al., 2022). S.A.M. will use brochures and other print media to describe the products and services offered. Combining premium and prescriptive sales approaches will help S.A.M. attract more customers than its competitors.
Sales Forces
Sales forces involve those factors that are significant for marketing plans. S.A.M. is driven by various sales forces for revenue generation, profit maximization, sustainability, and effective business management. Consequently, the firm will adopt direct, field, and online sales forces. The direct sales force involves selling products to clients directly by employed salespersons (Agnihotri et al., 2021). The field approach will require S.A.M. employees to visit potential consumers for product promotion activities. Meanwhile, S.A.M intends to create an e-commerce platform where clients can order and have their products delivered to their doorsteps.
Distribution Channels
S.A.M.’s clients are in various U.S. regions, mainly Alabama, Tennessee, and Mississippi. Therefore, the firm will adopt both direct and indirect distribution channels. The direct channels will involve e-commerce platforms and retail shops where the clients can shop from the company (Jain et al., 2022). Meanwhile, the indirect channels will involve using agents and other retailers outside the main areas of S.A.M. operations. A combination of direct and indirect distribution channels ensures that S.A.M. meets all clients’ needs from diverse locations.
Promotion and Advertisements
Product promotion activities help organizations increase sales and attract more clients. S.A.M. product promotion and advertisement activities will include print and digital media. Print media will include brochures, lifestyle magazines, and flyers at the point of sale terminals. The media will be given to the clients who make purchases at S.A.M. retail shops within the U.S. Digital media will include social media platforms and mainstream media stations to advertise products and services (Quansah et al., 2022). TikTok, YouTube, Twitter, Pinterest, and Instagram, among other platforms, will be used to advertise the products.
Credit and Pricing Policies
Although S.A.M. is focused on selling quality products to clients at cheap prices, the company puts in place an effective financial strategy. The organization has adopted a liberal crediting policy that promotes customer retention through generous terms (Jain et al., 2022)—clients who purchase products in bulk and frequently are allowed more extended payment periods and high credit limits. Meanwhile, S.A.M. uses price skimming and value-based price policies.
Price-skimming allows the business to set up high initial prices for new products, which are gradually lowered as the products stay in the market (Quansah et al., 2022). Meanwhile, the value-based policy involves S.A.M. setting prices based on the perceived utility of the products (Jain et al., 2022). The adopted credit and pricing policies prioritize clients’ needs and ability to afford the products.
Marketing Strategy
Sales and Market Share Projections
S.A.M. is an average casual clothing company that could expand to other U.S. states and countries. S.A.M. is expected to sell 12,000,000 units of clothes annually at an average selling price of $60. Therefore, the total revenue for S.A.M. is estimated at $720 million. The total revenue for the apparel industry is estimated at $353 billion and $1.74 trillion globally, as of 2021 (Shahbandeh, 2021). The projected S.A.M. sales and market share are shown in Table 1.0 below.
Table 1.0 S.A.M U.S. and global market share projections
Contacting Customers Strategy and Customer Services
Engaging with clients is the most beneficial form of customer service. S.A.M. utilizes the available and revolutionary technologies to contact its clients. The company has set up a communications department that will be responsible for routine engagement with customers. Some of the communications channels used include social media messaging extensions.
Additionally, the department can communicate with corporate clients through email and other necessary channels. Furthermore, direct communications will be made to clients through physical visits to their business premises. The channels will be used to offer customer services and address their unique needs.
Operations and Development Plan
Operating and Manufacturing Methods
S.A.M. operations are two-dimensional: manufacturing and selling activities. The company uses contemporary technology to produce clothes and other related textiles. The company integrates Lean manufacturing techniques into its operations. The technique promotes the elimination of wastes in the production process while maximizing the output of products. Lean manufacturing is consistent with S.A.M.’s purpose of promoting environmental sustainability and a circular economy (Takhar & Liyanage, 2020).
The company will also combine traditional embroidery methods to meet the cultural needs of its client base. S.A.M. operations and manufacturing methods are anchored on sustainable development and the circular economy.
Operations Facilities
Various facilities, including manufacturing processes, are needed for S.A.M.’s effective operations. These facilities are categorized into storage, manufacturing, maintenance, and quality control equipment. Some of the machines needed are conveyors, dyers, papers, and extruders.
The company’s headquarters and manufacturing plant will be located in Tennessee. Moreover, S.A.M. intends to secure spaces in other states for building storage and shipment facilities. The spaces needed for operations will be located near cities and populated areas in the states of operation.
Quality Control Methods
S.A.M. adopts two quality control methods to ensure the products align with the company’s purpose and objectives. In-line inspection methods will be used to control apparel quality during every stage of production (Hoque, 2021). The process will involve checking fabrics before they are cut and inspecting the stitching and seams during sewing. Meanwhile, the acceptable quality L level (AQL) inspection will be applied by setting a predetermined acceptable level of defects for a batch of garments (Hoque, 2021). The defective garments will be recycled or reused for other purposes in line with the Lean manufacturing method.
Inventory and Operations Control Procedures
S.A.M. intends to serve a broad consumer base, requiring adequate inventory and operations control procedures. First-in, first-out (FIFO) inventory management will be adopted to ensure that old stock is sold first. The method allows S.A.M. to effectively monitor the inventory levels with desired revenues through FIFO (Mogbojur et al., 2022).
The Standard Operating Procedures (SOPs) will be the primary operations control procedure. SOPs allow S.A.M. to maintain consistency and quality in its operations (Mogbojur et al., 2022). The inventory and operations control procedures are central to helping the firm achieve its mission.
Supply Sources and Purchase Procedures
The company will maximize the use of local suppliers to acquire its raw materials. Some of the farmers will be involved in providing the company with silk, fiber, and cotton wool. Additionally, the firm will outsource some of its raw materials, including quality dyes and cotton wool, if the local suppliers fail to meet the client’s demands. The purchase procedure will involve the procurement department, requiring the interested suppliers to send quotations and relevant business documents. The company will only involve suppliers with good business reputations, prioritizing local businesses.
Management Team
Management Personnel, Qualifications, and Training
At S.A.M., the CEO heads the company and makes crucial decisions on its operations. The CEO is deputized by regional officers who lead the company in various areas of operations. Other key management personnel include the head of departments and supervisors.
The key management personnel must have a bachelor’s degree in business administration or any other relevant field. The management will be responsible for recruiting and training other employees through a competitive process as described under the S.A.M. constitution. It is upon the management to outsource employee trainers if needed.
Critical Risks and Problems
S.A.M. is subject to various risks and problems associated with the apparel industry. First, the company will face stiff competition from reputable brands such as Nike, Kohl’s, and Macy’s, among others. The competitive brands have been in business for a long time and have a broad consumer base (Hemantha, 2020). Second, consumer resistance may be inevitable since S.A.M. is a new brand, and many people are used to the existing ones. Therefore, the business needs to adopt effective and productive market entry strategies.
Thirdly, given the intended organizational size, S.A.M. may face initial cost challenges. Setting up the company will require sufficient funds to purchase equipment, recruit and train employees, and pay for the office spaces. Lastly, many factors influence consumer behavior in the apparel industry (Busalim et al., 2022). Consequently, S.A.M. may face the risk of an unpredictable consumer base, making it challenging to adopt effective business growth strategies. S.A.M. must maximize the existing opportunities in the U.S. apparel industry to overcome the possible challenges.
Offering, Financial Projections, and Requirements
S.A.M. intends to raise its capital through shares from investors. The minimum amount of capital a typical investor requires to purchase S.A.M. shares is $200, without any maximum limit. The amount of share capital will be used to purchase equipment, reimburse employees, and set up offices in the new areas of operations, among others. Figures 1.0, 2.0, and 3.0 show the start-up budget, operational costs and expenses, projected income, and the first three years’ cash flow (Appendix).
Exit Strategy
Investors can exit S.A.M. if the company fails to meet its unique needs. Two approaches are available for investors wishing to exit: a share buyback and a public stock offering. Through the buyback strategy, the investor can offer their shares to the company, which will purchase them in return. The option is meant to increase the value of the remaining shareholders. The investor can also offer their shares in a stock market to be purchased by other interested investors.
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Appendix
Figure 1.0: Start-Up Budget
Figure 2.0: Operational Costs and Expenses, and Income
Figure 3.0: Three-Years Cash Flow
