The North Face (TNF) was a market leader in the manufacture and marketing of outwear clothing, sleeping bags, and tents. TNF was also one of the major companies that engaged in the manufacture of backpacks. The company had dedicated sales representatives that provided it with a competitive edge over other companies in the industry. In addition, TNF had an efficient distribution network.
The company used a strategy that ensured that it did not compete with the distributors of its products. The market for TNF’s products was maturing. This necessitated the company to devise new strategies. The management of the company identified skiwear as the area that had a huge growth potential.
The company already commanded a significant market share despite the fact that its products did not specifically target this market. However, diversification into this market may pose several challenges that may derail the company’s efforts on its existing products.
The existence of an efficient distribution network chain is one of the major factors that guarantees the ultimate success of a company. The distribution network ensures the effective movement of finished products to the consumers. Companies strive to ensure that they have a lean supply chain management. This reduces the costs of supply chain management (Lambert, 2008, p. 224).
The large network of wholesalers who stock TNF’s products is one of the major strengths of the company. The wholesalers enable customers in a large geographical to access the company’s products. The company’s policies ensure that it does not compete with the wholesalers. This was one of the major factors that led to the closure of TNF’s mail order business.
Employees of a company are the major stakeholders of any company. Companies strive to improve the motivation of employees. Improved motivation guarantees improved productivity of the employees (Pride, Hughes & Kapoor, 2010, p. 236). TNF’s sales representatives offer the company with a competitive edge over other companies in the industry. The representatives have extensive knowledge of the company’s products.
The sales representative are the ‘foot soldiers’ who help in marketing the company’s products. Introduction of a new product line may reduce the efficiency of the sales representatives. It would require them to start marketing a new product. This may reduce their focus on other products that the company sells.
To venture into the skiwear market successfully, the company should hire new sales representatives whose sole aim would be to market the products. Poaching employees from competitors is one of the major strategies that companies use to improve their competitiveness (Frey & Osterloh, 2002, p. 33). TNF may poach skilled sales representatives from other major companies that sell skiwear.
TNF focuses on the manufacture of various products. It mainly distributes its products through wholesalers. TNF only has five retail outlets. This is in contrast to more than 700 specialty shops in the U.S. and other foreign countries that sell the company’s products. Focus on manufacture of products helps in reducing the expenses of the company. However, it reduces the profitability of the company.
Overreliance on wholesalers placed the company at the mercy of the wholesalers. This is one of the major factors that reduced the ability of the company to venture into the skiwear market. Wholesalers objected the sale of the TNF’s products to shops that were their direct competitors. TNF was reluctant to sell its products through the competitors as this would damage the relationship it had with the distributors.
Diversification requires a company to have huge finances. The finances would help in supporting the development of new products. In addition, it would help in marketing the products to new customers. TNF believes that a single sale does not enable the company to make profit from the sale of the product. Repeated sales is the major source of profit.
Therefore, the company needs huge finances to support the venture into the skiwear market before it breaks even. Venture into this market would require the company to experiment with new distribution channels. This may have huge financial implications on the company. Effective diversification would enable the company to reap huge financial rewards.
However, the company may incur huge losses if the strategy fails. In extreme cases, it may even lead to the collapse of the company (Furrer, 2010, p. 6). TNF does not have funds to finance this move. Therefore, it should be very cautious in venturing into the skiwear market. It should ensure that venture into this market does not disrupt the company’s activities.
References
Frey, BS & Osterloh, M 2002, Successful management by motivation: Balancing intrinsic and extrinsic incentives, Springer, London.
Furrer, O 2010, Corporate level strategy: Theory and applications, Routledge, London.
Lambert, DM 2008, Supply chain management: Processes, partnerships, performance, Supply Chain Management Institute, Ponte Vedra Beach, FL.
Pride, WM, Hughes, RJ & Kapoor, JR 2010, Business, Cengage Learning, Mason, OH.