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Strategic issues facing True Religion
The business landscape is a competitive realm that requires its players to remain vigilant due to its highly dynamic and volatile nature. The True Religion example, explicitly attests to this fact. At one point, the premium denim manufacturer was performing excellently, but without warning, the situation changed and the company found itself struggling. The following delineation of the company’s strategic issues supports this assertion.
To begin with, True Religion found itself in a tight spot over the issue of value. The changes that took place in the industry at the time made it increasingly difficult for premium denim manufacturers to demonstrate the value of their products to their customers. Second, True Religion seemed to have focused too much on the wrong market segment. Its focus on ‘the very young, very slim, and fashion oriented woman’ was misguided.
The average American woman wears a size of 12, yet True Religion focused on size 8. Additionally, it focused on the young women, yet older women have more spending power. Apparently, the company’s strategy was off the mark in these two cases. Third, the company’s focus on fashion was another strategy related undoing. Its premium brand was so fashion oriented that it only attracted fashion conscious people. In this respect, a customer would easily go for a brand that is less fashion oriented so that they could use it for several years rather than a few seasons, as would be the case with True Religion premium jeans. Fourth, the company had projected itself successfully as a denim maker.
Any attempt to move out of this line of operation would be faced with challenges as was seen when the True Religion attempted to project itself as a lifestyle brand. Retailers chose to ignore its other offerings and stuck to the denim jeans. Finally, using retail store expansion as the major growth driver when competitors were increasing in numbers and becoming tactical was a bad approach. Moreover, all True Religion’s key competitors had the same growth strategy in mind. As such, it needed a better and unique approach to achieve its expansion goals.
The key elements of True Religion’s strategy
True Religion attempted to construct a strategy that would enable it to survive the tide of challenges that came its way towards the end of the economic meltdown of 2007-2010 with little success. The key elements of the company’s strategy included differentiation, market segmentation, and diversification. True Religion differentiated itself from other jeans makers as a premium jeans manufacturer with a special orientation towards fashion.
This way, it sought to capture fashion-minded customers. It also used market segmentation to target the very young, very slim and fashion oriented women. Although based on a basic analysis, the idea did not bear much fruit for the company. However, it still goes down in the annals of the company as one of the elements of its overall business strategy. Finally, True Religion employed diversification as part of its strategy. It diversified its product portfolio in a bid to project itself as a lifestyle brand albeit with little success. Nonetheless, diversification was an element of strategy especially for the overseas markets.
Porter’s Five Forces model of the premium jeans industry
Porter’s Five Forces model is applied to this industry to ascertain its attractiveness. This model features five key points of analysis that are used to determine the attractiveness of a business or an industry. These include the threat of new entrants, the bargaining power of buyers, the threat of substitutes, and the rivalry between industry players.
The threat of new entrants is a key point of analysis in Porter’s model. In applying to the U.S. denim industry, it is easily deductible that new entrants had a chance of coming onto the scene and making a big change. Using True Religion as an example, it opened shop in 2002 and was at the top of the rankings in 2010. Clearly, this shows that the threat of new entrants in the industry was real.
The second element of Porter’s model is the bargaining power of buyers. This element had a notable influence on the denim industry. The economic meltdown of 2007-2010 confirms that the industry could be rattled by a shift in the buying habits of consumers. Their unwillingness to pay the high denim prices during the economic meltdown caused problems in the industry leading to the closure of one of the key players. This occurrence shows that buyers had the ability to affect profits adversely to high degree.
The fourth element of Porter’s model involves substitutes. Apparently, substitutes caused plenty of trouble for denim jeans due to their low prices and almost equal quality. Jeans makers such as Levi’s produced substitutes that consumers tended to move towards since they catered for more diverse needs and were cheaper. Substitutes had the ability to affect profits negatively albeit at a medium scale.
Finally, suppliers also have a say in the denim industry of U.S.A. When the cotton prices hit an all time high, denim makers attempted to pass on the heightened costs to the consumer. They failed and there was trouble within the industry. The fact that manufacturers could not dictate the prices at which they purchase raw materials means that the suppliers are in a position to influence the profits of the industry significantly. However, their influence can be termed as low.
The sources of True Religion’s competitive advantage
Despite the seemingly perilous conditions that characterized the U.S. denim industry, True Religion maintained its position as an industry leader. The reasons behind its dominance included its fashion consciousness and retail strategy. The fact that most of the company’s products retailed via its own retail outlets or departmental stores helped True Religion to have direct contact with its customers. In this manner, it was able to get direct feedback and used it to align its products with the latest fashion trends. As such, its fashion conscious customers got exactly what they need at every time.
The company’s strong fashion orientation could help it to stay among the top denim producers in the U.S. However, it could not leverage on fashion alone to stay in its position. Its competitors had already implemented or had plans of implementing similar strategies in almost every respect. Consequently, differentiation could be the best way for the firm to gain a competitive edge over its competitors, but only if it focused on something more subtle.
Lessons learnt from the case analysis
There are a number of lessons to be learnt from this case analysis. For example, it emerges from the case analysis that the textile industry is volatile and somewhat difficult to predict. This assertion applies especially to the fashion oriented textiles. The trends of the day can change completely within a very short time causing a glut in the market and huge losses for manufacturers. As such, investors should invest in this area with caution.
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Additionally, the business landscape of the U.S. is quite flexible. New entrants can move from scratch to become industry leaders within less than a decade. True Religion is the best example in this case. Starting in 2002, it became an industry leader in 2010. Although faced with plenty of challenges, there are chances that it can still do well in future.