External Environment Analysis

The current business environment with the emphasis on the ability to complete locally and in the global markets companies must be able to respond to the rapidly changing conditions of the market. The companies must be capable of seeking and developing different strategies that will help them to maintain a competitive advantage in the market. Vanity Fair Corporation is a apparel and footwear company that started its operations in America in the year 1899. Currently the company has more than 30 different brands under its belt and they are organized into five different categories. These categories fall under;

1. Outdoor and action sports
2. Jeanswear
3. Jeanswear
4. Sportswear and other recent brands
5. Image wear

The main aim of the following report is to provide a critical analysis of the external environment of the mentioned company to expand its business worldwide especially in China. The aim to expand its business in China is basically because of the upcoming Winter Olympics to be held in the country in the year 2020. The success of the business will rest on the formulation of an efficient strategic plan of the business. The use of different strategic models can be of great help to the growth of the business of the organization.  

1. Political- The political scenario of most of the Asian countries is not stable and thus the company would find it quite disturbing to carry on business in this part of the globe. However an efficient communist party of China is liberal towards business and has opened up its market for all foreign companies, which is a great opportunity for the organization to start its business in China.
2. Social- The Company must follow all the social and cultural aspect of the mentioned company before venturing into the new market. VF Corporation must ensure to complete a detailed survey on the social and cultural traditions of the place where they are venturing for an entry.
3. Economical- Initially it will be tough for the organization to establish its presence in emerging Asian countries as GDP and Per capita income in many such countries are quite substandard in comparison to the other counties of Europe (Eden and Ackermann 2013).
4. Technological-Technological factors are one of the most important elements of the modern business organizations. Latest technologies acts as a game changer for the organization to attain a great competitive advantage over their rivals
5. Legal-Legal aspects of the host country must be well known which will help the organization to formulate the business strategies accordingly.
6. Environmental- The management of the company must ensure ethical and fair environmental practices to make sure that the organization has a green policy towards achieving a clean and green future for the business.

The sports apparels industry has been projected to generate annual revenue of $184.6 billion by the year 2020 growing at the rate of 4.5% during the forecast period. The growth of the industry has been mainly due to the growth of the market in the last couple of years that have made the organization one of the best in the business. The focus of some of the prominent companies operating in the particular segment has shifted towards opening retail stores in the emerging economies to expand their geographical base and increase the customer base of the organization. Some of the key findings in the Apparel market are listed below;

1. Increasing disposable income, preference for quality sports items, changing lifestyle have been the main source for the rise in the apparels and footwear industry in the emerging markets of Asia.
2. The retail stores segment will be growing at an apparent rate of 3.1% during the year 2015 to 2020.
3. Different survey results have predicted Asia Pacific as the largest sports apparel market by the year 2019.
4. Men’s sports industry has been the largest revenue earner in the particular segment and thus it has all the potential to be one of the top revenue earners amongst all the other sectors of business.

VF Corporation faces strong challenge from different international as well as regional giants in the apparels and footwear sector of the industry. The management of the organization has taken some efficient strategies to compete with the likes of Nike, Adidas and other different brands that produce almost the same type of products. The establishment of retail stores, acquiring a number of different small enterprises and signing up agreements and deals with other organizations has led the company to success.

Porter’s Five Forces concept provides guidance for scanning the issues that are specific to the industry where the mentioned company operates. The company has to provide the customers a competitive price for all the products it launches in the market and also has to make sure that the products have a considerable amount of difference with the other rival products (Eden and Ackermann 2013). There will be a huge demand for the products in the market where the initial investment is very low or substantial in amount. The products will see a huge growth rate once they enter into such markets.

Threat of Substitutes- The companies thrives on branding and this particular activity will help them to create a proper brand name of its own. VF Corporation has the critical task of attracting the customers by offering them the right value for the products. The management of the company must be innovative enough and in the process must implement different strategies and measures to counter the threat of substitutes. Another fear lies on the emergence of small companies which tries to imitate the technologies from the large companies and produce the products in a much cheaper price. This results in increased competition in the market as because the lowering of the prices of the products forces the large companies to reduce the prices in a similar manner to make sure that they retain their competitive advantage in the market.

Industry Competition

Bargaining Power of Buyers- The bargaining power of buyers is a competitive threat to the organization if the product produced by the organization is easily available in the market. The power of the buyers increases automatically as a result of such a market condition resulting in the fall in the price of the product. The growth in the number of the different apparel companies in the market has resulted in the increase of competition. The management of VF Corporation has to amend the competitive strategies of the company every now and then to make sure that they are in lines with the latest trend.

Bargaining Power of Suppliers- VF Corporation produces quality sports and other merchandises for various purposes. There are some unique parts of the product which are supplied to them via the suppliers. The company totally lies at the mercy of the suppliers and thus an increase in the price of these parts by the suppliers will have to be obliged by the Company as they are left with no other options.

Rivalry in the Industry- There is a number of other companies in the market similar to VF Corporation that produces quite a number of same products like the ones produced by the aforesaid company. Wall Mart and some other retail stores has a number of different products like winter jackets but North Face which is a dedicated line of winter clothing of VF Corporation has a better brand image than all the other products in the market. The present level of competition will restricts the new companies to enter in the same segment. Therefore the advanced level of competitive advantage in the market helps the organization to minimize the rivalry in the industry. 

Market penetration- The large number of orders by the existing consumers have been a source of great revenue for the organization. The varied range of products starting with the apparels and footwear and other sports accessories have helped them to earn a competitive advantage in the following industry. According to Eden and Ackermann (2013) winning back customers from the rival companies and industries is one of the major aims for each and every organization. On the other hand Peppard and Ward (2016) argues that converting the non users of the products to regular users is what decides the market penetration levels of the organization. Opening retail stores and reduction in the price of the different products can also be beneficial for VF Corporation.  

1. Development of Sports Product- According to some eminent researchers like () modification of the existing garments and sports accessories has helped the organization to drive its way towards growth. However recent reports have emerged on the different quality levels of the garments which is surely to affect the sales of the organization. As mentioned earlier the establishment of a number of premium retail stores by the mentioned organization caters to the growing demands for the customers.
2. Development of Sports Product in the future- VF Corporation have started to expand its worldwide presence and have targeted the Asian market especially China for the same. The main reason for selecting China has been the upcoming mega sports event in the form of Winter Olympics in the year 2020. A market study by the management team of the company has revealed the tremendous opportunities for growth by the organization. WheelenHunger (2017) has argued that the most important task of the organization to ensure its sustainability is to expand its marketing segment and open up new channels for distribution.
3. Diversification-The acquisition of some regional Chinese companies has opened up the possibility of the organization to diversify its supply in the new market and compete with the existing rivals.

1. Inbound Logistics-The operations department of the organization receives stores and handles all the different types raw material needed for the proper delivery of the products.
2. Operations- The transformation of the raw materials into finished products with the help of skilled employees is one of the key aspects in the value chain model. According to (Slack 2015) the more efficient the operations department the better is the quality of the goods produced.
3. Outbound Logistics- Outbound Logistics is another main part of the Value chain. The main task of the organization is to store, distribute and deliver the finished goods to the end users. Outsourcing and delivering the finished products can be beneficial in the growth of the organization.
4. Marketing and Sales- The promotion and marketing of the products of VF Corporation via different media channels will be beneficial for creating awareness of the products. The management of the company can also endorse sp[orts personalities and other regional or international celebrities that will help to promote brand awareness for the products of the organization.
5. Service- A proper after sales service will be very essential for the organization to help build a customer loyalty. The high level of customer service provided to the customers is essential for high customer satisfaction (Hill and Jones 2013).

1. Firm Infrastructure-Firm infrastructure includes all the departments of management, infrastructure, legal and finance which work in proper co ordination to keep the stores of the company operational. The well designed and pleasing stores of the organization are complemented with good customer care service.

Human Resources Management- VF Corporation has a well trained group of committed workforce that work together to bring success to the organization. The employees of the mentioned organization are taken well care of. Apart from receiving on par salaries they are awarded and recognized by the seniors of the company which makes them more dedicated towards the organization. However according to (Hill Jones Schilling 2014) rather than awarding the employees employee training programs are more essential for managing the human resources of the organization.

Procurement- According to Hill and Jones (2013) the tasks involved in the procurement of the raw materials like clothes, machines, well knit materials are essential for manufacturing different apparels and sports garments. The Asian market is a dream place for quality textiles. VF Corporation will no doubt have a large competitive advantage in the European market if they are able to expand their presence in the emerging Asian markets like China.

1. Technology- The use of modern technology has been an effective tool for the mentioned garments company to acquire a considerable competitive advantage in the market. The installation of new technologies in the manufacturing units will surely ensure both the superior quality and quantity of the products in the market.

The analysis of the above models and theories has led to two different conclusions. The first one is accepting the strategy of the organization while the other being the negative standpoint which goes against the decision of the organization. However studies reveals that the management of the organization has done quite a commendable job which will surely guarantee the success of the organization in the coming future (Hill Jones Schilling 2014). The technological advancements and the use of different innovative ideas have helped the organization to become efficient in nature.

Table No 1- SWOT Table

Source- (Barney 2014)

1. Strengths-The presence of a large number of retail stores of the mentioned organization across the globe with a healthy number of employee rate of 50,000 is a huge strength for the organization as such a numerical supremacy can be beneficial for gaining a strategic competitive advantage in the market. Apart from having a diverse range of products under its fold, the presence of world class brands like Vans and Timberland makes a great deal for the growth of the business.
2. Weaknesses- The most notable weakness of the mentioned business organization is the absence of a proper brand awareness of the company and its products in the emerging markets of Asia and its limited opportunity for growth in these markets. The limited opportunity of the organization comes from the presence of other rival organizations in these markets.
3. Opportunities- The decision of the management of the mentioned organization to start its business operations in China can be helpful for the organization because of the vast market and the high demand for such products in the country. The upcoming Winter Olympics in China in the year 2020 can act as the perfect platform for the growth of the organization in China. The demand for the sports items and accessories during and after the event will favor the growth of the organization (Hill and Jones 2013).
4. Threats- As mentioned earlier the presence of different companies in the same segment provides a great barrier to the expansion plans of the company in the Asian market. The cheap economies of the Asian countries are nowhere in comparison to the wealthy European and Western countries. The willingness of the potential customers to buy the product will be overtaken by the inability to buy the costly products of VF Corporation.

As mentioned earlier in the project the mentioned apparels and footwear company is one of the global leaders in branded lifestyle products in the mentioned category. The management recently announced its decision to support for the superior returns of the profits of the organization to its stakeholders (Barney 2014). The model of the organization consists of different powerful brands of the hotel which are important to the success of the business organization. The management of the company provides a total of 20% on the sales of the products to the shareholders for the last five years. The different frameworks have helped to determine the strategic concepts of the business organization and its impact in the emerging Asian market especially China. The company has a projected target of $17.3 billion earning per share as revenues. The company has recently entered into the outdoor and action sports category as it is one of the fastest improving brands among all the other forms of sport. According to Steve Rendle, Vice President of VF Corporation the most important five year targets as decided by the organization are;

1. North Face Brand is expected to grow 12% with revenue of $3.3 billion
2. Vans Brand have improved its market share and now captures 15% of the total market share up from the original 13%
3. The brand Timberland has also experienced a huge growth in the western markets as sales revenue of the following brand accounted to around $2.3 billion

References

Barney, J.B., 2014. Gaining and sustaining competitive advantage. Pearson Higher Ed.

Bettis, R.A., Ethiraj, S., Gambardella, A., Helfat, C. and Mitchell, W., 2016. Creating repeatable cumulative knowledge in strategic management. Strategic Management Journal, 37(2), pp.257-261.

Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.

Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper Saddle River, NJ: pearson.

Hill, C.W. and Jones, G.R., 2013. Strategic management theory. South-Western/Cengage Learning.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Peppard, J. and Ward, J., 2016. The strategic management of information systems: Building a digital strategy. John Wiley & Sons.

Peteraf, M., Gamble, J. and Thompson Jr, A., 2014. Essentials of strategic management: The quest for competitive advantage. McGraw-Hill Education.

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

Slack, N., 2015. Operations strategy. John Wiley & Sons, Ltd.

Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. pearson.