Produce a SWOT analysis for Harris Tweed taking account of market dynamics.

University Degree Business and Administrative studies

DAUBRY JULIEN 23rd April 2002

01008906

INTERNATIONAL MARKETING STRATEGY
MK32004

CASE STUDY ASSESSMENT

1. You are required to produce a SWOT analysis for Harris Tweed taking account of market dynamics.

SWOT Analysis is a very effective way of identifying strengths and weaknesses of a firm, and of examining the opportunities and threats it face. Carrying out an analysis using the SWOT framework will help Harris Tweed to focus its activities into areas where they are strong, and where the greatest opportunities lie.

Harris Tweed has to exploit their key forces, resolve their problems, keep away from threats and benefit from opportunities… SWOT analysis will help the firm to find a relevant strategy and allows it to do the best choice to succeed in the market.

Strengths:

Tradition: Harris Tweed Industry has been introduced in Scotland in the 1840’s and the production of the tweeds follows a well-established formula. Consequently it has a lot of experience, and that helps the brand to sell more products thanks to its image.

Brand image: As the brand was introduced to the British Aristocracy, and used by the privileged for their pastime, the brand benefit from a good image of quality, and so that enable them to sell products at a high price. The wool quality and the machine technology are continuously monitored. Moreover, retail outlets consist of selective Department Stores and specialist Scottish outlets, and that strengthen the brand image because the product cannot be found in bargain or general shop.

Brand preference: Harris Tweed enjoys brand preference over other tweeds that enable them to attract new customers. In addition, 75% of interviewees could name the brand spontaneously or recognise it when named, so peoples who want to buy this kind of clothes should normally buy a Harris Tweed.

Nearly monopoly: The KM Harris Tweed group holds a near monopoly with 92% share of the market. Moreover an orb has been created and provides a strong barrier to entry to competitors in the Tweed Industry, and has positioned Harris Tweed as a premium brand. So the firm is well established and sell a lot of tweed clothes, which normally guaranty it a safe future.

Unique product innovation: The new clothe known as “baby soft” can be produced economically as it is a unique product. Indeed, it can reduce for example the production cost.

Weaknesses:

High cost of production: Harris Tweed’s clothes are high-quality products. Therefore their cost of production is high and they have to sell expensive clothes.

Product life cycle: The brand is in the mature stage of its product life cycle in the UK market, and that means that they are going to enter the next stage which is the decline.

Investment: They have to innovate and invest if they want to avoid the decline stage, and that is both risky and expensive.

Lack of diversification: Harris Tweed is specialised in the tweed fabrication for ...

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Weaknesses:

High cost of production: Harris Tweed’s clothes are high-quality products. Therefore their cost of production is high and they have to sell expensive clothes.

Product life cycle: The brand is in the mature stage of its product life cycle in the UK market, and that means that they are going to enter the next stage which is the decline.

Investment: They have to innovate and invest if they want to avoid the decline stage, and that is both risky and expensive.

Lack of diversification: Harris Tweed is specialised in the tweed fabrication for menswear. So it might be difficult to diversify in womenswear regarding to the image of the brand, which was a brand for fishing, shooting… The company may be disadvantaged by the lack of diversification, also because of its unique product which represents the only source of income.

Outlet: To provide a brand image, Harris Tweed products are not sold in every clothes shop, so it is more difficult to find one.

Opportunities:

Demand: There is a new demand for high quality unique designed clothing produced and manufactured in Scotland, so it should help the brand to develop itself and sell more and more products.

Trends: Regarding to the charts and graphs, the forecasts are goods for the next years on the market and indicates that Harris Tweed should normally continue to a premium brand.

Support from designers: Some great designers have promoted the brand by taking it up, and some supermodels have worn it. Subsequently that provides a good publicity and image for the brand.

Help: Recent Government monetary incentives coupled with support from local developers and colleges to promote specialist skills will hopefully revive the pool of skills needed to support the brand internationally.

Diversification: Harris Tweed should benefit from the launch of the new wider cloth, which will allow the company to enter diverse market segments in women’s fashion garments.

Threats:

Competitor: Derek Reid is the chairman of Donald McLeod Ltd, and he intends to use his marketing skills to promote his competitor brand outside Scotland; so that could be dangerous for Harris Tweed because of its efficiency. Furthermore, there is a new competitor in the cloth market, as Belinda Robertson has successfully promoted her cashmere design in the European market place.

Export: 85% of the sales are exports, and that mean that Harris Tweed’s profits depends on the international trend. So if there is a crisis somewhere in the world (as there has been in the Far East), it could reduce Harris Tweed’s sales.

Trend: There is a decline in the Textile Industry, especially in Scotland.

Purchase behaviour: Consumers have new purchase behaviour, which consist in looking in store rather than buying, and then waiting for discounts or sale reduction to buy a cloth.

Lack of workers: There is a dwindling of the supply of skilled workers, which may be a problem to develop the firm and grow the tweed’s production.

2. Based on your analysis and taking account of cultural and market entry methods, discuss the key factors affecting Harris Tweed’s entry into the following international market: Germany.

Before launching its new product into the German market, Harris Tweed has to spend time researching information about the market, and about German’s purchase behaviour. Success in international marketing depends to a large extent upon satisfying the demands of the market and ultimately, on whether the product offered is suitable and acceptable for its purpose, regarding to additional elements such as packaging, warranties, after sales and branding that make up the total product offer for the purchaser. Success depends also on building market awareness and ensuring the availability of the product, which can be achieved by the effective use of the other marketing mix elements. Companies have to develop international markets in order to provide a cost effective way of generating new market opportunities and increased demand for a new product, especially when the brand is going to enter the decline step in the home market.

So Harris Tweed have to be aware of the following information in order to enter the German market.

A huge market:

Germany is a strong market with its 82 million population maintaining a healthy disposable income and the desire to buy quality, value-for-money products. It is also the largest clothing market in the EU with DM 87.32 billion. The German clothing market has experienced a long period of recession between 1992 and 1999, but 2000 showed further growth in the market, and it should normally continue to grow until DM 91.07 billion in 2004.

Germany is the world's second largest importer. It is the UK's largest European export market, the UK holding a 7% share, worth £22.5 billion in 2000, up 10% on 1999. Britain can, and does, sell practically everything to Germany, and almost 1000 British companies, including virtually all the major UK multinationals, have subsidiaries in Germany.

So Harris Tweed should take advantage of the rich opportunities of the German market. The Scottish firm should have facilities to enter this market, as the brand has a traditional and quality image, which appeal to German consumers. Regarding to the forecast, Harris Tweed should rapidly make benefits, even if strategic plan looks at long term.

But the firm has to take into consideration the differences of income between the former territory of the Federal Republic and in the new federal Länder.

Competition:

Germany’s largest clothing suppliers are China, Turkey and Poland. Workforce in these countries are quite cheap so they can provide very competitive prices, what Harris Tweed cannot really afford because of Scotland’s higher labour cost. Moreover, Italy is by far the largest EU supplier of clothing to Germany. UK suppliers to the market face global competition and a market in which fashion trends in the men's wear sector are particularly strongly influenced by Italian fashions. As a high-status brand, Harris Tweed will have to compete with some world’s clothing Italian giants like Benetton, Versage, Gucci etc. The young fashion/street fashion trends are on the other hand much influenced by British fashion, although too few UK companies are seen to be successfully exploiting to full commercial advantage the design talent/creativity existing in the UK.

To sum it up, Germany clothing is a sophisticated, mature and highly competitive market. So the firm has to increase awareness about its quality, benefit from its actual contracts with famous designers, and take care about the competitor’s new products and production process.

Constraints and opportunities:

As an EU member country, UK suppliers of clothing enjoy unrestricted, duty free access to the German clothing market. Suppliers to the market will however need to comply with existing EU labelling regulations (Textilkennzeichnungsgesetz). Consequently, political risks are avoided when exporting in Germany. Moreover, trade could be made easier thanks to the European currency (Euro), which UK might use in several years.

The market remains Europe's largest and richest clothing market, which calls for increased efforts by UK companies to increase their share of the market. It is a market that does place heavy demands on newcomers' resources and marketing skills and calls for long term commitment. The market environment is highly competitive and will remain so against the background of moderate market growth, intense global competition, the challenge of strong established brands. British clothing companies have and do continue to trade successfully in Germany, and that is a key point for Harris Tweed to enter the German market.

Supplying conditions:

German clothing market has experienced a lot of changes, most significantly in the structure of the retail trade, in the speed of the fashion business and in the service demands of the retail trade on its suppliers. The main focus has now switched to the ADDED VALUE such as marketing concepts and skills, flexibility, quick response and customer service. It is on these attributes that Harris Tweed has to work in order to increase the total of its sales.

Because of its process of production, HT should act in indirect export, meaning that the goods are produced at home and sold through an intermediary. The main advantage it implies is the reduction of risks because of the intermediary’s knowledge of German clothing market. Harris Tweed should choose specialised stores in order to compete with the other quality brand.

The new Economy (ICT and E-Commerce) grew in 2000 by 11.1%, and the medium term prognosis for the sector for this year is for lower growth of 8.7%. Consequently, Harris Tweed should also use the direct export, thanks to Internet, as it appears more and more popular, and as seller retains complete control.

In conclusion, with a right preparation and approach, Harris Tweed could be doing business in Germany and invest money in this market, as its total value is about £12 millions. It should take up the challenge that Harris Tweed is an old and experienced firm, and its entry in the US market has ever been successful. Germany’s market is maintaining a healthy disposable income (highest in the EU) and the desire to buy quality product should help Harris Tweed to succeed in the market.