Critically evaluate the perceived competitive starategies of the five clothing retail outlets, namely Edgars, PEP stores, Mr Price, Truworths and Ackermans.

* Political factors

The political factors comprise of political processes and regulatory institutions that shape the code of conduct in a society. ( Narayanan et al 1985).

Accordingly to Johnson & Scholes ( 1999) political factors influencing the direction of a firm include monopolies, environment protection laws, taxation, taxing policies, foreign trade regulations, employment and government stability.

South Africa

TEXTILE AND APPAREL INDUSTRY

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND

U.S. DEPARTMENT OF STATE, 1998. ALL RIGHTS RESERVED OUTSIDE OF

THE UNITED STATES

SUMMARY

The textile and apparel industry is South Africa's sixth largest

the manufacturing sector employer and eleventh largest exporter

of manufactured goods. After the mines, it is the second largest

user of electricity and second largest source of tax revenue.

The textile and apparel industry directly employs 230,000 and

another 200,000 in dependent industries such as transport and

packaging. The Industrial Development Corporation (IDC) has

calculated that for every worker in the textile industry, 2.5

jobs are generated in related industries.

In 1997, total South African retail apparel sales exceeded R24.1

billion. This figure represents a 258% increase in retail sales

since 1990 and a 146% growth since the elections in 1994. In

997, the textile industry sales were R 11.9 billion.

Economy

The current volatility of global financial markets and

realignments of emerging market economies has impacted on South

Africa heavily, making the government's ambitious reform and

restructuring process difficult. The Asian Financial Crisis hit

South Africa particularly hard, as Japan and Taiwan are South

Africa's two largest trade and investment partners. As a direct

result, the South African Rand has lost 25 percent of its value

against the dollar since January 1998. South Africa is

experiencing an economic slowdown, which began in the 3rd quarter

of 1997. During the second quarter of 1998, GDP increased at .03

percent. Current conditions suggest that the economic slowdown

will continue into 1999. The economic slowdown combined with the

dollar/rand exchange rate may present challenges to U.S.

companies seeking to export to South Africa.

South Africa is, at once, a first world and a third-world economy

living side by side.

Per capita income statistics may be misleading unless the

substantial gap between reasonably well-off middle class and the

masses of poor are taken into account.

Tariff Structure

In 1992, the South African Government instituted a program to

drastically reduce tariffs for textiles and apparels over a

twelve-year period. The tariff reduction timetable gives the

non-competitive domestic producers a grace period in which to

increase efficiency. Textile tariffs will be reduced over twelve

years from 100% to 45% on clothing, from 50% to 25% on fabrics,

from 35% to 17.5% on yarn, from 15% to 10% on fibers, and from

60% to 30% on household textiles.

South African Customs Union Textiles and Clothing: Tariff

Phase-Down Program *1992*1993*1994*1995*1996*1997*1998*1999*2000*2001*2002**

Synthetic fiber *15%*25%*25%*23%*21%*19%*17%*15%*13%*11%*7.5%**

yarn *35%*32%*32%*30%*28%*26%*24%*22%*29%*18%*15%**

fabric *50%*45%*45%*42%*39%*36%*33%*30%*27%*24%*22%**

Clothing *100%*90%*90%*84%*78%*72%*66%*60%*54%*47%*40%**

Household made-up

textiles *60%*55%*55%*52%*49%*46%*43%*40%*37%*34%*30%**

Source: South African Government, Department of Trade and Industry

Although the government seems intent on conforming to the

standards of the WTO, the legacy of an import substitution policy

supported by high tariffs and import permits has left the South

African apparel industry largely non-competitive on the world

market. Due to this lack of competitiveness coupled with the

high unemployment rate in South Africa, the government has

vigorously explored WTO-permissible supply-side measures designed

to facilitate worker re-training and technological innovation.

Market Access

Since 1989, when import penetration escalated to around 40% of

local production, import control measures were removed and tariff

levels were reduced. The Structural Adjustment Program (SAP),

which for years offered duty-free imports based on export

volumes, was introduced in 1989. At the same time, the General

Export Incentive Scheme (GEIS) was introduced which offered

textile manufacturers an export incentive based on the export

value. In 1994, the Duty Credit Certificate (DCC) which offers a

customs duty credit for export performance replaced SAP.

The South African Textiles and Apparel Industry has embraced the

General Agreement of Trade and Tariffs (GATT) and the philosophy

of trade liberalization and is striving to become more efficient

and competitive. The textile industry has plans to dedicate R3

billion of investment over a five-year period. Large capital

investments have already been made and the improving financial

performance of some of the industry's major companies provides

concrete evidence of the textile industry's determination to

succeed.

Possibility of quota-free and duty-free U.S. entry of Sub-Saharan

African textiles and apparel Legislation introduced into the U.S.

Congress in 1997, the African Growth and Opportunity Act, would

eliminate quotas and duties on all Sub-Saharan African textiles

and apparel. This region includes South Africa. If both quotas

and tariffs were removed, the U.S. International Trade Commission

estimates U.S. imports of apparel from Sub-Saharan Africa would

increase by $100-$175 million. For textiles, it is estimated

that the removal of duties would result in an increase in U.S.

imports from $2.5-$4 million. This influx of capital into

Sub-Saharan Africa, may provide South African firms with capital

to purchase U.S. products.

Market Assessment

Following the long period of stability, the sharp decline in the

value of the Rand since mid-February 1996 has caught analysts by

surprise and nullified most forecasts of the exchange rate. The

devaluation of the Rand, from 3.65/USD in 1995 to 6.5/USD in

September 1998, gave the South African textile industry a

short-term advantage against imports. The price of imported

textiles will rise and make local textiles more attractive to

purchasers. The exchange rate adjustment will also enable

exporters to achieve genuine profit margins without having to

depend of GEIS and DCC export incentive schemes. This will not,

however, make up for the unilateral decision by the government to

slice GEIS benefits by one half and to impose new conditions on

the DCC scheme participants.

Factors that will influence the manufacturing industry in general

and the textile industry in particular will include: political

stability, labor relations, wage controls, training, new

technology, research and development, competition (local and

international) and the cost of money.

Interest rates and exchange rates will have an effect on new

capital investments and upgrading of technology. Inflation has

fallen from double digit to 6 percent. Real interest rates have

dropped but are still high by international standards at 25.5 in

September 1998.

Companies willing to make a 5-10 year investment in South Africa

will enter into a market with huge potential. American firms

must be willing to invest in infrastructure, computers and

logistic capability and be willing to market a specific brand to

create product demand.

Apparel Industry

In 1995, the South African apparel industry had actual sales of

approximately $2 billion accounting for approximately 3.7% of

GDP. The apparel industry employs approximately 170,000 directly

and an additional 200,000 indirectly. In 1995, South Africa

imported approximately $103 million and exported approximately

$123 million apparel products. The South African apparel

industry has vast export potential. In 1995, world apparel

exports totaled $170 billion and South Africa captured less than

one percent.

South Africa experienced a huge increase in smuggling and fraud

which needs to be effectively controlled through customs patrol.

More efficient and effective control could be achieved by

improving systems and procedures, rather than increasingly the

amounts of human and capital resources to the problem.

South Africans spend, on average, 7 percent of their annual

income on clothing.

Imports and Exports of Textiles

The change in the unit of measurement for fabrics from square

meters to kgs makes it difficult to directly compare imports of

fabrics during 1995 and 1996 with previous years. It appears

that imports of yarns stabilized during 1996, being slightly

higher than in 1995. However, imports of yarns under rebate of

duty increased. It is expected that this trend will continue.

During 1996, 45% of the total volume of yarns imported into the

country were cleared under rebate of duty. Approximately 60% of

all imported yarns were man-made filament yarns and 20% were

yarns of man-made staple fibers.

During 1996, the total value of textile imports (R3.54 billion)

was 5.1% higher than in 1995. The value of clothing imports

increased by 65.8% from 1995-1996. Turkey supplies 30% of all

imported textile.

Outlook

The continuing weakness of the Rand might inhibit importers from

placing orders overseas. The total textile industry will suffer

from business lost to duty-free imports due to the various rebate

facilities, fraudulent imports and possible increased imports due

to the general reduction in customs duties.

Volume of production will be under pressure. Soft consumer

demand and reduced disposable income will lead to fierce price

competition and therefore a decline in local sales is expected.

It is expected that exports of South African textiles will

increase as a result of the weak Rand and the fact that South

African manufacturers are increasingly breaking into foreign

markets.

Although production costs will be under pressure, an increase is

expected due to increases in the price of raw material and higher

wages. It is expected that technology and machinery will

continue to be upgraded which will improve quality and

productivity.

Best Sales Prospects - Textiles

Textile machinery remains a significant potential market for U.S.

companies. While South African import figures are not available

for textile machinery and equipment imported from the U.S., the

following areas have been identified by the textile industry as

having the best potential for U.S. exporters:

Spinning and Twisting Machinery for Natural and Man-made fibers.

Winding and Reeling Machinery.

Weaving and Weaving Preparatory Machinery.

Knitting and Hosiery Machinery.

Bleaching, Dying, Printing and Make-up Machinery.

In addition, the following service areas are of major concern and

importance to the Textile Industry:

Training and skills development.

Technology upgrades.

Small Business Development.

Industry Database.

Textile Consultants.

Best Sales Prospects u Apparel

A leading South African Department Store chain and an industry

association stated that the combination of the existing tariffs

and unfavorable exchange rate made U.S. apparel quite expensive

for the South African market. In order to be price competitive,

many retail outlets source from the Far East where American

styles are imitated.

Opportunities for high-end U.S. manufacturers lie with boutiques,

rather than department store chains. South Africans are very

brand conscious and a strong niche market exists for designer

labels. The following areas have been identified by apparel

retailers and manufacturers as having the best potential for U.S.

exporters:

There may be an opportunity for off-season merchandise because

South Africa's are opposite those in the U.S.

Opportunities exist for licensing agreements to manufacture U.S.

branded products in South Africa.

U.S. apparel has a reputation in South Africa for superior

quality. South Africans are prepared to pay top dollar for

American products because they get value from American products.

South African consumers follow U.S. fashion and culture very

closely. The "American image" sells.

Additional Opportunities for American Apparel companies

American consulting firms could teach South African retailers,

designers and merchandisers U.S. marketing practices.

Joint Venture opportunities exist and, in light of the current

economic condition, may be the advisable strategy for companies

interested in a long-term presence in South Africa.

Retailers may be interested in establishing partnerships with

U.S. department store chains.

* Economic factors

Kotler & Armstrong (1999) point out that markets require purchasing power as well as people

"It's becoming a natural progression for us to move farther and

farther north," said Dan Barrett, managing director of the Durban-based

discount chain. "You can dominate a market pretty quickly."

Once rejected as the economic storm troopers of white-minority

rule and rapacious Western capitalism, South African businesses are cutting

a path through the continent in a move that underscores this country's

emergence as Africa's economic powerhouse.

Led by the gold- and diamond-mining houses that have long been

the vanguard of its multinational economic power, the expansion of South

African business ties on the continent has spread into a host of other

sectors.

South African fast-food shops and clothing stores are in

Zimbabwe. Its national brewer, South African Breweries, is in eight African

countries, including Uganda, where it purchased a controlling stake in a

brewery last month. A South African cable TV network, Multichoice, can be

viewed as far north as Kenya. South African supermarket chains are sprouting

in Zambia and Mozambique, and all over the continent one can find South

African hotels, banks, restaurant chains, construction companies, rail and

road engineering projects, sugar processors, paper manufacturers, mineral,

oil and gas exploration efforts, even auto service centers.

Since 1990, direct foreign investment by South Africa's private

sector has increased at least threefold, to $25 billion in 1995, the latest

year for which figures are available. Investments in Africa account for a

small portion of this total, but foreign exchange requests in the pipeline

indicate that Africa's share will grow dramatically, an official of the

South African Reserve Bank said.

Among shoppers, demand for the growing South African presence is

high. In August, when a Shoprite Checkers supermarket food chain opened in

Maputo, the Mozambican capital, a near riot reportedly broke out amid the

crush of the thousands clamoring for the grand opening sale.

Governments are clamoring too -- for investment. Kenya's

officials recently appealed for more, in part to help level its trade

imbalance with Pretoria. In Zambia, which has virtually rolled out the red

carpet to all comers as part of its privatization drive, recent figures show

that South African firms have overtaken the British to become the leading

foreign business licensees. Angola was a Cold War enemy of South Africa, yet

Angolan business officials are running ads in South African newspapers

inviting joint venture investors.

The move northward is not without complications. Though some

governments have adopted investor-friendly policies such as easing

restrictions on foreign ownership and offering incentives for business

development, bureaucratic red tape is an obstacle -- as are the suspicions

that some governments harbor about their economic big brother to the south.

On the South African side there are drawbacks as well. Mining

houses and other large corporations aside, South African business is not

accustomed to dealing with the outside world after years of isolation

brought about by international sanctions aimed at ending apartheid. Its

learning curve adds costs to doing business in a world where it was long

rejected.

As South Africa emerges after dismantling apartheid, it has

become not only a target of the economic trend toward globalization, but a

player in it as well.

"If we make a success here economically, then the rest of Africa

will certainly benefit," said Erich Leistner, a research fellow at the

Africa Institute.

The South African investment trend has been growing since 1993,

just after passage of an interim constitution signaled the death knell of

apartheid and brought an end to sanctions.

The formal introduction of nonracial democracy the following

year led to the gradual lifting of South African currency controls that

prohibited foreign investment, which in turn brought the opening of the

country's economy to the world.

Under a democratic, black-led, relatively free-market

government, South African firms are far more welcome on the continent than

they were in the days when business here symbolized racist rule. Although

big business in South Africa remains largely white, on a continent in

desperate need of economic development after years of stagnation, it is the

color of money that speaks more loudly.

South Africa's economy is four times larger than those of its

southern African neighbors combined, and its industrial base is relatively

diversified. While most of Africa comprises developing, Third World

countries, South Africa straddles the Third World and the First. It is an

emerging market with deep socioeconomic needs, but with sectors that already

have emerged into the global economy.

Analysts say it is important for South Africa to invest in

Africa, especially southern Africa, to strengthen its natural export

markets. In addition, some South African businesses have saturated their

domestic markets and need to expand to remain viable.

To facilitate regional development, the South African Reserve

Bank, which administers the nation's protective controls on the movement of

the national currency, the rand, gives preference to investors targeting

southern Africa. Firms now are allowed to move into foreign direct

investment the equivalent of $10.5 million for each new project -- not a

huge sum, but more than before. The reserve bank also issued a rule recently

that allows South African firms to use their domestic cash reserves as

security for foreign financing for outward investment.

African countries want what South Africa has to offer, but some

resent the inherently unequal nature of trade and business deals with this

economic behemoth. South Africa's exports to its neighbors are six times

greater than its imports from them and are heavily weighted to manufactured

goods that other countries do not produce or do not produce efficiently.

Though some of South Africa's trading partners have reduced their tariffs

substantially to ease trade in the region, South Africa -- with its

export-driven growth strategy -- has been reluctant to make it too easy for

imports from the region to get in.

Margarida Martins, a Mozambican who coordinates several "spatial

development initiatives" along key business and transport corridors in

southern Africa, said the fear of South African domination "is continually

coming up" in her presentations to governments.

"Officially, they all give green lights," she said. "But when

you start coming to details, then you have certain sensitivities. What is

the role of South Africa? Are they coming in?"

Said Game Stores' Barrett: "There's a certain amount of fear

north of South Africa that South African business will come in and just roll

over their local business, which is a valid fear. But at the end of the day,

you can't hold back the world."

Anthony Wright, general manager of Standard Bank of South

Africa's Africa Banking Group, said one of the legacies of African

countries' post-independence embrace of socialism and command economies is

that " `profit' is a dirty word."

South Africa's Standard Bank has expanded, largely through the

purchase of a British bank, into 14 African countries since 1992. In some,

there are rules that govern the remittance of dividends or require a high

level of local employees.

Other challenges or drawbacks to investing in Africa include

government instability and armed conflict. And even in times of peace,

communication systems in much of the continent are poor. Standard Bank, for

instance, plans to link all of its continental branches via a satellite

because African telecommunications systems are not sophisticated enough for

global banking.

But the problems of investing in Africa are not just up north:

Because of South Africa's long international isolation, for instance,

bankers here are accustomed to dealing in only the local currency and are

less well-versed in the juggling of foreign exchange deals, which are part

and parcel of international banking and finance.

"So when you buy a business up in Africa, it's very difficult to

find [South African] guys with the right kind of expertise," said Wright,

who is British. "We're part of the global village up north, but not in South

Africa."

* Social factors

The social-cultural environment represents the values, beliefs, opinions, lifestyles and the general behavior of persons in the firm's external environment - Pearce et al (2000).

The recent decline in interest rates, increased urbanization and the emerging black middle class are all factors that spur growth in the retail sector. With consumer confidence in positive territory in January 2001 and positive sales in the second quarter of 2001, for the first time in 18 months, the predictions for sales in 2001 are optimistic. Nevertheless, the financial turmoil of the post 1995 period, accompanied by continued high interest rates, high consumer debt and the lower supply rate of new credit cards has taken its toll on the retail sector. Market pressure has been exacerbated by low per capita incomes, the breakdown of the central business districts, low operating margins and changing shopping habits. In the 1990s, South Africans started to divert their disposable income to cellular phones, gambling, the lottery, security costs, medical aid, insurance and school fees

DeLange (2001) argues that unemployment has grown disastrously, and there has been increasing polarization between the rich and poor. He asserts that these factors have given rise to an increasingly intolerable growth in crime levels and a breakdown of traditional patterns of social and community organization.As a result, the clothing retail industry is plagued by problems of shrinkage, pilferage and fraudulent transactions.

* Technological Factors

Pearce et al. (2000) points out that, to avoid obsolescence and provide innovation, firms must be aware of technology changes that may influence their industry.

Two of the major grocery retail groups, Pick 'n Pay and Wooltru, launched high-profile e-retail initiatives in 2000. The first six months of trading on the Wooltru site, Inthebag, met expectations and Wooltru was committed to funding Inthebag until June 2001. Limited PC-based infrastructure and basic logistics and fulfillment mechanisms are among the major challenges facing online retailing in SA but online trading is gaining momentum and the outlook is positive. While South African online purchasing figures are generally below global averages, in almost every instance, SA is ahead of the 2000 global averages. Furthermore, the relatively slow development of online shopping is a potential blessing in disguise, giving retailers an opportunity to bypass the exploratory and developmental stages and focus immediately on effective multi-channel retailing. Another challenge for retailers is to improve stockholding and inventory control. To achieve this efficiently, while containing distribution costs, most large chains have invested in major information technology upgrades in recent years and this investment continues.

According to Doherty, Ellis-Chadwick & Hart (1999) the retail sector provides an obvious route for development

3.2 Competitive Environment Analysis ( Porter's Analysis )

While PEST analysis were able to deliver a fairly broad understanding of external influences there are also other forces which determine the competitive balance within the specific industry ( Lynch, 1997 )

2 important factors - attractiveness of the industry, and relative position within that industry ( Porter (1998 ))

Attractiveness of the industry - determines the profitability of a firm and the ability to sustain it over a long period of time. It can be measured in terms of facilitating the development of competitive advantage and delivering value to the customer and to the company.

Competitive Position - is about a firm's position within that industry as compared to others and will determine profitability.

Attractiveness of the industry is a reflection of factors over which a company has little influence; Competitive positioning on the other hand, will be determined by the competitive strategy.

The choice of strategy chosen by a firm can make an industry more or less attractive.

Before a company can develop its competitive strategy, it has to first analyse and understand the rules of competition within the industry in which it competes. The ultimate aim of the strategy will be to cope and ideally change those rules to firm's favour ( Porter, 1998 ),

The retail clothing outlets will be analysed for attractiveness and profitabity using Porters 5 forces.

PORTERS 5 FORCES

Suppliers

* VMS out sources it's manufacturing to 2 separate companies.

* VMS is extremely dependant on each of it's suppliers.

Buyers

* Buyers in fairly strong position as there are more voice capable router options

* Buyers very well informed, using the Internet and references to compare vendors and if happy then options considered based on price & delivery.

Substitutes

* There is a slight threat from next generation of switchboards, but still minimal.

Competitors - Intensity of Rivalry

* Risk from competitors is fairly high

* However, due to price advantages, risk is decreased

* Little "brand" identity with most clients assessing on price & delivery comparisons.

New Entrants

* Entry barriers medium

5.4 STRENGTHS & WEAKNESSES

Strengths:

Weaknesses:

VMS leading vendor in Voice technology

VMS not known as a major network player

Established Voice sites

Few qualified resellers

Pricing is very competitive

Perceived lack of support

Warranty is longer - 1 year versus 3 months

No local presence

2.2.1 The threat of new entrants

New entrants to the retail clothing industry can bring new capacity, the desire to gain market share and often substantial resources. The seriousness of this threat depends on the barriers to entry and the anticipated retaliation from existing competition(Porter, 1991). The main barriers, within the retail clothing are economies of scale delivered by geographic coverage of the population, location of retail outlets, relationship with main suppliers, selection of brands and marketing.

2.2.2 The threat of substitute products

The threat of substitute products determines the extent to which other products can meet buyers needs and therefore place a ceiling on how much a buyer is willing to pay ( Porter, 1998).

Flea-markets, Chinese products, imported goods

2.2.3 Threat of competitive rivalry

According to Porter (1985), competition is at the core of the success or failure of firms. The intensity of rivalry will determine the extent to which competing companies will give away the value that they have created. They will either pass this value to the buyer in lower prices or it will be absorbed by higher costs of competing (Porter, 1991).

Company's survival and growth in such market depends on its ability to differentiate and to innovate(Porter, 1991).

2.2.4 Power of Buyers

Industry's customers constantly look for reduced prices, improved quality and best services which affect the level of competition(Pearce et al. (2000))

2.2.5 Bargaining Power of suppliers

The bargaining power of suppliers determines to which extent value created will be retained by suppliers (Porter,1998).

Figure: Porters model applied to the clothing retail industry

(Source: Porter. M. E. (1985) Competitive advantage: Creating and sustaining superior performance. New York: The Free Press)

3.3 Competitive Strategy

Strategy is a mechanism that companies use to determinehow, when, and where it should compete ( Pierce & Robinson, 2000). Thus without strategy a company would become stagnant and eventually die. According to Mintzberg & quinn (1992) Strategies are use in both single-minded enterprises andas well as in large diversified enterprises.

The 4 levels of strategy are as follows:

a. Corporate - group wide or company wide strategies,

Decisions such as ; diversification, joint-ventures, outsourcing, created or closing down business units and

Investment sourcing and funding.

Consider global,economic, political and social environment.

b. Business - The strategies for each business unit can be similar or

very different on the industry focus, target segments. Ultimate each SBU's strategy must be driven by the corporate strategy.

Developing responses to the changes in the industry, the global economy, the political and regulatory arena, etc

c. Functional - Relate to the operations, marketing, finance and human

resource functions. According to Mintzberg et al.1992), a company needs a functional strategy for every major unit or department in the business. The main role of functional starategies is to support the company's overall business strategy and competitive approach ( Thompson & Strickland, 1995).

d. Operational - Concerns the pattern of strategic decisions and actions which set the role, objectives and activities of the operation.

Figure :

The four perspectives on operations strategy

(Source: Slack,N., Stuart,C., Johsnton,R. 2003)

Top-down - what the whole group or business wants to do

Bottom-up - where operations improvements cumulatively build strategy

Operations Strategy - involves translating market requirements into operations decisions

Operations resource - involves exploiting the capabilities of operations resource in

chosen markets

None of these four perspectives alone gives the full picture of what operations strategy is. But together they provide some ideas of the pressures which go to form the content of operations strategy.

Competitive Positioning within the Industry

Porter (1998 ) argued that the crucial question in determining the firm's profitability is whether it can capture the value it creates for buyers, or whether this value is competed away to others. Who actually captures the value is determined by industry structure ( Porters 5 forces).

Cost advantage and differentiation combined with the scope of activities for which a firm seeks to achieve them lead to three generic strategies for achieving above-average performance in an industry: cost leadership, differentation and focus ( figure )

Porter also argues that a firms profitability is ultimately a function of two basic types of competitive advantage:

a. Low Cost or

b. Differentiation

Lower Cost Differentiation

. Cost Leadership

2. Differentiation

3. Cost focus

4. Focused Differentiation

Broad target

Competitive Scope

Narrow target

Figure 1.3 Generic Strategies

(Source: Porter, M. E. (1998b): Competitive advantage: creating superior performance, New York: Free Press)

The nature of merchandise and services offered, pricing policy,advertising and promotion programmes, approach to store design and visual merchandising and typical location to create an image of the retailer in the customer's mind relative to it's competitors.

e.g.

Cost Leadership

I. no frills product/service

II. Low-cost product design

III. Raw materials cost advantage

IV. Low cost production

V. Reduced overheads

VI. Scale economies

VII. Location cost advantage

VIII. Purchasing inexpensive capital eqiuipment etc.

Differentiation

According to Aakar (1992), in the retail industry, companies can pursue differentiation strategies based on the product i.e.

a) Enhancing performance of the product

b) Improving quality - to be the best

c) Creating prestige

d) Providing service back up

e) Improving convenience of the product

f) Enhancing the reliability of the product

Differentiation according to Aakar (1992) can also be based on:

a) Brand awareness

b) Service features

c) Technical superiority

d) Customer orientation

e) Distribution channels

f) Brand loyalty

Examples:

Focus

Pearce et al. (2000) stated that small companies usually thrieve because they serve narrow market niches. Focusing is usually achieved by selected a specific market segment with a product or service, or by selecting a specific product or service to offer to a specific market.

Example

Companies must choose a position, being all things to everyone is a recipe for strategic mediocrity and below average performance, because it often means that a firm has no competitive advantage at all. Porter (1998) refers to this as being "Stuck in the middle".

example

Types of competition specific to clothing industry

a. Intratype competition - two or more retailers in the same industry compete directly for the same household

b. Intertype competition - two or more retailers not exactly of the same type compete directly by attempting to sell the same product to the same household

c. Divertive competition - when retailers intercept or divert customers from competing retailers, e.g. supermarkets diverting customers from liquor stores. Can be intratype or intertype.

Operations performance Objective

Figure :

Strategic objectives for an operation applied to stakeholder groups

( Source: Slack, N., Stuart, C. Johnston, R.(2001): Operations Management, Third edition, London:Prentice Hall )

Quality:

Speed:

Dependability:

Flexibility:

Cost:

The cost objective is about doing things cheaply by enabling appropriate princing and passing the cost advantage to the customer. Costs are affected by factors such as;

Recruitment, training, technology deployment, size and location of premises, and raw materials or goods.

Prioritising Performance objectives

Measuring Organisation's performance against the Objectives

Fig.3.6 Slack ( Operations management )

Competitive factors

If the customers value this ..

Performance objectives

Then, the operation will need to excel at these ...

Low price

Cost

High quality

Quality

Fast delivery

Speed

Reliable Delivery

Dependability

Innovative products and service

Flexibility ( product/service)

Wide range of products and services

Felxibility ( Mix )

The ability to change the timing or quantity of products and services

Flexibility ( Volume and/or delivery )

Practical Research

Defining objectives of the research

The problem

The hypothesis

The dilimitation

Definition of terms

The assumptions

Reasearch methodology

Data needed

Location of data

Sample questionnaire

Treatment of Data

Primary data

Support data

Findings of research

Summary of Data

Critical analysis of this research and its limitations

Conclusion

Explanatory notes

Scope of the survey

3 The survey of retail clothing trade sales covers a sample of 5 retail outlets. The survey collects

information personal visits by each of the six members to various locations in Gauteng. The pricing was two fold, on the overall pricing of all goods and a more focused look at prcing based on jeans across the different outlets.

This survey includes -

· Edgars

· Truworths;

· PEP;

· Ackermans ; and

· Mr Price.

Classification Data are only collected for those establishments of the enterprise that are

predominately engaged in the retail clothing trade industry.

Survey methodology

and design

4 Designed using Slack operations model , Third edition ( 2003 0, Operations Management, Slack )

different competitive factors imply different performance objectives, Slack p 70 - operations management

The objective of the survey was to access as customers the importance ratings of competitive factors and then to rate the cloting outlets on meeting the performance objectives.

Fig.3.6 Slack ( Operations management )

Competitive factors

If the customers value this ..

Performance objectives

Then, the operation will need to excel at these ...

Low price

Cost

High quality

Quality

Fast delivery

Speed

Reliable Delivery

Dependability

Innovative products and service

Flexibility ( product/service)

Wide range of products and services

Felxibility ( Mix )

The ability to change the timing or quantity of products and services

Flexibility ( Volume and/or delivery )

5 The survey is collected by a questionnaire being filled by each member of the syndicate acting as a customer by personal visits between March and April 2003. The questionnaires are collated and summarized into a single document to be used for making conclusion and positioning.

Sample questionnaire

9. Findings

References

Appendix