2.3 Social
Social factors influencing organisations include consumer behaviour, trends and attitudes all of which can affect organisational activities at different times. a factor relevant to River Island is the rise of ‘fast fashion’, in the UK and worldwide. Today clothes are bought to keep up with current trends rather than for functionality, for example a coat for warmth. The importance of “fashion” in clothing consumption has risen by two-fold since the 1960s, measured by purchase probability. Clothing have transformed from durable goods to consumables. (Majima, 2006). Another social influence is evident in media coverage regarding the exploitation of supply chain workers, River Island has recognised this sensitive issue and are now members of the Ethical Trading Initiative (See Appendix One) as stated on their website. “In June 2008 River Island became a member of the Ethical Trading Initiative (ETI)…the ETI is an alliance of companies, trade union organisations and non-governmental organisations committed to working together to identify and promote good practice in the implementation of codes of labour practice” (riverisland.com, 2008).
2.4 Technological
Technology is crucial to an organisation’s marketing success, it is essential be up-to-speed with the fast-paced industry, as competitors may be exposing themselves to customers using more advanced methods that another company has not yet discovered. “Many technological breakthroughs change the rules of the competitive game” (Jobber, 2004, p151.) River Island, rapidly identified that it’s direct competitor Topshop were emailing weekly ‘style notes’ to their customers following this they adopted a similar technique. They have also ‘raised the bar’ with a mini- site incorporating their designer’s profiles and style tips, as well as blogs and competitions. (See Appendix Two)
2.5 Legal
Legislation such as codes of practice enforced locally nationally and internationally results in consequences for all organisations. An industry- specific legal obligation River Island encountered in 2005 was the introduction of chip and pin machines into all of it’s stores (logisticsit.com, 2008). Compliance to this requirement protected it’s customers from identity theft and fraud. As a result a training need emerged and costs for this were incurred, affecting disposable income and cash flow.
2.6 Environmental
Organisations are challenged with environmental implications at all levels of the supply chain from distribution to packaging, if found to be irresponsible in this area negative media coverage is attracted and public pressure groups are aggravated. According to River Island’s Corporate Responsibility statement they are actively involved in measures to reduce their energy consumption and levels of packaging “In our stores, our offices and our warehouses we are committed to operating in a way that is mindful of the demand on our planet’s limited resources. (riverisland.com, 2008) This evidenced on their website represents them as environmentally aware and responsible; a credential that many consumers value.
3.0 The Microenvironment
The Microenvironment consists of various influences in a company’s immediate environment such as. (see fig.2 for examples). One definition stated “The Macro Environment can be described as the environment that is most closely linked to the organisation.” (Groucutt, 2005. p.42). The company has a degree of control over some of the influences, but has little over others such as more local influences, known as publics e.g. local government and community. See Table 1 for a SWOT analysis of River Island as a company.
Figure 1. The Organisation
Source: Groucutt, J. (2005) Foundations of Marketing. p.43
Table 1. River Island SWOT Analysis
4.0 Competition
Being aware of competition as well as customers is instrumental in a business’s marketing success. Jobber, 2004, p.678 stated “satisfying customers is a central tenet of the marketing concept, but is not enough to guarantee success. The real question is whether a firm can satisfy customers better than the competition.” Awareness of competition can enable a business to adjust its marketing strategy and fulfil its customer requirements superior to its competitors, therefore increasing purchases and profits.
4.1 Analysing Competitive Industry Stucture
River Island operates in a monopolistic competitive nature “ A type of competition within an industry where a firms produce similar yet not perfectly substitutable product” (investopedia.com, 2008). Where many sellers selling a similar product are present in the market; yet customers see them as different, usually due to its Unique Selling Point, this can be quality, price, image depending on the industry it operates in The young fashion retail market is vast, however River Island customers perceive their products as better quality goods, and this is what differentiates them from it’s competitors, the fashion market is relatively easy to enter, although it would take considerable time to rival the amount of stores, reputation and customer base that River Island has.
4.1.1 Competitive Forces
There are 5 forces that decide what the competitive nature of a business is, and whether an industry is viable to be in these are Porter’s 5 forces (see fig 2.)
Figure 2. The Porter Model of Competitive Industry Structure/ Porter’s Five Forces (1980)
4.1.1.1 The threat of new entrants
The clothing business is easy to enter, but it is difficult to become as successful as market leaders such as Topshop and River Island quickly so River Island would be unlikely suffer an effect from a new entrant until some considerable time has gone by, by which time they have amended their marketing strategy to better the competition.
4.1.1.2 The bargaining power of suppliers
Where suppliers can increase their costs of raw materials, usually when a client is not their most profitable, River Island as part of the Ethical Trading Initiative ensure that all their cotton is sourced away from Uzbekistan, as it has a reputation for exploitation of child workers, in that suppliers could use this attribute to charge a higher cost for this, the only way River Island could resist this would be to threatening to use alternative supplier or to go into supplying themselves.
4.1.1.3 The bargaining power of buyers
Occurs when there are many suppliers and few buyers and the influence that buyers have on suppliers, i.e. they can set the price of what they are purchasing. If this was the case River Island could threaten to go backwards in to supply or buy their suppliers out to force them to reduce their prices.
4.1.1.4 The Threat of Substitutes
Where there are many substitutes of the same product in an industry, thus making it difficult for a company to raise its prices because it is a very similar product; River Island is not really affected because they have differentiated themselves from other retail stores similar to them. This is dependent on whether the customer thinks they will benefit from switching to a substitute, due price, or brand and the implications of doing so.
4.1.1.5 Competitive Rivalry Within the Industry
If a company slashes it’s prices, customers will respond to this, but in turn, its competitors also will. If a price war begins the prices can decrease too much, and profitability an the industry as a whole suffers, meaning that it would have been better for a company to remain in it’s previous position, actually making a profit, alongside healthy competition within the industry. Companies can finish up financially unstable if they are not cautious with their competitive tactics.
5.0 Internal Environment
The internal environment is the departments within an organisation such, as production, purchasing, research and development, and finance. All impact on marketing one way or another. Interdepartmental conflict can arise; finance can set strict marketing budgets, which may constrain a marketing from reaching it’s full potential. A production department may be testing products for quality for control before releasing, whereas marketing are eager for it to be ready for sale so they can develop a campaign or promotion to attract custom.
6.0 Conclusion
To conclude my research has found that River Island’s competitive environment has various influencing forces at work on a constant basis; to avoid the company’s position being threatened, its marketers need to be vigilant of these forces when formulating tactics and strategies, only then can success be guaranteed within the industry.
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