MARKETS OF THE COMPANY
Fashion is described as a way by which high-class people create a gap between them and the lower class people by adopting some thigh different usually in clothing. The fashion encourages those closest to the higher-class people to adapt the same, so that they can feel the status of high class. The process keeps on running and then again, the high class adapts some thigh different. The company has grown tremendously in last few years than its competitors which have been in the market for longer period than the company. All this because of its controversial brand name (FCUK), which has given boost to the sale making FCUK a brand. It presents itself as youthful, cheeky, sexual and irreverence brand in the market. Which attracts the young segment of the market and appeal to the older section of the market that still have youth in them. French connection focuses on the upper end of the middle segment of the market. The company provides its clothing through retailed outlets, franchising and licensing to independent stores and departmental stores. 56% of the business of the company comes from the retail activities and wholesales consist of 44% business of the company. Its clothing is available in more than 30 countries, but it mainly operates its business in Europe, United Kingdom, North America, Asia, Australia, and the Middle East.
COMPETITOR OF THE COMPANY
Main competitors of French connection are:
- GAP
- Marks and Spencer Group plc
- NEXT plc
- Debenhams plc
- John Lewis Partnership plc
- House of Fraser Group Plc
- Selfridges plc
- Arcadia Group Limited
- New Look Group
FINANCIAL SUMMARY OF THE COMPANY
(Fig. no.1)
In the year 2001, the company had a turnover of £193.6 millions of which retail revenue was
26.6% from UK and Europe, and 6.3% from North America, even with poor economic conditions.
For the fiscal year ending January 2005, the company generated revenues of £265.7 million, representing a slight downturn of just under 1% from £267.9 million in the previous year.
The company has increased its retail trading space from 264000 sq ft of 2001 to 402000 sq ft in the year 2005.
THEORY OF CONSUMER DEMAND FOR THE COMPANY
The consumer demand theory is centred to analysis of the utility generated from the satisfied needs and wants. As if now I will explain Consumer demand theory for French connection group plc (FCUK) a manufacturer of fashion clothing. It will involve the analysis of indifference curves, Marginal utility theory and Demand for product characteristics. The Indifference theory was developed in first part of 20th century by Francis Ysidro Edgeworth and Vilfredo Pareto. The indifference curve analysis will focus on how the rational customer decides to buy between two products. Means how the income will affect the choice of the consumer. As the consumer have unlimited choice, limited budget and unlimited wants. The consumer are aware of what they are going to buy, they look for more in order to utilize their limited spending power to its fullest.
In case of French Connection I will explain it with e.g. I will compare FCUK with GAP as this will allow me to have two dimensional diagram. The vertical axis measures the FCUK purchases and the horizontal represents the GAP. Taking in the mind that FCUK is cheaper than GAP and the income of consumer are constant.
FCUK
FCUK*
12
11
0 BC
GAP* GAP
(Fig.no.2)
BC is the budget constraint line; the line is diagonal as it comes from equation
X * px + Y * py ≤ income. The figure shows that the consumer chooses FCUK over GAP as this provide highest utility with in the budget constraint. 12 is out of the budget of the consumer and 11 is appropriate which results in Purchases FCUK* of FCUK and GAP* of GAP. This shows that FCUK is more appealing to the public and French connection consumer are willing to give up other brand clothing to get more of the FCUK as it is the most popular brand in the UK market at this time with good quality and fresh designed which are preferred by the company target consumer.
The Marginal Utility Theory
Marginal utility is very important in the theory of consumer demand because it focuses on the utility of a product which customer always look for in a product, the consumer wants to utilizes its income on a product which will satisfy its need by giving utilization. This is affected by substitute and the change in the income of the consumer.
French connection is very much related to the marginal utility curve. E.g. the cloth of the company which the customer has brought for the first time has given some satisfaction and in economics satisfaction is called as utility. I can say that the first cloth has given five utilities . the second garment which the customer has brought has given three utilities and third must have given less utilities like two. The main thing in this is that the customer is getting less satisfaction every time on additional cloth of the company. I can say like marginal utility of the first cloth is five, three for the second and two for the third cloth. I will explain it on the fig no.3 and 4
12
10
8
Total utility
6
4
2
0 1 2 3 4 5
(Fig.no.3)
FCUK cloths
10
8
Marginal
Utility 6
4
2
0 1 2 3 4 5 (Fig.no.4)
FCUK cloths
The fig no. 3 shows total utility from the cloths of the company and fig no.4 shows marginal utility. The marginal utility of the first clothing is largest than of the other. The marginal utility of the cloths decreases as the customer buy additional cloths per unit of time. It is know as law of diminishing marginal utility. This show that the consumer is willing to pay for the first cloth, they even want to pay for the second cloth but less than the first. This will continue decreasing and at time marginal utility will be zero. Company is also facing the same problem too. The company has to reduce its prices in order to overcome this problem.
Demand for Product Characteristics
The basic of this analysis is that the demand for the product derives from the demand consumer has from the characteristics of the product. In case of French connection I think it is a luxury product as consumer can buy clothes of some other company for much lesser price but it has priced its product cheaper than its competitors like GAP, NEXT etc. Consumer looks for quality, trendy and fresh designed cloths. Mainly it’s all about satisfaction and brand status attached to the company’s product that makes the customer to buy its products. More over marketing strategy of the company is very fresh. There advertises attract the youth very much which is target market of the company.
THEORY OF CONSUMER BEHAVIOUR FOR THE COMPANY
The consumer behavior depends upon social, cultural psychological and personal factors.
(Fig. no. 5)
SOCIAL FACTORS: The consumer takes in account many thighs before buying any product.
Family: Family is the most important to any consumer and consumer takes care that he has to buy the right product as the family is the one who is really going to use the product.
Status: Before buying any product the consumer have to make sure that the product is up to his status. That he is not buying any thing below his status.
Social group: The consumer also makes sure that the product he is buying will be acceptable to the social group from which he belong and in which he lives. French connection clothing is a brand, people tend to buy its cloths as it is one of the famous brand and help the customer to maintain there social status.
CULTURAL FACTORS: Culture is the principle of person desire and behavior. Culture gives a set of values, preferences and perception. The consumer has to follow the set of rules or values given to him by his culture. Like French connection clothing is for everybody but younger generation buys more FCUK than the older people. E.g. consumer in India will hesitate in buying FCUK as it is controversial brand name. There culture won’t allow them to have something offence or vulgar written on there t-shirts.
PSYCHOLOGICAL FACTORS: the consumer behavior is also influenced by three psychological factors.
Motivation: consumer has many needs at a given point of time. Biogenic needs are those which arise due to state of tension like thirst and hunger. Other needs is psychogenic which arises due state of tension like esteem and recognition. All the need become motives when they reaches a certain level of intensity. I will try to explain motivation theory with the help of Theory of human motivation by Abraham Maslow.
Self
Actualization
Needs
Esteem Needs
(Staus, Recognition, etc)
Social Needs
(Love, sense of belongingness)
Safety Needs
(Security, protection)
Physiological needs
(Food, water, shelter)
(Fig.no.6) (A.H. Maslow, 1970)
This theory by Abraham Maslow states that the consumer is drived by some need at a given point of time. The needs may be physiological need like food or esteem need like status that depends upon on the financial and social condition of the consumer. But for most every customer satisfy its physiological needs first than he think of going up in hierarchy like social and esteem needs. For e.g. a hungry man (physiological need) can not think of love or security, but when he get enough food he will turn to his next needs. In case of French connection I think only those customer buys the company product who have fulfilled there needs till social needs as buying branded cloths is not a social need or safety need but it is an esteem need. Company’s product helps the customer to have a status or to maintain it, recognition in the society.
Learning: learning is normal phenomena of the life and all that learning become the experience. E.g. if the consumer has used the company product for first time he will learn what the product is giving him, what the quality of the product all that become experience of the consumer, than the next time when he will go for buying company’s product he will use his experience for buying the product.
Perception: perception is a sense which helps a person select, organize and interpret information to create a meaningful thing. For e.g. if the consumer buys the company product and if he is satisfied with the quality and price of the product. This will help him to have a perception that the company has good quality product on reasonable prices.
PERSONAL FACTOR: Consumer behavior is also depends upon his personal characteristic like age, economic condition, occupation, lifestyle and personality. For e.g. the French connection clothing is usually consumed by young people, which are influenced by fashion and have decent economic condition.
FRENCH CONNECTION SALES AND EFFECT OF DEMAND AND CONSUMER BEHAVIOR
French connection has grown very much in last five years; the company is among best in business. Company had a turnover of 267.9 million GBP in the year 2004 but in 2005 they just had a turnover of 265.7 million GBP, 1 percent decrease in the turnover. There was a decline of 12% sales in the year than last year. Low retail sales combined with low wholesale orders caused the decline in the sales and turnover of the company.
Consumer who are loyal to the company and even new consumer still are interested in wearing company’s clothing but the problem is their high prices which normal consumer cannot afford in other words the company has failed from last few years to analyze changing price perception of the market. Company’s Products are neither different enough to make its own market nor cheap enough to compete with other brands.
More over what I think is the consumer are bored with the “FCUK” slogan. They have been seeing the same slogan for last eight years. They had enough of FCUK they want some thigh new, refreshing and more trendy now.
CONCLUSION OF THE REPORT
The analyses of the report shows that the company is one of the best in the business but it is affected low retail sector growth. The company has also failed to adapt the changing price policy of the market. I think these are the main reason of the low sales for the company and low demand which results in decreased turnover. The analyses of the demand theory of the company show that the company’s clothing is very costly and everybody cannot afford it.
The company’s target market is youth and youth have very limited purchasing power. The company needs to focus on other sections of the society and should make its clothing cheaper so that it will be in reach of a normal person. Analyses of the marginal utility theory show that the company should create new things which will keep the customer interest in the company.
The theory of consumer behavior shows that the consumer should be satisfied on the basis of his social life, there personal interest and by keeping in mind the cultural values of the customer. Company is very effective in marketing. There advertisements are one of the best.
The company has done very well so far and the company can do well now also but the company needs to be more creative and trendy and should focus more on the quality of its products. It should also reduce its products prices in order to increase its sales which will increase the demand for the company’s product.
BIBLIOGRAPHY
Earl,Peter and Wakeley,Tim (2005), “Business Economics”, Mc Graw Hill Education, p.p 95-117
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Bach, George, Leland, Flanagan, Robert, Howell, James, Levy, Ferdinand and Lima, Anthony (1987), “Economics”, 11th Edition, Prentice Hall, p.p 294,295
Palmer, Adrian and Hartley, Bob (2002), “The Business Environment”, 4th Edition, Mc Graw-Hill Education, p.p 175-187
Hornby, win, Gammie, Bob and Wall, Stuart (2001), “Business Economics”, 2nd Edition, Prentice Hall Financial Times, p.p 185-187
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