This report focuses on the re-examination of ActiveWear's marketing practices and on providing specific recommendations for the company to deal with the problems.
.0 Introduction
"Change is the only constant." (Toffler in Jobber, 2001: p119) Successful companies nowadays need to change constantly, or else they will find themselves in a situation of loosing market share and ultimately being out of business. This is the case of ActiveWear, a small women sports apparel manufacturer operating in the UK since 1973, which recently failed to maintain its market share. Internal investigations showed that this is due to poor market segmentation, inaccurate targeting and unclear positioning.
This report focuses on the re-examination of ActiveWear's marketing practices and on providing specific recommendations for the company to deal with the problems. Competitors and environmental analyses are also provided, in order initially to understand the external environment the firm operates in as it "can determine the future of the whole organisation" (Adcock et al, 1995) and to "take advantage of emerging opportunities and minimise potential threats." (Jobber, 2001: p120) The report concludes in suggesting a relatively untapped, profitable and growing market niche for the company to target and in providing ways by which it can position itself close to that niche to satisfy its needs and to regain market share.
2.0 Situation Analysis
The UK sports clothing industry is an extremely fragmented industry as it consists of clothes for different sports as well as leisurewear bought by non- participants. However, "if the many hundreds of small- scale clothing manufacturers are excluded, a basic list of around 30 leading clothing suppliers can be identified" (Key Note, 2000: p17) leading to the industry having a polarised structure. Of these, the three dominant with worldwide sales are Adidas, Nike and Reebok. The industry was worth £2.75bn in 2001; 8.7% of the total clothing market, having increased from £2.60bn it was in 2000. (Key Note, 2002) Although the trend towards "sporty look" that boosted the clothing market in the 1980s is no longer at the height of fashion, leisurewear has been firmly established and retained its position in the consumer wardrobe. The trend towards healthy lifestyle, which in recent years has shifted away from competitive team sports to more general fitness activities, also affects the industry. (http://www.mindbranch.com/listing/product/R310-0253.html)
2.1 The Macro- Environment
The initial step for every marketing-oriented company in determination of its strategy is to consider factors such as the dynamic and complex macro-environment it operates in, analysis of which determines its opportunities and threats. (Lancaster and Massingham, 1999) A commonly used environmental assessment tool is PEST analysis, which is illustrated in figure 1.
Figure 1: PEST Analysis
2.2 The Micro-Environment
Although criticised as to its simplicity, Porter's five forces framework is still a very useful model when analysing the sources of competition in an industry in order to identify potential opportunities and threats. ActiveWear should recognise how changes in the five forces give rise to new opportunities and threats and formulate appropriate strategic responses. (Hill and Jones, 2001)
Figure 2: Porter's Five Forces
2.3 SWOT Analysis
Macro and micro-environmental analyses provide ActiveWear the framework of identifying major opportunities, of which it can take advantage and threats, which should be minimised. (Jobber, 2001) Internal company's strengths and weaknesses are also identified as they relate to external opportunities and threats. (Ibid.)
2.3.1 Strengths
* Highly experienced as it operates in the sports clothing business since the 1970s.
* The founder of the company is a clothing designer, who is seen as the main asset of the business.
* Highly skilled and loyal employees.
2.3.2 Weaknesses
* Strong competition from already established firms.
* High operational costs due to expensiveness of research, development, technology and equipment.
* Not highly recognised brand, in an industry where "branding continues to be very important, particularly in capturing a share of the fashion-conscious youth market." (Euromonitor, ...
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2.3.1 Strengths
* Highly experienced as it operates in the sports clothing business since the 1970s.
* The founder of the company is a clothing designer, who is seen as the main asset of the business.
* Highly skilled and loyal employees.
2.3.2 Weaknesses
* Strong competition from already established firms.
* High operational costs due to expensiveness of research, development, technology and equipment.
* Not highly recognised brand, in an industry where "branding continues to be very important, particularly in capturing a share of the fashion-conscious youth market." (Euromonitor, 2001: p2)
2.3.3 Opportunities
* Technological developments provide additional distribution channels such as the Internet.
* Consumer attitudes towards more healthy lifestyles are strong and continue to grow.
* Leisurewear's sales, which dominate the market, offer opportunities for companies that originally specialised in specific sports to diversify operations. (e.g. Puma)
* Invention of fabrics provides additional garments that are valuable to consumers, which can be charged at premium prices.
* Strong governmental sponsorship of the apparel sector through the Department of Trade and Industry that stimulates improvement and competitiveness of the industry at home and overseas. (http://www.dti.gov.uk/sectors_clothing.html)
2.3.4 Threats
* Stronger competition from foreign potential new entrants as the industry becomes more global.
* Specialised companies face the possible threat of some sports getting rapidly out of fashion.
3.0 Competitor Analysis
Understanding and monitoring competition is a necessary process in examining ActiveWear's marketing strategy. "Competitors actions can spoil an otherwise attractive industry" (Jobber, 2001: p574) Nike is the market leader in the industry having a share of 21%, while Adidas is very close with 19.5%. Reebok lost share in 2000 having 15%, while Puma's share reached 3%. (Euromonitor, 2001) Puma's apparel sales rose 16% in 1997. (Mintel, 1998) While Puma, Adidas and Reebok are diversifying into more stylish sportswear employing designers such as Jil Sander, Yohji Yamamoto and Paul Smith respectively (Barrie, 2001), Nike focuses more on athletes. Dunlop Slazenger is the UK's leading sports equipment company involved in all racket sports, golf, cricket and hockey. (Mintel, 1998) The company reappraised its logo in 2001 as a new promotional strategy to compete with the "big three", (Brand Strategy, 2001) however it focuses more on comfort and fit rather than style. Ellesse, which is now owned by Pentland Group is trying to diversify into the more stylish women's market, launching a comprehensive women's fitness wear collection for spring/summer 2003 (Barrie, 2001) Finally, Diadora uses a narrow focused strategy targeting mainly football players. (Mintel, 1998)
4.0 Marketing Strategy
Internal strengths and external opportunities analysed earlier should be exploited by ActiveWear to increase market share. Ansoff (1957 in Kotler, 2003) identifies four product strategies for growth. (table 1) The best option for ActiveWear to compete favourably with the aforementioned companies may be to promote its existing clothes to a new relatively untapped market as it is a small company having limited resources and can with no means compete with the big companies in every single segment. Ansoff (1957 in Kotler, 2003) refers to this strategy as market development. Targeting a niche; "a more narrowly defined group seeking a distinctive mix of benefits" (Kotler, 2003: p280) may be even more preferable as it provides less competitors, higher profit margins and relationship marketing development. (Balestrini, 2002) "Today more than 75% of the leading industrial and non-industrial firms are targeting new products and services to smaller market segments." (Pollakoff, 1992: p57) According to Kotler (2003) market development can be done by a better understanding of segmentation. (i.e. identifying new market segments)
Table 1: The Ansoff Matrix
Source: Ansoff, 1957 in Kotler, 2003: p100
4.1 Market Segmentation
"Market segmentation and the analysis of segments is an essential input to the strategic market planning process." (Neal, 2001: p45) At this stage, ActiveWear "makes sense to use the classic "80/20" rule, which states that 20% of a company's products will typically represent 80% of sales." (Burrows, 2001: p34) Smith (1956 in Dibb, 2001: p195) defined market segmentation as a process of "viewing a heterogeneous market as a number of smaller homogeneous markets, in response to different preferences, attributable to the desires of consumers for more precise satisfaction of their varying wants." Jobber (2001) argues that there are four main reasons why segmentation matters; ActiveWear will be able to find the right segment to target, to form a tailored marketing mix for that segment, to find ways that differentiate it from its competitors in that segment and to spot opportunities and threats through possibly identifying new untargeted segments. However, because understanding consumer behaviour is getting much more complex over time, demographic segmentation is no longer able to stand alone when segmenting a market. Different customers have different attitudes, needs, and preferences, thus ActiveWear should further segment the market into sets of customers who share attributes that might be based on values or needs as well. (Forthsyth et al, 1999)
4.1.1 Geographic Segmentation
This implies segmenting the industry in terms of different regions, counties or cities the consumers live. Mintel identifies seven geographical segments within the UK market; London, the South, Anglia, Southwest, Northeast, Northwest and Scotland.
4.1.2 Demographic Segmentation
In this type of segmentation demographic issues such as gender, age, social class etc. matter. (table 2) As seen, women penetration is higher than men. Barrie (2001) agrees arguing that "as far as sportswear is concerned women are leading the field."
Table 2: Penetration of Sports Clothing Purchases by Demographic Variables (% of Adults), 1999
Source: Key Note, 2000: p37
4.1.3 Psychographic Segmentation
Kotler (2003) suggests that psychographic segmentation can be further divided into lifestyle and personality characteristics. Following his suggestions lifestyle segmentation for ActiveWear may include culture- oriented, sports- oriented and outdoor- oriented customers and personality segmentation may include compulsive, gregarious, authoritarian and ambitious customers. Clearly, ActiveWear is more interested in sports- oriented consumers, which can be further divided according to the sport they exercise. Table 3 shows that walking is the most preferable sport in the majority of adults in the UK. (Key Note, 2002)
Table 3: Sport Participation (% of Adults), 1999
Source: Key Note, 2002: p 23
4.2 Targeting
Jobber (2001: p201) defines targeting as "the choice of specific segments to serve" and adds that "it is a key element in marketing strategy." The factors that determine what segment ActiveWear will target are its resources, the nature of rivalry and competition, and the nature of the marketplace. (Gilbert, 1999) Porter (1990) identifies three generic target marketing strategies from which ActiveWear can choose; cost leadership, differentiation and focus. The most preferable option for ActiveWear could be the focus strategy as, as said earlier it will target a niche. Focus strategy does not provide economies of scale, however it provides economies of loyalty. These imply that satisfied customers will bring repeat business to ActiveWear, which is worth more than a one- off even high volume purchase. (SeMS LearnWare, 2002) Market segmentation, clearly identified that the most preferable niche for ActiveWear- because of its growth- are sporty women, who prefer to walk as a sports activity. Bigger firms' energies may have been so dissipated in serving the whole market that they have underestimated this niche. (Jobber, 2001) ActiveWear realises that "women have been poorly served by manufacturers and retailers, and they have the money and inclination to spend." (Lainson, 1998) The clothes should be stylish; design is key for these consumers (Barrie, 2001), in order also to be worn as leisurewear, as "the leisure side is definitely more popular. People mix sporty leisurewear with denim at the week-end, so sportswear is now considered general clothing." (Ibid.) Furthermore, the clothes should be of high quality, following that quality is also very significant among women consumers. (Lainson, 1998)
4.3 Positioning
"Product positioning is the final stage in the overall process of target marketing. Once the firm has established its product positioning strategy, it is then in a position to go on to plan the details of its marketing mix." (Lancaster and Massingham, 1999: p191) Unclear positioning of ActiveWear in the past; Kotler (2003) refers to it as underpositioning, made consumers have a vague idea of the brand. The company should reposition itself in that part of the market, where it will compete favourably with its competitors. (Adcock et al, 1995) (figure 3) The best option for ActiveWear may be to reposition itself as a higher quality and trendy firm, following that quality and style are factors of high value to its niche. The company could even increase its prices by targeting this niche as women are willing to pay more to get the right product. (Barrie, 2001) Jobber (2001) identifies four generic repositioning strategies. Of these, intangible repositioning may fit to ActiveWear's case most, as it will not change its product however, it will change its target market. Lucozade used this type of repositioning strategy to target a new segment.
Figure 3: Repositioning of ActiveWear; Perceptual Mapping
5.0 Conclusions and Recommendations
Marketing analysis clearly showed that in order for ActiveWear to regain its market share it should reposition itself close to a niche, which is relatively untapped, as it cannot compete with the established big companies in all segments. Its resources and its competitive advantages lead to the conclusion that the company is capable in competing in that niche. Focus marketing strategy will allow ActiveWear reposition as a specialist manufacturer of women fitness clothes - especially designed for walking (i.e. durable, waterproof, "pull" sweat away from the body etc.) - that combine style and fashion with sport. The company's mission will be "to be the No1 in a woman's heart and mind"
ActiveWear decided to be involved in this type of clothing manufacturing following the recent trend towards fitness and health. Consumer expenditure on fitness clothing increased by 61% since 1992 and reached £355m in 1997. (Mintel, 1998) Additionally, the company took into account the growing popularity of walking between British women.
However, additional marketing research may also be needed in order to have a clear view of consumer behaviour. Reebok's experience suggested alternative ways than traditional marketing research, which could be followed by ActiveWear in understanding consumer behaviour, such as "intuition, observation and one-to-one conversation with retailers and potential customers." (Martinez, 1998: p15) Finally, because a successful marketing strategy depends not only on the selection of a target market, but also on the creation of an appropriate marketing mix that satisfies that market, ActiveWear's marketing mix needs to be also accordingly developed.
6.0 References
* Adcock, D., Bradfield, R., Halborg, A. and Ross C. (1995) Marketing Principles & Practice, 2nd ed., London, Pitman Publishing.
* "Anatomy of a Brand" (2001) Brand Strategy, October, pp 16-18.
* Balestrini, P. (2002) Marketing Lecture 5, Week 8, [ 28 October 2002]
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* Burrows, R. (2001) "The Profit is in the Details" Journal of Business Strategy, 22(3), pp 34-39.
* Country Report (2000) "Consumer Lifestyles in the United Kingdom" Euromonitor.
* Dibb, S. (2001) "New Millennium, New Segments: Moving Towards the Segment of One?" Journal of Strategic Marketing, 9, pp 193-213.
* Forsyth, J., Gupta, S., Haldar, S., Kaul, A. and Kettle, K. (1999) "A Segmentation you can Act on" McKinsey Quarterly, 3, pp 6-16.
* Gilbert, D. (1999) Retail Marketing Management, Essex, Harlow Financial Times Prentice Hall.
* Hill, C. W. L. and Jones G. R. (2001) Strategic Management Theory, 5th ed., Boston, Houghton Mifflin.
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* Jobber, D. (2001) Principles and Practice of Marketing, 3rd ed., Berkshire, McGraw- Hill.
* Kotler, P. (2003) Marketing Management, 11th ed., New Jersey, Prentice Hall Pearson Education Limited.
* Lainson, S. (1998) The Women's Market, Sports Trust http://www.onlinesports.com/sportstrust/sports35.html [Accessed 30 October 2002]
* Lancaster, G. and Massingham, L. (1999) Essentials of Marketing, 3rd ed., Berkshire, McGraw- Hill Publishing Company.
* Market Research (2000) "Sports Clothing and Footwear", Key Note.
* Market Research (2001) "Sports Equipment in the UK", Euromonitor.
* Market Research (2002) "The Sport Industry", Key Note.
* Martinez, A. R. (1988) "Two CEO- Driven Improvement Programs: Reebok: Sprinting Ahead Through Influence Marketing" Management Review, 77(11), pp 15-18.
* Mintel (1998) "Sports Footwear", Mintel International Ltd.
* Neal, W.D. (2001) "Segmentation as a Business Strategy Does Work" Marketing Research, 13(2), pp 45-47.
* Polakoff, J. C. (1992) "Making Niche Marketing Work (Book Review)", Management Review, 81(2), pp 57.
* Porter, M. E. (1990) The Competitive Advantage of Nations, New York, The Free Press.
* SeMS LearnWare (2002) Marketing, Segmentation and Marketing, KC6, Electronic Lecture.
* UK Sports Market, Mindbranch http://www.mindbranch.com/listing/product/R310-0253.html [Accessed 30 October 2002]
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