UK Fashion Industry: Strategic Analysis

UK Fashion Industry strategic AnalysisIntroductionFashion industry is angiotensin-converting enzyme of the close to thriving and profitable industries of the world. The advent of inter racealization has led to great penetration of style into the mind of individuals. Mega form shows atomic number 18 being held in many nations crosswise the world which has handd considerable interest among the individuals. The present study deals with the fashion industry of UK. The choice of the nation assumes significance as it is one of the largest fashion hubs of the world. The nation withal houses some of the well-nigh popular discolorations in the fashion industry. A study conducted by research firm Grail puts UK as among the top hubs in the global fashion industry along with USA, France, Italy and Japan. London Fashion Week which happens to be the largest fashion related guinea pig in the nation is the only fashion event that invokes works done by students thus talllighting its com mitment and presence in the global fashion industry. Prestigious awards comparable River Island Gold Award find their origins in UK (Grail Research, 2009, p.6, 8). The present study would focus on the industry analysis of the fashion industry particularly that of the UK mart. The report would include an industry analysis along with the analysis of the private-enterprise(a) framework prevailing in the UK trade. Subsequently the key success factors and strategic groups would be analyzed in the report. The report would also lineament examples of the strategies that defecate been adopted by the trade leaders to continue their sustainability in the industry.Industry AnalysisGlobal Fashion Industry- An OverviewFashion industry includes fashion former houses, retail chains and the firms engaged in the manufacture of apparels. A report published by Levis Strauss Co has pegged the value of the global fashion industry at US $ 1334.1 billion as on 2008. The report also predicts a nort hward trend for this fancy in the subsequent geezerhood. Apart from being a style statement, fashion also generates creativity, well being and identity. The report also states certain shortcomings of this industry which primarily includes aspects standardised poor working condition of workers in the industry, wastage of resources and also encouragement of unrealistic consumption. Certain another(prenominal) shortcomings include unavailability and high prices of raw materials which also emerge as a major(ip) quarrel for the firms engaged in manufacture of fashion apparels across the world. Numerous opportunities also exist for the industry from the emerging markets like India, China, Brazil and Russia which confine started emerging as fashion hotspots of the world (Levis Strauss Co, 2010, p.5).Overview of the UK Fashion IndustryUK has been among the pioneers in the global fashion industry whose association with the world of fashion dates back to the 1960s popularly cognize as the swinging sixties, the punk and romantic 1970s and Cool Britannia Image of 1990s. Present age fashion designer label brands like Vivienne Westwood, Burberry and Mulbery, to name a few, are some of the numerous brand names housed in the nation (British Council Fashion Oxford Economics, 2008, p.9).A recent trend observed in the industry is that the nation is shifting from home based manufacturing units to sourcing products from foreign retailers. This has been attributed to the aspects of high labour be coupled with the rise in prices of raw materials which has forced manufacturers to outsource their production units to nations like China which offer a significant pool of talented resources and raw materials at cheaper rates (British Council Fashion Oxford Economics, 2008, p.16).UK is one of the pioneers in the fashion industry, and the nation is real with numerous alterations in the industry segment. A research study conducted on the fashion industry in UK states that consum er spending on fashion apparels in UK see a growth rate of 6.5 share in 2009 with sales figures reaching 2.5 billion Pound. One of the major market players in the UK market Newberry reported 19.1 percent growth on an annual basis. The growth of fashion industry has been fuelled by large levels of spending by the local people. Over the last ten years spending levels of individuals have grown by approximately six percent on a real term basis. The fashion industry also has do significant contributions to the economy of the nation. In the year 2009, the industry is said to have contributed approximately 20.9 billion pounds towards the economy of UK which forms about 1.7 percent of the total GDP figure of the nation. Retailer GVA alone has contributed approximately 6.5 billion pounds towards the economy of UK. Indirect contributions to the economy include providing employment options to about 816,000 individuals in a direct or an indirect manner. This figure represents about 2.7 perc ent of the total workforce in the nation which highlights the growth and importance of this sector towards the economy of the nation. On a standalone basis i.e., excluding the employees at the retail stores, the sector employed about 155,000 individuals or about 0.5 percent of the total workforce based in the nation. The fashion industry is also one of the major contributors to the nations exchequer with contribution figures ranging about 13.2 billion pounds which stands at 2.6 percent on absolute percentage terms. These contributions have mainly come from VAT and by dint of the income tax paid by the employees engaged in this industry (British Council Fashion Oxford Economics, 2008, p.14).The magnanimity of the fashion industry can be adjudged from the fact that the contribution of fashion industry towards the GDP of the nation is importantly higher than chemical and publishing industry. Fashion industry is the fourth largest employment provider in UK and comes only succeeding(p renominal) to travel and tourism, telecommunications and real estate (British Council Fashion Oxford Economics, 2008, p.20). This implies the huge potential of the fashion industry in UK. The following chapter would provide an analysis of the competitive framework predominant in the UK market.Porters Five Forces ModelCompetitive framework for any industry can be analysed by using Michael Porters five forces framework. The analysis of a market using the framework proposed by Porter helps an organization to analyse the market potential of other players in the market. This helps in generating sustainable competitive advantage for the firms. consort to this framework, the competitive framework can be analysed by using five factors namely,Bargaining Power of SuppliersBargaining power of ConsumersCompetition from existing playersThreat of new-made entrantsThreat of substitutes (Haag, 2007, p.72)Bargaining Power of SuppliersSuppliers have a high barraging power when the raw materials a re available in scarce quantities. It also rises when the number of suppliers for a particular product or raw material is quite limited. In case of fashion industry, suppliers constitute of vendors who provide raw material like cotton fiber and other textiles which serve as raw material for apparels. The UK fashion market is characterised by the presence of a few suppliers which is generally due to high costs of raw materials. The suppliers also use traditional practices which again increases the cost of goods sold (Karra, 2008, p.27). High cost of real estate also serves as a major source of concern to the fashion retailers. This analysis implies that suppliers have a fairly high bargaining power. Market leaders in UK have started outsourcing their manufacturing departments to vendors based in nations like China and India where cheap raw material is present at affordable cost of labour (PricewaterhouseCoopers, 2004, p.2).Bargaining Power of ConsumersBargaining power of consumers farm when the market is characterised by the presence of numerous players who have a large product line. presence of large number of competitors puts consumers in the drivers seat as they have numerous options. The present status of the consumer market in UK reveals the presence of large number players. Most of these players have high brand values products to suit all(prenominal) type of customers. This provides ample choices for the consumers. Hence it can be concluded that consumers have a high bargaining power in the UK market.Major players in the market like Marks and Spencer, Austin Reed have started providing value added services to consumers to woo them to their stores. Celebrity promotions have also been used to target consumers like course Crawford roping in supermodel Maggie Cheung for its promotions.Competition from Existing PlayersUK is characterised by the presence of large number of global players like Marks and Spencers, Next, Arcadia, Matalan and Bhs all of which have formidable brand image and an impressive product line to target consumers. Competition exists in al roughly all segment of the target market. This implies that competition from existing players has a significantly high impact on the fashion industry in UK. Market leaders have formulated policies that tend to win the consumers in favour of their brands. furious competition has prompted leading market players to vouch for newer locations like for example Marks and Spencers eyeing the Indian market.Threat of New EntrantsNew entrants do not pose able threats to the existing players. This is mainly due to the fact that the present market in UK is completely saturated with big brands like Marks and Spencers, Next etc. Moreover, high cost of establishing a business deters new players from entering the UK market. This implies that new players do not have significant power to challenge the existing players.Threat of SubstitutesSubstitutes are those products which have attributes that are highly similar to the original products. The customer segments of firms like Marks and Spencers are highly niche in nature and are incredible to switch to substitutes which basically constitute low priced products. Hence it can be concluded that substitutes do not present significant threats to the existing players present in the market.Key Success FactorsThe key success factors for the fashion industry are stated belowGovernment supportCustomer AwarenessAbility to forge in continuous innovationsGovernment SupportGovernment support is a key element in the success of the fashion industry. Pro active policies by the government favour the emergence of new players as well as boost up the existing players by creating market conditions that tend to provide greater value to the customers. Creation of competition would automatically generate innovations which is the backbone of the fashion industry.Customer AwarenessThe success of fashion industry depends on high levels of consumer sentience. Consumer awareness implies that consumers get regular updates about the new products that are being innovated by the fashion industry. Events like London Fashion workweek, Paris fashion week and other such festivals have emerged as a platform for fashion designers and retailers to showcase their products and creativity. These festivals are characterised by presence of high profile celebrities who endorse products of different designers and fashion labels. In these events, awards and accreditations are given to talented individuals who generate creativity in their designs (London Fashion Week, n.d.). This also serves to motivate individuals to produce greater creativity.Ability to bring in Continuous InnovationsInnovations are the key to success in the fashion industry. The basic tenets of this industry are based in continuous innovations. Firms like Hilfiger have created competitive advantage by introducing continuous innovations in their product line (Manlow, 2009, p.24 2). Innovations in fashion include amalgamations of modern and traditional fashion. Mega events like Paris fashion week and London fashion week serve as major forums where market players can showcase their products to the target audience. Firms are also roping in celebrities and supermodels to promote their designs. These innovations and subsequent endorsements by popular celebrities generate substantial interest among the target audience with regards to the diffusion of innovation among the general masses. Broad appeal and glamour of these events generate enthusiasm among the target markets with regards to adopting new products.The analysis of key success factors reveals the importance of factors like government, awareness among the target market audience. The aspect of innovation also generates decent interest among the firms to innovate their products. The UK market represents numerous potential for the market players as all the three key success factors can be achieved by organ izations. A suitable mix of the three key success factors would help in generating sustainable competitive advantage for the firms in the highly competitive market.Strategic GroupsStrategic groups are defined as a group of firms and organizations which operate within a specific industry who have similar strategies. It has been observed that in most of the cases the difference among the different market players is generally captured by the presence of strategic groups within the industry (Kim Mauborgne, 1999, p.86). The fashion industry in UK is characterised by market players like Marks and Spencers, Next, Arcadia, Matalan and Bhs who are global market players having operation in all major markets across the world. All these firms have the very(prenominal) target market and have a similar marketing mix for their products. The basis of forming a strategic group is based on the fact that all the above stated market players operate in a similar macroeconomic set up and have a similar target market. These firms intend to have similar arrangement strategies. The presence of a strategic group also creates entry barriers for new entrants as well as generates sustainable competitive advantage for these firms in the market. Presence of strategic groups tends to stabilise consumer preferences, it also generates greater competition and rivalries among the market players, as all the players in the strategic group are known to target the same customer segment. This leads to aggressive marketing by the firms to beat their rivals in the business markets. The scenario in UK market resembles a similar situation with firms trying to use every possible strategy to beat their rivals and capture the market (Hoskinsson, Hitt Ireland, 2008, p.87-88).ConclusionThe concept of fashion has been prevalent in UK since time immemorial and the nation has been among the pioneers with regards to creativity in this sector. The study reveals that fashion industry is one of the most happenin g industries in UK. This can be gauged from its contributions towards the economy of the nation both in direct as well as in indirect terms. The UK market also represents tremendous opportunities for market players as it has a large customer base with high levels of spendable income which makes it an attractive destination for fashion brands across the world. The study also shows certain challenges which mainly arise due high cost of raw materials and labour. Presence of strategic group also tends to increase the competitive rivalry among the market players. In spite of this, the huge potential of the target market serves as an incentive for most of the market players to eye the lucrative market of UK. Hence, it can be concluded that success of an organisation precisely that of fashion, lies in its ability to generate continuous innovation and to mould the advantages of the market to generate sustainable competitive advantage.