Esprit - Where Next for the Icon of Hing Fat Street Retailing?

Introduction

In the fast fashion industry, it is important for the firms to have an active response in the needs and wants of the target market in order for the firm to remain in the competition. However, most of the companies might not keep it up in the tight competition especially when in terms of low cost production and providing the high quality output at the same time. The fashion conscious consumers more likely admired the firms that can initiate what they need and because of the sophisticated tastes of the consumers, it has been a challenge for the firms to respond and even setting trends. Therefore, it leaves an impression that the firm must act and should follow the changes in the market since the business’s growth is dependent in the market.

Repositioning Strategy

In the journey of Esprit, the organization initiated Six Strategic Initiatives in which the company can draw its source for competitive advantage. By reviewing these initiatives, the organization can start its progress well. The six initiatives are the important factors that can also reshape the brand position of Esprit. The six initiatives namely – global brand, products, channel and country cost, support functions, and organization - are good indications that Esprit has a clear objective in their business venture (Esprit, 2010). However, it is important that the company can continue to upgrade their performance to avoid the confusion in the market as well as the negative perceptions. Therefore, the firm must strengthen their brand name that will target the idea on how the organizations what the market see their products. Esprit should optimize their business approach through precise production and logistic strategies which is an important requirement to identify their supplier and create a tactic in the fast fashion industry (Peterson, et al., 2010). In addition, there should be a clear brand position to emphasize the perception of the core targets. In addition, the perception should be also essential in terms of functional and non-functional benefits for the consumers within the fast fashion industry. Esprit can also adapt the points or positions that can be found among their consumers and competitors (Sengupta, 2005).

Sustaining Competitive Advantage

The fast fashion industry means that the firms has a fast response in the consumer’s needs but this is not only through the name because it generally affect the retailing industry and thus changes the production, supply, supply chain management, and the overall sales in the industry. Therefore the fast fashion ideals are considered to be a retailing business models (Seigle, 2011). Moreover, the retailers can now be easily found among the high-streets and thus it is also referred to as “high-street fashion”. The advantage on this position is probably due to the inspiration in knowing what the consumers are seeking for. The trend and the continuous changes in the market can be easily appreciated or anticipated in the fast fashion industry and there after providing the quick response. This tends to push the firm in getting the quickest supply chains as much as possible and effective logistics as well wherein every part of the production cycle are expected to produce the output that will suit the taste of the market. Through this market, Johnson, Scholes, and Whittington (2005) considered that time is an important factors which makes the fast fashion industry competitive, challenging, and have a lot of potential.  The competitive advantage of the European franchisors can be found in the supply chain management, branding, service, and the quality of their products. Apparently, there are other apparel brands that already made a name in Hong Kong market namely Giordano and Esprit because of the strategy in combining the international management skills and understanding the foreign market. With this implication, the franchisors became fiercely competitive and offers apparel with the fashionable design and in the level of competitive prices.  Esprit has a theme in competing within the value-for-money segment which held a direct competition with the fast fashion industry for high-quality, fashionable ladies business wear, although it subsequently expanded into casual wear (Hayes, et. al., 2005).

In the competitive landscape of the clothing lines and apparel, the geographic distribution can be the most important part of both domestic and foreign business. In Hong Kong, Zara and Bossini can use the strategies left by two largest brands that currently dominating the country. Li-Ning and Esprit created a strategy wherein the products are sold in various cities that were differentiated and targeted towards their specific target or customer group. However, Zara and Bossini should also expect that the product differentiation strategy should manifest in the country thus, allowing the businesses to engage in the said strategy rapidly (Ghemawat, and Nueno, 2003).

Positioning Strategies for Different Markets

In terms of discussing the competitive advantage, it is more likely applicable to sustain more of Esprit strategies (six initiatives) that of eroding one aspect of it. According to the Esprit Interim Report (2010), the organization understands that the cost of goods sold should be strengthened such as gaining more savings because of their approach and good relationship with the suppliers. However, when it comes in positioning strategies like in Europe, the firm sought a great advantage in their performance because of their Generalized System of Preferences (GSP) that were applied on textile imports to Europe that were originated from most of the developing countries. It plays a significant role in fast fashion because the idea lies on textile and clothing and how the business can embrace the latest fashion (Peterson, et al., 2010). In addition to Peterson et al (2010) study, there is a promising future for Esprit (as well as other fast fashion organizations) in China and Hong Kong markets because of the good supply chain that nestled in these Asian markets.  However, Esprit should at least reduce the risk that the business might experience. Since China and Hong Kong markets have a positive approach in competitive retailers, each organization is bound to employ their strategies towards precise production, logistics, and dynamic approach with their supply chain management.

Growth Strategies in China

China is at the core of Esprit’s long-term strategy and in 2010, the firm realized a strong turnover growth of 5.9% in local currency from the China subsidiaries. China is also a part of Esprit’s strategy to become a truly global brand and a geographically diversified company (Esprit, 2010). Within the initiative of the firm in channel and country, the firm assured that the management already prepared a growth plan in China which can aid their position towards the fastest growing apparel market. At present, Esprit successfully acquired one portion of Chinese market which enables them in integration phase and thus focusing on accelerating the businesses. The positive outlook of Esprit in Chinese market is supported by Harris and Cai (2002). In Harris and Cai’s (2002) study, the authors highlighted the importance of market driving approach which allowed the international business to play in the Chinese market. It is important that the marketers understand that two important factors which allows the firm to improve their performance. Chinese market is a potential market for Esprit since there is a strong market growth particularly in fast fashion industry (Peterson et al., 2010). The growth strategies of Esprit in Chinese market lead the firm to open new sourcing office for Central and Northern China in the Spring of 2011. Also, Esprit also developed direct relationships with main fabric mills and accessory suppliers and is transacted with direct negotiation (Esprit, 2010). The fast fashion business is subsequently coordinated with the retail businesses and manufacturing organizations. Therefore, the fast fashion businesses like Esprit should manage the supply and as well as the needed adjustment sin the supply chain in order to improve the production while reducing the cost of production in the Chinese market. There are difficulties that manufacturers and retailers might face in the fast fashion business but it is important for Esprit to secure the competitive advantage within this market if there are changes in the Chinese market that might create an impact in their market position (Peterson et al., 2010).

It is possible for the firm to transfer their competitive strengths to other markets if the two factors were only be established – customer familiarity and preconceptions of product characteristics, and the extent of market control (Rajagopal, 2007). It is important to determine the movement of the market to have an insight with the nature and dynamics of the drivers of market. Upon determining the two market driving approach, Esprit can definitely include the market sensing, changing customer preferences, channel control through relationship, and the local sensitivity (Harris & Cai, 2002).  

Forward Integration

Based on the study of Peterson et al., (2010), the firms that play in fast fashion industry should recognize the use of business model. The appropriate business model can present various solutions and strategies towards better understanding in terms of time management (e.g. seasonal production of clothes) and the cost that are associated in producing such product. Furthermore, the firm’s reaction towards the changes in fast fashion industry and their association with the suppliers can create broader insight for Esprit to prioritize the textile and clothing processes, as well as its management and innovativeness which makes the firm remain competitive (Peterson et al., 2010). However, in terms of using the forward integration, there are many possibilities that a firm might realize. As part of the strategic management, forward integration is a business strategy is a form of vertical integration. The activities that are included in the business include control of the direct distribution of products because the buyers are used in formulating the core strategy of the business (Investopedia).

The advantages in forward integration consider the identification competent suppliers, ability to reach the end customers and have a better access in the information particularly about the end customers. Other advantage includes the lowered cost structure on the production and better differentiation strategies, enhancements and standardization of the product quality, and the improvement in production and distribution scheduling. However, forward integration has its downside effect which can also increase the cost once the changes in the market has been realized in the production, fast-changing technologies, unpredictable demand, and weak or inappropriate business model (Sharma, et al., 2009).

In fast fashion industry, there are two organizations that applied the idea of forward integration (for some vertical-forward integration) are H&M and Zara. Although these firms are different in the outsourcing production, spending, advertising, and pricing strategies, they still share the fashion forward which enabled them to lower the prices for the retailers and creates a strong capability in international expansion (Craig, Jones, & Nieto, 2004). Actually, there are numerous of firms that are promoting the integrated structures to provide the value products for the wide range of consumers. The forwards integration, on the other hand, enables the managers in the fast fashion business to layout, categorize, and maximize the products that will match within the location of the store (Gallaugher, 2008).  If Esprit can adopt the forward integration there is an expected further enhancement of sales and effectiveness of the organization through embracing the latest fashions and limiting the stock of items. Henceforth, there is an optimization of business approach and focuses in moving forward with hard line buying and sourcing standards (Peterson, et al., 2010). 

Conclusion

In the recent strategic approach of Esprit, the firm acknowledged the challenges such as the substantial increase in cost of raw materials, wage inflation, shortage of talented laborers, and retailers. Still, if the appropriate measurements were taken, the firm believes that they would be in a strong position in terms of giving values to their customers. Esprit dedicated its business performance for its customers by providing thorough reports and enhancing the attributes of the product in terms of the “value for money”. Despite of all their initiatives, Esprit must also consider the various strategies in which they can draw their competitive advantage.  

References:

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Esprit, 2010. Interim Report, Six months ended 31 December 2010 Hong Kong Stock Code 00330 [Online] Available at: <http://jrj.com.cn/acc/HK_DISC/stock_time/2011/03/15/001164466-0.PDF> [Accessed 27 June 2011]. 

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Johnson, G., Scholes, K., & Whittington, R., 2005. Exploring Corporate Strategy, 7th Ed., Harlow: Prentice Hall.

Peterson, J.H., Chang, J., Wong, Y-H., & Lawrences, C.A., 2010. The Emergence of the Fast Fashion Business Model and Imposed Quick Response Challenges for Chinese Fabric Manufacturers. Innovative Quick Response Programs in Logistics and Supply Chain Management, International Handbooks on Information Systems. Berlin: Springer-Verlag.  

Rajagopal, 2007. Marketing Dynamics: Theory and Practice. Mexico: New Age International Publishers

Sengupta, S., 2005. Brand Positioning: Strategies for Competitive Advantage, 2nd Ed. New Delhi, India: McGraw-Hill Companies.

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