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SITUATIONAL ANALYSIS

BUSINESS OPPOTUNITY; BRIEFING

DesignerWear (DW) is a new Sri Lankan SME that is involved in importing branded clothing
items for 1.5 years. It features many world renowned brands such as Abercrombie and Fitch,
and French Connection. DW has recently entered into a contract with Reebok International to
import the innovative Reebok PlayDry line of t-shirts (with cooling fabric design) to Sri
Lanka for the purpose of retail selling.

Figure 1: Reebok Play Dry Fabric Technology Illustration

FEASIBILITY STUDY

1. Organizational feasibility
HR
-

Marketing department: Sufficient; Employees are capable to handle promotional

campaigns.
Training need analysis: Hiring new retail staff that are competent in the English
language (Training needed after selection)

Risk:
-

Primarily, this is a low risk project as it is an existing product in international markets.


This matches the managements risk averse policy.

Financing for marketing campaign:


-

A section of the annual budget is allocated for each brand; to introduce at least one
new line of clothing to the local market. The budget will be explored in depth later in
this report.

2. Industrial feasibility
Nature of the branded clothing Market in Sri Lanka: Oligopoly

Few main players (Nike, Puma, Adidas)


High capital investment to enter

Intensity of competition: High

Reeboks competition in is not with local brands in Sri Lanka however with
global competitors like Nike (alternatives within the local market).

3. Product feasibility
-

Special attributes:
Innovative fabric technology of the PlayDry range of clothing,
Elegant design,
Durable material
Demand analysis:
Need analysis: Sri Lankas western provinces have a hot climate; there is an

unmet need for clothing that evaporates sweat


Ability to purchase: Disposable income is sufficient.

4. Market feasibility
-

Key segments: young adults,


Market demand: the demand for branded wear items is in a growth stage.
Purchasing power: moderate to high (disposable income level: 15,000 upwards)
Value proposition: Similar to the international markets Reebok has a competitive
advantage in price, making it affordable than the alternatives.
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Loyalty: brand loyal


Need level sought: esteem, social

INTERNAL AND EXTERNAL ANALYSIS

The following SWOT analysis summarizes the findings from both the internal and external
audits done via the Porters 5 Force (P5F) and the PESTLE framework. (Appendix 1)
Strengths
-

Globally renowned brand reputation


Reebok is a globally recognizable trademark with high brand value.
Affordability relative to competing brands;
Compared to its competitors (I.e. Nike), Reebok delivers unique value

proposition (greater value for lesser cost).


Innovative and unique product line in terms of design, and cooling technology via

specialized fabric
Prominent and suitable store location

Weaknesses
-

Human resource issues; Language barrier of retail staff


Retail staff with low English language competency may potentially deter a
high profile consumer base
Low market share in SL

Opportunities
-

Political and economic stability;


Sri Lanka is experiencing public infrastructure development during the post

war period which has the potential for economic growth.


Relatively low interest rates
This could facilitate business development investments
An increasingly educated population

Globalization of culture; aspects of western culture are increasingly visible in the

local context
Need for individualism,
External conformity,
Staying fit
(Discussed in depth in Appendix 1; Cultural factors)
Threats
-

Increasing popularity of online purchasing mediums;


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Site like EBay/Amazon allow customers more alternatives than retail stores
Depreciation of the LKR currency
As DWs inventory depends on importing from international distributors; this

increases costs
Higher dependency rate
Threat of new fashion brands entering the market
Due to favorable government and trade policies

OBJECTIVES SETTING

ORGANIZATIONAL OBJECTIVES
1. To increase revenue by within 18 months from product launch.

2. To gain a 30% increase in brand awareness ensuring survival in a dynamic market


MARKETING OBJECTIVES
1. Attain a 25% growth of the existing customer base ensuring market survival within 18
months from launch
2. Ensure a marketing orientation is prevalent resulting in a minimum customer
satisfaction rate of 80% in the annual survey
3. Retain 25% of total Reebok customers ensuring customer retention and brand loyalty
resulting in a lower churn rate within 18 months from launch

MARKETING STRATEGY
SEGMENTATION

Segmentation

Segment 1

Segment 2

Segment 3

base
Demographic

Social

grade

A,B, C1

B, C1

C2, D, E

(NRS) 1
Age;
21-39
19-29
(Refer Appendix 1: Social, for; central bank statistics)
Disposable
20000+
15,000+
income [LKR]
Education

35-59
5000 or less

Undergraduates/Post

Undergraduates/

No

graduates/

Vocational/After ALs

education/

Professional

formal

secondary
education only

Geographic
Climate
Population

Warm
Urban, suburban

density

Warm/ temperate
Urban,
suburban,

Cold
Rural, semi-rural

semi-rural

Psychographic
Lifestyle
Loyalty type
Need Level

Behavioral
Type of product

Corporate, active

Fun loving, social

Conservative

brand loyal

shop

shop loyal

Esteem, Social

loyal
Esteem, Social

Security

branded clothing

branded

Unbranded items

purchased

loyal/

brand

clothing/

unbranded clothing

Desired

style,

brand

attributes
External

design, material
Conformist

value,

style, brand value,

Functionality,

design, material
Conformist

cost
Ritualism

low

conformity3

(Refer Appendix 2: Segmentation Notes for; explanation of superscripted bases)

TARGETING
A single segment concentration strategy is used where a firm concentrates on one market.
(Kotler & Keller, 2006)
DW should concentrate its resources on satisfying the needs of 'Segment 2' as it matches the
criterion it is looking for.
-

Middle class with sufficient disposable income


- Reebok does not target the ultra-high end segment as it is covered by Nike;
however the middle class represent the type of segment that wishes to wear
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branded clothing without spending their half their salary on it. Thus the
affordability aspect is leveraged.
-

Buyer behavior:
- Shopping is a social experience as they (I.e. likely university students) prefer
to do so with their friends (fun loving, adventurous).
-

Branded clothing gives them a sense of self confidence, individualism and


esteem
(Discussed in cultural factors: Appendix 1)

An active lifestyle. In hot climates;


- The products features would not be useful in cold areas. PlayDry t-shirts are
-

designed to offer cooling via air vents in the fabric.


Students who play sports (i.e. tennis, cricket etc.) can utilize the PlayDry

features more
Whereas Segment 1 would not have an opportunity to wear these items as they
are involved in more corporate lifestyles, thus needing office wear.

POSITIONING
Positioning is the act of designing the company's offering and image to occupy a distinctive
place in the mind of the target market. (Kotler & Keller, 2006)
Brand essence:
Positioning statement; "Global brands. Local reach"
Explanation: The statement communicates that DW provides access to a
collection of the worlds most renowned brands to the local market.
(Detailed analysis in Appendix 3: Positioning)

GROWTH SHARE MATRIX STRATEGY

In a market development strategy "the organization moves beyond its immediate customer
focus into attracting new customers for its existing product range". (Lynch, 2007)
Which strategy is used in DWs case depends on perspective. From Reebok's perspective (as
an international firm) the introduction of clothing with PlayDry features is a market
development strategy; as it is an already existing product (In foreign markets) which is being
introduced to a new market (Sri Lanka). From the DW perspective (as a retail store) it is a
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product development strategy; as the t-shirts with PlayDry technology (new line of clothing)
are being targeted at the existing market. This product development strategy is justified by
DW's move towards an increasingly sustainable market advantage that aims to exploit
opportunities while retaining a more loyal customer base.
COMPETITIVE STANCE

Essentially a differentiation strategy is adapted by DW with the aim of targeting customers


that are prepared to pay for quality and brand value aspects of clothing.
However the Generic strategies model has its loopholes; it fails to recognize that in the real
world firms may use a combination of strategies. Further it assumes that differentiated
products are higher priced. There is now empirical evidence that companies do pursue
differentiation and low cost strategies at the same time. (Lynch, 2007, p. 491)
This holds true in DW's case as well, Reebok's t-shirt line is lower in price compared to its
competitors, however still differentiates in terms of quality attributes like brand, material,
technology used, style etc. Thus it is evident that strategy formulation cannot occur within
'airtight' like containers as specified by the model; however a more dynamic approach is
needed according to the capabilities of the firm.
MARKETING MIX

1. Product
Stage in PLC: In the Sri Lankan context the Reebok Play Dry range of t-shirts is at an
Introduction phase; thus, promotion expenses would be high with low market share. However
internationally the Play dry range has reached maturity level, and is not promoted
aggressively. (Kotler & Keller, 2006)

Core benefit:
Clothing
Actual Product:
T-shirt s with cooling features, high quality durable polyester fabric, elegant design
Expected Product:
authentic branded Reebok clothing,
psychological benefits: status and esteem, thrill, heightened self confidence
Augmented Product:
Friendly and helpful sales staff, high quality interior store design (psychical evidence)
using themed brand colors, the branded shopping experience

Figure 2: Product Levels

(Detailed explanation of innovation type; Appendix 3)


2. Price
Designer wear would be contractually obligated to use Reebok's pricing strategy for its
PlayDry range of clothing as it needs to display price equity (or parity) in terms of
international markets. This is primarily a cost plus strategy.
Due to information restrictions Reebok's production costs (I.e. fixed/ variable/ overheads) are
unknown, however the following is known about production process.
-

Reebok outsources its production to developing countries including Sri Lanka


(Apparel manufacturing firms like MAS). Resulting in massive savings in terms of
production costs, a strict contractual policy prevents release of any finished product to
the local market; it is exclusively for foreign markets.

Thus DW needs to import the product from Reebok suppliers in India. Reebok's
production cost cannot be controlled however a markup can be maintained by DW to
ensure a profit is made on each unit. The tactic would be to target potential market
that has the purchasing power required.

Through a strategic viewpoint Reebok's pricing for Dry Fit t-shirts is competitive in
relation to Nike which is premium.

Thus, the cost plus strategy ensures the following


-

Achievement of profitability objectives to the firm.


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Matches the price elasticity of demand in the Sri Lankan market. Customers that
compare prices with premium brands i.e. Nike would chose Reebok's product due to
the higher value for cash spent.

3. Place/ Distribution Channel


Production of Reebok clothing is outsourced to emerging markets including India and China.
(See figure for channel members) Wholesalers or else distributors store this production in
large quantities and perform the role of sending shipments to retailers (I.e. DW). Import taxes
like excise duty, PAL would be charged on shipments in Sri Lanka.

Figure 3: Distribution Channel

Source: (Solomon, et al. 2012)

The key focus is to ensure a smooth flow of stocks within the supply chain from distributors,
wholesalers and final retail stores. This would ensure that DW effectively responds to
demand in the local market. Prior agreements would have to be drawn up with distributors in
India.

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4. Promotion
An integrated marketing communications (IMC) approach is adapted by DW to promote the
PlayDry range using multiple elements of the promotional mix.
Advertising:
These methods promote sales by raising awareness, persuading, reminding and reassuring
customers on the authenticity of Reebok's products.
-

Billboards in prominent locations (i.e. in high street fashion store areas in Colombo).
This needs to feature a simple message capturing the brand identity (logo as well as
tagline).

Social media: Facebook's ad service could target the specific demographic needed
(i.e. youth) which are highly active users of social media. Further this is a relatively
cheaper medium of advertising.

Public relations
Sponsorships: Sri Lankan player uniforms for International Cricket matches are sponsored by
Reebok which increases brand awareness as well as relates to the local culture.
(Detailed analysis of IMC; Appendix 3)
5. People
This element of the marketing mix recognizes that front line employee competency and
emotions can have an impact on customer satisfaction. DWs retail staff needs to be friendly
and helpful while giving the customer the freedom of choice in product. Importantly retail
staff should be competent in the English language as dealing with a higher end segment.
Selection of competent staff that have the right attitude, providing on the job training,
reinforcing and motivating staff can have a positive impact on customer satisfaction.
6. Process
Effective business processes are needed to retain a customer base (and facilitating positive
word of mouth). DW can minimize the customer waiting time when purchasing Reebok items
by using ICT systems like Point of Sales (POS) ones that automate the sales transactions to
great extents. Getting the item information via bar code recognition and generating sales
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receipts faster. Support for credit and debit card payment methods with a fast response time is
also important.

7. Physical evidence
As DW is acts as a franchisee to Reebok maintaining high standard of interior store design is
important. The store design needs to reflect the brands personality. This can be achieved by
using the brands logos, theme colors as a color scheme both internally and externally. Even
though these are smaller details elegant colors (that are not too bright) can help evoke that
unique emotional experience provided by the brand image.

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IMPLEMENTATION
CONTROL MECHANISMS

Balance Scorecard

Measures for DW

Sector
based on; (Kaplan &
Norton, 2007)
Financial

Customer

Result in a consistent gross profit margin of 35%


Achieve an ACID test ratio greater than 1.0

Receive a customer satisfaction rate of 80%

Increase social media engagement resulting in a


minimum of 3000 likes on the Reebok Sri Lanka
Facebook page

Increase brand awareness by 30% via promotion

Operational

Ensure smooth inventory control

Learning

Provide a minimum of 3 training hours to retail staff per


month

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SCHEDULE

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Figure 4: Gantt Chart View

BUDGET

Activity

Units (if

Amount

applicabl

[LKR]

e)
Market research and planning
Secondary research

150,000

agency
Supply chain activity
Reebok contract
Initial order

3 year

300,000

contract
150 units
Play dry t-

440,000

shirts
Store design
Taxation
Assembling store

500,000
132,000
30,000

components
Promotional
Graphic design firm
Printing billboard ad
billboard leasing
Facebook Ads cost

50,000
15,000
150,000
150,000

Implementing
Recruitment ads
Administration expenses
Maintenance costs
Contingency cost

18,000
300,000
15,000
15,000
2,265,000

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