Business Strategy and Enterprise Modeling

FINAL TEST
Friday, December 4th, 2020
07.30-11.30 AM
Open Book
Multahadi Qisman
29119492/YP62B

1. Industry and Geographical Scope:

Based on the case, the Columbia Sportswear are focused on outdoor equipment,
which were designed for the fishermen at the time it founded, and then its got others
sport equipment for example like apparel, accessories, and equipment suitable for skiing
or mountaineering activity along with the brand itself, Columbia Sportswear evolve into
brand that known for the outdoor equipment.
Columbia Products consists of:
 Apparel
 Accessories
 Equipment
 Footwear
At the time of 2011. Columbia’s Geographical Area consists of:
 United States
 LAAP (Latin America and Asia Pacific)
 EMEA (Europe, Middle East and Africa)
 Canada

2. Societal environment factors that affect the operation of Columbia Sportswear. Using
PESTLE ANALYSIS
 Political
Trade regulations & tariffs related to Consumer Goods. pricing regulatory
mechanism for Consumer Goods
 Economy
Increase in crude oil affects the cost of transportation as the manufacture of goods takes
place outside of the USA.
 Social
Shift in demography. The decline in male youth participating in outdoor activities
declined & females participation increased.
  Technology
Columbia incorporates an equal or greater amount of technology into each
product it sells, and does so at a lower price than other competitors. For example,
Columbia’s winter jacket only cost $200 rather than Nike’s that cost $300 for the
same product. Throughout the majority of its existence, Columbia Sportswear has
focused on technology and innovation. This mindset has allowed the firm to
create different technologies that ultimately create value for its customers.
.
 Legal
Products Legal Issues. There is a lawsuit between companies regarding the patent
infringement from counterfeit products
 Environmental
According to the US Environmental Protection Agency stated “the average
surface temperature of the Earth is likely to increase by 2 to 11.5 ° F by the end
of the 21st century.” Due the statement, changing weather and all the issues it
creates for Columbia will be challenged Columbia's sales skewing toward the fall
and winter seasons also proves its product lines mostly appeal to consumers living
in locations that traditionally experience colder seasons makes harder to approach.
This is because the recreation and leisure meaning of Columbia's product lines,
sales and consumer demand greatly depend on "consumers' discretionary
spending patterns.”

3. The task environment factors that affect the operation of  Columbia Sportswear. Please
conduct the proper Porter’s Five Forces Analysis.
Threats of new entrants
New entrants must be able to find ways to put pressure on the Columbia
Sportswear Company through lower pricing strategies, reducing costs, and providing
new value propositions to customers. The Columbia Sportswear Company must manage
all these challenges and build effective barriers to maintain its competitiveness.

This is the way to overcome threats from new entrants :

 By innovating new products and services. New products not only bring new
customers, but also give old customers a reason to buy Columbia Sportswear
Company products.
 By building economies of scale so as to reduce fixed costs per unit.
 Build capacity and spend money on research and development. New entrants tend to
enter a dynamic industry where established players like the Columbia Sportswear
Company continue to set standards regularly. This significantly reduces the window
of extraordinary profits for new companies thereby preventing new players in the
industry.

Bargaining power of suppliers

 Suppliers in a dominant position can reduce the margins that can be obtained by
Columbia Sportswear Company in the market. Strong suppliers in the Consumer Goods
sector are using their negotiating power to get higher prices from companies in the
Textile Clothing field. The overall impact of higher supplier bargaining power is that it
decreases the overall profitability of Textile Apparel.

This is the way to overcome bargaining power of suppliers :

 By building efficient supply chains with many suppliers
 By experimenting with product designs using different materials so that if prices
rise from one raw material then the company can move on to another.
 Develop a dedicated supplier whose business depends on the company. One of
the lessons that the Columbia Sportswear Company can learn from Wal-Mart
and Nike is how these companies develop third-party producers whose
businesses depend solely on them, creating scenarios where these third-party
producers have far less bargaining power compared to with Wal-Mart and Nike.

Bargaining power of Buyers

Often many buyers want to get the best e = goods at low prices. This puts pressure
on the Columbia Sports Company profitability in the long run. The smaller and stronger
the customer base of Columbia Sportswear Company, the higher the bargaining power
of customers and the higher their ability to seek discounts and increased offers.
This is the way to overcome bargaining power of buyers :
 By building a large customer base. This will help in two ways. This will reduce
the bargaining power of buyers and will provide an opportunity for companies to
streamline their sales and production processes.
 By innovating rapidly new products. Customers often look for discounts and
offers on established products so that if Columbia Sportswear Company
continues to produce new products it can limit the bargaining power of buyers.
 New products will also reduce defection of existing customers at the Columbia
Sportswear Company to its competitors.

Threats of Subtitute
When there are substitute products coming in and meeting similar customer needs
in different ways the industry profitability will be disrupted. For example, such as e-
mail that is a substitute for correspondence that is already inefficient because it uses
physical costs. The threat of substitute products or services is high if offering a unique
value proposition is different from current industry offerings.

This is the way to overcome threats of subtitute :

 By being service oriented rather than just product oriented.
 By understanding the core needs of customers rather than what customers buy.
 By increasing switching costs for customers.

Rivalry among the existing competitors

 Price competition among competitors in this industry is very influential for the
profitability of each company because if industry competition is very tight then lowering
prices can reduce overall profitability.
industry. The Columbia Sportswear Company operates in the highly competitive clothing
industry which impacts on the organization's overall long-term profitability.

This is the way to overcome rivalry among the existing competitors :

 By building sustainable differentiation
 By building a scale so that you can compete better
 Collaborate with competitors to increase market size rather than just competing
for small markets.

Implications of the Porter Five Forces on the Columbia Sportswear Company

 Columbia Sportswear can get a complete picture of what impacts on
organizational profitability in the Textile Apparel industry.
 They can identify trends in game change early on and can quickly respond to
take advantage of opportunities that arise.

By using the information in Columbia Sportswear Company, five forces analysis,

strategic planners will be able to understand how different factors under each of the five
forces affect the profitability of the industry. A stronger force means lower profitability,
and a weaker force means greater profitability. Based on this a judgment of the industry's
profitability can be made and used in strategic planning. The Columbia Sportswear
Company can also form that power for their benefit.

4. The Organizational of Columbia Sportswear

Columbia's has twenty members within its top management team and performs a
functional organizational structure where each manager has a functional specialization
replacing the place and role of the owner of the company. The transition to this
specialization requires a substantial change in the management style of the company's
leadership. As an organization that grows and develops a number of related products and
markets, this organizational structure regularly changes to reflect greater specialization.
- President and CEO : Timothy P. Boyle
- VP of Global Innovation: Michael W. Blackford
- VP of Finance and Chief Finance Officers (CFO) : Thomas B. Cusick
- VP Legal and Corporate Affairs and general Counsel and Secretary: Peter J.
Bragdon

The Board of Directors is comprides of nine individuals and chaired by the

company’s iconic leader and longest serving member, Getrude Boyle, who has served
 since 1978. At 87 yers old, Chairwomen Boyle is also the oldest serving member of the
Board of Directors, which have average age of 65.

Columbia Sportswear Board of Directors (Exhibit 9)

Name Title Principal Occupation Director
Since
Getrude Boyle Chairwoma Chair of the Board of Directors 1970
Timothy P. Boyle n President and CEO 1978
Murrey R. Albers Director President and CEO, US Bakery 1993
Stephen E. Director Managing Director, Endeavour Capital 2002
Babson Director Co-owner and executive VP of Brand 1988
Sarah A. Bany Director Development, Moostruck Chocolate
Company 2005
Andy Bryant Director Executive VP of Technology,
Manufacturing and Enterprise Services and
Chief Administrative Officer, Intel 1989
Edward George Director Corporation 2000
Walter T. Kienz Director Retired Director, First National Bank San
Diego 1997
John W. Stanton Director Retired Managing Director, Beringer Blass
Wine Estates
Private Investment, Trilogy Equity Partners
and Trilogy International Partners

In the beginning, Colombia was a family company, but over time and business
development has made Colombia a great deal to date. Although it is a publicly traded
company, Colombia has maintained a strong organizational culture rooted in the ideals
established when it was a family owned company. The most logical reason for this lasting
characteristic is the strong familial line of leadership that has guided the company since
its established in 1937. Throughout its history, no other corporate leaders embodied
Colombia's hardworking and fiesty spirit as well as Gestrude Boyle who unexpectably
had to assume the leadership role after the death of her husband. Her leadership and
succession of her son, current CEO and president, Team Boyle has guided the company
through the tumultuous and competitive landscape of the outdoor apparel industry.The
opportunities and threats faced by Columbia Sportswear.

5. The current corporate strategy. Elaborate your answer.

The Columbia Sportswear company uses a corporate strategy analysis. Columbia
acquired major brands such as Sorel, Mountain Hardwear, Montrail, and Outdry. Each of
these acquisitions created conditions through which Columbia has improved its
performance because Columbia gained knowledge and insight while increasing its share
 of various markets including those of outdoor apparel, footwear, and accessories.
Columbia needed $ 59 million to acquire the 4 companies. From sorel, Columbia gained
knowledge about better footing. from Mountain, Columbia Get knowledge about insight
into the lightweight footwear market segment. Form Outdry, Columbia created a patented
membrane lamination technology. From Mountain, Columbia, get knowledge about
outdoor accessories (such as tents and sleeping bags) market.

6. The current business strategy. Elaborate your answer.

Columbia Sportswear emphasizes the branding of advertising, design, quality, and
development of new products and here Columbia uses a differentiation strategy.
Columbia sports clothing company is an innovative leader in the highly competitive
active outerwear industry. Columbia believes that using independent manufacturing
allows it to increase or decrease production capacity, maximize flexibility, and
ultimately, increase product prices. Columbia invented a patented membrane lamination
technology that created a product that was "dryer, lighter and more comfortable for all
outdoor enthusiasts". Columbia also acquired big brands such as Sorel, Mountain
Hardwear, Montrail, and Outdry. Each of these acquisitions creates a condition where
Columbia has improved its performance. The technology used by Columbia Sportswear:
Omni tech and Omni-Dry, Insect Blocker, Techlite, Omni Wick, Omni Shield, Omni
Grip. Columbia Sportwear is more focused on the originality of its products so that no
one mimics the product even though the price offered by Columbia Sportwear is
relatively high.

7. Strengths and weaknesses of Columbia Sportswear

Strength Weakness

Highly skilled workforce ( 1 ) Brand positioning and unique selling

proposition is not clearly defined ( 1 )

High level of customer satisfaction ( 2) Investment in Research and Development is

below the fastest growing players in the
industry ( 2 )

Reliable suppliers ( 3) Limited success outside core business ( 3 )

Successful track record of developing Days inventory is high compared to the

 new products ( 4 ) competitors (4 )

Successful track record of integrating The profitability ratio and Net Contribution
complementary through mergers & % of Columbia Sportswear are below the
acquisition.( 5 ) industry average. ( 5 )

Strong distribution network ( 6 ) Financial planning is not done properly and

efficiently ( 6 )

Strong Free Cash Flow ( 7 ) There are gaps in the product range sold by
the company ( 7 )

Good Return ( 8 )

8. The opportunities and threats faced by Columbia Sportswear

Opportunity Threat

Economic uptick and increase in customer New technologies developed by the

spending ( 1 ) competitor ( 1 )

Stable free cash flow provides Rising pay level especially movements
opportunities to invest in adjacent product such as $15 an hour and increasing prices
segments. ( 2 ) in the China ( 2 )

Decreasing cost of transportation ( 3 ) New environment regulations under Paris

agreement (2016) ( 3 )

Government green drive also opens an Growing strengths of local distributors

opportunity for procurement of Columbia also presents a threat in some markets as
Sportswear products by the state as well the competition is paying higher margins
as federal government contractors ( 4 ) to the local distributors ( 4 )

New customers from online channel ( 5 ) Intense competition ( 5 )

New environmental policies ( 6 ) Liability laws in different countries ( 6 )

The new technology provides an Increasing trend toward isolationism in

opportunity to Columbia Sportswear to the American economy ( 7 )
practices differentiated pricing strategy in
the new market ( 7 )

Decreasing cost of transportation ( 8 ) As the company is operating in numerous

countries it is exposed to currency
 fluctuations especially given the volatile
political climate in a number of markets
across the world ( 8 )

9. What alternative strategies that are available for Columbia Sportswear? Please be sure to
use a proper TOWS analysis

Internal Factors

Strength Weaknesses

Opportunity ● (S6,S 8,O1,O 8) ● (W4, O7)

New trends in the Use Just In Time
consumer behavior Technology to reduce
could open up new inventory cost.
market for the ● (W7, O5)
Columbia by learning
Using online media to
their problem and
create a new promote their product.
segmentation to
penetrate the new
market.
● (S6, S8, O5,O8)
New customers from
online channel and
Eksternal social media catalogue
Factor
Threats ● (T5, S1, S2, S4,) ● (W2, W3, T5)
(T) According to Increase research and
climate changes and development investment
temperature in so that .
different countries,
creating a product
that suitable for
each country could
make a huge amout
of customer interest.
10. Strategy(ies) you propose to improve their profitability going forward? Why?

 Columbia Sportswear needs to increase product visibility to competes with

other known brands. It could collaborate with retailers, other product’s image
that could adding creativity and style with maintaining the function and
durability of the product.
 Consideration must be given to establishing new partnerships with
distributors and retailers to penetrate a higher demand market and current
customer trending tend to be more effectively online shopper.
 Diversify product lines to compete with their main rivals in all seasons,
demographics and sporting events, athletes involved also proven could reach
the market’s penetration.
 Marketing and advertisements to shows that the product of Columbia
Sportswear is worth, cheaper than others with high quality products

11. How will you measure the success of the proposed strategy? Why Each strategy will
be measured as successful strategy are determined by:
 How much the revenues of the company increased
 Satisfy and loyalty from customer to create repeat buyer traits from
customers
 How Columbia’s profitability sold largely on retailers successfully selling its
products to consumers.
 Ability to successfully balancing pricing, product exposure, and expanding
the business in the online space, while maintaining its relationships with and
limiting the power of retailers.
 If the people and outdoor community knows about Columbia’s newest
product, it means that Columbia’s product has been successfully known by
loyal customers and other people with outdoor enthusiast.