Toppy Fashion Designer
GOAL – develop oversea market
Project target to “Differentiation Service” (may gain more revenue generation), add value (create collaborative partnerships) to buyers and suppliers for sustain the business in long term running. The company currently stays in “Lower Cost” position (cut cost), however higher operation cost is found and to be improving.
Use McFarlan’s Strategic Grid only: current is Support à after implemented, we will go to Factory à after implemented phase 2, go to Strategy (state Business / IS / IT is enough)
http://www.1000ventures.com/business_guide/crosscuttings/capabilities_corporate.html Current = Reproducible à After implement, Distinctive
Phase 1 mainly for e-procurement, so choose cost saving for competitive advantage is better, online design will be implemented in phase 2.
- IT equipment
- Human Capital
Fashion Design selection and place customer order at seasonal meeting in HK
Fashion Design promote with market strategy
Enquiry material price and place procurement order.
Enquiry product’s price and place production order.
Fig. 1.4Current Business Model of ToppyBUSINESS CONCEPT
This is a traditional fashion retail industry. Toppy sells fashion product with high quality to customers. Toppy negotiate lower cost with supplier and manufacturer. Furthermore, Toppy invest on hiring good designer, marketer and training the sales girl to attract more customers.REVENUE MODEL
The revenue generates 70% from franchise trading and 30% from local retails. The company sells physical products through their retail stores. Also, the company sells products to franchise in other countries.COST MODEL
The production runs in Traditional Supply Chain "Push" Model, the raw material suppliers are at one end of the supply chain. They are connected to manufacturers and distributors, which are in turn connected to a retailer and the end Buyer. Although the Buyer is the source of the profits, they are only part of the equation in this "push" model.
Toppy sources the raw material from suppliers and calculates the cost. When S&D approved the buyers’ order, the Production Line dept. focuses on lower cost sourcing in their manufacturers list.ASSET MODEL
Toppy has six brand name and 300 outlets and many independent Toppy stores in worldwide. And the company own about 250 employees and stores in Hong Kong.CAPABILITIES
Toppy has a good relationship with different manufacturers. The company has an ability to provide the economic scale of goods for buyer. It can get save cost of product to attract the buyer.VALUE
The retail stores and franchisees have made the profit for Toppy. The reason is people like shopping in physical shop.
Internal Environment Analysis
Here is the Value Chain analysis of Toppy:
SCM, QC, Distribution, B2B, B2C and CRM
Recruiting, Motivating and Rewarding
Production, Inventory, Shipping, Buying and Informative Website
Two suppliers to take advantage of competitive prices
Sales & Marketing
Standardized specifications and
Lower cost raw materials
Lower cost manufacturing
Performance measures for QA
Centralize Distribution Channel
The company deal with activities like material handling, warehousing and inventory control, used to receive, store and disseminate inputs to a product. Toppy purchases raw materials from two suppliers in order to receive competitive prices, as well as the latest development. This allows Toppy to bargain for required prices of raw materials.
Toppy strictly follow certain specifications of raw materials for manufacturing around the globe. It helps to keep a consistent quality of the final products even it is manufactured overseas.
Toppy realized the need for outsourcing. The company receives roll stock from offshore suppliers and follows certain performance measures for the quality assurance. Then distribute the raw materials to manufacturer for production.
All finished products are distributed from Toppy’s warehouse to all customers. For oversea customers, the products distribute by ship.
Sales and Marketing
Toppy has developed strong advertising and promotional campaigns by developing and supporting their sales force through print ads and other visual media. The company believes that a brand provides a unifying set of values and attitudes. Toppy sells their products at local retail stores and sells to buyers in the seasonal meeting.
Toppy provides numerous after-sales services. The company asks for comments, compliments and feedback on their Informative websites.
Porter’s five forces provide a framework that models an industry as being influenced by five forces. It is important to analyze the ability of Toppy to deal with these outside forces because the collective strength of these forces determines the ultimate profit potential in the industry. (Refer Fig. 1.2)
Rivalry among existing firm
Threat of new entrants
Threat of substitute product or services
- Common technology
- Market access
- Product Differentiation
- Selection of supplier
- Economic of scope
- Buyer Selection
Fig. 1.2 Porter’s Five Forces ModelTHREAT OF POTENTIAL ENTRANTS (High)
The barriers for potential entrants are high due to the following reasons:
- The products provided are not unique. The competitors will be attracted to an industry where the production process is easily learned.
- Start-up costs are low for new businesses entering the industry. The less commitment needed in advertising, research and development and capital assets, greater the chance of new entrants to the industry.
- The threat of substitutes is medium because of economic of scope. Toppy provide diversity of products which are target to various customer segments – ages, income, occasional dressing, etc. It required a long time for development.
- The fashion trend and customer behavior are the factors influence the brand loyalty. Like Korea entry the HK market growth faster in the past few years.
The bargaining power of the suppliers is low or weak for the garment industry due to the following reasons:
- The factory in China has provided cheap fixed cost. However, Vietnam and Cambodia also are developing their industry in recent years. Those governments provide more benefit to attract the manufacturers. This causes that lower bargaining power of suppliers.
- Some manufacturers are selling their own brands in their own outlet stores. But there are not many of these stores and thus very low market penetration. The sales through the outlet stores are not high enough to fulfill the production capacity and thus making it difficult to integrate with supply chain.
- Buyers nowadays are becoming more and more proactive. Moreover, they are going directly to off-shores manufacturers, cutting the middlemen. This gives them an opportunity to integrate backwards into the supply chain.
Rivalry among existing garment industry, specifically in fashion, is high or intensive. This is due to the following reasons:
- Market growth – the retail industry has had a fast market growth in past 2 years in HK. The company must produce near fashion style but high quality, which it will have to sell to the market which would result in increased rivalry.
- Fixed Costs – fixed costs are rising. In order to attain the lowest unit costs, the company must sustain higher bargaining power from suppliers and decrease operation cost.
- Product Differentiation – the company provides a wide selection of styles and colors for providing a marvelous selection for customers of all ages. The majority of customers are buying high-cost product such as Jessica. This cause higher level of rivalry among the companies.
Competitive Force Analysis(1) BUSINESS PROCESSES
The purchasers deal with a lot of fax, email and paper work while negotiating price with suppliers. They store the suppliers’ information for comparison by using word processor. It is highly demand of their working experiences and requires higher salary to keep their retention. The company would lose assets due to their knowledge is one of the human capitals. Also, the operation would be disorder in a short time once they left the company.
S&D communicates with each production line and deals with the costing and pricing calculation. It is time consuming for S&D to server all buyer and bottlenecks of deal with bulk ordering in a short period. The turnover in S&D is higher due to high pressure. The cost is increased for training new employees.(2) CUSTOMER BEHAVIORS
- Buyers waste time on travel to Hong Kong for each seasonal meeting;
- Time consuming for buyers fill in order form at seasonal meeting;
- Buyers notify S&D to change their order after the seasonal meeting;
- Time consuming for waiting the reports to make ordering consumption;
- The group of buyers is fixed due to non-changeable design. The fabric and color of products may not suitable for the buyers’ perspective due to their country weather or culture is different from Hong Kong;
High bargaining power of supplier
reproducible capability can be bought or created by competitors
No IS Strategy reduce the competition
Lower cost at sourcing materials and manufacturing
Lack of IT support for dealing with price control
Advertising the latest fashion, news and promotion events on Informative Website
Using the outmoded technology for handling the customer order
Intense customer relationship supports by e-marketing strategy (e-subscription, e-
Facing high operation and transaction cost
Speed of order fulfillment at both buyers and suppliers are lower.
Impact on Business Operations
Impact on Strategy
Toppy currently stays in “Lower Cost” position, however higher operation and transaction cost is found and to be improving continuously. The company requires streamlining the operation for increasing speed of order fulfillment among suppliers.
For long term sustainable advantage, the company better target to “Differentiation Service” for more revenue generation. Add value on both buyers and suppliers for improving order accuracy and create good Buyer-Seller relationship.
Also, the company better to review the group of customers to target, recognizing the different market segments have different needs. Gain more potential customer segments to increase their revenue from franchise trading.
For IS Strategy, the company should consider utilizing IT support to deliver more value on their value chain and create collaborative partnerships. For managing the customer relationship to benefit the company, create B2C e-business is proposed for increasing communication between customers. For improving the streamline process in supply chain and customer ordering, using B2B e-business to deliver value to customers.
Article name: Toppy Fashion Designer essay, research paper, dissertation