VF Corp. is American apparel and footwear organisation that was established in the year 1899 and it has it headquarter in North Carolina. Steve Rendle, the new President and CEO of VF Corp. took his job on January 1, 2017, and he is trying to capture the consumers’ mind and developing the growth strategy for the business. The aim of the report is to develop a strategic plan for VF Corp’s growth and expansion. In this report, external environment analysis will be conducted with competition analysis. In the following section, resources and competencies analysis will be explained based on VF Corp. Moreover, expansion strategy of VF Corp will also be produced in this report. Finally, a SWOT analysis will be conducted based on the organisation and justification will be given based on the business strategy of the organisation.
1. PESTLE analysis
Political factors play an important part in VF Corp as a political factor can create long-term profitability for a business and in the industry. More than a dozen organisations expose themselves to different types of political factors. In the apparel and footwear industry, political stability is important as it provides significant amount on the economy (Majeed and Rupasinghe 2017). Moreover, the risk of military invasion can happen and level of corruption is increasing in the politics to influence on business decision-making. Moreover, bureaucracy and interference are the factors that can impact on trade regulations. Moreover, intellectual property protection is another important factor for VF Corp.
Macroeconomic factors like inflation rate, saving rates, foreign exchange rate and interest rate are some of the factors that provide a significant economic impact on the organisations. As VF Corp is in the apparel industry this organisation needs to focus on the economic system of the countries in which it is working. Moreover, exchange rates and host country’s economic stability is another factor that can be taken into consideration. The infrastructure of the apparel industry and competitive analysis of consumer’s goods factors are some of the important factors.
VF Corp works worldwide and society’s culture impacts heavily on apparel industry as customers; choices influence the company’s fashion and marketing. VF Corp needs to consider demographic and skill of the employees and class structure, power structure and hierarchy of the business can impact on the business. As stated by Soener (2015), leisure interests and attitudes of the people can impact on societal factors.
Technology can disrupt the industry in footwear and textile as the manufacturing process and transportation process can be changed through technological factors. Moreover, VF Corp. Has to take into consideration of the recent technological changes and technology can impact on product offering of the business. VF Corp can impact on the value chain of the organisation with the rate of technological diffusion.
VF Corp should carefully evaluate the legal factors in which it is making its business as the organisation serves worldwide. VF Corp’s leadership must do the business following the rules and regulation. Moreover, the Anti-trust law in textile in the US is an important factor. Apart from that legal factor like health safety laws and discrimination laws are some of the factors should be followed by the organisation. Employment laws and discrimination laws and data protection act need to be followed by VF Corp.
VF Corp is the apparel and footwear industry and it manufactures the products like weather, laws regulating the environment pollution and climate change. In the Industry, recycling and waste management are some of the important factors that impact on the business (Cao et al. 2014). VF Corp needs to take the attitudes towards the environment that support renewable energy and they can manufacture ‘green’ ecological products.
|
Competitive rivalry |
In the apparel industry, the competition is high in the global market that drives down the cost of the products. The companies’ have to market the products more in order to reach the customers. VF Corp has to differentiate the products and building quality scale to compete better. Competitors of VF Corp are Canada Goose Holdings Inc, China Xiniya Inc, Columbia Sportswear, Delta Apparel and Ever-Glory International Group and Bebe Stores. |
High |
|
Bargaining power of customers |
In the global market, there are numerous footwear and apparel companies that offer products to the customers. Buyers have their own demands and VF Corp reduces the bargaining cost by providing low pricing and high-quality products that can provide profitability in long run |
High |
|
Bargaining power of suppliers |
In apparel and footwear industry, the companies buy the products from various suppliers and suppliers’ switching cost is low. VF Corp has to buy raw materials from many suppliers and powerful suppliers have negotiating power. |
Moderate |
|
Threat of new entrants |
The threat of new entrant in the apparel and footwear industry is high, however, VF Corp organisation serves worldwide and therefore the threat is moderate. New entrants can put pressure on VF Corp through pricing low pricing strategy, costs and produce new values. |
Moderate |
|
Industry substitution |
When a new service or products launch in the market, organisation’s profitability suffers (Szenberg et al. 2014). VF Corp has a substitution in the market and they offer the products in worldwide. VF Corp understands the value proposition the market and the switching cost of the customers is low. |
High |
Table 1: Porter’s Five Forces
(Source: Author)
Based on the PESTLE and Porter’s five forces analysis of V.F. Corp, the opportunities and threats of the company in the new EU member countries can be realized.
Opportunities:
Threats
1. Resources analysis of the company
Physical resources are raw materials in the production system and in the apparel industry, the raw materials are important. VF Corp has its physical building in many places across the world and the headquarter is located in North Carolina and business operations are controlled from the headquarter. It has machinery and latest technologies in supply chains and manufacturing of the footwear and clothes (Foss and Knudsen 2013). It has its own vehicles for the supply of the products and other materials in the business process.
Financial resources of an organization are debt, equity and retail earnings. VF Corp has cyclical stock types and its fair value estimated to premium. This organization has three main brands and the total revenue of the organization USD 12.3 billion and operating income of the organization is USD 1.647 billion (Vfc.com 2017). Net income of the organization is USD 1.2 billion on 2016. Total assets of the organization are $10.34 billion. In the year fiscal 2016, VF Corp organization had sales of $12 billion, earnings of 1.2 billion. Cash flow was $1.5 billion. The organization targets to have $16.5 billion even with an acquisition (Vfc.com, 2017).
VF Corp organisation values honesty and respect to the employees and the organisation chooses integrity for the employees. In case any violation of a code of conducts occurs, the organisation asks the employees to look into the matter to the local administration. In the Footwear and clothing organisation, the values of human resources are large and corporate governance provides extra care to the rewards and bonus. A number of employees in VF Corp are 58,000 employees in worldwide.
Core competencies mainly fulfil three major criteria. First, it provides access to a variety of the products. Second, it should make a contribution to the customers’ benefits and third, it is difficult to imitate the products by the competitors (Bohlouli et al. 2017). VF Corp organization exists in effective marketing strategies where they compete with three major companies, The North Face, Van and Timberland. Moreover, the competitors cannot imitate the products as the products are leveraged all parts to most of the markets and products. VF Corp has tried to enter the Chinese market and it took the strategy of acquisition. The organisation has set the target to reach the billion-dollar potential.
Threshold competencies refer to the basic knowledge, traits, skills, motives, self-images and the social role, which are essential for doing a job. Without these competencies, the quality of performance of an organization gets reduced (Armstrong and Taylor 2014). VF Corp has been one of the market leaders in the footwear and apparel goods in the USA and it is trying to expand its business in EU countries. The company has established its position in the global market on the basis of knowledge on the cognitive domain, attibutes, relative to the qualitative aspects and personal characteristics of the brands, outstanding performance regarding quality of the products and services and skills, related to the ability to perform (Kusumastuti 2014).
To get an idea about the competitive advantage that VF Corp can get from the competencies, the VRIN framework can be used. Based on four parameters, the VRIN framework gives the level of competitive advantage of a company (Hinterhuber 2013).
|
Competency |
Valuability |
Rarity |
Imitability |
Non-substitutability |
Competitive advantage |
|
Physical resources |
Yes |
No |
No |
yes |
Competitive Parity |
|
Financial resources |
Yes |
No |
Yes |
Yes |
Temporary competitive advantage |
|
Human resources |
Yes |
No |
No |
No |
No competitive advantage |
|
Core competencies |
Yes |
Yes |
No |
Yes |
Temporary competitive advantage |
|
Threshold competencies |
Yes |
Yes |
Yes |
No |
Temporary competitive advantage |
Figure: VRIN analysis of VF Corp
(Source: Author)
From the above analysis, it can be said that, overall, VF Corp can have temporary competitive advantage in the new locations as their resources and competencies are quite relevant for those locations also. From the performance trend of VF Corp, it can be said that the company can utilize its physical, financial and human resources and the core and threshold competencies to establish a competitive advantage in the EU countries.
VF Corp is trying to develop and extend the resources and competencies, not just to be in the same industry and market in Europe for a long time. VF Corp tries to make harmonisation of knowledge that follows the routine of the organisation. VF Corp can integrate the plan and they can use the resources to make an acquisition. The company needs to identify the potential key in resources for the new location and these resources should be valuable in order to be implemented in their strategies. They should make the resources rare and non-imitable so that their competitors cannot imitate their products. Acquisition of another company can provide benefits to the business as VF can obtain qualified staff, knowledge and additional skills. VF Corp. has been facing the issue of growth and accessing funding or valuable assets, new acquisition can help better production with accessing wider customers. Moreover, acquisition of new company can reduce the competition and can make a business a global player with organic growth (Greve and Zhang 2017).
The core competencies of a company usually remain the same for all their locations. The existing competencies of VF Corp have enabled the company to capture a big market share in the USA. Apart from the political instability, the nature of the European market is quite similar to that of the USA. VF Corp provides access to 35 brands under its portfolio. It contributes in the consumer’s benefits from the end products through categorization of the brands into multiple segments of high quality footwear and apparel for outdoor and action sports, jeanswear, image wear, sportswear and contemporary wear. Lastly, there are many competitors in the global market but the products of VF Corp are non-imitable (Bohlouli et al. 2017). Thus, the company can utilize its exiting competencies in the European Union market to establish its position.
The vision and mission statement of VF Corp focuses on the constant innovation of the lifestyle products that would improve the quality of life of people. The company manages a very complex but efficient supply chain, covering over many nations and boundaries, category of products and distribution channels. The company must improve their services to expand their business in EU member countries. For that, it needs to make changes in the business strategies, along with cost leadership strategy and differentiation strategy, corresponding to the mission and vision of the company.
VF Corp is in consumer discretionary sector and this organisation’s success depends mainly on the economic growth of the organisation. This organisation’s business strategy depends on consumers’ spending and payroll. The organisation has been facing the issue from the coalition and this is related to the high-end products (Greve and Zhang 2017). The growth and expansion are the major factors that enable the organisation to take the business strategy. In the tough economic condition, the diversification is another key of VF Corp to survive in the market. However, VF Corp can change the business strategy:
Cost leadership strategy will be helpful for VF Corp as this provides a competitive advantage. VF Corp can lower the prices of the products and this strategy can increase the market share of the company. The organisation needs to minimise the production cost and this would enhance the profitability (Tanwar 2013). In emerging market, the strategy of the low cost will help VF Corp to create the large market share with exponential growth.
In order to have the growth of the company, VF Corp can take differentiation strategy as the company can opt to start standard athletic wear or workwear for the customers. The products line of the business needs to enlarge that can produce high-quality products.
Conclusion
VF Corp’s current plan is to achieve growth in the market to position itself to grab the market share in the global industry. The organisation is trying to focus on emerging market like China to open direct retail stores. The bird’s eye is to catch the customers on 2020 Olympic Winter Game and the organisation wants to tenfold increase in business across China. The external environment supports the growth of the business and the organisation faces the competition from global market scenario through large market players. VF Corp needs to use the resources and competencies in the right order that can create the competitive advantage for the organisation. Moreover, the SWOT analysis of the organisation proves the fact that acquisition of the business provided significant growth for the organisation in previous occasions. In recent time, the organisation can again achieve significant profits through acquisition. Cost leadership strategy can help the business to reach larger customers as the organisation focuses on newness and they want to understand the customers’ wants.
Reference List
Armstrong, M. and Taylor, S., 2014. Armstrong’s handbook of human resource management practice. Kogan Page Publishers.
Bohlouli, M., Mittal, N., Kakarontzas, G., Theodosiou, T., Angelis, L. and Fathi, M., 2017. Competence assessment as an expert system for human resource management: A mathematical approach. Expert Systems with Applications, 70, pp.83-102.
Cao, H., Wool, R.P., Bonanno, P., Dan, Q., Kramer, J. and Lipschitz, S., 2014. Development and evaluation of apparel and footwear made from renewable bio-based materials. International Journal of Fashion Design, Technology and Education, 7(1), pp.21-30.
Foss, N.J. and Knudsen, C. eds., 2013. Towards a competence theory of the firm (Vol. 2). Routledge.
Greve, H.R. and Zhang, C.M., 2017. Institutional logics and power sources: Merger and acquisition decisions. Academy of Management Journal, 60(2), pp.671-694.
Hinterhuber, A., 2013. Can competitive advantage be predicted? Towards a predictive definition of competitive advantage in the resource-based view of the firm. Management Decision, 51(4), pp.795-812.
Holburn, G.L. and Vanden Bergh, R.G., 2014. Integrated market and nonmarket strategies: Political campaign contributions around merger and acquisition events in the energy sector. Strategic Management Journal, 35(3), pp.450-460.
Kusumastuti, D., 2014. Identifying competencies that predict effectiveness of disaster managers at local government. International Journal of Society Systems Science, 6(2), pp.159-176.
Majeed, A.A. and Rupasinghe, T.D., 2017. Internet of things (IoT) embedded future supply chains for industry 4.0: An assessment from an ERP-based fashion apparel and footwear industry. International Journal of Supply Chain Management, 6(1), pp.25-40.
Soener, M., 2015. Why do firms financialize? Meso-level evidence from the US apparel and footwear industry, 1991–2005. Socio-Economic Review, 13(3), pp.549-573.
Szenberg, M., Lombardi, J.W. and Lee, E.Y., 2014. Welfare effects of trade restrictions: A case study of the US footwear industry. Academic Press.
Tansey, P., Spillane, J.P. and Meng, X., 2014. Linking response strategies adopted by construction firms during the 2007 economic recession to Porter’s generic strategies. Construction Management and Economics, 32(7-8), pp.705-724.
Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of Business and Management, 15(1), pp.11-17.
Tarhini, A., Ammar, H. and Tarhini, T., 2015. Analysis of the critical success factors for enterprise resource planning implementation from stakeholders’ perspective: A systematic review. International Business Research, 8(4), p.25.
Vfc.com. 2017. VF Corporation (VFC). Available at: https://www.vfc.com/ [Accessed 4 Nov. 2017].
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