Read the following fashion industry background and answer the question that follows:
Prior to 2020, the fashion retailing industry (clothing industry) as a whole had experienced several years of low-to-modest sales growth, and falling profitability. There were some signs of recovery, led by luxury demand in North America. Fast-fashion remained stubbornly lowprofit and low-growth. Traditional fashion retail shopfronts in particular had struggled to remain competitive as digital retail disruption continued. Other external factors such as changing societal values relating to sustainability were forcing manufacturers to re-invent their value chains to meet consumers’ increasing demands for social responsibility (e.g. fair working conditions and wages) and environmental concerns. There has also been a longterm shift in consumer preferences towards more casual business wear, reducing demand for formal attire such as suits.
However, we know that the fashion industry is not homogenous, with many different market segments.
1. Assume we are in 2019 and the pandemic is yet to emerge. Use strategic group analysis to compare and contrast the business-level strategies of ‘fast-fashion’ with ‘custom-made tailoring’. Comment on the strength of rivalry in the fashion industry and how this may have helped shape the business-level strategy adopted by these two distinctive strategic groups. Use examples of fashion brands to support your answer.
Use the following additional information for the next question.
In 2020 the pandemic caused not only health impacts, but also severely disrupted economies around the world. The tailoring industry, particularly for custom-made business suits, has seen sales volumes decimated. Alongside reduced local demand, international travel destinations and transit locations such London, Hong Kong and Singapore have been particularly hard hit as international travel has declined. In addition, movement restrictions and stay-at-home orders have shifted workforces out of the office, greatly reducing the need for formal business attire. Non-essential shops have been ordered to close their doors for public health reasons. Cancellation of functions and special events such as weddings has further reduced orders for bespoke clothing. Job uncertainty and loss of income has seen a reduction in non-essential expenditure.
2. It is now 2020. An established tailoring business, which specialises in custom-made clothing such as men’s and women’s business suits, and formalwear for special occasions, is feeling the effects of the economic downturn. Assume that you are a business consultant hired to devise a strategy to help survive the tough business conditions. What do you recommend? Ensure you use an appropriate strategic management evaluation framework in your answer. (Hint: All options should be considered, including altering the business-model, diversification, and retrenchment strategies. In your recommendation, be specific and realistic. Take account of specialised resources and capabilities and any barriers to exit you may have identified)
The next question relates to corporate governance.
Read the following news article extract and then answer the question that follows.
Uae Corporate Scandals Require a Clean-Up
Two years ago, the spectacular fall from grace of Dubai-based private equity titan, Abraaj, concentrated minds on the importance of developing a strong corporate governance culture in the region.
The UAE had been proactive in its response to the Abraaj scandal - on April 28, new corporate governance rules for public companies came into force, which are in line with international best practice and aim to promote accountability, fairness, gender diversity and transparency.
The legislation includes a mandate for a female board representation of not less than 20 per cent and a requirement that the majority of board members should be independent, non-executive directors
However, recent scandals at NMC Health and Al Masah Capital have reignited longstanding concerns over corporate governance standards in the UAE. NMC Health collapsed into administration in March after more than $4 billion of hidden debt came to light following suspected fraud by senior executives within the firm. As with Abraaj, numerous conflicts of interest existed, including family members occupying senior positions within the company and former partners of the firm’s auditor, EY, sitting on its board.
a. Define corporate governance and explain how good governance and sustained competitive advantage are closely linked.
b. The news item above refers to the collapse of NMC Health and highlights possible internal governance problems. Propose two changes to the internal governance structure at NMC Health that may have helped prevent these problems arising, with supporting arguments.
The next question relates to expansion strategy.
4. A local bubble tea company in Singapore has experienced high levels of growth over the last five years. The owners wish to expand further however they realise the local market is become highly competitive and may be reaching maturity, and health concerns are growing about the high levels of sugar in most bubble tea products. With no international market experience, the owners have hired you to advise them on their idea of expansion into offshore markets.
a) Explain why an organisation may wish to expand internationally
b) Identify some of the risks involved in entering offshore markets
c) What is your recommendation to the owners?