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PM303 Strategic Management

tag 0 Download 13 Pages / 3,019 Words tag 09-07-2021

Question:

Steve Rendle, the new President and CEO of VF Corp., does not have much time. Rendle who took the job Jan. 1, 2017, must move fast to capture the changing consumer mood and to develop a growth strategy that will resonate with investors. After a period of reshaping the company over the next two years, Rendle sees a period of acceleration in the following three years.

The focus will be on innovation in VF’s three major holdings – Vans,North Face, and Timberland. Each is expected to contribute a great deal to the company’s bottom line. Wrangler/Lee jeans are also expected to play a role. In addition to repositioning the company for growth, acquisitions are a top priority for management. The recent lack of new growth through acquisitions is, per management, a thing of the past—M&A is back on the agenda. One requirement: targets must have billion-dollar potential.

China is a top priority for the company across operating divisions. The 2020 Olympic Winter Games will be played there, an important event for cold weather active gear. Management expects a tenfold increase in China in the coming years.Van’s is projected to have a growth rate of 8% - 10% on a base of $2.3 billion in 2016. The brand has a leading position in skating, footwear, and apparel. Like the rest of the company, Van’s is expected to make a major move into China.

North Face, which recently opened exciting new stores in New York and San Francisco. With 2016 sales of $2.3 billion, a compound annual growth rate of 6% - 8% is expected from sports, footwear, and international growth.Timberland is expected to have a compound annual growth rate of 4% 6% in the next five years from $1.8 billion in sales in 2016. The focus is on men’s and women’s fashion and especially footwear with expansion planned in Asia.

Digital innovation is also important to VF’s future. In 2016, digital sales were $600 million. Since 2012, when digital first started, this division was well-accepted recording compound annual growth of 29%. It is likely that this will be the fastest growing group going forward. Today there are labs in San Francisco, China, and Europe designed to accelerate growth through digital marketing and social networks. A global rollout of the digital platform is in the cards.Steve Rendle is 57 years old. His tenure as CEO probably will stretch over the five-year period ending in 2021. Like his brilliant predecessor, Eric Wiseman, he is likely to retire in his early 60’s. Rendle will oversee the company during this period and intends for innovation and brand experiences to underpin his strategy.

In fiscal 2016, VF Corp had sales of $12 billion, earnings of $1.2 billion,and fully diluted earnings per share of $2.78. Cash flow was $1.5 billion. By the end of 2021, it's likely that sales will exceed $16.5 billion even without an acquisition, although M&A is likely to add to this sales target.Innovation and a focus on China should bring exciting changes to the
company. While Wrangler and Lee jeans are still an important backbone for the company, its growth is dependent on newness and an understanding of what the customer wants. Not an easy task, but hopefully, after the period of adjustment, under Rendle’s leadership, VF Corp. will see substantial growth.

You have been hired by VF Corp. as a consultant to help develop a strategic plan for its growth and expansion. You are expected to write a report to summarise your research findings on the given tasks below:
Tasks (100%)
1. Critically analyse the external environment and industry competition within the apparel and footwear industry.
2. Using relevant frameworks, critically discuss VF Corp.’s resources and competencies as well as how they can be utilised in gaining competitive advantage in the apparel and footwear industry.
3. Critically evaluate the options available were VF Corp. to make acquisitions as a means of achieving its growth and expansion strategies. In addition, develop a critical argument either in favour of OR against VF Corp. making such acquisitions.
4. In light of the analysis done in Task 1, 2 and 3, construct a SWOT analysis of VF Corp. and recommend changes (providing justifications) to its current business-level strategy if required. If changes are not required, provide justifications for retaining the current strategy.
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