Harrington Collection

instance Assignment 2 Harrington Collection panorama for everyplace on the whole womens app arl manufacturing Since the mowswing that began in the early 2000s signifi toilettetly impacted the womens app argonl industry, the change magnitude prize on overall gross r levelue had presented a polished decrease from 2004. Although it came up from 3. 5% to 5. 7% in 2004, it began to receive down from that year as substantially with a congenericly stable move valuate. However, it led to a signifi bathroomt version among units that sell in dispa rank worth gets.Lets replete a olfaction at Chart-1 down the stairs which is transformed from Exhibit-2 in the case to the form of increasing rate and proportion respectively. According to (a), units s obsolescent whose bell is more(prenominal)(prenominal)(prenominal) than $200 and in the range of $ degree Celsius and $200 improverd closely below the second-rate increasing rate. piece the units sold whose expense rang ed from $50-$century and at a dishonor place $50 increased blue(prenominal) than the average increasing rate. Whats more, the emersion rate of units sold under $50 had jumped to 11. 50% in 2007 by 4. 28% which is in great contrast with that of that 1. 5% whose expense ranged from $ cytosine-$200. Chart-1 (a) scathe Point 2006 ( issue rate) 2007 (growth rate) disagreement $200+ 0. 6508% 2. 8736% 2. 2228% $100-$200 -0. 0457% 1. 5075% 1. 5532% $50-$100 7. 0548% 9. 0851% 2. 0303% chthonian $50 7. 2188% 11. 5010% 4. 2822% get 5. 1272% 8. 1631% 3. 0359% According to (b), the units sold proportions presented tiny difference from 2005 to 2006. However, in 2007, we show that 2 points little of units sold damage up from $100 and 2 points more of that were valued under $50 comp atomic number 18d with previous year.Chart-1 (b) Price Point 2005 (proportion) 2006 (proportion) 2007 (proportion) $200+ 10. 7601% 10. 3020% 9. 7982% $100-$200 17. 0388% 16. 2004% 15. 2036% $50-$100 34. 0776% 34. 7025% 34. 9983% Under $50 38. 0456% 38. 8025% 40. 0000% Total 100% 100% 100% Although the statistics call downs a slight increase of the contribute demand in the industry of womens app arl, the shift in the structure of units sold in una alike(p) hurt ranges indicates a downturn in the industry which led to a downward consumer buying behavior.Indeed the economic sluggish ravisher the plane section st ane pited on upscale-class apparel determine higher than $100, however, it provides a great chance for manufactures who engaged in the segments targeted toward cypher and defend classifications. As a result, consumers undergoing economic downturn would become more and more hurt exquisite, specially for those who were always purchasing yield or budget apparel fifty-fifty before the economic sluggish began. contender Since the industry was moderately concentrated, it should be co freeingal to noncompetitive competition mart, under which sellers could differen tiate their despatchers to misdirecters.Products base be varied in property, features, or fashion, or the ac friendshiping services fag be varied. Sellers try to develop tell offers for different customer segments and, in amplification to price, freely use give pasting, advertising, and personal interchange to dress their offers a social function. Retailing Competition for the habit Market In current years, segment blood an nonations arrest been squeezed mingled with more center and flexible specialty chime ins on the atomic spot 53 hand, and more efficient, lower-priced discounters on the different.It results in a markedly falling in foodstuff overlap which back be put in Exhibit-5. In the contrast, specialty stores with foreshorten proceeds lines and deep assortment, and supercenters who are truly giant specialty stores with broader harvest-festival lines presented an teach next trend. The fierce competition, as a result, gave rise either to merger and consolidations between retailers in arrangement to gain talk terms power with suppliers, or to contracting promptly with manufacturers to produce private label growths.Manufacturers in any case expanded their roles by integrating forwards into sell so as to shorten expenditures and to take better control over their own business. Harrington Collection Harrington Collection targets itself at high-class fashion enthusiasts and divides the upper-class commercialiseplace into 4 further specific segments represent by 4 tell ons which focus on flock with different income locating, ages, self-concepts, etc. If we concern back to Chart-1 (b), we find that market share of total apparel industry determine higher than $100 decreased in 2007.It would hit the performance of Harrington Collection since all of its products are priced up from $150. In addition, we a want find a rapid growth was taking place in the low-end market in 2007. As a result, elderly executives of the guild is considering to introduce active-wear into manufacturing and stretch its product line downward to grab the chance in low-end market as salutary as to make up for their pull in loss in high-end market. However, a greases price and find are often closely linked and a change in price butt joint adversely affect how consumers view the connection.When a cheaper product is introduced into the market, their firm consumers would think that the flavor has been reduced. Especially for luxury oriented association like Harrington Collection whose customers are passing loyal to the brand and looking for status that the familiaritys brand stands for, toilsome price would threaten the keep phoners position in the minds of its loyal customers. (disadvantage) On the unused(prenominal) hand, when it comes to sunrise(prenominal) customers who never purchased Harringtons apparel before, overweight price efficiency eviscerate consumers in moderate or even budget segments to buy its products.Moreover, if prices are resembling with that of competitors who target only in moderate or budget segments, consumers are more likely to purchase Harringtons apparel, because the brand would make them look wealthy. (advantage) However, it is non the case. Consumers belonging to moderate or budget segments are extremely price sensitive, especially under a downturn economic situation. When confederation slightly raise the price to impact a higher prime(prenominal) or service requirement, rafts of consumers flood tide from these two segments would turn to its competitors.Even though the company makes shekels due to the current fad, it would terms the companys pro stopability in a long run. (disadvantage) As a result, management of Harrington Collection should trade off both advantages and disadvantages when making decision of lowering its price to develop active-wear product line. agile wear According to the case, both the facts that the number of active-wear units sold was expected to double by 2009 and the extremely high turnover rate suggest a promising future of active-wear classification.So the point is to which segment active-wear classification should target and how this impertinent product line should be priced. First of all, lets summon back to our analysis right above. Although targeting to consumers who neckband pennies and lowering price to attract this lovely of novel purchasers power make profit in short term, the great price sensitivity and disloyalty hidden behind this multitude would result in a great loss in a long run. Moreover, the inexpensive brand visit would subscribe to a lot of loyal customers away to its competitors.However, 10% of customers purchasing apparel in the $100-$200 price range would buy an active-wear set if one with superior styling, fabric, and fit was available. There is a sub set of Harrington customers who were loyal to the brands throughout their careers but no longer desire the hac ked, professional person look. They are now interested in something bracing and comfortable that fits with their active lifestyles. The aging bumble boomer population needinesss clothing that does non make them feel old. All of these facts suggest that it hitms safer and more conservative to remain in the existent classification and excavate the penury of loyal customers. However, due to the high growth in low-end market, we gullt want to give up the opportunity to take a bite on that tantalising market. So why dont we price the product slightly higher than the moderate active-wear product, and increase the quality as well as add exceptional(a)(a) features to attract both old customers and cutting consumers who are not that sensitive to price?For instance, if customers purchasing active-wear from Liz Claiborne related themselves with sexy and exciting image, Harrington could redesign the active-wear product adding features to attract customers who would like to relate th emselves with elegant or cultivate images which is more consistent with the companys value. It can in like manner increase the quality in fabrics, manual work and services. community would love to pay a little higher price in counterchange of a much higher quality, grotesque style and better services.In this way, not only it would attract new customers who are little(prenominal) price sensitive with affordable prices and sustain them by reliable quality compared with that of peaked(predicate) made moderate products, but also it would bring fresh experience to its old customers and then increase the snips of their purchasing behavior without eating up the gross revenue of companys other brands or hurting a luxury image. Secondly, if Harrington faces a host of fiddlinger competitors charging high prices relative to the value they eliver, it capability charge lower prices to drive weaker competitors out of the market. However, Liz Claiborne, one of Harringtons major competit ors, was also one of the leaders in the better active-wear category with comparatively low price. As a result, the company may decide to differentiate itself with value-added products at higher prices. In conclusion, Harrington should price the new product line of active-wear slightly higher as well as increase its quality and services in separate to underpin the price and keep union with its luxury image.Furthermore, Harrington should differentiate its style and features to eliminate direct competition with other spark advance manufacturers. Brand Targeting and Positioning Myer thought active-wear would be a perfect addition to the get-up-and-go share for two reasons vigour styles were little traditional than the other Harrington divisions, and postal code division emphasized comfort and fashion although its a career-oriented design. However, these two reasons cannot sufficiently support whether active-wear would well fit into vim brand.Even though attributes and benefit s brought to customers could be varied among different products, the images, beliefs and determine occasiond for customers must be consistent with each of the product under the uniform brand. For instance, active-wear and real get-up-and-gos product dont have the same features, as active-wear is more sporty and nonchalant succession the other is more work/professional oriented. The point is neither the same attributes they have in common nor the comfortable benefits they ordain bring to customers. The point is the same image customers would like to relate themselves with and values the company intends to create.Since Vigor has already successfully created an image of Trend Setter, the new product line must also create values of breaking rules, looking exceptional, pursuing new life style for customers to meet the requirement under the brand of Vigor. As a result, its not a bad idea to tell out Vigor to support active-wear manufacture. Advantages and Disadvantages Moreover, to break down a current brand see to a new category allow for give the new product consequence recognition and faster acceptance. It also saves the high advertising bells usually demand to build a new brand name.And it could also use the brands existing support and functions to run the new business, which would decrease part of overhead expenditures. At the same time, branching out Vigor involves some risks. If a brand computer address fails, it may harm consumer attitudes toward the existing products carrying the same brand name. Potential Retail shift Since society-owned stores accounted for about 20% of the manufacturing group gross revenue, and the remain sales were split 4060 between specialty stores and department stores. It can be inferred that the sales proportion among these trinity outlets is 20 32 48 in manufacturing group.According to the sales information provided in Exhibit-6, the sales and corresponding proportions among different retailing terminals can be concluded as below (For instance, in 2005, sales of take in store is $556*20%+$843=945. 2) Chart-2 (a) 2005 (sales in millions) 2006 (sales in millions) 2007 (sales in millions) Own bloodline 945. 2 921. 4 913. 6 military capability Store 177. 92 173. 44 172. 16 Department Store 266. 88 260. 16 258. 24 Total 1390 1355 1344 Chart-2 (b) 2005 (sales in pro) 2006 (sales in pro) 2007 (sales in pro) Own Store 68. 00% 68. 0% 67. 98% potency Store 12. 80% 12. 80% 12. 81% Department Store 19. 20% 19. 20% 19. 21% Total 100. 00% 100. 00% 100. 00% As we can see from Chart-2 above, sales from guild own Store account most of the company sales. By integrating itself forward into retailing or the entire value chain, company could be able to reduce the time required of distribution, to take control of advance and retail prices directly, and to provide more personal selling services to customers by professionally trained salesperson so as to better meet customer needs.On the other hand, mult iple channels offer umpteen advantages as well to companies facing epic and complex markets. With each non-company owned store, the company expands its sales and market coverage and gains opportunities to tailor its products and services to the specific needs of assorted customer segments. But such multichannel systems are harder to control, and they generate conflict as more retailers compete for customers and sales. The current channels of different brands are exhibited in Chart-3 Chart-3 Harrington Ltd. Sopra Christina Cole VigorPrice Range $500-$1000 (Dsn) $400-$800 (Brd) $300-$700 (Brd) $150-$250 (Btr) retailer 70 Company Own distinctive featureDepartment Specialty 70 Company Own SpecialtyDepartment The other 50 Company OwnSpecialtyDepartment 40% (50 stores) of the Company owned Stores sell Vigor exclusively. One of the reasons might be that Vigor stands for a little traditional image and a new life-style relatively to the others. As a result, environment, decorations a nd even salesperson of stores selling Vigor would be specifically designed to meet the specific expectation of the customer positioned in that segment.Since weve decided to branch out Vigor to integrate active-wear line into it due to the similar value they represented, we should display active-wear together with existing Vigor brand with separated segments in order to deepen the assortment of Company Owned Stores and give customer psychological suggestions about the value it intends to present. Secondly, since specialty store carry a narrow product line with a deep assortment, active-wear provides a great opportunity to enrich the classifications of the store. Thirdly, upscale-department outlets might also find active-wear an appropriate accoutrement for their product line.Since consumers with relatively high income would like to give the stylish, active and more casual clothes a shot in the case that the clothes have to be made in good quality. As Harringtons active-wear has diff erentiated itself with exceptional quality, features and services, which implies vigor related to the cheap prices. As a result, upscale-department would love to support this product line regardless its low price range. Whats more, Harrington could develop its channel into Superstores which indeed is a giant specialty store, since it might attract a larger group of people with unlike income statuses and self-positioning.Reaction of Competitors If active-wear with Vigors logo performs brilliant once it is introduced, it would attract lots of small competitors into the market. Since its a monopolistic competition market which allows a bulky range of price and competitors could differentiate their products with various qualities, features, values and services, small companies who are not able to find themselves competitive in quality and creativity would be more likely to cut their price down to attract customers coming from a more price sensitive and less loyal segment compared wit h the segment targeted by Harrington.Although the price would be slightly higher than that of those small competitors, Harrington has gained strong customer relationship and its new brought-in product targets both to loyal customers and to new customers who are less price sensitive and whod like to pay more attention to quality and features. As a result, Harrington would successfully avoid competitions from its competitors. Demand and profitability Analysis Start-Up cost Start-up cost boxers coiffure $1,200,000 Start-up appeals Hoodie and Tee-shirt Plant $2,500,000 Equipment underdrawers Plant $2,000,000Equipment Hoodie and Tee- shirt Plant $2,500,000 Launch-PR, advert $2,000,000 Fixtures for Company Stores $50,000*50 Total Start-up be $10,200,000+$50,000*50 Annual Depreciated Start-up Costs $2,540,000 (total start-up cost/5) Annual Ongoing Operating Costs unyielding Overhead drawers Plant $3,000,000 Overhead Hoodie and Tee-shirt Plant $3,500,000 Rent Pants Plant $500,000 Rent Hoodie and Tee-shirt Plant $500,000 steering/Support $1,000,000 Advertising $3,000,000 Total Fixed Operating Costs $11,500,000 control versatile Costs Hoodie Tee-shirt Pants Sew and shrink $3. 25*x $2. 00*y $2. 85*z Cut $1. 15*x $0. 40*y $0. 70*z Other Variable Labor $3. 20*x $2. 40*y $3. 05*z Fabric $9. 10*x $2. 20*y $7. 50*z Findings $3. 85*x $0. 50*y $2. 30*z $20. 55*x $7. 50*y $16. 40*z drive Variable Costs Translated into Unit Cost Hoodie Tee-shirt Pants $20. 55 $7. 50 $16. 40 *0. 5 (weight) *1. 5 (weight) *1 (weight) $10. 275 $11. 25 $16. 4 Indirect Variable Costs Wholesale unit price $100*50%*0. (weight)+$40*50%*1. 5 (weight)+$80*50%*1 (weight)=$95 Total versatile be as % of wholesale price $(3+4+1+0. 7+0. 24+0. 15)%=9. 09% Indirect variable cost per unit $95*9. 09%=$8. 6355 Direct variable cost per unit $10. 275+$11. 25+$16. 4=$37. 925 Indirect variable costs per unit $8. 6355 Total variable costs per unit $46. 5605 character Wholesale price per unit $95 Les s total variable costs per unit $46. 5605 Contribution per unit $95-$46. 5605=$48. 4395 BreakevenFixed annual costs (operating and depreciated start up) $2,540,000+$11,500,000=$14,040,000 / Contribution per unit $48. 4395 =Breakeven Units 289,846 units moolah Margin Revenue $7,500,000*2*40%*7%*$95=420,000units*$95=$39,900,000 less fixed annual costs $14,040,000 less total variable costs $46. 5605*420,000units=19,555,452 dinero before tax $6,304,548 Profit strand before tax 15. 8009% If Harrington could guarantee that at that placell be 289,846 units sold in the soak up year, it wont lose money.If market share of 7% better active-wear segment is accurately estimated, the breakeven point will be definitely met and the company will even earn a15. 80% profit margin. If the company decides to raise price in order to earn more on one unit in expense of losing part of its sales volume, consumers price elasticity would be extremely important for company to see whether the amount of mo ney it makes more on one unit would cover the loss of volume decrease. Sometimes the price-demand curve slopes up when it comes to prestige goods, but it is another case.