Although within Harrington the firm believes that it has a strong brand, this brand is supposed to allow it to charge high prices for its goods. Yet, margins are slipping; this could indicate an erosion of brand power at Harrington. Activewear could restore some of this brand power by showing consumers that Harrington was up-to-date with modern fashion sense.
There are a number of threats, however, associated with entry into the activewear market. While the brand could be enhanced, it could also be diluted if a large number of existing Harrington customers do not approve of the activewear trend. Moving into activewear, even if successful, could result in cannibalization of existing sales. For example, marketing money will likely be shuffled from older lines to promote the new activewear line. Shelf space and inventory space in the distribution channel will also need to be created at the expense of more established lines, meaning that even if activewear is a success, that success could come at the expense of other lines within the company. As well, moving into activewear would introduce new competitors to Harrington, and this could place the company at a strategic disadvantage, attempting to compete against companies Harrington knows little about.
If Harrington does decide to launch into the activewear market, it needs to understand the demographic, psychographic and purchase behavior profile of the activewear consumer. The following table outlines the key characteristics of the potential Harrington activewear customer:
Demographics
Female
25-60
Professional, good income
College-education
Predominantly urban, white
Psychographics
Wants to be viewed as professional, sophisticated (aspirational)
Shifting lifestyles towards a more casual approach, brought about by family and established career success
Wants to feel young (esp. The 45-60 baby boomers)
Still retains an interest in maintaining status even while dressing down
Vigor consumers emphasize the blending of comfort and fashion
Purchasing Behavior
Brand loyal
Do not view the brand as subject to dilution if an activewear line is introduced
Not concerned much about quality (easily pleased, even by shoddy products)
10% of customers would pay $100-$200 for better styling, fabric and fit
Purchase more frequently (higher turnover)
Harrington must also consider the financial implications of its decision. In this case, it needs to analyze the breakeven point for the project, and determine if capturing that level of sales is feasible. The figures utilized in the breakeven calculation are those specific to the decision to enter the activewear market.
Harrington Breakeven Analysis
Start Up Costs
Pants Plant
1,200,000
Hoodie Plant
2,500,000
Equipment Pants
2,000,000
Equipment Hoodie
2,500,000
Launch- PR, Advertising
2,000,000
Fixtures
6,000,000
Total Start-Up costs
16200000
Annual depreciated
3,240,000
The market share is expected to grow large enough that it will be profitable for Harrington to enter this market by 2009. The company will have a breakeven point of 238,000 units, and if it gains the market share it expects to gain, it will easily break that number of sales. There is minimal evidence that the brand will be damaged or diluted by the move (just 2% of customers) and there is significant evidence that the move into activewear is congruent with the needs of the Harrington customer base. The company's estimates of market share are therefore reasonable -- its customers are waiting for this product. Even if those market share estimates are not met, the company should still be able to turn a profit on activewear. The impacts of negative externalities on this plan have not been examined (cannibalism, channel difficulties) but on its own merits, the plan to enter the activewear market appears to be profitable for the company. Therefore, Harrington should enter the activewear market.
