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Shanghai Tang Strategic Case Analysis
Strategic Case Analysis: Shanghai Tang (ST)
Fashion and Clothing Industry Overview
Shanghai Tang (ST)
Global Business Expansion
Analysis of Environmental Factors
Suitability of Shanghai Tang Strategy
The strategic review of Shanghai Tang is conducted in order to explore brand presence, business focus, and other related functional strategies. The business is quite well placed in terms of its growth, revenues, and profitability. The company has also expanded its business line in other business. It is regarded as a flair for growth. However the expansion in unrelated businesses also creates an impact on the focused approach for young businesses. The fashion industry overview provides a significant account of the industry trends and key variable influencing the business. The micro and macro environmental analysis along with the SWOT analysis also provides a significant understanding of the business. The assessment of Shanghai Tang's strategy is the basis for recommendations for business improvements.
Fashion and Clothing Industry Overview:
The overall situation in fashion and clothing industry is also directly related to the external factors of economy (Pahl&Mohring2009). The global recession in industry has instigated the requirements for cost reduction and deployment of techniques for creating value for the customers. The businesses are also focusing on strategically locating their manufacturing unites in emerging markets including China, India, Turkey, and central Eastern countries (Khanna, Palepu&Sinha2005). It is helpful in finding highly skilled labor force to manufacture fashion articles. However at the same time the industry also has dynamic character that the global trends in fashion industry change according to the time and requirements of the market.
The reliance on information, fashion trends, technology, and creating a fusion of cultures are major factors influencing the industry (Manlow2009). Fashion clothing business requires increased information sharing as well a fully integrated supply chain system to take advantage of the market. The short time to market products is also a notable feature. The industry requires short lead time to market products to capture market share as capitalize the seasonal nature of the business. The pricing and inventory decisions also have a strategic impact in the business. The business is focused to cater markets through strategic sourcing and integrated planning for all business units.
Shanghai Tang (ST):
The shanghai Tang is one of the leading fashion brands of China. The business was inaugurated in 1994 with a clothing outlet in Hong Kong. However it has experienced a steady growth since its inception. The business has established number of retail branches within the home market. Similarly it has also expanded in the global markets. The business has gained momentum for international expansion since the 1998. The major shares of the business were acquired by CompagnieFinanciereRichemont which is one of the large Swiss luxury goods brand. IN 2005 the business has opened new stores in Zurich, Shanghai, and Bangkok. The business generates its 80% sales from markets in Asia. The business is experiencing huge growth in the domestic markets (20%) as compared with 10% in Europe, 7% in USA, and 3% in Japan (Jana 2005).
The business is well placed to reap the benefits of high growth rate in the emerging markets. The recession of economy in United States and Europe is posing a potential for low growth in business (Khanna et al. 2005). The management of the business is focused to promote Chinese culture and heritage through their fashion articles. The business is focused to create fashion articles for current times through fusion of modern, Mandarin, and Cantonese cultures. The business has also expanded drastically through vertical and horizontal integration strategies. The company is successfully offering men, women, children clothing. At the same time the brand has also opened new avenues including accessories, home decor, and gifts. The gifts section isn't only offering individual gifts but they are also focusing on corporate gift ideas (Shanghai Tang).
The strategies for business are usually focused on the organizational mission, goals, and targets. Three major types of strategies are widely discussed in the academic and professional literature. These include corporate, business, and functional strategies. The influence of corporate business strategies is in relation to the overall business direction. However the business level strategies are influential in defining the goals and targets of intermediate nature. The functional strategies are mainly regarding the individual business processes i.e. marketing, sales, pricing, promotion, and finance etc. The business also develops a variety of strategies to align its business goals with the overall mission.
The business strategy for the band plays a vital role in its expansion and growth. The business strategy for forward and horizontal integration is followed throughout the brand. The company has expanded its operations in multiple markets. The brand is available in almost all developed parts of the world. The major areas for revenue are local market through which a significant number of sales are generated. The analysis performed by Ernst & Young in 2005 clearly indicates that the business in luxury goods consumption for china is significantly high as compared with other markets for the period 2005 until 2008. The later developments in the local market of the business indicate that China will take over United States in terms of market size by 2015. The luxury goods consumption in the local market will be followed by United States and Japan. Therefore the business focus in catering local market is an important factor for growth (Jana 2005).
Global Business Expansion:
The technological developments in the world have underlined global expansion. The easy access to information and resources has influenced the business in a number of perspectives. The usage of technology to facilitate business processes has resulted into process automation enabling the business to effectively reduce cost and improve their business performance. Another aspect of the business expansion is the desire to procure cost efficient raw materials, manufacturing in labor intensive markets and later locating the warehouses at strategic locations for increased product availability. It is observed that business has expanded to fifty four countries since its inception in 1994 (Shanghai Tang). It is a significant development for a local brand to become increasingly available in the world markets. It is also notable that at certain time the business had to close its outlets and relocate them according to target markets.
Shanghai Tang Outlets Locations:
The locations of retail outlets are also a significant factor in defining a business success (Bhardwaj&Fairhurst, 2010). The business is obliged to open its outlets in the target markets according to its products, pricing, and availability of the distribution channels. The business can take advantage of the situations arising from various product and distribution channels. Shanghai Tang is one of the local brands in China that has expanded in the global markets. The brand is also available through internet supported e-commerce website. The location of the brand outlets is mainly in the areas of middle to low class income groups. The brand also opens its outlets in densely populated areas of foreign inhabitants throughout Europe and United States. The brand is available in major cities of USA including Miami and New York. The United Kingdom outlet is located in London. Germany is catered through outlet in Frankfurt. Similarly United Arab Emirates and Kuwait also has two outlets in Dubai and Kuwait City respectively.
According to Choi (2011) the strategic placement is an essential part of the distribution strategy for a business. The supply chain solutions emphasize on the capabilities to maintain products inventory in the strategic locations. The characteristics of strategic locations are relevant for the business performance in terms of products availability and shipping time required to maintain efficient flow of products. The business also needs to take into account the cost of maintaining stocks at strategic locations as well as the technological and supply network facilities available to cater business requirements. The brand has established its presence in multiple important locations. The business expansion can easily take place through operations for these areas. The business presence in almost all major financial capitals of USA, China, Europe, and Middle East are significant developments (Shanghai Tang).
The strengths, weaknesses, opportunities and threats of a business are an important factor in analyzing its current situation as well as the account of future opportunities and threats facilitates in business planning. The SWOT analysis is also helpful in facilitating the understanding of a business in terms of internal and external factors. The management of a business takes into account these analyses to place itself in the international business environment and take advantage of the opportunities. The SWOT analysis of Shanghai Tang provides a clear understanding of the current position and future requirements in terms of its corporate, business, and functional strategy.
Table: SWOT Matrix of Shanghai Tang:
Fusion of latest and traditional clothing trends.
Focus on local market
Presence at strategic locations
Brand awareness in global market
Low Market share
Wide spread distribution through physical presence
Growing demand for luxury items in local…[continue]
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The process would then need to continue so that the changes that can be seen in the environment can also affect the changes in entry strategies. Environmental factors, economic factors, political/legal factors, social/cultural factors and also technological factors should all be considered. The legal factors that need to be addressed include issues in employee law, monopolies and mergers legislation, environmental protection laws, and wider issues such as foreign trade regulations.
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