Operations Mavi Founded in Istanbul

Operations Mavi

Founded in Istanbul in 1991, Mavi Jeans designs a full collection of jeans-wear, for young women and men. Turkey's first fashion brand to become global, Mavi has been the leading jeans brand in Turkey for the past 16 years. With 11% market share, Mavi continues to drive sales growth through its innovative assortment of brands and apparel. Mavi is currently sold in over 4000 specialty stores, better department stores and specialty chains in 50 countries worldwide. Mavi has over 285 retail stores with flagships in New York, Vancouver, Montreal, Istanbul, Berlin, Frankfurt and Dusseldorf. In its most recent fiscal year, the company posted a 30% sales growth increase in its unique line of assortments. Mavi continues to grow with global denim unit sales of more than 5.5 million per year.

To become a dominant player within the retail market Mavi had to apply the right business strategies. Before a brand can be adequately established, the firm must first have a detailed action plan in place. Customer demographics and market research is the primary method to establishing a brand. Understanding consumer preferences, macroeconomic trends, income levels, and commodity prices should all be incorporated into the research. In order to be successful, a company must innovate in a manner that is unique to competitors. The value proposition must be compelling in order to entice consumer to purchase. Such case studies like STEEPLE and SWOT are important tools companies can use to formulate both a compelling value proposition and commensurate brand awareness. STEEPLE analysis is formed from the first letters of the Social -- Technological -- Environmental -- Ethical -- Political -- Legal and Economical environments. On the other hand SWOT is formed from the first letters of Strengths -- Weaknesses -- Opportunities and Threats. Undoubtedly, before Mavi Jeans Company established its business, leadership did extensive research using many of these forms of research. Moreover, the execution of the strategy was flawless. Through proper execution, the company it has become one of the most successful and profitable companies in Europe.

STEEPLE Analysis of Mavi Jeans:

Social: Mavi Jeans socially is at a very good point. Currently people know about Mavi and its subsequent value proposition. The Mavi brand is know to millions, will celebrity endorsements and an ever-expanding market base. Also, the advertising technique that is used by Mavi is very innovative in regards to its overall value proposition. With television advertisement, Adriana Lima was used as a means of endorsing Mavi Jeans. Adriana Lima is a very well-known model through the world and using her in an advertisement provides an appropriate communication mechanism for the overall brand of the jeans. By using her in the advertisement the company presents itself both nationally and internationally as a viable alternative to retail competitors.

Technological: Mavi Jeans has a grand factory in Corlu, Turkey. The facility has all the Technological advances that are needed to drive same store sales growth for the company. Inside the factory there are machines such as spreading machines, manual cuttings, automatic cutters, fusing to waistband, flying preparation and other machines for quality production. This facility serves two primary purposes. First, the technological advances help the company in regards to its overall margins. The more the company produces, it can benefit from economies of scale. As the company produces more, the unit volume of each item diminishes. This is particularly important as the company continues its expansion overseas. The company, to maintain margins will need to engage in technological advances which allows for more units to be produced while also providing a means of producing goods cheaply.

Economical: As mentioned earlier, Global denim unit sales are more than 5.5 million per year. Also opening a franchise in overseas countries contains serious risks. These hazards include political risk, economic risk, and consumer risk. However, Mavi have overcome this issue and the company opened 15 showrooms worldwide. These showrooms are designed to showcase the brand in a manner that is consistent with the value proposition the company provides. This the company believes that the brand awareness will provide the company with a sustainable competitive ad vantage relative to others companies. This competitive advantage has numerous advantages for the company. Foe one, the company has more pricing power in regards to its assortments. The band, in regards to its consistency, quality, and value, provides an avenue in which the company can leverage to drive same store sales growth. The company is expanding overseas which now has a growing middle class. This middle class has discretionary incomes that are t can spend on retail items that ultimately will help drive business growth for the franchise. This business growth can then be used to further expand the business into new markers. Within the retail environment, scheduling and a rapid response to changing consumer sentiments are critical. As such, the organizations systems must reflect this change in consumer dynamics to maximize sales and profitability. A systems approach works well in accomplishing this task. In many instances, consumer demand, consumer sentiments and macroeconomic factors all influence one another. In the context of Mavi, macroeconomic factors determine consumer demand and confidence. Attempting to forecast this demand, the organization must then adjust scheduling and inventory levels accordingly. The input elements in this system would therefore be aligned with macroeconomic considerations. Aspects such as income growth, discretionary income, consumer confidence, tax policy, and commodity prices all affect the system. For instance high gas prices, can potentially cause less discretionary income for individuals. This lack of discretionary income ultimately hinders the amount of spending on discretionary items. This lack of spending impacts Mavi on the output side as the company must now lower inventory levels or markdown merchandise to compensate consumers. Therefore inventory management is critical system in which Mavis can use to add value to the consumer, the company, and its shareholders.

Environmental: Environmental concerns for Mavi include commodity risks from products used to produce items such as cotton. In addition, inflation risk within the market can cause prices of products to rise disproportionately over the general level of the market. Environmental factors such as market consolidation can provide competitors with more financial resources than they might otherwise have. These financial resources can then be used against the company as marketing and advertising campaigns.

Mavi SWOT Analysis

Strengths

Inventory management solutions for Mavi's

Inventory management is essential for capital intensive businesses such as Mavis. As indicated in the introduction, business is dynamic and characterized with incessant change as macroeconomic conditions change. As such, companies must be adequately prepared for variations and changes in consumer sentiments and propensity to purchase discretionary goods. These changes often reflect the overarching macro level environment as it relates to consumer purchasing behavior. Inventory management is no different in this regard as business must adequately prepare for consumer demand. As with many forecast, inventory management is merely a rough estimate of expected business activity. These estimates can vary in large quantities resulting in an overall lose in both productivity and profit for the organization. The further up the supply chain a company is, the larger the swings and variations in inventory. This swings ultimately cost suppliers money as they are inundate with merchandise that is either obsolete or no longer demanded.

As such, a quality inventory management system must be utilized in an effort to prevent excessive loss due to unforeseen circumstances. Mavis, through the systems approach does a particular good job at managing its current and future inventory in a manner that is advantageous to the company. The system communicates with the entire supply chain including suppliers, buyers, consumers, employees, and designers. Systems are in place within the organization to track sales of a particular brand relative to others. The Net promoter score, used to track customer satisfaction indicates how well inventory initiatives are going. Actions are then taken to allocate inventory towards a particularly profitable segment in which consumer demand more of. Consumers also aid in this process, through Mavi's Omni-channel strategy mentioned in more detail in the next section. Through use of various inputs, the system as a whole is able to work more effectively, while being more responsive to consumer demand.

In regards to the system approach mentioned, the consequences of these inventory effects are as far reaching as they are systemic. For one, suppliers are forced to carry greater amounts of "Safety stock," which is used as a buffer against changing consumer sentiments. In addition large variations in demand due to the inventory management procedures can cause inefficient production and excessive inventory as producers need to fulfill the demand from those in the front of the supply chain. This creates a "bottle neck" of merchandise that is ultimately not getting sold. As such, it is imperative for the system to have accurate and viable data throughout the entire process. Mavis combats this negative trend through the use of localization and district teams. Through the use of district teams, the company is better able to respond to consumer, supplier, and vendor demand. For example, Mavis will be able to provide white linen assortments in the Miami, Florida area while eliminating the offering altogether in its Gainesville, Florida store. This allows the strategy to mitigate gaps in communication or overall service. Finally, the Bullwhip effect leads to many financial costs which are both tangible and intangible (Mason-Jones, 2000). Those in the supply chain must deal with the ramifications of poor customer service, lack of productivity, and missing parts due to stock outs (Anand, 2006). Moreover the hiring and dismissals of employees can result in losses due to inadequate methods of inventory management.There are however, methods by which the inventory concerns can be mitigated. The localization strategy mentioned above does a good job of abating this influence. Inventory management procedures such as vendor management inventory and "just in time" replenishment help abate the consequences of inventory management procedures as well (Lewis, 2006).

Vendor Management Inventory

To supplement the potential negatives of inventory management alone, the company also engages in vendor management. Vendor managed inventory is a valid method to reduce these variations of inventory management while also being more responsive to consumer demands. Much the like the inventory management system, VMI is a collaborative management system that allows both the retailer and the supplier to better coordinate inventory levels through information sharing. VMI mitigates the potential damage incurred through misinformation and lost productivity within the inventory management process. In addition, vendor representatives, who do not work for Mavis, are used within the store ensure that the overall product line is displayed correctly for consumer demand. This approach, allows the vendor to be on the front lines to adequately see consumer demand. This allows stock levels to more adequately reflect demand as consumers can easily pinpoint displays and merchandise. Employees will also be better educated as to the benefits of the product line through the use of vendors on the selling floor. Another major component of the VMI is the risk that is shared within the entire system. One entity alone will not bear the entire risk of the system but instead, share some of the risks involved. For example, if a particular product thought to be in high demand, does not sell, the supplier will repurchase the product from the retailer to mitigate loss. In other cases, the product may be in the possession of the retailer but is not owned by the retailer until the sale takes place to mitigate the risk of the retailer itself. In this instance, the retailer acts simply as a warehousing agent, used to assists with the sale of the product in exchange for a predetermined commission. This creates a stable revenue stream for the retailer, while also encouraging the sale of the product from the supplier. This is to the benefit of the retailer who now has a more stable revenue stream and the vendor who has more control of displays within the retailer's location.

Weaknesses

A critical input for the system involves macroeconomic forecasts and considerations. One economic issue prevailing in the United States is that of rapid fiscal and monetary stimulus and its inflation implications. This directly correlates to the inventory management process and procedures of Mavis as prices of commodities correspond to clothing prices. Due to prevailing market conditions, governments have embarked on a path to massive fiscal ease to help spur economic growth (David, 2009). These operations are designed to help build consumer confidence in the financial markets while also enhancing the overall appeal of risky asset classes such as stocks and real estate. For instance, the United States has kept interest rates near 0% for the past two years with an expectation of low interest rates until late 2015. This interest rate policy also discourages savings as little income can be garnered (Nicolas, 2012) as such; the theory suggests that consumers will spend money on products goods and services. This bodes well for Mavis as consumers now have incentive to spend more money on discretionary items as they can get very little through savings

These goods, particularly those in retail would then be purchased further stimulating the economy. These massive stimulus efforts however, have yet to enhance economic activity as previously anticipated. Consumers are still very cautious with purchasing. They are looking to trade down as they reduce debt and save more. As such, the massive asset purchases created by the government may result in rapid inflation as more currency is circulating in their respective economies. As governments continue to print money, the relative value of this money will continue to decline, ultimately harming the consumers it was intended to help (Krugman, 2009). Due primarily to this theory, inventory management, total quality management, and VMI will all become very important. As inflation takes hold and consumers continue to be cautious, it is very important to reduce waste and unnecessary expenses. As such, the strategies mentioned above will allow the company to continue to earn an adequate rate of retune while operating in an inflationary environment.