Mgw3401 Tenfold Fucking Final 35491n

MGW3401 – STRATEGIC MANAGEMENT

Tenfold™ Organic Textile Case Analysis Report Lecturer: Dr Chong Yit Sean, Esther Tutor: Dr Tan Seow Kian, Sharon

Cheok Huei Chun (24826200) Teoh Tong Aik (26094193) Florian Navintach Zeorelli Samerawickreme (24729833) Clement Marsha (25342754) Habiba Almahrooqi (25384589)

Word Count:

Table of Contents Executive Summary.........................................................................................2 1.0

Introduction.............................................................................................3

1.1

Purpose of the report...........................................................................3

1.2

Company information...........................................................................3

1.3

Assumption..........................................................................................3

1.4

Methodology........................................................................................3

1.5

Purpose of Report.................................................................................3

2.0 Strategic Analysis......................................................................................4 2.1 SWOT ANALYSIS......................................................................................4 2.1.1 Strengths..........................................................................................4 2.1.2 Weaknesses......................................................................................5 2.1.3 Opportunities..................................................................................5 2.1.4 Threats.............................................................................................6 2.2 Main issues.............................................................................................6 2.2.1 Issue 1..............................................................................................6 2.2.2 Issue 2..............................................................................................7 3.0 Evaluation of Alternative Strategies..........................................................7 3.1 Alternative 1...........................................................................................7 3.2 Alternative 2...........................................................................................9 4.0 Implementation.......................................................................................10 5.0 Conclusion...............................................................................................12 6.0 Reference list...........................................................................................13 7.0 Appendix..................................................................................................14

Executive Summary

1

Tenfold™ Organic textile is a company that provides naturally dyed organic cotton products to consumers, manufacturers and retailers. Tenfold attracts its customers by being an environmentally responsible organization that produce apparel using eco-friendly and chemical-free dye. The purpose of this report it to analyze the strengths, weakness, opportunities and threats of Tenfold in order to address the main issues that the company can improve. Furthermore, using academic journals, two alternative strategies will be discussed to improve and enhance the organization’s strategic position. The first issue that Tenfold faces is that there are many brands that are being sustainable and socially responsible in the long run, however, not much apparel companies have the capacity to reach the goal with Tenfold to be the right partner. The second issue is that there are low barriers to entry as a result of highly fragmented market which allows more competitors in the market. Two alternatives are provided in this report. The first alternative is using the strategic alliance strategy to help reducing costs with suppliers and development of new products and technologies. The second alternative is using the Blue Ocean Strategy to create value innovation by offering different kind of organic apparel to the partner brand. Moreover, blue ocean strategy can help Tenfold to enhance the organization’s strategic position. All in all, the best strategy for Tenfold is the blue ocean strategy since it can decrease the number of its competitors when using this strategy.

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1.0 Introduction 1.1Purpose of the report The purpose of the report is to analyze and discuss the main issues that Tenfold organic textile need to improve and provide alternatives to get a superior performance. Assessing the company’s strengths and weaknesses will help Tenfold to have a planned strategy, gain more profit and create a well-known

brand.

Furthermore,

a

clear

understanding

about

the

opportunities and threats of the organization can help the management to identify the changes and new alternatives that can be made to enhance the organization’s strategic position

1.2Company information Tenfold Organic Textiles is a company that manufactures naturally dyed organic cottons which was founded by Leah Weinstein and her brother Paul Weinstein in 2006. Tenfold’s main mission is to provide organic apparel using naturally dyed fibers by reducing the use of the chemicals in textile manufacturing. They believe that fashion industry should not pollute the environment with chemicals and synthetic dyes. In order for the cotton to get an organic label, it must meet the standards mandated by the organic foods production Act of 1990 which can be very costly to farmers. Tenfold’s main objective is to provide high quality fashionable products from the organic textile. In 2007, Tenfold signed a two-year contract with “Aura Herbal wear” in India that uses modern conventional dyeing machinery. The agreement was to give Tenfold exclusive right to naturally dye fabric produced by Aura and sold in the U.S. and Canada.

1.3Assumption The information of the company that are sourced from textbook is considered based on the date of the case study presented. Hence, the SWOT analysis and alternative strategies may not be accurate as of today as there is no latest information about the company found.

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1.4Methodology The sources of information that are used for this report are academic journals that provide different management theories and strategies and examples of how a company can improve its strategic position. Besides that, case study on this company were analysed to carry out SWOT analysis

1.5Purpose of Report The report will first discuss the SWOT analysis, external and internal environment of Tenflod in order to identify two main issues to improve the company’s strategic position. After that, the report will evaluate the two alternatives that the management should consider to improve the identified main issues. Finally, the report will conclude the recommendation for the best strategy to be used.

2.0 Strategic Analysis 2.1 SWOT ANALYSIS -

2.1.1 Strengths Many of the apparels uses synthetic dyes because it is cheaper and have various color variation. However, synthetic dyes can cause environmental degradation and health impact such as toxic exposure for dye workers. With that, the natural dyes could be the alternative and this will serve as a strength for Tenfold as more people would incline on using organic apparel with natural dyes especially in a business-to-business market when more

-

businesses are getting more sustainably focused. Tenfold gain attention by focusing on two things which are environmentally responsible and having emphasis on fashion at a reasonable price. The purpose of it is to attract the customers as well as providing an environmental

friendly

solution

which

then

further

strengthen

the

consumers’ trust towards Tenfold. 4

-

Brand association with the consumers is the main strength which includes the

innovation

of

the

organic

apparels

production,

good

corporate

transparency. They also emphasize on producing apparel using eco-friendly -

and chemical free dye in addition to fashionable products. Tenfold has been in a partnership with Aura Herbal Wear, which has developed a patented and unique natural dyes production in commercial quantities using modern conventional dyeing machinery. This allows Tenfold

-

to be the only company that has such access to unique dyeing technology. Tenfold has a solid management team consist of experienced marketing professionals, outsource a PR agency to enhance branding and promotion of the company and also assemble of advisory team to further improve the company’s growth.

-

2.1.2 Weaknesses Tenfold is using natural dye to produce organic apparel. However, there are disadvantages of natural dyes. According to Wild Colours (n.d.), natural dyes require large quantities in order to produce. Besides that, the range of colour of the natural dyes is limited compared to synthetic dyes. This is also because of high cost of producing the natural dye which leads to limited variation of the colours.

2.1.3 Opportunities The global retail sales for organic products will be set to reach around $1.1 billion and $ 2 billion in 2007. Hence, there will be strong demands of sustainable type of product which then enhance the growth of the sustainable apparel (Refer to Figure 1 in Appendix). Using organic food as an example, it has made a significant impact in the food industry by shifting the purchasing and consumption habits of consumers (Regmi, 2001). Hence, 5

organic apparel as a sustainable purpose could be the driver to the strong demand and growth which serve as the opportunity for Tenfold Textiles. -

During the recession that happened in 2007, consumers in the United State are being cost adverse on purchasing apparel. Consumers are not purchasing because of economic uncertainty. They are trying to reduce consumption of the apparel or goods do not bring them good cause. Hence, the reason for buying organic apparel can be desirable to the consumers because it is for a

-

good cause. Hence, this will serve as an opportunity. As many large multinational brands are incorporating “sustainability” as their core mission for corporate social responsibility purpose (McKinsey & Company, n.d.). Tenfold can produce organic apparel to brands such as Nike, Walmart and smaller brands which will enhance Tenfold’s positioning in the

-

market. Tenfold emphasize on using private-label strategy. Most of the brands such as Abercrombie & Fitch have no capacity to produce natural dye products. Hence, Tenfold have the opportunity to partner with businesses to create and produce such products. In fact, Tenfold has already developing products for Aveda.

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2.1.4 Threats Organic cotton would be falling under a regulatory framework. In United State. Organic cotton must meet all the mandatory requirement and standards which is under Organic Foods Production Act of 1990. In order to meet this requirement, farmer would want to incur extra cost to produce it. As organic cotton is grown without herbicides, pesticides and synthetic fertilizers. This will result in a lower yield. Organic cotton according to U.S. standard must be grown for three years before it can be commercialized and

-

sold as organic products. In conventional clothing industry, there are wide array of sizes and styles for consumers to choose. However, in the organic apparels, the choices remain limited because they need a lot of considerations ranging from socially 6

responsible -

labor

practices

to

environmental

friendly

packaging

and

distribution. In garment industry, the sustainable category in the apparel industry is highly fragmented with low number of barrier to entry. Hence, this lead to the entrance of many competitors which will affect the marketplace. Hence,

-

this can be served as a threat. Critics from investors in of Tenfold’s partnership with Aura may have cause the company to lose some funding due to the different direction that the company is heading and still going for the same direction after being advised by investors. The company then may have issue in expanding due to lack of funds.

2.2 Main issues Two main issues are identified from the outcome of the SWOT analysis of Tenfold: 2.2.1 Issue 1 From the “Opportunity” above, most of the multinational brands have been aware of being “sustainable” and socially responsible in a long run due to social pressure from the communities, government and nongovernment organizations. However, as stated in the opportunity part of Tenfold, not much apparel companies have the capacity to reach the goal with makes Tenfold the right partner for them to produce such apparel. 2.2.2 Issue 2 From the information in the “Threats” above, there are low barrier to entry due to highly fragmented market which allow more competitors in the marketplace.

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3.0 Evaluation of Alternative Strategies Defining a company’s business strategies is vital as it will determine the direction of the business and how it will address the issues the company is facing. By using a clearly defined business strategy, the company will be able to enhance the organization’s strategic position. Once the main issues are identified, appropriate alternative strategies can be formed in the basis of functional strategies, business strategies and/or corporate level strategies. These strategies will then be used to address the issues and to achieve company’s business goals.

3.1 Alternative 1 The appropriate alternative that has been identified to address these issues is a corporate level strategy which is strategic alliance strategy. Strategic alliance is an agreement between two or more companies to cooperate in a unique business activity (Isoraite, 2009). This strategy will help the companies involved in the alliance to benefit from each other's strengths and gain a competitive advantage over their competitors. The companies involved in the strategic alliances would also share available knowledge in their area of expertise. Moreover, this strategy can also assist in reducing costs and risks with suppliers and development of new products as well as technologies (Isoraite, 2009). As stated above, numerous companies are making an effort to incorporate sustainability into their business. An example of a successful strategic alliance in the form of creating sustainability is the alliance between Procter & Gamble and World Wildlife Fund's Global Forest & Trade Network in 2008. This alliance assists companies with sourcing more of their wood and paper products from responsiblymanaged forests (Confino, 2012).

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Tenfold Textiles has the capacity to exploit this opportunity that would help to improve their organisation’s strategic position. Tenfold uses natural dyes that are completely sustainable in nature compared to synthetic

dyes

used

by

competitive

companies

which

causes

environmental degradation and negative health impacts. Therefore, Tenfold can create a strategic alliance with other major apparel companies such as H&M, Zara, Uniqlo and Marks & Spencer to help improve and incorporate sustainability and social responsibility value into their products and core strategies. Tenfold could produce organic apparels for these brands for them to add into their products lines. Therefore enabling these brands to incorporate social responsibility and sustainability into the nature of their business which would in turn help Tenfold improve their competitiveness in the industry. Using this strategy, Tenfold would also create awareness of their brand, increase customer base and gain the opportunity to reach new markets (Buckles, 2011). The strategic alliance strategy would also be competent in addressing another issue faced by Tenfold which is the low barrier of entry in the garment industry. Barrier of entry is the existence of an obstacle that prevents new competitors from easily entering an industry or an area of business. A low barrier of entry type of industry such as the garment industry discussed in this report, however, would convey that there is minimal obstacle that prevents new competitors from entering the it’s industry. This would pose a threat to companies that are already competing in the market as there will be more competition from new entrants. It would also increase production capacity without concurrent increase in demand which would reduce the profits of the existing companies such as Tenfold itself.

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However, through strategic alliance, Tenfold would able to better compete with other competitors and new entrants. By forming an alliance with major and well known apparel brands, Tenfold would be able to benefit by marketing their products through these brands. These brands are further established in the industry and would be more capable of overcoming the competition posed by the low entry of barrier. Brand that are well established would also have a strong consumer base which Tenfold can use to their advantage. By marketing their products through these brands, Tenfold would acquire improved brand awareness and recognition through the existing consumer base which will widen their grasp in the garment industry, hence, improving their competitive advantage.

3.2 Alternative 2 The appropriate alternative to address these issues is a business level strategy which is Blue Ocean Strategy. Blue Ocean Strategy was developed by W. Chan Kim and Renée Mauborgne. It helps companies to create new markets, instead of competing in existing ones and by standing apart by dialing up value for buyers, yet keeping costs low. Moreover, it creates new demand and making the competition irrelevant (Kim and Mauborgne, 2004). Thus, this will position a company to be superior with value innovation to stay competitive.

To address issue 1, the blue ocean strategy involving value innovation as such that Tenfold would create value by offering different kind of organic apparel to the partner brands such as H&M and Zara. With the concept of sustainability practised by the companies, Tenfold could leverage to produce more products using their organic cotton which at the same time helping the companies to achieve the value of 10

sustainability. This allow the companies to maintain their brand image and also promote the awareness of Tenfold. For example, Tenfold could deliver value innovation to apparel companies in a way that they are benefiting more from getting the organic apparels. They could insert the same value into their customers and hence, this would create a win-win situation for both Tenfold and the companies (INSEAD Knowledge, 2015). To address issue 2, although Tenfold is in a fragmented market and barriers of entry are low, the blue ocean strategy will help Tenfold enhance the organization’s strategic position by creating uncontested market space, making the competition irrelevant and creating & capturing new demand. Instead of concentrating on customers, focus should be on non-customers (Kim & Mauborgne, 2005). Hence, Tenfold would need to shift the focus on create awareness to attract them to be new customers. This can be done by using various marketing strategies which also includes guerilla marketing styles as what Paul has mentioned in the case study. This could be also involve creating different kind of product lines ranging from scarf to other wearable product by using the ‘organic’ concept. With this, Tenfold has ultimately created a uncontested market space and hence would even strengthen the strategic position of Tenfold compared to its competitors which are Prairie Underground and Stewart and Brown. Due to the situation in the market where new competitors are present every day, it is important that Tenfold maintain its strategic position to gain competitive advantage. An example can be seen from an apparel company known as Ralph Lauren. They managed to implement blue ocean strategy to create uncontested market space by combining the features of haute culture and classical lines in their production of their polo shirts (Polo Ralph Lauren Case Study, 2016). With that, their position is strategically strengthened. 11

4.0 Implementation Based on the SWOT analysis and the issues of Tenfold, it can be seen that Tenfold has a competitive advantages of being able to produce organic garments. But the apparel market has a low barrier entry. And by Tenfold itself is capable of avoiding the sustainability and social responsibility due to social pressure by themselves as they were to produce such apparel. It’s a better choice for Tenfold to use the Blue Ocean Strategy, as the strategy create a new markets, Tenfold will have less competitor and their capability of producing organic garments is a value innovation will be an important advantages. This will result in Tenfold having an uncontested market space. Which will solve the issue no.2, while the strategic alliance will make Tenfold compete in the existing market which has a low barrier entry. By using Blue Ocean Strategy, Tenfold will be able to have more control over their organic product quality and they will be able to avoid being dependent on their allied companies. An example of a successful company that used the Blue Ocean Strategy is AirAsia. Air Asia positioned themselves on a new market that target middle class, while majority of flight industry target on upper class. Tenfold can also do line extension with this strategy. This will allow Tenfold to offer more varieties of product even though they have their weakness of incapable of producing variety of colours because of the limitation of organic dye or textile. By doing so, Tenfold will be able to maintain its strategic position to gain competitive advantage. Like for example, Tenfold can produce product like scarves, and since Tenfold uses organic dyes, they will also be able to produce garments using traditional methods like Batik.

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Another approach on the strategy is for Tenfold to be able to persuade consumers to know the advantage of using organic textile compared to synthetics. This will even further push Tenfolds competitive advantage and give tenfold more brand consideration compared to its competitor. This will open up new demand in the fashion industry for organic apparels. In order for the strategy to success, Tenfold will need to consider their capability of closing the gaps as they will have lack of fund in expanding, as most of their funds are already focused on producing and obtaining the organic materials. If their scalability is unable to handle the production of variation of product, they might need to abandon the idea of producing the other variant of product. And with it, they need to reconsider whether to choose Blue Ocean Strategy all over They also need to consider the market demands of the current market they operate for organic products.

5.0 Conclusion In conclusion, SWOT analysis on Tenfold textile are conducted and according to the analysis, two main issues are identified which are how Tenfold can produce more organic apparel with multinational brands that emphasise on being “sustainable”. The second main issue is the low

barrier

to

entry

in

the

sustainable

apparel

industry.

Two

alternatives strategies are introduced which are the use of corporate level strategy which is strategic alliance and business level strategy 13

which is blue ocean strategy. The alternative strategy proposed is blue ocean strategy with the reason that they can control the company easily, provide more variation to create more markets and reduce competitions. Several considerations were debated which is the issue of funding and the scalability to meet the current demand of the organic apparel.

6.0 Reference list Buckles, J. (2011). Understanding the Benefits and Challenges of Strategic Alliances | International Franchise Association. Franchise.org. Retrieved 5 May 2016, from http://www.franchise.org/understanding-the-benefits-andchallenges-of-strategic alliances 14

Confino, J. (2012). Sustainability partnerships are the key to future business. the Guardian. Retrieved 5 May 2016, from http://www.theguardian.com/sustainable-business/procter-gamblesustainability-report-partnerships INSEAD Knowledge,. (2015). How to Build a Sustainable Blue Ocean. INSEAD Knowledge. Retrieved 6 May 2016, from http://knowledge.insead.edu/strategy/how-to-build-a-sustainable-blueocean-4219 Isoraite, Margarita. (2009). Importance of Strategic Alliance in Company’s Activity. Intellectual Economics. Vol. 1(5), pp. 39-46 Kim, W. & Mauborgne, R. (2005). Blue Ocean Strategy How to Create Uncontested Market

Space and make the Competition Irrelevant.

Boston: Harvard Business School Press..

Retrieved from

http://www.strategiccompliancegroup.com/docs/BOS.pdf Kim, W. Chan & Mauborgne, Renee. (2004). Blue Ocean Strategy. Harvard Business Review. Retrieved 6 May 2015, from http://www.syv.pt///files/image/Reinventing%20Your %20business%20model%20HBR.pdf#page=71 McKinsey & Company. (n.d.). The Business of Sustainability: McKinsey Global Survey Result. Retrieved 5 May 2016, from http://www.mckinsey.com/business-functions/sustainability-andresource-productivity/our-insights/the-business-of-sustainabilitymckinsey-global-survey-results Polo Ralph Lauren Case Study. (2016). Blue Ocean Strategy. Retrieved 6 May 2016, from

https://www.blueoceanstrategy.com/bos-moves/ralph-

lauren/ Regmi, Anita. (2001). Changing Structure of Global Food Consumption and Trade. Retrieved 5 May, 2016, from http://www.ers.usda.gov/media/293645/wrs011_1_.pdf

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Wild Colours. (n.d.). About Natural Dyes. Retrieved 5 May 2016, from http://www.wildcolours.co.uk/html/natural_dyes_comparison.html

7.0 Appendix

Figure 1

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