Jeans Essay, Research Paper
Marketing Plan for the introduction of Virgin jeans
In order to understand why the Virgin Group excists, it is inalienable to especially focus on one person, the founder and the core of the company Richard Branson.
His personality alone already legitimates the purpose of the company, playing the role of the every positive thinking entrepreneur, that is strongly drawing together stakeholders and employees by showing them that they can commit themselves to the business not only because of financial benefits. Branson`s and therefore Virgin s higher ideal just simply seems to be to have fun and find new challenges while doing business.
Virgins core strategy seems to be to go into those markets were complacent industries have held high prices for years because of their monopolistic size. And they try to take an advantage of that complacentness. The markets itself can not be defined exactly as the Virgin Group never had a core business thing”. Thus the business where Virgin wants to be in is also hard to define, but there is an opportunity for Virgin wherever the monopolistic position of a competitor can be beaten.
Another basic strategy of the Virgin group is always to use its undoubtedly strong brandname which is one of the view that is elastic enough to bind together a clutch of diverse products without snapping”. It is part of Bransons strategy that the Brandname is not so much a product that it stands for, rather it stands for values: youth, iconoclasm, cheeky and perky informality”. This provides the Virgin Group with a flexibility that is almost unbeatable in terms of brandname. The key is to make sure that the Virgin name stays fresh and not to overuse it, and certainly the product has to have a certain quality.
The third part of any Virgin strategy that has to be emphasised, is the strategy of public figure marketing”. Like no other entrepreneur in the UK, Richard Branson has the talent to market his products by going into the media with extraordinary actions that get him into the front-pages of the newspapers without paying any money for this advertisement.
The values seems to be having fun in the business and to do things differently. The goal of the Virgin Group is to be the ultimate outlet and to provide the best value for money to customers. They believe that there should be some kind of fun to go into the big monopolistic businesses and then shake them up by offering good value quality based products, and a better service and people care to the customers and last but not least to make a profit at the end of the day.
Overall the mission statement has clearly been defined by Richard Branson over the last 25 years. He has the Vision, the strategic intent, and he is the motivator for any person who is part of the company.
Detailed information about the first stage of the marketing planning process being the marketing audit can be found in the appendix as well as charts referring to a nation-wide analysis of the UK jeans market in 1994. The following SWOT analysis is intended to be a short summary of the appendix.
The Virgin group has the advantage that they are experienced in two different kinds of distribution. Firstly in stationary trade and secondly in mail ordering.
The group is far less integrated than other big groups like Daimler or Smiths Industries. This gives Virgin the advantage of higher flexibility. This effect is even more extreme since Virgin has very small Strategic Business Units.
The Virgin Group has a strong brandname incorporated by Richard Branson and is experienced in introducing new products in an competitive marketing environment.
The strength of being not too integrated into the concern can also be a weakness, when errors are discovered too late because of a too loose supervision or when the support of the mother company becomes insufficient or because of sluggish communication. Richard Branson s chaos approach is therefore less efficient.
The jeans market is an old and established market. The leading companies – being in the market for a century or more – have established themselves in a monopolistic or oligopolistic situation with the help of huge advertising budgets. The magic concept of Richard Branson in the past was to exploit the inefficiency of these kinds of markets normally protected with high barriers of entry.
The jeans venture is only one of the many in the big group and could easily be abandoned if it seems not to be feasible after a while. The jeans market has a very unsteady component which are the designer jeans. With the customer s change in taste new competitors enter and leave the market. At the moment all the important designers are coming back into the market. The situation is very much alike the one in the late 70 s and early 80 s. In the mid 80 s the market for designer jeans collapsed and many players had to leave the market.
Generation and Evaluation of Strategic Options
There are a number of different options for a possible entry into the highly competitive jeans market , firstly Virgin could use its promotion experience to take over some claims of the existing competitors. Virgins second penetration possibility could be to use distribution channels more efficiently than its competitors therefore being able to get an advantage in terms of costs and service. Thirdly, Virgin has the possibility to sell the new product at a very competitive price. Virgin could also acquire an already established company in the jeans market to be able to gain access. Even though the product and the market is new, the entry strategy is based upon the core competence of the Virgin Group.
The results of the generation and evaluation of strategic options lead to the definition of market objectives. Two types of objectives have to be considered which help defining the core strategy. These objectives are strategic thrust (future direction of the business) and strategic objectives. Together they define where the business and its products intend to go in future
Considering the facts Virgins future direction of its business is to enter into the existing jeans market by market penetration. Alongside objectives for product and market direction, strategic objectives need to be agreed This involves the process of planing at the product level. As it is intended to enter an existing market with existing products the determination would have to be the task of being better than the competitors in terms of price, service and supply. This goal could be reached not only by being cheaper than competitors but also much more flexible, to put it in a nutshell, firstly offering the same product for a better price than competitors and secondly offering a closer and better customer service.
The Target Market
Generally speaking Virgin should attack the recession proof” 5 pocket style straight leg blue jeans market, thus competing against brands such as Levi s, Mustang, Pepe Jeans, Lee, Wrangler etc. ,therefore targeting the average consumer. The core target market will be those jeans that are mainly sold in the department stores and the discount chains. The target is the average customer whereas the most important component is the 5 to 24 year old customers which account for 60% of the total jeans market , especially for Virgin this is an interesting option as this is a similar target group as the customers of the Virgin Megastores this will be dealt with in more depth later on in this assignment. Expressed more precise referring to a lifestyle analysis the target segments are ranging from modern mainstream, traditional working class, traditional mainstream to upper conservative.
It has always been the core of the Virgin philosophy to target an entire already established and rather mature market, in which it is possible to gain an small market share with the high profile of the Virgin brand name. The big market-small share” strategy can be found in most of the Virgin enterprises. A certain market share is not regarded feasible to exceed as this would mean a clash with the Virgin Groups niche market exploitation strategy. Referring to the airline, Virgins flagship, Richard Branson said: 18 jets are expected to operate by the mid 90 s, flying some 3m passengers to about a dozen destinations. The temptation to get any bigger must be resisted.”
Alongside decisions regarding target markets lie judgements about competitor targets. The analysis of how industry structure affects long-run profitability has shown the need to understand and monitor competitors. The key to superior performance is to gain and hold a competitive advantage. Firms can gain a competitive advantage through differentiation of their product offering which provides superior customer value or by managing for the lowest delivery cost. The right strategic focus for the Virgin Group concerning competitor target would be to try to win market share as the jeans market is in its mature state and cannot be expanded. This strategy implies gaining marketing success at the expense of the competition. Virgin should seek to win market share through promotional innovation and penetration pricing. If Virgin carries out a frontal attack towards the market leaders its advantage will be based on cost leadership which will support a low price strategy to fight the market leader. Furthermore success is more likely if there is some restriction on the leader s ability to retaliate. Restrictions include pride, inflexibility and high advertising costs and technologic advantage. All market leaders in the jeans market have high expenditure on advertising and promotion which they off load on the customer. As Virgin generally does not run highly expensive advertising campaigns it would not have this disadvantage, it could offer jeans to a far better price than competition. Concerning promotional innovation, Virgin would not need to open new shops, as it could sell and promote the jeans in its existing record shops. Finally, the challenger, in this case the Virgin group, needs adequate resources to withstand the battle that will take place should the leader retaliate. Virgins cash cow which has to provide the money for all new investments is its airline, Virgin Atlantic. This will enable the group to withstand major competitor attacks.
Competitive advantage will be obtained through lower prices for a good quality product. This can be achieved by the Virgin Group through a cost advantage in terms of already established brand name partly established distribution channels and a high bargaining power.
Competitive advantage will also be achieved through being able to respond quicker to customer needs. Richard Branson once said : everything I have ever believed in can be summed up in the phrase small is beautiful”. Through building small business, units a closer relationship with the customer can be established, thus representing a serious weapon” against the economies of scale and scope of the major competitors in the market. A very advanced IT system will improve the flow of communication between distributors, manufacturer, headoffice and customer.
Marketing Mix Decision
Production facilities in Pakistan ensure a cheap production in one of the few countries without sellerquotas. Jeans are very easy to manufacture and it will therefore not be a problem to manufacture them in a country with less qualified workers (Levi s produces in Mauritius)
It is not desirable to start with a high degree of vertical integration. This indicates that the production plant will not be owned by Virgin and that the jeans will be manufactured for a commission. The quality control will consist of a small unit in Pakistan.
The problem of insufficient quality is related to the quality of the denim (deviation is the so called quality criteria) rather than the skills of the workers in the manufactory that saws the jeans together. It is therefore feasible to buy a better quality denim in Italy. Once the jeans is manufactured it will be shipped to the destination of sale within 30 days (Hong Kong to Hamburg takes normally 25 days).
The sales will take place in the Megastores owned by Virgin and in retail stores with a good reputation like Marks & Spencers. The fight for shelf space will clearly be won by Virgin because of its established reputation and brandname.
When these principles can be realised a solid average jeans at a very attractive price will be the result. The jeans will be available in two main lines: for men and for women. These will have slightly different cuts but still correspond to the classic five pocket style. The material in use will be denim and for the beginning there will only be two basic colours which will be different kinds of blue and black.
Promotion can effectively be realised through the partly owned Storm model agency with top model Kate Moss. The public figure Richard Branson will do the rest (he was in all the Virgin spots in the past).
Organisation and Implementation
The near future does not seem to have major external positive or negative surprises. It is therefore unlikely that strategies and objectives have to be redefined. On an internal basis Virgin is unlikely as well to be restructured or to be bought up and the marketing plan can then be implemented smoothly and without any problems. A rise of a new company of that size requires a fair amount of capital, which can be provided by the big Virgin group.
Because of the rapid development of information technology, Virgin has the possibility to gain a true competitive advantage towards its competitors. As Virgin will have build up an IT-system for its new company anyway, it can buy the very latest standard, giving Virgin a considerable advantage. Virgin has the unique chance to be the first competitor with an interactive consumer service system. Virgin has therefore to install an Intranet/Internet application that will enable outlets, distributors, manufacturers and consumers to communicate and order on a real time basis. Such facilities are internationally available (although they are not fully exploited yet) and can meet the company s needs at lower cost then traditional computer systems and networks. An practical example would look like this: a consumer browses through the Virgin Jeans Web site, then places a direct order, pays with his credit card and can then choose between a delivery per mail for an extra fee or collect his jeans at the nearest outlet. This avoids the very annoying situation to make one s way to an outlet just to find the required jeans sold out. Furthermore would this action automatically update the stocklist at all levels of the product chain (requirement: being on-line), change the accounts in the headoffice and give the marketing people a highly efficient tool to analyse consumers, their tastes and behaviour (e.g. a questionnaire). A more detailed analysis of the future system would not be desirable as it would go far beyond the scope of this marketing plan. This IT system will incorporate the framework around which the marketing mix decision will be wrapped.
With the help of a highly advanced IT system it will be possible to realise the just in time approach.
The IT system must not only be used to undertake day to day business but also to be aware of the market and its behaviour.
In order to be able to launch a new product, the marketing environment has to be scrutinised, which consists of external and internal environment. Marketing audit is a basis upon which a plan of action to improve marketing performance can be build. The marketing audit provides answers to the following questions:
Where are we now?
Assumptions should be made as an ongoing part of the marketing audit:
+ Inflation will remain at around 2.5% per annum.
+ Unemployment will be about 8 %.
+ VAT levels will not be changed
+ Governmental change at next general elections (May 1997)
+ UK stays in the European Union
+ EMU is not expected to be realised before the year 2000
External Marketing analysis:
Inflation 2.2 % per year.(30/10/95 – 30/10/96 according to RPI)
GDP growth 2.2 % (according to economist)
Unemployment 8,1 % (according to economist)
Social and cultural casualisation have made jeans the most popular article of clothing. Although the younger part of the population tends to represent a bigger part of the jeans market, older people are becoming increasingly important. Jeans have made their way from working clothes to an every day dress.
Little has been changed since the first modern jeans was manufactured by Levi Strauss. An important invention was the zipper introduced by Lee in 1926. Tweel (the untreated cotton fabric) is still the material jeans are mostly made off. New materials include rubberised cotton, nylon, leather, velvet, corduroy, snake printed or sequinned. The finishing wash every jeans goes through before it is ready for sale has recently seen some changes. Stone wash is an example for a washing trend in the late 80+s and early 90+s.
The most important regulation in the jeans market has come with seller quotas. All non EU countries have seller quotas restricting the import of foreign produced jeans into EU countries. Those seller quotas have different bases for calculations in different countries which makes it rather difficult to set up an international distribution plan. But there are certain exceptions to the rule. Pakistan, Bangladesh, Barain and Dubai and states have no seller quotas and are therefore a preferred location for production.
Jeans are very often produced in economically less developed countries (LCD s). In these countries children workforce is often widely exploited. Levi+s has been the first big jeans producer to ban children workforce in its production plants all over the world.
Saving the environment has gained great importance over the last decade and is expected to keep on gaining importance although the only mentioning in the Maastricht treaty is that business has to be conducted in a way that respects the environment (article 2). Energy scarcity can cause prices to rise drastically (oil crisis) even though there is no such thing expected in the near future.
Market and Competition
According to Prudential Securities sixty per cent of the jeans market is five-to 24-years-olds. But this market segment will grow by only 0.6 % each year for the rest of the decade. The world market for Jeans is between 6.6 and 8 billion Dollar worth and (4 to 5 hundred million pairs sold annually). The growth rate over the last few years was: 1993 – 2.6%, 1994 – 2.6%, 1995 – 2.4%.
The main competitors in the market are Levi s, Wrangler, Mossimo, Girbaus, Diesel, Bugle Boy and Jordache. However, in dollar sales, Levi remains No.1. Recent competition has come up by designers such as Versace, Armani, Moschino, Joop, DKNY, Lacrois, Dolce & Gabbana, Anna Sui and Todd Oldhamm. This development shows the new consumer trend to spend more on jeans if they are well branded. Levi s just introduced the baggy style in an attempt to regain market share in the urban youth customer segment, demonstrating the importance of the urban youth market.
The majority of sales takes place in retail chains and not in jeans outlets. Mail order has a surprisingly small market importance.
To gain a view over competitors consider the charts 1,2,3 in the appendix.
The figures originate from a market research among 157 jeans companies analysed in 1994.
Internal Marketing Audit
The internal analysis of the Virgin Group is difficult because it is far less integrated than many other concerns like Daimler or Smiths Industries. Richard Branson s SBUs are unusually small and the business culture of them is quite different. But still, certain patterns can be found through the group. The group s image is unusually young. The concept of success is always similar: value for money. Since Virgin penetrates most of the times oligopolistic markets it is understandable that the company has a competitive advantage over its rivals in terms of price. Furthermore Richard Branson incorporates a very valuable branding tool. He incorporates youth, dynamic, entrepreneurial skills, sympathy, continuity and non-scandalous behaviour. This means that less money has to be spend on advertising and branding. The range of products Virgin offers includes air travel, record production and sales, vodka, softdrinks, wedding dresses, cinemas etc.- all together over 120 different companies from all sectors.
Distribution experience comes from stationary sales on the one hand and from mail order on the other hand. This indicates that the jeans could be sold either way.
+ Principles and Practice of Marketing ; David Jobber
+ Like a Virgin ; Anthony B. Perkins ; The Red Herring Magazine
+ New generation in Jeans? ; Pat Corwin ; Discount Merchandiser 1994
+ China to hold first competition for jeans designers ; Xinhua news agency
+ Virgin Brand Embraces Diversity; Los Angeles Times
+ Faded Blue Jeans ; Financial World
+ Winner and still champion; five pocket jeans; Discount Merchandiser 1995
+ Fast-moving jeans and activewear; Dicount Merchandiser 1993
+ Tailoring the plus-size mix; Discount Merchandiser; Discount Merchandiser 1993
+ Another win for retro; American Marketing Association 1996
+ Levi`s Lets Loose with New Line; The Times Mirror Company1996
+ Designer invasion; The Europe Magazine
+ London chamber of commerce and industry