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Interaction of areas of specialization in an apparel firm

Merchandizing

Production

OperationsFinance

Marketing

Executiveleadership

Target Market

QuickResponse

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Responsibilities of executive leaders:

•Establish the firm’s goals and policies.•Formulate the firm’s mission.•Identify target customers.•Define the merchandise mix.•Determine the fashion emphasis.•Determine quality level.•Empower employees.•Inspire futuristic thinking.

Executive leadership

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Responsibilities of producers:

•Engineer the product and the workplace.•Plan production.•Negotiate product requirements with contractors.•Manage cutting, assembly and finishing operations.•Carry out quality assurance program.•Package and ship products.

Production

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Responsibilities of marketers:

•Conduct and report customer research.•Position the firm relative to target market(s).•Position the firm relative to competition.•Develop the firm’s image.•Propose marketing program.•Propose advertising/promotion strategies.•Forecast sales.

Marketing

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A Merchandising division surrounds the concept of the target customer and translate customer prefrences into a product line for the rest of the apparel firm.Merchandising is the planning, development and presentation of the product lines(s) for identified target market(s) with regard to prices, assortments, styling and timing.

Merchandising

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An operation division is responsible for the procedures and processes required to manage people and physical property. Acquiring, supporting and educating personnel are primary responsibilities.

Operation

Responsibilities of operations:

•Select sites for production plant and/or retail stores.•Operate production plant and/or retail stores.•Manage physical facilities.•Select, support and educate personnel.•Implement and support technology and equipment.

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Responsibilities of finance:

•Propose financial goals.•Create and protect cash flow.•Manage finances.•Operate accounting systems.•Establish sources of funds.

Finance

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Quick Response (QR)

Quick response was a concept first developed by Kurt SalmonAssociates (KSA) in the US, who studied the US apparel industry in a1986 study, where they found that on average it took 66 weeks forapparel product to get from manufacturing into store, despite a totalproduction time of only 11 weeks. The major delay in the supply chainwas due to inventory delays (Hines, 2004), although fabric is alsorecognized as being a key factor in causing delays.

Quick response places an emphasis upon flexibility and productvelocity in order to meet changing requirements of a highlycompetitive, volatile and dynamic market place (Lowson et al. , 1999,cited in Christopher et al. , 2004).

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Shortening the time between conceptualizing a new product and delivering the finished product to the ultimate customer is the fundamental goal of QR.

Some aspects of QR:

•Partnering with suppliers and customers=> Supply Chain Management (SCM)

•Electronic Data Interchange (EDI) => InternetObtaining Point-of-sale (POS) information.

•Shipping Floor-ready.

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BENEFITS OF QR:

•reduce stockholdings•quicker deliveries - shorten lead times from order receipt to delivery •faster inventory turns and lower inventory investment•increase cash flow•develop communication through •establishing a strong partnership

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QR Technologies:

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Concepts of production and productivity

Garment manufacturers have to focus on “cost effective production” to sustain. This is possible only when the basic

resources for garment manufacturing are being utilized effectively.

Production

Production is any progress or procedure developed to transform a set of input elements like men, machinery, capital, information and energy into a set of output elements like finished products and services in proper quality and quantity, thus achieving the objectives of an enterprise.

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•Through the production process, the value of the input (raw material) is added to convert it into value-added output product.

• The concept of production system is applicable to both production of components and production of services as well.

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Productivity

Productivity of a production system is analogous to the efficiency of a machine. Productivity may be defined as the ratio between output of wealth and input of resources of production. Output means the quantity produced and inputs are the various resources employed, e.g., land, building, machinery, materials and labor.

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Example:

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Productivity measures

Labor productivity

The resource inputs are aggregated in terms of labor hours. Hence this index is relatively free of changes caused by wage rates and labor mix. By improving methods of work (eliminating unnecessary movement, etc.) the output of a worker can be increased.

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Machine productivity

By use of sophisticated modern machines, better method of manufacture and reducing idle time of machines, the number of pieces (items) produced by a machine per hour can be increased.

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Material productivity

Materials that can be converted into products to be sold, both as raw materials or auxiliary materials such as solvents or other chemicals and paints needed in the process of manufacturing and packaging material. By product design and by use of skilled workmen, material wastage can be greatly reduced. Thus from a given quantity of material more number of pieces can be produced.

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Capital productivity

Energy productivity

Land productivity

Overall productivityIt is the ratio of total output to the sum of all input factors. Thus a total productivity reflects the joint impact of all the inputs in producing the output

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Example:

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Marketing Strategies

Marketing is a set of business activities that direct the flow of product and services from producer to consumer.

There are four basic marketing procedures:

(1) Sell old fashion products to old consumers – least risky.(2) Sell new fashion products to old customers.(3) Sell old fashion products to new customers.(4) Sell new fashion products to new customers – most risky.

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Four groups of variables (4 P’s of marketing):

● Product decisions – a garment should satisfy customer needs and be competitive; brand; packaging; development of new products;● Price decisions – pricing strategy, retail price, discounts, seasonal pricing;● Placement decisions – distribution channels, market coverage, inventory management, warehousing, transportation, logistics;● Promotion decisions – promotional strategy, personal selling,advertisements, promotional sales, games of fortune;

5P model adds people as the fifth function, whereas 7P adds process and physical evidence (in servicing activities).

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4P’s represent a seller’s point of view, and marketing should be turned towards a customer (4C’s):

● Price – Cost to the customer.● Place – Convenience.● Product – Customer needs and wants.● Promotion – Communication.

The goal of marketing mix is to achieve such combination of elements which can acquire competitive advantage and satisfy customers, and at the same time realize bigger sale and bigger profit.

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Market Analysis

Consumer needs are one of the bases for creating garments; therefore, the information which a designer receives from marketing department must be real, clear and precise together with the recommendation for a garment quality level and timely so that new collection should be available in the market at the right time. Ideas for new creations can arise from various sources: consumer suggestions and opinions, achievements in science and technology, keeping up with competitions in fairs, fashion shows, from Internet presentations, experiences of sellers, etc.

The most successful producers in fashion industry are those with organized teams of experts for design and marketing since they dictate the fashion cycle and present new creations, thus surprising their competition.

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The influence of fashion dictated by fashion designers throughout the world is very important. Modern design at the beginning of the twenty first century longs for refined lines of geometrical forms and aerodynamic surfaces burdened by the demand of assembly-line and mass production. This is not the case with fashion industry that dictates a great number of models and different styles with indefinite construction parameters of textile surfaces the garments are made of.

On the other hand, there are producers who want to increase productivity and standardization of products and at the same time want to satisfy the consumers’ needs as far as the quality and diversity of products are concerned.

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Consumers today have real possibilities to satisfy their needs for products in a better way than in the past, thanks to the standard, socioeconomic development, technical–technological progress, modern information systems, cultural and educational progress. Depending on their purchasing power, consumers react to fashion. Fashion trends have economic, psychological and sociological influence on consumers.

Consumers will often buy a new and prestigious product which is above their purchasing power, especially a branded garment, hoping to identify with a certain social group by doing so, and try to achieve a certain status. They want to be different – but not too much – so for that reason they accept certain features of a fashion trend, improvising and expressing their personality at the same time.

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There are two types of garment producers in fashion industry: leaders and imitators.

Leaders create a new product, impose and dictate new fashion with the help of powerful creative centers and modern technology, as well as marketing campaigns.

Imitators are late with production, but they find their place in satisfying the needs of a large market. They do not oftenhave a quality product, but there is a real competition among them.

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The concept of analysis and research must cover the interest in design, consumers and profit, improve creative process of designers, use market researches to gain new information about consumers’ demands or their reactions to offered garments in order to make the basis for doing business in the future, define aims and strategies. Therefore it is necessary to do some researches and explain all the phenomena and legalities related to modern production –market, in order to get the information which point to the fact as to what kind of products should be made to be accepted by the market, and that a design as a creative discipline can make products with largely different characteristics demanded by consumers.

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Market analysis requires a series of data, such as:

● analyze previous business and prices of products,● analyze quality of product,● analyze competitive prices,● gather data about garment industry,● gather data about competition,● gather data from various institutions, associations, fairs, conferences, symposiums, magazines, Internet and other available sources,● gather data about the prices of raw materials, textiles and fuels,● make contacts with buyers and suppliers and● conduct researches ( polls, questionnaires, phone conversations).

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Market research

Market research is a standardized procedure based on the principles of scientific methodology used to gather, analyze and interpret data, aiming to get the information necessary in decision-making and problem-solving in the field of marketing.

Market research is a team work. In most of the cases, teams must be multidisciplinary. There are two possible types of research approach:

● the needs of market are researched and the results give the idea about the product,● the idea about the product came from some other source, so the opinion of the market about that product is to be researched.

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skills, training and attitudes of marketing team

The rhythm of technological development is faster thanthe development of human generation (life cycle of technological generation is 4–5 years, which is 7–8 times less than working cycle of an engineer in garment industry), thus requiring constant education of production-technical staff.

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five principal methods used in researching the market of PBS:

● survey,● focus groups,● personal interviews,● observation, and● field trials.

For producers of clothes, most widely used are survey, focus groups and personal interviews.

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Survey is a very widespread technique of gathering data. A person who is to be questioned fills in, on his own, a prepared form with questions or it is done by Internet or email.

Focus groups is the most widely used method in qualitative research, where the aim is to find out more about the attitudes of consumers, their beliefs, motivation, behaviour, emotional relationship with certain phenomena and products. Focus groups are often used as an initial phase of field research with a less known topic, and its aim is to gather necessary information for making a questionnaire.

The number of focus groups in a study varies, depending on the topic of research, and there are usually 3–5 focus groups. Optimal number of the people questioned is 8–10.

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One of the main advantages of focus groups in relation to other methods of research is the possibility of applying different projective and encouraging techniques which provide a better perception of consumer behaviour, motivation and emotions.

Personal interviews ensure a deeper insight into a certain problem which is tested (testing new product, evaluating brand image, lifestyle, etc.).

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Competition analysis in garment industry should include the intensity of rivalry among producers which depends on:

•number of competitors of the same size, •similar production and financial abilities, •fixed costs, •similarities in strategies, •decisions made by competitors and risks they are followed by, expert institutions it cooperates with, •structure of employees and •their specialties.

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In contrast to large fashion companies, small garment producers often neglect marketing. Due to the lack of financial resources and inabilities of employing more workers, the owner or the manager is often the person who makes decisions concerning marketing which can be either good or bad choice. The owner is the person who knows his garments and consumers best, but he should also educate himself and learn about new trends on the market.

Small producers often hire experts to advise on a certain marketing project, thus reducing the costs of employing workers, or cooperate with marketing agencies.

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Constant changes, which are actually fashion, imply the creativity of designer team. Firstly, the products necessary to consumers should be identified. There are many institutes and agencies for fashion predictions which give instructions (reference books) for the approaching seasons (spring–summer, autumn–winter) for 1–2 years ahead. Anticipating in these fashion agencies is based on different aspects of research:

● researches of designers about different textile materials, fashion lines and styles,● researches and analyses of sociological and psychological influences on fashion trends, colours and lines,● researches about the influence of music, painting, films, comics etc., and● influence of media on buyers of fashion garments.

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Successful Small and medium enterprises in the

market constantly prove that even “the small ones”

always have their place, unless they provide

competition with “the large ones” on few ways:

● specializing on a narrow market segment,

● business flexibility and adjusting to consumers,

and

● enabling interaction with buyers and consumers.

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Market Segmentation

Consumers are unequal not only by number but also by its specific demands and space dispersion. Therefore, some PBS will be more competitive in relation to the others if focused on a certain part (segment) of the market which is considered to be most attractive referring to profitability.

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The steps of segmentation are the following:

(1) Market segmentation – Setting criteria for market segmentation.– Making segment profiles.

(2) Setting target market – Setting ways of measuring segment attraction.– Setting one or more segments.

(3) Positioning – Positioning on each target segment.– Making marketing mix for each target segment.

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Main variables of segmentation for consumer market:

(a) Geographical – dividing market in different geographical units(regions, provinces, cities and parts of cities, climate).

(b) Demographical – consists of sub-variables, such as age structure, sex, size of family, life cycle of family, income, profession, education, religion, etc.

(c) Sociocultural – segmentation of buyers or consumers is observed in regard to the social layer they belong to, way of life and special characteristics (culture, religion, family).

(d) Psychographical – lifestyle, social status, being unique.

(e) Behaviouristic – segmentation of buyers is observed on the basis of their knowledge, attitude, usage or reaction to product.

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Market segmentation can be defined by asking three basic questions:● Who buy?● What do they buy?● Why do they buy?

Effective segments should be:● Measurable – size, purchasing power, segment profile can be measured.● Attainable – must be large enough or profitable.● Accessible – segments can be accessed and can be served in an effective way.● Different – segment must react in a different way to a differentmarketing mix.● Stable – must allow enough time for marketing efforts to be realized.

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For setting a target market, the following strategies are used:

● Strategy of non-differentiated marketing. Neglecting market segmentation and appearing in the whole market with one kind of product.

● Strategy of differentiated marketing. Targeting in few market segments and giving special product offers for each of them.

● Strategy of concentrated marketing. The attempt to realize a bigger share on one or smaller market segments.

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4P

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It is possible to spread in the market if there is an appropriate fashion product, sold at the appropriate price, at the appropriate places and promoted in the best possible way, so the main principles for a breakthrough in the market are:

● cheaper product,● better product,● different product, and● better service.

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In almost every branch of economy there is at least one companyacknowledged as a market leader.

Market leaders most often develop the following marketing strategies:

A- The strategy of expansion in the whole market is based on taking over new consumers, new use of products and increased buying by the current buyers. Strategy of taking over new consumers is carried out in three ways: taking over a group of relative non-buyers, spreading segments by adding new consumers and selling products out of domicile market, i.e. strategies of geographical expansion.Strategy of new use of product is applied with those products which can satisfy some other needs, beside their main purpose. One example is nylon which was firstly used as a synthetic fibrefor parachutes, as a thread for stockings, then for blouses for men and women, as well as in production of car tires, etc.

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B- The strategy of protection of market participation consists of taking measures in order to protect positions of their own products from the attacks of competition. One of these measures is a permanent innovation of products.

C- The strategy of expansion of market participation. Companies which decide to develop a strategy and increase market participation, as a rule, develop and improve their assortment of products, increase the quality of products related to the products of competitors. The increase of participation in the market can also be realized by bigger investments in marketing, better to say in promotion of products and modernization of sales space. Market participation is counted by putting a realized sales of a company into relation with overall realized sales in garment industry.

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4P

Product Strategy

The process of development of new garment consists of six phases, which are as follows:

1. Making an idea. It happens due to information obtained from market research, consumer needs, or is the consequence of making new technologies. Ideas from the market are made as a response to consumer needs of garments. Identification of market demands can influence the development of new technologies and new products.

2. Choice of product. All ideas cannot be accepted as new products. They must satisfy more tests: market potential, financial feasibility and product compatibility, needs and taste of a spoiled consumer.

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3. Previous shaping of product. It is the development of best design on the basis of the best ideal solution of new product. If a preliminary design of a new product is approved, next step is making a prototype for future analyses. While shaping a product there is often a conflict of interests arising from quality demands, costs and deadlines as well as a product which should be competitive in the market and technologies in production.

4. Making a prototype. There are various prototypes in classical production. Before making new garments it is necessary to make prototypes of referent characteristics in a defined size. The goal of prototype research is to check marketing and technological characteristics of a new product.

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5. Testing. Market research usually last from 6 months to 2 years and they are often geographically limited (it particularly refers to anthropological characteristics of a target group). The purpose of market research on a new product is gathering quality and quantity data about how it is accepted by buyers.

6. Final design of a product. Shaping of new product is often finished with specification completion, working on documentation (technical drawing) and production specification. Besides that, it is necessary to make an “informational package” to ensure production technologies and have data on process technology and quality control, as well as activities research of product characteristics.

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A fashion trend has its cycle of existence in the market (a product life cycle) which consists of four phases:

Product Life Cycle

Sales

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Price Strategy

There are high cost areas and low cost areas:

● Low- and middle-priced clothing is very popular and comes from Asia.

● Low- and middle-priced clothing is sold mainly by supermarkets and large high street retailers and basic department stores.

● Much of high priced clothing is still produced in EU.

● High-priced clothing is sold by luxury department stores, independent boutiques, own brand stores and via the Internet.

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The price has a psychological influence on consumers and that is why it can be symbolically used by:

● increasing the price to emphasize the quality of clothes that is being sold, or

● reducing the price to emphasize shopping, thus attracting buyers.

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The price is not the same as the value of product, because the producer can:

● set too high a price and lose the sales which could be profitable with a lower price.

● set too low a price and lose a potential difference in price, and the sales itself.

● set an “approximately ideal” price and make a profit necessary for further development.

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There are various methods of forming the price

(1) Method of forming the price based on costs

A- Method costs plus. It is the most often used method of forming the price. It is based on the conception of total products. Price is formed on the basis of real, planned or standard average costs, including the rate of profit which a producer of clothes consider normal or possible in a given period of time during which a price is formed.

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B- Marginal method of forming the price. It is based on a marginal conception of costs. It is appropriate for short-term forming the price. It enables the production–business system (PBS) to adjust to market situation even though it does not imply the knowledge of demand and competition. This method requires the knowledge of variable costs and possible market prices for each product.

C- Method of target rate of profit. When a producer is really focused on profit as a target function in forming the price. Disadvantage of this method is the usage of sales evaluation in order to form prices but, in fact, sales capacity is influenced by price when there is price elasticity of demand (elastics demand means big changes in demand due to relatively small changes of price).

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(2) Method of forming the price based on demand and competition

A- Method based on demand. The starting point is what price could be accepted for the product by consumers, thus seeing the costs of production and sales. A successful pricing requires understanding the factors which influence consumers sensitivity to prices (a unique effect of values, effect of comparison difficulties, effect of total costs, income effect, effect of dividing costs, investment discount effect, price effect, supply effect, etc.)

B- Method based on competition. Pricing is done according tocomparison of projected price of product to the one which acompetitive producer of clothes has.

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(3) New method of forming the price

New methods combine the influences of all four main factors of forming the price (costs, demand, competition and economic policy and measures of state price control). Prices based on values are those which maximize the expected perception of values by consumers. The emphasis is on estimating the product values and services for consumers, not on costs.

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The structure of production costs.

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When forming the price of product, it is necessary to pay attention to the quality of clothes, consumers, the price range of competitors and position on the market, beside costs, i.e. to answer the following questions:

● What is the final goal to be achieved by that strategy (spreading in the market, increasing profit, fighting back the competition, etc.)?● What is the product which is offered in the market?● Who is the consumer (which segment does he belong to, what are his spending habits, how does he decide what to buy)?● What does the consumer actually solve by buying the product?● Who is the competition and how does it satisfy consumer needs?● What is the right price with which we can achieve maximum profit?

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Producers of clothes, just like other producers, look for the ways to reduce their costs. One of the most popular ways of big companies is transferring their production into countries where the price of manpower is lower which still makes the price competitive in the market with higher transport costs and longer periods of delivery. However, even if the advantages of foreign investments with frequent deliveries are used (expensive transport), being incapable of quick responding to demands (due to distance and production process) can lead to incompetitiveness on the market very easily.

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Sales Strategy

Main task of sales, traditionally speaking, is to sell products to a large number of retail traders and wholesalers, industrial buyers, final consumers or users. Main task of sales, in modern sense, is promoting and selling company’s products, giving all kinds of information and services to consumers (before, during and after buying).

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In the phase of introducing new products in the market, the emphasis is on readiness of certain number of consumers to pay for the innovations in the market at higher price. Promotion is directed towards informing as many potential buyers as possible in a short period of time. Market is limited and distribution tends to be exclusive. In the phase of product growth the competition is bigger and there are modified products which are offered at lower prices. Sales grow at a rapid rate. Distribution is selective and promotion tends to shape a positive image on the mass market.The longest phase in the lifecycle of fashion product is a maturity phase in which fashion gets a massive response. Competition is very strong and prices go down. Distribution is increasing, whereas promotion tries to remind of what has already been fashion.

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The last phase, the phase of decline, is when the observed style soon goes out of fashion and sales and profit go down. Those who remain in the market try to prolong the lifecycle of product by intensive advertising or searching for new segments on the market.

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Promotion Strategy

Promotion is a process of communication between a supplier and a consumer and its aim is to create a positive attitude on products or services and their acceptance in the process of buying.

Most-often-used activities when promoting garments are fashion shows, various happenings, fashion videos and advertising in magazines. Main advantage of magazines is the fact that most of buyers keep them and in that way they are longer exposed to advertisements of potential consumers.

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Main types of promotional activities are:

economic propaganda, sales promotion, public relations, direct marketing and personal selling.

(1) Economic propaganda

Economic propaganda is a mixture of business activities aiming to inform potential buyers about the product and its characteristics and motivate them to buy it. It stimulates the demand, i.e. it helps to transform the needs into wishes. Increasing demand has a positive effect on production growth and prices, and it also reduces costs. That is how economic propaganda contributes the growth of business efficiency.Economic propaganda includes using magazines, film posters, signs, inscriptions, direct reports, calendars, albums, radio and television, etc.

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(2) Sales promotion

Sales promotion consists of all activities which immediately stimulate buying a product and urge market to react more rapidly and decisively,

The functions of sales promotion are:

● making sales quick and easy,● improving mutual interest of producer, consumer and trade,● educating of sellers,● creating positive atmosphere when buying,● increasing knowledge on products,● lessening seasonal oscillations, and● influencing public (e.g. fairs and exhibitions).

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The instruments of sales promotion are the following: gifts at largersales (e.g., fashion details – shawls, scarves, belts); reduced prices for buying more than one same product; coupons; package decorations; discounts; promotion material (fashion catalogues); rewards for faithful buyers; product presentations; lotteries, games, travel rewards, and so on.

The activities of sales promotion must be directed to sellers, too, inorder to sell products successfully, such as:

● trainings and continuing education on how to become and remain good sellers,● financial reward,● other kinds of rewards (travels, presents, choosing the best seller of the month, visits to garment producers), etc.

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(3) Public relations

Public relations is a type of promotion aiming to create good relationships between companies and their internal and external public. Main aim of public relations is a system activity directed towards individual segments of PBS environment in order to create the image, and it should be based on the culture of PBS. Main characteristics of public relations are direct, immediate and personal communication face-to-face. In its contents and style, symbolic essences of public relations are promotion constants, e.g. logos, colours and slogans. Creating a trade mark or a brand is often accomplished by public relation, not by economic propaganda or some other forms of promotion.

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The activities of public relations are the following:

● relation with printing presses and newspapers,● campaign of economic propaganda of fashion products,● making and maintaining local, national and international relationships,● maintaining relationships with investors, i.e. shareholders andrepresentatives of financial institutions, etc.

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(4) Direct marketing

Direct marketing includes promotion activities that are used tocommunicate directly with potential buyers, in order to get an immediate response or transaction. It opposes mass marketing and is a consequence of the wish to make individuals or social groups different from the others.

The characteristics of direct marketing are:● personal sales,● tele-marketing (phone contact),● by post,● catalogue marketing,● TV with wireless phone, and● Internet.

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The rules for success of direct marketing are as follows:● 50% appropriate data base,● 20% appropriate supplies,● 20% action time of direct marketing, and● 10% action promotion of direct marketing.

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(5) Personal selling

Personal selling is an oral presentation of a sales representative which includes conversation with one or more potential customers with the purpose of making sales or establishing long-term business relationships. It is considered to be the oldest and the most applied form of promotion.Personal selling is carried out within a unified system among the seller, buyer and retail space. The aim is the decision to buy, so we should focus personal sales on the sales conversation which consists of six stages:

● preparation (introducing new products, consumers and creating a sales atmosphere),● first contact, first impressions (trying to gain the confidence),● researching consumer needs (knowing to ask a question),● product presentation,● complaints elimination, and● sales termination.

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Sellers who make direct sales of clothing must know the psychology of sales, all the items, fashion styles, trends, colours, textiles, the ways of clothing maintenance, as well as the personality and consumer demands.For successful communication with customers, a garment manufacturer is required to transform his own ideas into symbols such as words, images and movements. This process is called encoding. A coded message is sent through a channel of communication. Channels can be personal (personal sales) and impersonal (economic propaganda, sales promotion and publicrelations). When a recipient gets the message, he transforms received symbols into a thoughtful message and causes a certain reaction. The reaction may be buying a product.

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There are different types of promotion strategies, such as:

● Push strategy that aims to distribute products through marketing channel and direct sales. Personal sales is mostly applied.

● Pull strategy that tends to provide distribution and sales of products by focusing on consumers. Economic propaganda is applied.

The decision to use push and pull strategies depends on the manufacturer reputation, its customer relationships and characteristics of the target market.