Massimo Dutti Marketing Analysis

Massimo Dutti Marketing AnalysisMassimo Dutti was founded in 1985 as a company whose main(prenominal) activity was the sale of personal mannerable mens apparel. Ten age later, the commercial format was bought by the Inditex Group (Industria de Diseo Textil S.A.), one(a) of the worlds largest fashion distri only ifors, who owns brands like Bershka, Pull and Bear and Zara. The Inditex Group as a whole has more(prenominal) than 4,530 stores in 74 countries in Europe, the Americas, Asia and Africa. The group likewise parti whollyy and wholly owns more than a hundred companies related with the varied activities in the business of stuff and fashion design, manufacture and distribution. Its unique management model, based on innovation and flexibility, and its vision of fashion has resulted in fast international expansion and an excellent mathematical operation of all its commercial formats.Today, Massimo Dutti has more than 490 stores in 41 countries. The company entered UK in 200 3 with its first store in London. The parvenu megastore occupied three floors of a construction placed in downtown Regent Street, which had more than 2,000 squargon meters of business area. Massimo Dutti offers quality international fashion design for men, women and nestlingren, with a variety of collections that range from educate urban fashions to casual wear. Its universal design connects with independent urban men and women whose lifestyle portrays an impeccable image. During 2008 Massimo Dutti extended its assortment of complements and accessories to swear out customers find the small expatiate that mark the difference in style and add the finishing touch to the desired look. Highlights in this product extension are the late line of oculus and sunglasses, The Eyewear Collection, with more models for men and women, and the launch of a new womens perfume, En Esencia. The company also added the childrens line in 2008 which includes collections for boys and girls and was lau nched in Paris. During the same year, the chain entered six new countries Poland, Romania, Czech res publica, Slovenia, Guatemala and Israel. It also continued its expansion in the Asian Pacific region, opening its second store in Hong Kong, in Harbour City, one of the citys main shopping areas. With this establishment, Massimo Dutti now has three stores in China, where it opened its first store in 2007 in Macao. In total they opened 44 new stores in 38 new countries to develop their international presence. (Appendix B.1, B.2, B.3)This report examines the environment in which the company is situated. The macro environment covers the fronts in the changing environment and how they could potentially postulate the Massimo Dutti supply chain. It also suggests various opportunities and threats that the company may consent to face. The second section of the report analyses the various s gravelholders i.e. the suppliers, consumers, competitors etc in under the micro environmental analy sis. The trey section of the report analyses the internal environment and includes the supply chain analysis, the grocerying re rises, fiscal resources and the human resources employed within the memorial tablet. The report concludes by suggesting a strategic watchfulness the company should take in order to reach its full potential.Macro Environment AnalysisMassimo Dutti being a global organisation is modify by a number of macro environmental factors. These factors are the basis on which a company develops its understanding of the commercialize places, business position and the strategic direction for its operations.In new-fashioned years the macro environment has been increasingly being put into consideration because of uplifteder marker volatility, the global slowdown and the economic fadeout. These factors non only pose a great threat to businesses but gouge also create many opportunities which a company can identify and take advantage of. For instance, if a business is able to assess its current environment and predict potential flips, it will be better placed in its marketplace than its competitors to respond to changes in the environment. Thus understanding and operating with the macro environment i.e. the external environment in which the business operates, is increasingly becoming the key to organisational supremacy as it can help to maximise opportunities and minimise threats which the organisation faces. In some other words a macro environment scanning can help us to identify various opportunities and threats in the organisation. there are a number of macro environmental factors which affect the UK clothing sell market. These factors are cognise as the PEST factors or the political, economic, social and technological factors which help the scanning of the environment. (Appendix A.1)(P)olitical EnvironmentThe clothing retail sector in the UK has seen a number of changes in their political environment in recent years. The first chang e is the recent expansion of the EU territory which has facilitated import and export amongst various countries within the EU. As a result of this trade between these countries legal agreements and setting up new operations and stores has become more attractive than ever. For Massimo Dutti it translates to wider markets and a wider consumer base two within and outside the UK. This type of an come to is visible in a long term with a positive and increasing impact to the company.The second change is the change in interest rates and government taxation which is the result of the global economic recession. The government has implemented a range of measures to stabilise the financial markets and stimulate the economy including part-nationalisation of some banks, VAT cuts, and suexpense public sector borrowing rules. Also In March 2009, the Bank of England cut interest rates to a record low of just 0.5% where they remain at the time of writing. The government also gave the go-ahead for the more drastic policy of quantitative easing in an effort to kick-start the economy. (Appendix A.2) The impact of this government policy has resulted in a higher degree of spendable income in the hands of the consumer and has thus facilitated the retail sector. On the other hand when interest rates eventually start to drum they could do so quite suddenly and sharply thereby increasing the risk of slight send packinging on mid-market luxury retailers like Massimo Dutti. (Appendix A.3)(E)conomic Environment- Recession the UK Clothing RetailThere have been numerous amounts of economic changes since 2007 which are the result of the global economic slowdown and the recession. Until recently the British economy was enjoying the longest period of growth and had outpaced or so of the rest of Western Europe. But the global economic downturn, tight citation and falling house prices brought the UK into the recession in the back half of 2008. This economic downturn resulted in a change in the economic factors that affected the UK retail sector as a whole. The fashion application in particular(a) has been more under fire(predicate) to such a downturn than other retail settings. delinquent to the recession the economy has shown frequent magnetic variations in the currency rates. This change has affected the retailers as they have absorbed these fluctuations. This is because they are situated in a price-led market i.e. have to provide competitive prices in the market to survive further putting more pressure on their profit margins.Also due to the pass in the disposable income of the consumers only the cheap fashion / fast-fashion sector has benefited. Companies like Pennys, Primark and TK max have recorded highest gross sales due to the recession. The implications of such a trend are that less money is spent on designer apparel as well as accessorises. Consumers may stop spending on high end luxury brand and accessories and go in for fast-fashion clothing th ereby posing a risk to Massimo Dutti. It can also be noted that spending on clothing has reduced than compared to other spending sectors. The global economic slowdown has impacted heavily on clothing retailers as it has hit consumers willingness and exponent to spend on discretionary items. Thus companies like Massimo Dutti may face a slowdown in sales volumes.Unemployment has climbed consistently since mid-2008, reaching 7.8% by Q2 2009 and it could rise to over 10% in 2010. Youth unemployment (18-24-year-olds) exceeded 17% by the second quarter of 2009 and in the short term will continue trending upwards. This impacts heavily the purchasing power of those concerned and hence reducing an alpha market segment for mid-market luxury retailers. (Appendix A.2, A.4)(S)ocial Environment- The Changing DemographicsThe social environment relates to consumer attitudes and opinions towards different product types and brands in the marketplace. It also relates to changes in consumer behavio ur and their demographics i.e. age, sex, gender, family size etc. Changes in social trends can impact on the pauperization for a firms products and the availability and willingness of individuals to work. Thus it is very of the essence(p) for the firm to identify these factors and translate them into opportunities and get rid of all potential threats.A large number of consumers have changed the way they shop for clothes and in the main those changes involve cutting back in some way by spending less, by mostly acquire discounted lines, or by clouding from regard as retailers or less expensive shops. According to a research by Mintel over one in four people have not changed their shopping habits for clothes since the recession started but many consumers have, and the most significant changes are all savings-related i.e. spending less, shopping around more, not buying at full price, buying more from value or less expensive retailers. (Appendix A.5) This cutting back on expenditur e by the consumer means that they wish to spend more on value retailers rather than mid-market luxury retailers.According to Mintel the mid-market segment has also squeezed as a result of a price-led consumer market. For instance mid-market players like like-for-like and Dorothy Perkins have gone down in sales. Like-for-like traded down 2.4% in the Q1 of year 2009-10 and Dorothy Perkins was still heavy with summer markdowns when rivals were relatively clean with new autumn ranges. bedspreads international every quarter sales to August 2009 dropped by 5% which is an important competitor for Massimo Dutti. Other mid-market players like HM and MS have traded up as they are price-led retailers. (Appendix A.6) On the other hand high-end designer buyers tend to buy more from the mid-market than from the upmarket high street retailers as a result of the ongoing recession. This is because of lack of particular brand loyalty, financial inability to buy everything from designer brands and th e tendency of buying basics (i.e. T-shirts, jeans etc) from the mid-market retailers. (Appendix A.9)Another trend in change is that the 25-54s have traded down the most amongst all other consumer age groups. This age band has been among the worst hit by the recession because of their larger financial commitments. This age group is the main level market for Massimo Dutti and hence affect the company sales the most. (Appendix A.7) Because of a combination of various above discussed factors customers are much more likely to now buy more from familiar brands/shops they trust. (Appendix A.8)(T)echnological EnvironmentThe technological environment consists of changes in technology related to the manufacture, sourcing, distribution or sales of a various components of products in that industry. A change in technology for various processes in the industry sometimes creates barriers to entry and also leads to innovation. Thus it is very important for firms to adapt to the changing trends of technology.Online fashion has become significantly more popular as choices have improved. These days many consumers prefer to shop online as it not only saves time but also offers a full view of the collection at a single click. Fashion sites are also engaging more effectively with the customers through with(predicate) better product imagery, establishing online communities utilising user generated content, introducing virtual changing rooms etc. These types of innovations help the consumers to establish a better three dimensional understanding of the products they necessity to buy and hence provide a better opportunity for the marketers to capture the consumer. (Appendix A.10)Another trend is M-commerce. It is a potential source of growth for the future, particularly among the boyish a key demographic for fashion. But it will depend on more retailers launching mobile applications and on consumer ownership of smart phones. (Appendix A.10)Other FactorsThere are some other factors other than political, social, economic and technological factors that affect the UK clothing retail market. One of them is the environmental concerns facing the fashion industry today. umpteen environmentalists have raised objections against fast-fashion goods as they not only end up in landfills faster than usual but also because of the time, effort and resources utilized in their production. According to a research it shows that on average in the UK 30kgs of clothes per person are dumped into landfills as a result of the fast-fashion. It accounts for about 1,000kg of CO2 a year roughly half that emitted by a small diesel car. Each year the average person in the UK spends about 650 on 50 or so items of clothing and accounts for a large part of our carbon footprint. When they are manufactured, when they are transported, when they are washed and even when they are thrown away, clothes are responsible for significant greenhouse gas emissions. 90% of the clothes people buy in the UK are transported from abroad, mainly from China, India and Bangladesh and it only adds to the environmental impact of clothing. Also, working in the textiles industry often means long hours, low pay, poor safety records and the use of child labour. This it raises environmental and ethical concerns (Appendix A.11). It raises concerns for the Inditex group as a whole as their prime focus recently has been the introduction of fast-fashion products into the markets through their various brands.Massimo Dutti OpportunitiesWith the help of the macro environmental analysis opportunities of the company can be identified. These opportunities can be maximised so the company can be placed ahead of its competitors in the market. These opportunities are As a result of the EU territory expansion Massimo Dutti is able to reach wider markets both within and outside the UK increasing the scope of operations in the company. It also means that it is easier to source materials from the spouse countries , which is an important aspect of Massimo Duttis business strategy.The stimuli provided by the government in 2009 as a result of the economic recession have helped the people to overcome the problems of disposable income and hence has boosted the retail sector. However the impact is very long term and takes time to show signs of recovery.Shoppers of high-end designer clothes tend to buy more from the mid-market than from the upmarket high street retailers as a result of the ongoing recession. This has helped retailers like Massimo Dutti to capture new demographics.As a result of the rising concerns over the recession people have started spending lesser and lesser on clothes but have started to spend more on accessories which help them to look different with the same amount of clothes. Massimo Dutti thus has a competitive advantage because of their recent launch of men and women accessories as an addition to its prior range.Online shopping is one of the recent emerging trends in the fashion industry. This opens up markets for consumers who previously were unable to shop at specific stores. This also reduces the need for a physical location of its stores. This provides a huge opportunity for mid-market retailers whose sales can be boosted in the presence of online sales.M-commerce is another technological factor affecting the industry. It can tap the key demographic i.e. 25-50 year olds and therefore has a great potential for companies like Massimo Dutti whose main target market is this demographic.Massimo Dutti ThreatsDue to the Economic recession and currency rate fluctuation it has been difficult for retailers to keep up with a price-led market. This impacts the already low profit margins thereby posing a threat to the retailers.As a result of the lessen disposable income mid-market brands have suffered because people have shifted from them to fast-fashion cheap retailers who provide fashion clothes at a cheaper price.Another trend in change that has impacte d Massimo Dutti is that the 25-54s have traded down the most amongst all other consumer age groups. Being the key demographic of the company it has affected sales and may continue to do so in the future.As many environmentalists have raised objections against fast-fashion it poses a threat for companies like Inditex (Massimo Dutti) as their core business model revolves around the supposition of fast-fashion goods.Micro Environmental AnalysisThe micro environmental factors are those which are related with the firms immediate area of operation that affects the performance and decision making in that organisation. These factors also affect the boilers suit costs of the organisation the quality of products supplied and straightway contributes to organisational success. There are 3 major stakeholder groups which affect these factors. These are the suppliers, consumers and the competitors.The SuppliersThere are a number of ways in which the suppliers affect the performance of a firm. T hese may be related to the quality the supplier provides, the quantities that can be sourced from the suppliers, lead-time demands of the market or the ethical and environmental concerns followed by the suppliers. All these factors are responsible for having the right product at the right time to satisfy the demands of a firms consumer. establish on these factors firms must decide on issues such as who to source from, responsibility it takes for these suppliers and on the terms and conditions it adopts.Inditex has over 1,186 suppliers around the globe making it vulnerable to many factors. One of the most important trends in change is the adaptive process of suppliers to operate in low cost regions. This is because the textile industry inherently is a labour intensive industry and hence was the first to move to low labour cost regions. Five years ago, China was the only source for low cost products but now Vietnam is competing against inland China and parts of India for that same pos ition. This is because of the increased internationalisation of the clothing companies in Europe in the historic decade. As buyers are forced to spread their volumes across different regions, these regions or countries enter into competition with one another. This led to the creation of special economic zones in many countries, mostly with cheap labour. Besides cheap labour and resources these zones have no other connections to the local economy. On the other hand they are directly influenced by the high degree of fluctuations caused due to favourable or unfavourable conditions in foreign markets. China is one of the key suppliers to the European apparel industry but is less competitive than eastern European countries because of added logistics costs. (Appendix B.4, B.5)Another factor that has affected the suppliers is the requirement of buyers for environmental compliance and labour standards. Recently the government has launched a campaign to tackle the environmental and social i mpact of the fast fashion culture. As a result of this many retailers have introduced changes in their supplier regulations. For ensample Marks and Spencer, Tesco and Sainsburys have pledged to increase their ranges of Fair-trade and organic clothing, and support fabrics which can be recycled more easily. Also Tesco is banning cotton from countries known to use child labour. All these changes in the buying behaviour of the retailers have forced suppliers to follow stricter guidelines on environmental and ethical issues. (Appendix B.6)The ConsumersThe customers are a key to sales of all retail formats. An organisation must monitor its consumers and the trends in change that affect the consumers. By gathering data on shopping patterns of the consumers the retailers can identify realizable changes required to the marketing strategy. It can be in the form of a changed target market, the change in distribution channels or by responding to the new product or pricing needs of the consume rs.The target market for Massimo Dutti is women of 25-45 years old and men of 25-50 years old catering to the swiftness middle and upper socio economic class and upper middle cultural interests. The customer plays an active role in the Inditex business model. At Inditex production activity begins once customers demand reactions have been analysed. Unlike the traditional fashion company business model which started at the designers drawing table, Inditex activities starts by assessing the customers demands and continues to the store.The economic downturn is helping to boost sales of value clothing retailers. Consumers have been forced to cut back on other categories of spending like holidays abroad and restaurant meals. But consumer research shows that clothing is to be the most vulnerable area of spend amongst adults who have been forced to cut back their expenditure due to the recession, although value clothing appears to be one area of clothing expenditure that is responding posi tively to the trend. In response to economic worries, consumers are saving more and they appear to be trading down on clothing as a consequence. Specialist fashion discounters or value clothing retailers (led by Primark, TK Maxx and Matalan) are the main beneficiaries of the strong growth in value clothing sales, and have seen their sales rise by 7% to 5 billion in 2009. (Appendix B.7, B.8)The GfK NOP consumer confidence index, published on 31st March 2010, showed that overall UK consumer confidence fell to -15 in March, from -14 in February. The 2,000 adults interviewed by GfK NOP also took a more negative view of the overall economic situation over coterminous 12 months. The index also indicated that consumers are becoming more cautious about of their own personal financial situation. (Appendix B.9)The CompetitorsAnother important factor which affects the micro-environment of an organisation is its competitors. The success and behaviour of any business will depend on the degree o f competition in its market. In the case of fashion retail market the competition is intense because of a large number of players in the market. This puts a downward pressure on the price of the product offerings. Thus it is very important for a organisation to identify and monitor its competitors in order to obtain a competitive advantage.The major competitors to Massimo Dutti as a brand are Gap, banana tree Republic, Mango and HM (Hennes Mauritz).Gap Banana Republic (Gap Inc.)Gap Inc. is a clothing retailer from the US that has expanded into Europe via operations in the UK, France and Ireland. Clean, classic, American designs are the words on which the brand was founded and the current offer continues to reflect these values. The commercial formats at Gap Inc. include Gap, Gap Kids, baby Gap, Gap maternal quality and Gap body under the brand name Gap. Other brands which do not include the brand name Gap are Banana Republic and Old navy. Gap and Banana Republic have 140 stores in the UK. As a result of the tough trading conditions in all its markets, Gap saw the sales decline by 12% in 2008. However, Gap maintains a mid-market stance and as a result has looked to more muted act upon in the current recessionary climate as consumers seek items that will last longer. In August 2009 the company also ventured into the UK e-commerce arena, announcing the availability of Gap brand items on the ASOS website. (Appendix B.10, B.11)MangoMango is one of Spain largest clothing specialists and has also built up a sizeable international business in Europe, Asia and the Americas. Mango predominantly targets women aged 18 to 30 with a fashionable and sophisticated offer. Mango designs, manufactures and markets womens and mens clothing and accessories. Mango currently has a total of 1,220 stores in 91 countries worldwide. In the UK it operates 42 outlets which are mostly franchised. Mango follows the same multi-brand strategy as of Inditex. Mango has admitted that the glob al recession has led to a decline in the sales volume in early 2009 in markets such as Spain, Ireland, the UK and Russia. Consumers have been cutting back on their spending, particularly on discretionary items such as clothing. In reaction Mango has launched Think Up, an affordable sub-range for the weaker consumer climate. Recently, the group has expanded into menswear and has also hinted that it may launch a chain that targets younger shoppers. (Appendix B.12, B.13)