Guess?, Inc. - External and Internal Business Environmental Analysis

This report analyzes the external and internal environment of Guess?, Inc. in the fashion retail industry. It discusses the demographic, economic, political, social, technological, and physical environment factors. It also examines Porter's Five Forces and competitor analysis. Recommendations are provided to address challenges.

1.0 Introduction
Guess?, Inc. is an American clothing brand and retailer founded in 1981 by the Marciano
brothers (Shop.guess.com, 2019) namely Georges Marciano, Maurice Marciano, Paul
Marciano, and Armand Marciano. Its core business is in designing, marketing, distributing
and licensing of contemporary apparel and accessories for men, women, and children that
reflect the American lifestyle and European fashion sensibilities (Money.cnn.com, 2019). It is
listed in the US stock exchange with a stock price of $19.08USD (Bloomberg.com, 2019) and
its for the year 2018 revenue at $2.4B USD (Herrero, Marciano, and Marciano, 2019).
Guess?, Inc mission is to become the worldwide leader in the fashion industry
(Content.guess.com, 2019).
In this report, we will discuss and analyse the internal and external environment of the
Fashion Retail industry though Guess using tools like DEPSTGP, Porter’s Five Forces, Value
chain analysis and VRIO. The current strategies of the organisation will also be discussed to
analyse the efficiency and benefits to come out with recommendations to reduce the issues
and challenges faced by the company.
2.0 External and Internal Business environmental analysis
2.1.1 Macro environment analysis DEPSTGP
Demographic
 328,488,217 population in United
States (Worldometers.info, 2019)
 Increasing number of millennial and
less baby boomers
Economical
 Sixth highest per capita (GDP) in the
world
 Second largest manufacturer in the
world (Focus Economics, 2018)
Political
 Risk of changing the government
 Different rules and regulation
 Free from the barriers of Tariff and
non-tariff during trade
Social
 Diverse Culture
 High Immigration
 Clothing style is varied by social
status (Zimmermann, 2017)

Technology
 Improve living standard
 Workers are more productive
 Internet (Hitlin, 2018).
Global segments
 High rate of exports
 Business in worldwide
 Rate of export is increasing year by
year (United States Geogrpaphy,
2018)
Physical environment
 Environmental regulations and the environmental movement have emerged in order to
reduce the threat of environment
 Changing climate fluctuate the demand of consumers (United States Geogrpaphy,
2018).
Demographic
The population of United States stands at 328,488,217 as of 2018 (Worldometers.info, 2019).
The number of millennials occupied about close to a quarter of the total population at
75million strong (Frey, 2019). This group of customers are expected to overtake the
boomer’s generation as the largest US adult group by 2019 (Anon, 2019). This changing age
structure is favourable to the youth-centric fashion retail industry. Millennials are also the
most highly educated generation in history (CityLab, 2019), making them the group with
stronger spending power. As baby boomers are getting retired, the chances of Millennials
getting the new job will also be higher.
Social
It has been evaluated that the America is the only country who influence the other countries
to adopt their culture. It is one of the most culturally diverse countries in the world.
Therefore, percentage of Immigration is high as compared to the other countries leading to a

high percentage of growth in the U.S workforce. It is expected that the rate of workforce will
increase from 173million to 183 million in the year of 2035 through immigration (Cillufo,
2017).
The clothing style of Americans is varying by social status, religion and climate. Jeans,
baseball caps, sneakers, and boots are some items of clothing that are closely related with
Americans. The people of Americans are widely influenced by celebrities and the media and
fashion sales (Zimmermann, 2017).
Technology
It has been seen that the developing technology improve the living standard of a consumers.
Changing the living standard affects the demand of consumer towards the industry.
It has been evaluated that the workers are getting more productive as they use the advance
machines to do the work. In the year, the rate of using the advance technology products such
as broadband is 65% to 67% but it is observed that it is increases over the last two years with
the rate of 78 % to 73% (Hitlin, 2018).
Nowadays, no one can live without the mobile phones and internet. Every person uses the
smartphones and has an account on social media applications. It is beneficial for the
companies to promote their services (Litan, 2001).
2.1.2 Porters Five Forces
Threat of new entrants (High to
moderate)
Low level of capital requirement
(Hançerlioğulları, and Aktunç, 2016)
Bargaining power of consumers (High to
moderate)
Many companies provide similar services
(US Fashion Industry, 2019).
Bargaining power of Suppliers (Low to
moderate)
Low bargaining power
Companies can easily switch (Guess Los
Angles, 2019).
The threat of competitors (High to
moderate)
Charlotte Russe, J. Crew, Gap Inc. and
many others (Owler, 2019).
The threat of substitutes (Low to moderate)

Basic demand of consumer (US Fashion Industry, 2019).
Threat of new entrants – High to Moderate
It has been seen that the threat of new entrants is high to moderate. The companies have the
advantage to enter the US fashion industry as per the political support and high GDP rate.
Retail companies can easily enter the market due to low level of capital requirement.
(Hançerlioğulları, and Aktunç, 2016). The reason of high threat is its advance technology
which is used by the new entrants while entering the market (Yang, Song, and Tong, 2017)
The existing companies have high brand image in the market due to which it is difficult for
new entrants to beat the existing companies in the competition that is why; the new entrants
have high to moderate level of threat (Pratap, 2018).
The threat of substitutes
It is evaluated that the threat of substitutes is high to moderate there is no product that can
replace the clothes (Smith, 2007). It is observed that there are two types of clothes in the
industry such as ethical and fashion. Guess sales the fashion trends product that is why ethnic
wear is also a substitute for the company (Guess Los Angles, 2019). There is no item that can
replace the clothes from the other product but it is observed that the sports apparel and many
other industries of different clothes affect the business. It has been seen that the consumers
have many options in brands. There are many brands that can be easily replaceable the Guess
such as Venus, J.crew, Kohl’s and many others (Owler, 2019).
2.1.3 Competitor Analysis

Guess J.Crew Charlotte-russe
Price All type of prices Premium price
strategy
Cost leadership
strategy to attract the
teenagers
Place International
presence
Limited areas such as
US, Europe, South-
Eastern and Latin
American countries
Operates in 558
locations
Promotion New concept
advertisements to
build brand image
Campaigns and
advertisement
Advertisement
through TV stations,
hoardings and
sponsorship
Media and Non-
media marketing
communication
Product Diversified segments
in the fashion
products such as
fashion accessories
and clothes
High quality product
Major players in the
lifestyle industry
Focuses on fabrics
and raw material for
high quality
Offer different
services related to
fashion
Offers only clothes
Strength Latest designs and
fashions
Price as per
economies of scale
Good geographic
presence
Famous brand
Multiple sales
channels
Friendliness
Designs for teenagers
Weaknesses Rumours due to General perception of Less brand image as

controversy of
nineteen’s
consumer towards
the brand as
expensive
Limited presence
compare to
competitors
Lack of public
relation
Limited product
categories
Price
The competition between the companies is high such as J. crew, and Charlotte-russe (Owler,
2019). The companies adopt different pricing strategy in order to attract the customer towards
their products. J,Crew is a main competitor of the company because the demand of upper
class people is high and it adopts the premium price strategy of the product that helps it to
gain the competitive advantage. The revenue of the company states that it adopts the effective
strategy of pricing such as $2.15B as the annual revenue (Statista, 2018). The revenue of
Guess is 2.36 B as the gross revenue (amigobulls, 2018). Guess gain the competitive
advantage because it offers the prices to consumers as per their economic status.
Strength
As per the above discussion, the company offers the variety of products to consumer but it is
observed that the competitor of the company operates in limited areas. It offers the watch,
clothes, accessories, bags and many others (Guess, 2018). J.Crew offers the services of
clothes with its variety (J. Crew, 2018). It is a competitive advantage for the company as they
are leading over its competitors in the terms of providing the variety of products. The
company also offers the types of prices to consumer so that they can purchase the product.

Middle class and upper class the main target of the company as the J.Crew only target the
Upper class (Reuters, 2018).
Value chain and Resource Based view analysis
Value
Chain
Resource-based view VRIO Analysis Sustainable
Competitive
Advantage
Capabilities Resources V R I 0
Primary
Activities
Product
development
Operates in
fashion
products
such as
clothes,
fashion
accessories
and many
others
 ✗ ✗  Temporary
advantage
New Designs Develop
new
designs of
clothes
    Strong
competitive
Distribution
Management
It operates
in four
segments
such as
Retail,
Wholesale,
European
and
Licensing.
 ✗ ✗  Temporary
advantage

Brand
Management
It has high
brand
image in
the market
    Strong
Advantage
Advertising It uses the
different
tools and
source to
promote the
product
 ✗ ✗  Long term
advantage
Supportin
g
Activities
Financial
Management
It relies on
trade credit,
available
cash, real
leases and
generated
funds to
finance
expansion
(Guess,
2018).
    Strong
competitive
advantage
Technology
implementati
on
Different
technology
used by the
company to
develop the
new
designs
(Oshri,
2018)
 ✗ ✗  Temporary
Advantage
Human
resource
14700
employees
    High level of
competitive

management work in the
company
advantage
Patent
Management
It maintain
its assets to
protect
themselves
from
suffering
loss such as
Human
resource
managemen
t
 ✗ ✗  Partial
competitive
advantage
It has been seen that the company operates in the fashion products in the wide area such as
clothes, fashion accessories and many others. The product capabilities of the company are
valuable for it but it is not rare because there are many companies provide the similar services
(Guess Los Angles, 2019). It indicates that the company can gain the temporary competitive
advantage in the market as per its resources. New Designs is a factor which is considered as
strength for the company because it is rare, valuable, imitated and well organised (Think
Fashion, 2018). These qualities of the company help to gain the strong competitive advantage
in the market. The strong competitive advantage is necessary for long term survival in the
market. It has been evaluated that the distribution channel of the company is valuable because
it delivers the large number of services to consumer. It operates in four segments such as
wholesale, agents, European and licensing (Reuters, 2018). It is observed that the distribution
channel of the company is similar as the other company that is why; it is not a source to gain
the competitive advantage in the market. Brand management and advertising are the primary
activities of the company which helps to beat the competitors. The company uses the

different tools to promote the products in the market such as television, radio and many
others. The brand image is high as it is operating with the 30 years and the success of the
brand is a dream cream true for the company (Epparel, 2018).
The secondary activities of the company are financial management, human resource
management, patent management and the technology management. It is observed that the
trade credit, real leases and the generated funds. It earns the high revenue with the amount of
240 crores in US dollars (Guess Inc., 2019). The company has strong financial condition that
helps to adopts the new infrastructure and expand the business in the new market (Guess Inc.,
2019). The company achieve the success and build the high brand image in the market with
the help of employees. 14700 are the employees who work together with the company and
help it to provide the quality of services to consumers (Vault, 2018). It has been seen that the
company is capable in maintaining the assets which helps to protect them from suffering loss.
The supporting activities of the company help to gain the strong competitive advantage in the
market. Strong competitive advantage means the company earns the high revenue by beating
the competitors in the similar services for long time. As per the analysis, it has been seen that
the company can survive for long time in the market. The company gain the competitive
advantage as per its resources and capabilities. It has been seen that the resources of the
company are also valuable, rare and imitate in the market.
3.0 Current Strategic Position of the firm
Market Penetration
As discussed above, the company operates in four segments such as retailer, wholesaler,
licensing retailing and European (Reuters, 2018). It can easily build the strong relationship
with the suppliers and agents in order to deliver the services without any barrier as it has
strong channel (Leonard, 2019)

Diversification Strategy
It has been evaluated the company provides the new designs to consumers as per the trends
and fashion (Think Fashion, 2018). The differentiation strategy of the company develop it
brand image is different in the terms of product and services (Cheng, 2018)
Business level strategy
Expansion Strategy
The company plan the expansion in India market in order to earn the high revenue and
increases the sale of the product (Chakraborty, 2018). The brand is continuously grown
across Europe, Asia and the Middle East. It expands the business through the different online
platform (Higgins, Omer, and Phillips, 2015)
Acquisition Strategy
It is evaluated that the company acquire the other company by analysing its financial terms
and conditions. It acquires the company who generates the revenue between $10 million and
$ 125 million in terms of gross annual revenue (Reuters, 2018). The company acquire the
existing companies in the middle market. It adopts the roll-up strategy to acquire the growing
company to add-on transaction to expand the product and services (Guess & Co. Corporation,
2017).
Recommendation
Online presence

As discussed above, the controversy of nineteen’s damage the brand image of the company
due to which it faced the heavy loss. It is recommended that the company has to apologise the
controversy with the effective advertisement on social media application.
It is also recommended that the company also has to expand its business in the online
platform so that the large number of consumers can easily buy their products and services.
Advertisement on social media application helps to promote the product in the market and it
is a cost effective technique to promote the product. It helps to achieve the high success in
market in the near future (Suzuki, and Okamuro, 2017)
Competitive strategies
It has been seen that the company has high threat of competitors who provide the similar
nature of services to consumers. It is recommended that the Guess has to adopt the
competitive strategies and techniques such as cost leadership strategy, differentiation and
Focuses strategy. Although, the company adopts the price strategy but it also has to maintain
its cost so that it earns the high revenue in the market (Block, Kohn, Miller, and Ullrich,
2015).
Code of conduct
The company has to adequately inform the employees about the code of conduct so that they
can easily serve their purpose. During deliver the services in the country, managers of the
companies generally know about the codes of conduct. That is why, it is required to know the
code of conduct to employees so that they can easily and smooth operates in the market (US
Fashion Industry, 2019).

Conclusion
At the end, it is concluded that the US market is an appropriate market for the company to
grow highly in the market. It has large amount of resources and capabilities that helps to
compete the competitors such as J Crew, and Charlotte-russe. It adopts the current and
business level of strategy. Competitive strategies are the recommendation for the company to
gain the competition advantage.

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