Strategies for Next Fashion Company in the Retail Industry

This document provides an analysis of the macro and micro environment of Next Fashion Company in the retail industry. It discusses key changes in the macro environment through a PESTLE analysis and the micro environment through Porter's five forces analysis. Based on the analysis, the document suggests strategies and tactics for Next Fashion Company to stay competitive in the market, including enhancing online presence, launching innovative products, and setting competitive prices.

Summative
Assessment

Table of Contents
INTRODUCTION TO RETAIL......................................................................................................1
INTRODUCTION OF COMPANY................................................................................................2
KEY RELEVANT CHANGES IN THE MACRO ENVIRONMENT...........................................2
PESTLE analysis.........................................................................................................................2
KEY RELEVANT CHANGES IN THE MICRO ENVIRONMENT.............................................4
Porter's five forces analysis..........................................................................................................4
SUGGESTED STRATEGIES AND TACTICS..............................................................................5
RECOMMENDATIONS.................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
APPENDIX......................................................................................................................................9
PESTEL analysis.........................................................................................................................9

INTRODUCTION TO RETAIL
Retail is the process of selling different products and services to the consumers with the
help of various distribution channel for the purpose of generating higher profits. The retail
market of United Kingdom is very big and there are various business entities such as Next,
Burberry, Marks and Spencer, ASOS etc. which are operating under it. It is providing
employment to more than 555000 individuals. Consumer expenditures of the industry is 56048
million pounds.
Illustration 1: UK fashion industry statistics, 2019
(Source: UK fashion industry statistics, 2019)
The above chart is showing that the contribution of clothing in the consumer expenditure
is 56048 which means a higher amount of the income is spent by customers on clothing (UK
fashion industry statistics, 2019). The clothing industry employs around 75% of people who are
working in the retail industry.
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INTRODUCTION OF COMPANY
Next Fashion company is one of the largest British Multinational organisations which are
established in UK. It was founded in year 1864 by Joseph Hepworth. It is headquartered in
Enderby, Leicestershire, England, UK. The company is having around 44000 staff members who
are contributing in the execution of business in systematic manner. It is having more that 500
stores in UK and more than 700 around the world which means it has captured a large market
share. There are various locations where it is having its stores (History of Next Fashion, 2019).
Some of them are Saudi Arabia, UAE, Japan, Indonesia, Ireland, Russia, UK, Kuwait etc. It is
the second largest fashion retailer of UK after Burberry and the market position of it is very high
because of brand loyal customers and good quality of all its products and services. Market value
of it is around 7.16 billion pounds. The estimated annual sales of it is more than 4 billion pounds.
2% of the revenues of the company is generated from the international sales rest of it is acquired
from domestic sales. For year 2018 net income of it was more than 590 million pounds and the
operating income was 759.9 million pounds. By analysing the profits of the entity it has been
determined that higher profitability is resulting in great market position and performance of the
company.
KEY RELEVANT CHANGES IN THE MACRO ENVIRONMENT
PESTLE analysis
For all the business entities it is very important to make sure that macro environment is
analysed so that the changes which are taking place in it could be taken in to consideration for
the formulation of effective business strategies (Carmignani, Francesco and Massimo, 2016). For
Next Fashion it is also very important to analyse it in order to determine the future steps which
are required to be taken for betterment of business. PESTLE analysis is a technique which best
suits to this purpose. All the elements of it are discussed below in context of Next:
Political: It covers different political policies which are related to taxation, trade and
others. One of the major factor which is affecting the fashion retail industry and the companies
such as Next operating business under it is Brexit. Exit of Britain from European Union is
affecting the whole sector because it has resulted in increased taxation and tariffs for the
importer and exporters. Due to this most of the entities like Next which are selling their products
in other countries are facing issues as they have to pay higher amount for exporting their items.
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Economic: The growth of economy, different rates such as inflation, deflation, exchange
etc., unemployment and disposable income are the main components of it. Due to all of them the
UK fashion retail industry is getting affected because a slight rise and decrement in these
elements affect the purchasing power of customers. In order to remain competitive in the
industry it is very important for the management of Next to make sure that they are paying
attention towards these factors so that negative impact of them could be decreased.
Social: All the forces such as age, career attributes, beliefs, culture, lifestyle, population
etc. which are directly related to the buying behaviour of customers are the major elements of
social factors. Trends related to fashion gets changes frequently and when a new one is launched
in the market then old one becomes less popular (Delbufalo, 2015). Due to this companies such
as Next are facing problems because demand and preferences of target market are changing
continuously with changes in trends.
Technological: Automation, research and development, level of innovation, awareness of
technology, changes in it etc. are technological factors which are affecting the fashion retail
industry massively because it affect the mind set of customers. Now a days all the customers are
becoming friendly with online shopping and they want that all the fashionable clothing items
gets delivered at their door step. Internet has affected the fashion sector and the companies such
as Next because now all the entities are required to be active online so that they can retain all the
customers from the targeted market (Haq, Khan and Ghouri, 2014).
Environmental: For all the companies it is very important to perform operations
according to the environment protection laws so that a positive image in the market could be
established and sustainable development could be acquired for business. Fashion industry is
being affected due to these factors because most of the clothes which are sold in the market are
made from sheep wool which affects the number of animals on the earth. Now a days most of the
companies such as Next are using plastic bottles for making clothes which is beneficial for
protecting the environment.
Legal: Government introduces different laws and acts which are required to be followed
by all the industries. These are mainly based upon rights of staff members, export and tax
restrictions etc. If a change in them is made by legal authorities then it affect the fashion retailers
such as Next because the companies have to make changes in their strategies which is very
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difficult. Ethics and compliance are also required to be focused by all the companies for working
effectively.
KEY RELEVANT CHANGES IN THE MICRO ENVIRONMENT
Porter's five forces analysis
Micro environment can be defined as the set of such factors which may affect the
decision making process and business environment. The major elements which are considered as
the part of it are competitors, suppliers, customers, intermediaries etc. For Next Fashions it is
very important to assess it so that effective strategies for development of business in future could
be formulated (Keddell, 2016). For this purpose Porter's five forces analysis could be used. Some
of the major elements of it are discussed below in context of Next Fashions:
Competitive rivalry: Retail fashion industry is very big and there are various key
players in this sector. These are Marks and Spencer, ASOS, Next, Burberry, John Lewis
Partnership, Arcadia Merchandise etc. It shows that level of competition in the industry is very
high for Next Fashions in UK. The main factors which are resulting in it are continuous changes
in the market structure, trends etc. Due to high level of competition the organisation may have to
face different problems such as lower profits, revenues, incomes etc.
Bargaining power of suppliers: The external stakeholders which are supplying raw
material to the business entities are known as suppliers. In order to sustain in the market it is very
important for companies to make sure that they take control over bargaining power of suppliers.
The retail fashion industry is very big and there are end number of them in the market which
results in lower negotiation of them with the companies such as Next. In the opposite condition
the company may have to pay higher amount to them if the number of them is very low in the
industry (Kim and Lee, 2015).
Bargaining power of customers: When there is high level of competition in the market
then it results in bargaining power of customers as they have different options to choose from.
The industry rivalry for Next is very high due to end number of competitors in the fashion retail
sector. Due to this, organisation may have to face the problem of decreased profits and sales. In
order to retain buyers it is very important for enterprise to make sure that recent market trends
are considered by it for the formulation of its strategies. It will be beneficial to deal with the
negotiation of clients (Mishra, Pundir and Ganapathy, 2017).
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SUGGESTED STRATEGIES AND TACTICS
From the macro and micro analysis of the business environment different problems which
are faced by Next Fashions. For the purpose of analysing the key tactics and strategies the theory
of retail could be implemented by the organisation. The theory which could be used by managers
of Next is wheel of retailing. It has three main phases which are entry, trading up and
vulnerability. All of them could be used by the enterprise to enter in a new market in which at
first stage it will enter in a new marketplace and offer its products at lower price. At second
phase the entity will trade in the market and expand its services. The last phase describes that
rising cost of business operations will result in higher price of products for customers and at this
stage prices are required to be increased to generate profits (Pedersen and Andersen, 2015).
There are various factors which could be focused by the organisations for the purpose of
becoming successful in future. Description of all of them is as follows:
Social factors from macro environment: Due to changes in the market environment or
trends, taste, preferences, requirements of customers etc. are social factors which may change
due to launch of new products and services in the market. In order to attain success in future
management of Next can pay attention towards them as it will help to find the best suitable ways
for attaining growth for business development. The suggested strategy for the company is
launching such types of clothes which are highly in demand in the market. For example, now
customers like to buy innovative clothes which are made from plastic. With the help of it
environment could be protected and a positive image in the industry could be established. The
enterprise is suggested to formulate strategy for the launching of new clothes which are made
from plastics as it will help to attract large number of customers and beneficial to achieve
success in future.
Technological factors from macro environment: From the analysis of macro
environment of the fashion industry it has been determined that online shopping is one of the
latest technological factor which is leading the sector towards massive success (Pedersen and
Netter, 2015). Due to this, it has been suggested to Next to enhance its online presence and
provide experience of online shopping to its clients so that they can get their favourite clothes
delivered at their door step. In today's world where every one is having busy life the option of
selling the clothes online will help the enterprise to grow, get developed and achieve higher level
of success in upcoming period. Digitalisation around the world is spreading quickly therefore it
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is very important for all the organisations to make sure that they are formulating business
policies according to it. The suggested strategy and tactic for Next is offering online order
facility to all the customers directly to its website so that they can get the good quality stuff
without visiting a store.
Industry rivalry from micro environment: The micro business environment is showing
that the competition in the fashion retail industry is very high due to this Next is facing various
challenges such as lower profitability, decreased sales, affected market image etc. In order to
deal with all of them the suggested strategies and tactics for the company is conducting effective
marketing campaigns, spending money in promotional events etc. Apart from this the enterprise
can also launch new and innovative products and set competitive prices for all its clothes which
will be beneficial for attaining competitive advantage in the market. It will help to deal with
higher level of competition from major players such as Marks and Spencer, Burberry, ASOS etc.
Bargaining power of customers from micro environment: Due to end number of
sellers in the retail industry the choices for clients are very high which results in higher
bargaining power of them in the industry. In order to deal with this problem the suggested
strategy for the organisation is offering online shopping services to the customers it will help to
retain existing ones and attract new ones towards the enterprise (Turker and Altuntas, 2014).
RECOMMENDATIONS
For all the organisations it is very important to stay competitive in the market so that
business could be operated in systematic manner. For this purpose, most of the enterprises are
required to take effective steps so that the possibility of challenges in future could be decreased.
There are various recommendations which are provided to Next for the purpose of dealing with
all the problems which are faced by it in the market. All of them are as follows:
 The management of the organisation is suggested to enhance online visibility and
presence of the business so that it can attract large number of customers and increase the
sales.
 By launching new and innovative clothing items in the market the enterprise will be able
to attract large number of customer and retain its existing clients (Wang, 2016).
 The top level executives are recommended to form new marketing strategies and set
competitive prices for all the products so that it can help to attain competitive advantages
in the market.
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 Managers are also recommended to adopt latest technologies and then formulate
strategies for business execution as it will help to be the first choice for the targeted
audience.
CONCLUSION
From the above project report it has been concluded that Next Fashion is one of the
largest fashion retailers in the UK which is offering its clothes to different countries in the world.
The companies which are planning to attain growth in future are required to conduct analysis for
assessment of macro and micro environment. The models which could be used for same purpose
are PESTLE analysis and porter's competitive analysis. With the help of both of them the key
areas for the improvements could be identified and then effective strategies along with tactics
could be adopted to deal with the issues. In order to be highly competitive in the industry the
business entities such as Next should set appropriate prices for all the products and formulate
highly effective promotional strategies.
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REFERENCES
Books and Journals:
Carmignani, G., Francesco, Z. and Massimo, B., 2016. Using SCRUMBAN methodology for
production planning and control in luxury/fashion manufacturing companies. In 19th
International Working Seminar on Production Economics (Vol. 1, pp. 41-52).
Delbufalo, E., 2015. The influence of supply network structure on firm’s multiple innovation
capabilities: a longitudinal study in the fashion industry. Management Decision. 53(10).
pp.2457-2476.
Haq, M., Khan, N. R. and Ghouri, A. M., 2014. Measuring the mediating impact of hedonic
consumption on fashion involvement and impulse buying behavior. Indian Journal of
Commerce & Management Studies. 5(3). pp.50-57.
Keddell, J. P., 2016. The Politics of Japanese Defense: Managing Internal and External
Pressures: Managing Internal and External Pressures. Routledge.
Kim, S. A. and Lee, S., 2015. Case Study of Using Facebook of Each Type of Internal and
External Sports and SPA Fashion Brands. Journal of the Korean Society of Clothing
and Textiles. 39(3). pp.337-352.
Mishra, R., Pundir, A. K. and Ganapathy, L., 2017. Evaluation and prioritisation of
manufacturing flexibility alternatives using integrated AHP and TOPSIS method:
evidence from a fashion apparel firm. Benchmarking: An International Journal. 24(5).
pp.1437-1465.
Pedersen, E. R. G. and Andersen, K. R., 2015. Sustainability innovators and anchor draggers: a
global expert study on sustainable fashion. Journal of Fashion Marketing and
Management. 19(3). pp.315-327.
Pedersen, E. R. G. and Netter, S., 2015. Collaborative consumption: business model
opportunities and barriers for fashion libraries. Journal of Fashion Marketing and
Management. 19(3). pp.258-273.
Turker, D. and Altuntas, C., 2014. Sustainable supply chain management in the fast fashion
industry: An analysis of corporate reports. European Management Journal. 32(5).
pp.837-849.
Wang, Y. S., 2016. Dynamic capabilities in fashion apparel industry: emergent conceptual
framework. Baltic Journal of Management. 11(3). pp.286-309.
Online
UK fashion industry statistics. 2019. [Online]. Available through:
<https://fashionunited.uk/uk-fashion-industry-statistics/>
History of Next Fashion. 2019. [Online]. Available through:
<https://www.nextplc.co.uk/about-next/our-history>
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APPENDIX
PESTEL analysis
Political Economic
 Brexit
 Political instability
 Political influences on fashion trends
 Sudden changes in inflation or deflation
 Lower purchasing power of clients
 Higher unemployment rate
Social Technological
 Changes in fashion trends
 Fluctuation in demand and preferences
of customers
 Demographics
 Increased interest of customers in
online shopping
 Technological advancement
 Higher interest in researching about
products and latest trends
Environmental Legal
 Clothes made from plastic are in trend
 Climate change
 Animal protection acts
 Employment act
 Sudden changes in the governmental
policies
 Laws for international trade
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