This essay provides a business analysis of River Island Clothing Limited, highlighting the company's current position and three critical problems. It also evaluates strategic options to resolve these problems using the SAF framework.
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River Island Business Analysis Strategic Leadership in a Changing World CW 2 ZAKIYY ALAUDDIN (15050798) CHRISTINA COATES (15041984)
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“River Island Company Business Analysis” The purpose of this essay is to enlighten the reader about the company River Island Clothing Limited and the issues they facein their current markets. The essay highlights details about the current position of the company along with three critical problems affectingRiver Island in theircurrent corporate environment. Next, the essay will go on to evaluate details about three possible strategic options available toRiver Islandtohelp resolve their critical problems in the target market. For the purpose of evaluation of the provided options, SAF framework has been used in the paper. Suitable, Acceptable and Feasible strategy model clearly analyse the applicability of all the three options in the business. River Island is a UK based high street fashion brand that operates primarily in the domestic market, but additionally in foreign markets as well. It was founded in London in 1948 by Bernard Lewis and his brother, it has still remained privately owned by the Lewis family since creation. It is a holding company of the Lewis Trust Group. River Island creates high street fashion clothing for men, women and children as well as fashion accessories and footwear. In total, there are 350 stores across the UK, Asia, Ireland, Europe and the Middle East. Alongside the stores, they operate online through a website, allowing consumers to pay in 4 different currencies, they ship to over 100 countries worldwide. River Island is well known for producing fashionable clothes and accessories at an affordable price. Three strategic issues of the company that are going to be considered in this essay are customer relationship, supply chain and investment risk and sustainability.Ensuring a healthy customer relationship is a key aspect for River Island as they try to expand their potential target consumer base. The current market that River Island operates in is a perfect competition market, which is comprised of many competitors offering similar high streetaffordable fashion clothing and accessories with an unlimited amount of potential consumers, some of their main competitors being Topshop (Arcadia Group), H&M and Zara, all of which operate on much larger global scale with H&M having over 5000 stores and Zara having over 7500 store globally. Thus meaning that River Island 1 Zakiyy Alauddin (15050798) Christina Coates (15041984)
have a much lower market share compared to those 3 competitors. Furthermore, as these businesseshave more than 10 times the number of stores in comparison to River Island, so River Island must maintain a healthy customer relation especially when they aren’t able to reach as many target consumers as their competitors.Furthermore, in an attempt to better customer relations River Island recently launched a new campaign ‘Labels are for clothes’ this was done to create awareness for ‘100% Gender Free’ movement in which models wore both men’s and women’s clothing.This campaign allows them to target a new segment of the market that has in the past been overlooked by their other competitors but also, at the same time allows River Island to increase their potential consumer base and improve their brand image as they are catering for all people regardless of gender.It should also be noted that due to the lower penetration in the market compared to their major competitors, River Island is also facing the issues of retaining their existing customers. This is due to the reason that their major competitors such as Zara have achieved global brand status, which is helping them to cater to the customers in more extensive manner. In addition, the customers are also getting more attracted due to their global branding. In this case, it is a major challenge for River Island to retain their customers by having limited branding opportunities in the market. The next issue facing River Island is supply chain and investment risk. River Island operates on a small global scale, this means they need to have an efficient supply chain for their organisations because they need to distribute clothes and accessories to different countries and even continents across the globe. River Island works with a motto to put the business on providing original designs, efficient manufacturing and timely distribution of products to the customers in the market. This results in an increase in the need of effective supply chain management so that the business can adequately deliver the products they advertise to the consumers through in-store sales as well as online sales (Woods 2018).Furthermore, River Island produce and sell high street fashionclothingandaccessorieswhichisawell-knownmarketforhowquickly consumer trends change, so they need to ensure that their supply chain is efficient because of how quickly fashion trends come and go they are under a lot of pressure to quickly manufacture their clothes and get them into their stores, while still trying to 2 Zakiyy Alauddin (15050798) Christina Coates (15041984)
maintain the quality of their products Also, as River Island operates on a global scale they will need to take into account the different fashion trends that are specific to consumers in their domestic market that may not be as popular to consumers in foreign markets.Resultinginwhich,RiverIslandfacesthisconstantfearoflosingtheir consumers.It has been reported as an issue of customer relationship management since the company has started trading its products online. Late deliveries and heavy chargesoftheproductshavemadetheorganizationsufferintermsofsales (Santamaria 2018).On the other hand, it should also be noted that the supply chain of RiverIslandshouldbeeffectiveenoughduetothereasonthattheprice competitiveness of them is dependent on their supply chain. If the supply chain can be made effective and efficient enough, then it will help them to regulate the pricing and will also enable them to gain cost leadership advantages over their competitors. However, in the case of River Island, they are not gaining cost leadership due to the fact they are operating in small scale. As discussed in the above section, business operation of River Island is smaller than of their major competitors. Thus, the economies of scale being gained by the brands such as Zara due to their huge operation are not in the case of River Island. It can be concluded that increase in the business operation for River Island will help them to gain the economies of scale along with cost leadership in the market. The supply chain of River Island is exposed to potentially adverse events such as physical disruptions, industrial and environmental accidents that easily impact on the ability of the company deliver its products to the customers on time. The customers judge the product through its ontime delivery as well. Thus, it can be said that the supply chain activities of a business affects their brand reputation in the market. One of the key problems are where the clothes are manufactured, in the past River Island have comeunderscrutinyforoutsourcingmanufacturingtosweatshopswithunderpaid workers and awful working conditions often in countries like Bangladesh and China. Which in the past has caused some consciences, consumers,to boycott River Island and damaged their brands reputation.Further, it should also be noted that the company has taken various wrong investment decisions that have affected the supply chain process of the company. The retail market has been tough in the past few years that 3 Zakiyy Alauddin (15050798) Christina Coates (15041984)
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haveaffectedmanyorganizations.RiverIslandinvesteditsmoneyinstrategic expansion in clothing line due to which the company faced a 7% decrease in the profits in the year 2018 (Hammett 2018). Additionally, the last issue facing river island is sustainability.It isone of the main strategic issue faced byRiver Island in the global market. Sustainability is an important aspect for the customers and the company as well but with one of themain targets of the company to earn more revenue sometimes make it difficult for them to be sustainable. The vision of River Island is to double the size of the business by satisfying the customers and reducing the environmental impact and grow sustainably. The company producesclothes,footwearandaccessoriesthattakeamajorpartinincreasing greenhouse gases in the community. The carbon emission from the manufacturing process of the company is increasing day by day that is slashing human health. Further, it should also be noted that the fashion industry keeps on changing day by day (Rashid, and Barnes 2017). Companies like River Island play a huge role in changing the face of the fashion industry so the company faces difficulty in managing the growth while adopting sustainable fashion changes present in the environment. Already the company was facing technical issues in initiating online sales and then adopting dramatic fashion changes affects the sales of the company repeatedly.In this case also, the major challenge for River Island is to maintain the seamless cash flow required for initiating sustainableactivities.Intermsofthesustainablebusinesspractices,themajor competitors of River Island are ahead due to the reason that they are having access to larger financial resources due to their global business operation. Thus it is important for River Island to increase the cash flow in order to have effective process of sustainable business practices. Three strategic options for River Island that are going to be considered are product development, diversification and market development. Product developmentrefers to the Ansoff matrix strategy under which the business aims to expand the business by introducing a new product line in the same market they already operate in. River Island alreadyservesclothing,footwearandaccessoriesintheirdomesticandforeign markets, introducing a new cosmetic line in the market will help the organization to 4 Zakiyy Alauddin (15050798) Christina Coates (15041984)
successfully grow. Especially because it will allow them to have first movers advantage for expanding their products line, this is because it hasn’t been done by any of their competitors, although one of their stronger competitors Zara is known for having their own successful fragrance line, so River Island could also introduce a fragrance line alongside a new cosmetics line to widen its product portfolio. They won’t have any first movers’ advantage for the fragrance line but there is still a demand for it within River Island’s potential consumer base. The main demographic of River Islands consumer base are people between the age group 18 to 30 who mostly use make up on a day to day basis and while going to parties or attending meetings (Robinson, and Hsieh 2016). So, the company should produce beauty products to target these people so that they can feel comfortable and confident while wearing clothes and make-up of River Island clothing company. This will help in attracting and retaining customers by offering new products to the market (Goworek, Perry, and Kent 2016). The next strategic option is diversification it refers to the Ansoff matrix strategy under which an organization aims to diversify the scope of the business by introducing a brand new product to a brand new market. Considering the relation of diversification strategy with the River Island clothing limited company, it should be noted that the company should diversify its scope of business with a new product line of cosmetics to the American market. The beauty care industry is highly profitable and expanded in the target market so diversifying the scope of business will help the organization to enter in a new industry from which they will lower their investment risk by notjust operating in the fashion industry but also operating in the cosmetics industry.(Gardetti, and Torres 2017). The American market is favourable for the company to enter, as it is a tourist location due to which the economy of the country is favourable to enter. The diversified target market of America will help the organization to promote the brand in the eyes of prospective people present in the market. Furthermore, due to the rise in influencers and celebrities using make up it will have an already existing demand.This process will subsequently increase brand awareness and can make it easier for River Island to break into the American market with their main products. However, with their being a lot of bureaucracy in America River Island will face some barriers of entry before they can 5 Zakiyy Alauddin (15050798) Christina Coates (15041984)
operate in the American market. This strategy will help the company to target new customers and maintain a fixed relationship with them by eliminating supply chain issue and barriers as well. This will also help the company to invest their income in the right direction by expanding into a huge market that can help River Island achieve their vision of growing on a global scale. (Todeschini, et. al., 2017). The final strategic option for River Island is market development it again refers to one of the Ansoff matrix strategies, under which the business aims to expand their business operationsby exploring new markets for them to sell their clothes too. It is believed that market expansion strategies always provide various benefits and profitability to the companies. So, the company River Island should aim to make use of the Greenfield InvestmentstrategytoexpanditsscopeofbusinessintheSingaporemarket (Henninger, et. al., 2017). The fashion and clothing industry is the biggest revenue making industry present in Singapore with an expected annual growth rate of 12.5% in the year 2019. Further, it should be noted that a Greenfield investment strategy will help the organization to completely start their fashion retail business from scratch and help develop physical storesas well as having an online store. In this way, the company will easily eliminate bridges like Zalora coming between the customers and the company. Further, opening physical stores will increase the faith of the customers in the brand and will make the company more sustainable in the worldwide market (Statista 2019). In terms of the product development, it is also recommended that River Island should consider the introduction of their existing product line in different price points. This can be effective due to the reason that currently River Island is operating in the premium clothing segment, which is limited in terms of volumes. This if River Island can introduce their existing products in lower price levels, then their market share and sales volume will get increase as more mass market customers will get attracted with the affordable price points. Moreover, it should also be noted that the premium and favourable brand value and identity being gained by River Island will be beneficial to push the sales of their products in the lower price points. Hence, it can be concluded that the issue of 6 Zakiyy Alauddin (15050798) Christina Coates (15041984)
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lower market penetration for River Island can get mitigated with the help of affordable offerings. In terms of global expansion also, this strategy will be effective due to the reason that affordable products are having the major chances of getting succeeded in the global market compared to the premium products. Thus, River Island will face lower challenges in entering in the foreign markets with the help of their affordable products. In terms of the market development strategy, it is recommended that they should firsttargetthedevelopingeconomiessuchasIndia,BrazilandChinaoverthe developed economies for their foreign market operation. This is due to the reason that in the current global business scenario, developing countries are growing at larger rate compared to the developed economies. For instance, India and China are the top two countries in the world in terms of annual economy growth. Moreover, regulations and standards in entering in these countries are also much easier compared to the business operation in the developed countries. Hence, it can be concluded that entering in the developing countries will help River Island to have larger target segments along with having fewer business challenges. This strategy can further be complemented with market penetration business strategy. This is due to the reason that the recommended strategy of entering in the mass market clothing segment will find its pace in the developing countries due to the reason that these countries are having highest number of middle class population. Furthermore,itshouldbenotedthattheabovementionedthreestrategieswill successfully help the organization to promote its sales in the market. The product development strategy is suitable for the company to maintain an efficient customer relationship in the market. This strategy will help the company to attract customers towards new product and then maintain a solid relationship with them. Further, this strategy is acceptable because it takes calculate risk by introducing the product in the market in which they are already present. Also, this strategy is feasible because their consumers are already purchasing clothing, footwear and accessories and the demand for cosmetics already exists in the market. (Goworek, et. al., 2018). 7 Zakiyy Alauddin (15050798) Christina Coates (15041984)
Furthermore, the diversification option for investment and supply chain issue, it should be noted that this option is less suitable to the company according to SAF framework, because as the organization hasno physical stores in America so they will face difficulty when introducing a new product line in that market, especially when their three main competitors Topshop(Arcadia Group), H&M and Zara are all already well established in Americawithhugefollowingsandbrandloyalcustomers.Lastly,themarket development strategy for the sustainability feature will help the company introduce new markets and actively initiate CSR activities in the market. This strategy will help the company show its actions on the worldwide level and satisfy customers to a greater extent (Oxborrow, et al., 2017). Thus, due to which it can be said that this strategy is suitable, feasible as well as acceptable for the company. Thus, in the limelight of the above-mentioned events, the fact should be noted that the paper evaluated information about the strategic issues and options for the company River Island Clothing Limited. The company is facing three major issues that can be solved using product development, diversification and market development strategies. Suitability, acceptability and feasibility of the options are also overlooked in the paper. Effective implementation of these strategies will help River Island to gain more market share in the foreign markets and can take the challenge to their major competitors. In addition, this will also help River Island to the global branding similar to their global competitors. 8 Zakiyy Alauddin (15050798) Christina Coates (15041984)
References Gardetti, M.A. and Torres, A.L., 2017.Sustainability in fashion and textiles: values, design, production and consumption. Routledge. Geoghegan., J. (2017) Profits slip at River Island in ‘challenging market’ [online]. Availablefromhttps://www.drapersonline.com/news/profits-slip-at-river-island-in- challenging-market/7026182.article[Accessed on 20 Feb. 19]. Goworek, H., Oxborrow, L., Claxton, S., McLaren, A., Cooper, T. and Hill, H., 2018. Managing sustainability in the fashion business: Challenges in product development for clothing longevity in the UK.Journal of Business Research. Goworek, H., Perry, P. and Kent, A., 2016. The relationship between design and marketinginthefashionindustry.JournalofFashionMarketingand Management,20(3). Hammett., E. (2018). River Island hopes renewed customer experience focus can help itseeoffdigitalrivals[online].Availablefrom <https://www.marketingweek.com/2018/08/01/river-island-customer-experience/> [Accessed on 20 Feb. 19]. Henninger, C.E., Alevizou, P.J., Tan, J., Huang, Q. and Ryding, D., 2017. Consumption strategies and motivations of Chinese consumers: The case of UK sustainable luxury fashion.JournalofFashionMarketingandManagement:AnInternational Journal,21(3), pp.419-434. Oxborrow, L., Goworek, H., Claxton, S., Cooper, T.H., Hill, H. and McLaren, A., 2017, July. Managing sustainability in the fashion business: exploring challenges in product development for clothing longevity. In2017 Global Fashion Management Conference at Vienna(pp. 376-381). Rashid, A. and Barnes, L., 2017. Country of Origin: Reshoring Implication in the Context of the UK Fashion Industry. InReshoring of Manufacturing(pp. 183-201). Springer, Cham. 9 Zakiyy Alauddin (15050798) Christina Coates (15041984)
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RiverIsland.,(2019)AboutUs[online].Availablefrom <https://www.riverisland.com/inside-river-island/about-us> [Accessed on 20 Feb. 19]. Robinson, P.K. and Hsieh, L., 2016. Reshoring: a strategic renewal of luxury clothing supply chains.Operations Management Research,9(3-4), pp.89-101. Santamaria., B. (2018) River Island challenges social stereotypes in new campaign [online].Availablefromhttps://uk.fashionnetwork.com/news/River-Island-challenges- social-stereotypes-in-new-campaign,944766.html#.XGzmXKIzbIV[Accessed on 20 Feb. 19]. Statista.,(2019).Fashion[online].Availablefrom <https://www.statista.com/outlook/244/124/fashion/singapore>[Accessedon20Feb. 19]. Todeschini, B.V., Cortimiglia, M.N., Callegaro-de-Menezes, D. and Ghezzi, A., 2017. Innovative and sustainable business models in the fashion industry: Entrepreneurial drivers, opportunities, and challenges.Business Horizons,60(6), pp.759-770. Woods., B. (2018) River Island profits down as retailer adapts to online world [online]. Availablefrom<https://www.telegraph.co.uk/business/2018/09/24/river-island-profits- retailer-adapts-online-world/> [Accessed on 20 Feb. 19]. MeetingNamesDateLocationObjectives 1.Zakiyy Alauddin Christina Coates Jan. 29LRC Reviewed assignment brief. Set expectations for group members 2. Zakiyy Alauddin Christina CoatesFeb. 05LRC Decide on the company Discuss useful and reliable sources 3. Zakiyy Alauddin Christina CoatesFeb. 12LRC Analyse research and agreed on three issues and options for the report. 10 Zakiyy Alauddin (15050798) Christina Coates (15041984)
4. Zakiyy Alauddin Christina CoatesFeb. 19LRC Merge team members report Discuss necessary improvements 5. Zakiyy Alauddin Christina CoatesFeb. 22LRC Made the required changes Read over the final report 6. Zakiyy Alauddin Christina CoatesMarch 01LRC Finalise referencing Add Appendix Appendix 1: Meeting Log 11 Zakiyy Alauddin (15050798) Christina Coates (15041984)