Strategy, Product Mix and Tactical Decisions | Report

Strategy, Product Mix & Tactical Decisions
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Executive Summary
The report has been developed for undertaking an analysis of the strategic positioning of
the company, Accent Group Limited. The discussion held within the report ahs inferred that the
company is pursuing differentiation strategy for sustaining its position within the highly
competitive footwear market segment of Australia. The differentiation strategy is build on
embracing digital platform to redefine customer experience and improving its brand loyalty
among the customers.
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Contents
Section 1: Strategic Management....................................................................................................4
Introduction......................................................................................................................................4
Part 1: Brief Overview of the Firm History & its Strategic Priorities.........................................4
Part 2: Overview of Firm and its Environment with the use of Porter’s Five Forces..................4
Part 3: Strategic Recommendation with the use of Porter’s Generic Strategies..........................7
Part 4: Potential Financial and Non-Financial Measures for Evaluation of Firm Success..........8
Conclusion.......................................................................................................................................8
Section 2: Product Mix and Tactical Decision..............................................................................10
Part 1: Best product when machine hours is a constrained and when there is not any
constrained.................................................................................................................................10
Part 2: Optimal product mix.......................................................................................................10
Section 3: Linear Programming.....................................................................................................14
References......................................................................................................................................15
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Section 1: Strategic Management
Introduction
The report has been developed for carrying out an analysis of the future strategic
positioning of Accent Group Limited. The company was previously known as RCG Corporation
Limited and is known as a leading retailer of footwear’s having about 400 stores across Australia
and New Zealand. The firm faces stiff competition with the presence of large number of
international firms within the Australia footwear retailing market and rapidly changing
preferences of customers. In this context, the report is developed for conducting an analysis of
the strategic position of Accent Group Limited through the use of tools such as Porter’s Five
forces Model, porter’s generic strategies and the potential financial and non-financial measures
for evaluation of strategic recommendation given.
Part 1: Brief Overview of the Firm History & its Strategic Priorities
Accent Group Limited is recognized to be a leading retailer within Australia and New
Zealand having about 130 stores. The company was established in the year 1981 and is
headquartered within Melbourne. It owns different brands such as The Athlete’s Foot, Platypus,
Hype DC, Skechers, Merrell, Cat and others (Accent Group Limited, 2019). The different brands
of the company own and operate various types of footwear and apparel businesses in the
performance and active lifestyle sectors. It conducts its operations through four segments that
are, the athlete’s foot, a franchisor and retailer of general sports footwear. The strategic priority
of the company is to provide unique customer experience and retain its distinctive competitive
position within the footwear retailing sector of Australia. As such, the company is placing high
emphasis on its customer service and experiences by incorporating the use of digital platform for
attaining higher customer satisfaction (Blake, 2018).
Part 2: Overview of Firm and its Environment with the use of Porter’s Five Forces
Accent Group Limited is an ASX listed company that is known to conduct its business
within footwear and apparel sector of Australia. The retail stores operated by the company
include athletic footwear, premium sneakers, multi-branded sneakers and apparel outlets. The
company is facing increasing competition within the footwear retailing sector of Australia due to
rising number of international entrants. The company conducts its operations in a highly
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competitive and fragmented footwear industry of Australia that is largely impacted by the
economic conditions and spending patterns of consumers. As a result, it places high emphasis on
delivering best in class customer experience that has enabled it to achieve higher financial
growth and success (Accent Group Limited, 2019). The increasing online demand of the
consumers for the footwear products is causing Accent Group Limited to adopt the digital
platforms for meeting effectively the change in the consumer shopping habits. The different
brands of the company are emphasizing on adopting digital transformation for maintaining their
competitive position. The major brand of the company, Platypus, recognized as leader in
providing sneakers, has improved its consumer experience and improved its financial growth by
using the platform of digital transformation. The major objective is to improve speed and provide
mobile friendly customer experience as large number of its traffic is coming from online
channels. The other most important brand of the company, The Athlete’s Food, known be the
largest retailer of athletic footwear is also using the platform to develop higher customer
experience(Fashion, Apparel & Accessories, 2019). The strategic environment of the company
can be further analyzed with the use of Porter Five Forces Model as follows:
Bargaining Power of Suppliers
Accent Group Limited is known to the leader in the fashion industry and as such it holds
a powerful position within the industry. It is vertically integrated and therefore possesses power
over its suppliers and as such the bargaining power of suppliers can be regarded as low within
the industry (Industry Insights, 2018).
Bargaining Power of Buyers
The switching cost can be regarded as extremely low in the footwear industry of
Australia due to presence of different local as well as international brands. Buyers have easy
access to products offered by different players through online shopping. The high competition
has resulted in creating more options for the buyers to choose from the different products and
services. This is the reason for adoption of digital platforms by the brands of Accent Group
Limited such as Platypus and the Athletes Foot to provide higher customer experience because
the bargaining power of buyers is relatively higher within the industry (Australian Productivity
Commission, 2011).
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Threat of Substitutes
The threat of substitutes is quite low for the brands of the company such as Platypus
involved in manufacturing of sneakers. This is largely because sneakers cannot be replaced by
other fashion shoes. However, the threat of substitutes can be regarded as high for its other
brands that are involved in manufacturing of fashion footwear and apparels due to presence of
large number of companies within Australia market offering such products. As such, the threat of
substitutes can be regarded as moderate for the different brands of the company (Industry
Insights, 2018).
Threat of Rivalry
There is intense competition for the company due to presence of large number of
international and domestic brands within the industry. The changing customer needs and
preferences are making the threat of competition more intense as firms are continually evolving
their products and services for meeting the customer satisfaction level (Waldegrave, 2019). The
competitors present within the industry are continually involved in providing more offering and
expanding their product portfolio for surviving in the highly competitive business environment.
The increasing interests of international brands within the footwear segment of Australia are
further making the market scenario to be highly competitive. As such, it becomes highly
important for the different brands of Accent Group such as Platypus and the Athlete’s foot to
continually evolve their products and services and maintaining their competitive position within
the footwear retailing sector of Australia (Industry Insights, 2018).
Barriers to entry
The Australian footwear industry can be regarded as highly fragmented with the presence
of many small to large players. There is high brand loyalty and also large players such as Accent
Group limited owning large number of brands have achieved a distinctive position by gaining
economies of scale and releasing large benefits due to integration of their supply chains. This
makes it relatively difficult for the new entrants to enter within the industry and achieve a
distinctive position for them. However, it is relatively easy for the new entrants to gain raw
materials due to presence of large number of suppliers and realize profits due to increasing
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demand for sports and fashionable shoes within the country. As such, the threat of new entrants
can be regarded as high to moderate for Accent Group Limited (Industry Insights, 2018).
Part 3: Strategic Recommendation with the use of Porter’s Generic Strategies
The Australian footwear market is driven by the rising fashion demand of the consumers
and the technological advancement. The players within the industry are adopting the use of new
ways of manufacturing the shoe products that enables them to reduce the cost as well as time.
Therefore, it is highly essential for Accent Group Limited to adopt the use of strategy that
enables it to achieve a distinctive position within the footwear market of Australia. This is
because it would enable the company to sustain its competitive position within Australian
footwear market. As such, on the basis of Porter Generic Strategies it is recommended to the
company to adopt the differentiation strategy. The differentiation strategy of a company refers to
developing strategies that enable it to achieve a distinctive position within the industry. The
company should aim to achieve differentiation so as to develop a unique brand image and
ensuring its viability within the highly competitive footwear market of Australia (Waldegrave,
2019).
The major business segment of the company includes providing athletic footwear and
multi-branded sneakers and the company is aiming to attain differentiating position for these
brands by using the digital platform. This is mainly to meet the changing preferences of the
consumers as they are largely adopting online channel for shopping. Therefore, the brands of the
company such as Platypus and the Athlete’s Foot are largely focusing on providing in-store
customer experience into an online environment. The focus is to provide the best online
experience to the customers through the use of MyFit system that enables the customers to match
the right shoe as per their foot (Fashion, Apparel & Accessories, 2019). These differentiation
strategies of the brands of the company are aimed towards creating a distinctive position in the
mind of the customers through redefining the customer experience. Therefore, on the basis of
differentiation porter’s generic strategy it is recommended to the firm that it should strive to
develop strategies and caption that enables it to differentiate its products and services from the
competitors (Schermerhorn, 2009).
Part 4: Potential Financial and Non-Financial Measures for Evaluation of Firm Success
Financial measures
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 The success of the differentiation strategy adopted by the Accent Group Limited can be
evaluated by assessing the revenue per unit of its different brands such as Platypus and
the Athlete’s Foot. For example, the sales of Platypus has increased by about 10*in 10
months over the past one year after the adoption of the digital platform system and the
overall revenue of the group has exceeded by about AUD $700 million in the financial
year 2018
 The rising earnings per share (EPS) of the company that enables it to achieve higher
satisfaction of its shareholders and indicates the increase in gross profit margin achieved
due to differentiation strategy
 The increase in the overall market capitalization of the company also indicates the brand
loyalty from its different stakeholders
Non-Financial measures
 The use of customer feedback can be adopted for evaluation of the success of
differentiation strategy by gaining an analysis of the extent to which the various needs
and expectations of the customers are met
 The increase in the number of customers after the adoption of the differentiation strategy
could help in assessing its success to a large extent as it indicates the brand loyalty
attained by the company
Conclusion
It can be stated from the overall discussion held within the report that Accent Group
Limited has attained a distinctive position within the footwear retailing industry of Australia. The
Porter fiver forces model has indicated that the company is conducting its operations within
highly competitive industry and thus need to place emphasis on improving the quality of its
different products and services. As such, it is adopting the differentiation strategy of Porter to
achieve a unique position for itself in the highly competitive footwear sector of Australia. It is
adopting the use of digital platform for providing an online environment to its customers for
shopping its different footwear products. The digital platform is used by its brands such as
Platypus and the Athlete’s Foot for redefining customer experience and increase the sales
volume by developing high brand loyalty. The success of the differentiation strategy adopted by
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the company can be evaluated by the use of financial measures such as analysis of revenue per
unit and non-financial measures such as though customer feedback.
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Section 2: Product Mix and Tactical Decision
Part 1: Best product when machine hours is a constrained and when there is not any
constrained
When there is constrained of machine hours
Products Logo
Hoodie
Waterproof
Pullover
Jacket
Bomber
Jacket
Snowdown
Waterproof
Jacket
Selling price per unit $120.00 $200.00 $230.00 $300.00
Less:
Direct materials per unit $20.00 $35.00 $35.00 $40.00
Direct labour per unit $20.00 $25.00 $28.00 $30.00
Variable overhead per unit $15.00 $18.75 $21.00 $22.50
Total Variable cost per unit $55.00 $78.75 $84.00 $92.50
Contribution per unit $65.00 $121.25 $146.00 $207.50
Machine Hr per unit 0.3 0.55 0.7 0.8
Contribution per unit per
1 machine hr $216.67 $220.45 $208.57 $259.38
Rank 3 2 4 1
When there is no constrained
Products Logo
Hoodie
Waterproof
Pullover
Jacket
Bomber
Jacket
Snowdown
Waterproof
Jacket
Selling price per unit $120.00 $200.00 $230.00 $300.00
Less:
Direct materials per unit $20.00 $35.00 $35.00 $40.00
Direct labour per unit $20.00 $25.00 $28.00 $30.00
Variable overhead per unit $15.00 $18.75 $21.00 $22.50
Total Variable cost per unit $55.00 $78.75 $84.00 $92.50
Contribution per unit $65.00 $121.25 $146.00 $207.50
Rank 4 3 2 1
Part 2: Optimal product mix
Statement of optimal product mix when machine hour is constrained (12,000 hrs)
Products Logo
Hoodie
Waterproof
Pullover
Jacket
Bomber
Jacket
Snowdown
Waterproof
Jacket
Annual demand 10,000 7,500 5,000 4,000
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Machine Hr per unit 0.3 0.55 0.7 0.8
Rank 3 2 4 1
Machine hrs 3000 4125 3200
Machine hrs left over 1675
Products manufactured 10000 7500 2392.857 4000
Products manufactured 10000 7500 2393 4000
Part 3: New proposal of renting additional machinery
New Contribution per unit and optimum mix when there is decrease in labour cost
Products Logo
Hoodie
Waterproof
Pullover
Jacket
Bomber
Jacket
Snowdown
Waterproof
Jacket
Selling price per
unit $120.00 $200.00 $230.00 $300.00
Less:
Direct materials per
unit $20.00 $35.00 $35.00 $40.00
Direct labour per
unit $18.00 $22.50 $25.20 $27.00
Variable overhead
per unit $15.00 $18.75 $21.00 $22.50
Total Variable cost
per unit $53.00 $76.25 $81.20 $89.50
Contribution per
unit $67.00 $123.75 $148.80 $210.50
Machine Hr per unit 0.3 0.55 0.7 0.8
Contribution per
unit per 1 machine
hr $223.33 $225.00 $212.57 $263.13
Rank 3 2 4 1
Annual demand 10,000 7,500 5,000 4,000
Machine hrs used 3000 4125 3200
Machine hrs left
over 2675
Products
manufactured 10000 7500 3821.428571 4000
Products
manufactured 10000 7500 3821 4000
Statement of profit before opting the proposal
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Products Logo
Hoodie
Waterproof
Pullover
Jacket
Bomber
Jacket
Snowdown
Waterproof
Jacket
Total
Selling price per
unit $120.00 $200.00 $230.00 $300.00
Less:
Direct materials
per unit $20.00 $35.00 $35.00 $40.00
Direct labour per
unit $20.00 $25.00 $28.00 $30.00
Variable
overhead per
unit $15.00 $18.75 $21.00 $22.50
Total Variable
cost per unit $55.00 $78.75 $84.00 $92.50
Contribution per
unit $65.00 $121.25 $146.00 $207.50
Product
manufactured 10000 7500 2393 4000
Total
Contribution $650,000.00 $909,375.00 $349,378.00 $830,000.00 $2,738,753.00
Less: Fixed Cost $75,000.00 $70,350.00 $25,126.50 $45,000.00 $215,476.50
Profit $575,000.00 $839,025.00 $324,251.50 $785,000.00 $2,523,276.50
Statement of after opting the proposal
Products Logo
Hoodie
Waterproof
Pullover
Jacket
Bomber
Jacket
Snowdown
Waterproof
Jacket
Total
Selling price
per unit $120.00 $200.00 $230.00 $300.00
Less:
Direct
materials per
unit $20.00 $35.00 $35.00 $40.00
Direct labour
per unit $18.00 $22.50 $25.20 $27.00
Variable
overhead per
unit $15.00 $18.75 $21.00 $22.50
Total Variable
cost per unit $53.00 $76.25 $81.20 $89.50
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Contribution
per unit $67.00 $123.75 $148.80 $210.50
Product
manufactured 10000 7500 3821 4000
Total
Contribution $670,000.00 $928,125.00 $568,564.80 $842,000.00 $3,008,689.80
Less: Fixed
Cost $75,000.00 $70,350.00 $40,120.50 $45,000.00 $230,470.50
Less:
Additional
Cost $100,000.00
Profit $595,000.00 $857,775.00 $528,444.30 $797,000.00
Actual Profit $2,678,219.30
Recommendation: Yes, proposal must be accepted.
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Section 3: Linear Programming
Using Excel Solver following has been obtained
Street
Cleat Goldie
Side
Street Aura
Hi-
Lites Moda Total
Max
Capacity
Decision
Variable 1000 0 3600 0 0 0
Contribution $71.00 $69.60 $73.40 $44.00 $67.40 $59.60 $335,240.00
Constrains
Sole
preparation 0.25 0.25 0.25 0.15 0.25 0.25 $1,150.00 1,150
Pattern
preparation 0.188 0.188 0.188 0.113 0.188 0.188 $864.80 900
Stitching 0.35 0.375 0.375 0.225 0.375 0.375 $1,700.00 1,700
Final assembly 0.3 0.3 0.3 0.18 0.3 0.3 $1,380.00 1,500
Inspection and
packaging 0.125 0.125 0.125 0.075 0.125 0.125 $575.00 650

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References
Accent Group Limited. (2019). Premium Company Report Australia. Retrieved 29 August 2019,
from https://www.ibisworld.com.au/australian-company-research-reports/retail-trade/
accent-group-limited-company.html
Australian Productivity Commission. (2011). Economic Structure and Performance of the
Australian Retail Industry. Retrieved 29 August 2019, from
https://www.pc.gov.au/inquiries/completed/retail-industry/report/retail-industry.pdf
Blake, D. (2018). Inside Retail Australia. Retrieved 29 August 2019, from
https://www.insideretail.com.au/news/fashion-retail/accent-group-profits-digital-sales-
better-margins-201808
Fashion, Apparel & Accessories. (2019). How Accent Group Grew Sales 10X in Just 10 Months.
Retrieved 29 August 2019, from https://magento.com/case-studies/digital-transformation-
accent-group
Industry Insights. (2018). Australia Footwear Market Size and Forecast. Retrieved 29 August
2019, from https://www.hexaresearch.com/research-report/australia-footwear-market
Schermerhorn, J. (2009). Exploring Management. US: John Wiley & Sons.
Waldegrave, N. (2019). The digital strategy behind Accent Group’s supply chain transformation.
Retrieved 29 August 2019, from https://www.supplychaindigital.com/company/digital-
strategy-behind-accent-groups-supply-chain-transformation#
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