Bigotti's Marketing Strategy and its Impact on Profitability

This IB Extended Essay investigates the relationship between Bigotti's marketing strategy changes and its impact on competitive advantage and profitability. The essay analyzes Bigotti's pre-2012 and post-2012 marketing strategies, considering the financial crisis of 2008 and other factors like management changes, economic growth, capital investment, and supply chain management. The analysis utilizes SWOT analysis, Porter's Generic Strategies, and the 7Ps marketing mix. The research, based on primary data (interviews with Bigotti's CEO) and secondary data (articles, documents), concludes that the change in marketing strategy was crucial for Bigotti's success after 2012, while other factors also contributed to its competitive advantage and profitability. Recommendations include adapting to market changes and customer needs, and maintaining the value proposition of contemporary Romanian design.

IB Extended Essay
“To what extent has a change in marketing strategy at Bigotti, led to a
change in competitive advantage and therefore profitability?”
Subject: Business Management
Word Count: 3874
Personal code: ghn178

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Abstract
This essay investigates the question “To what extent has a change in marketing strategy at Bigotti,
led to a change in competitive advantage and therefore profitability?”. To achieve this, I looked at
how Bigotti’s pre-2012 marketing strategy and post-2012 marketing strategy, and how the financial
crisis in 2008 affected the pre-2012 situation. The essay also identifies factors not linked directly to
the marketing strategy that influenced at Bigotti’s development such as its management team and
cash flow position.
I based my analysis on primary and secondary research; interviews with Bigotti’s CEO are primary
research, and articles, documents and journals found online about Bigotti and the Romanian apparel
market are secondary. In my analysis, I linked my research with business theories appropriate to
address the question including SWOT analysis (company performance), Porter’s Generic Strategies
(competitive advantage), and the 7P’s marketing mix (marketing strategy).
My evaluation led me to conclude that the change in marketing strategy was critical to Bigotti’s
post-2012 success, but that we cannot ignore other factors contributing to its subsequently acquired
competitive advantage and therefore profitability. These factors include a change in the
management team, growth in the Romanian economy, securing capital investment, and supply chain
management.
In support of my findings, recommendations proposed for Bigotti's future are to learn from mistakes
made during the global economic crash, where the company decided to adopt a ‘business as usual’
approach which led to a decline in sales. To be profitable and sustain a competitive advantage
Bigotti should adapt quickly to changes in the business environment and the needs of its customers’
while maintaining its value proposition - whole look style and contemporary Romanian design to
the modern urban professional – delivered via its marketing strategy.
Word Count: 286
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Contents page
Page
1. Abstract 2
2. Introduction 4-5
3. Methodology and Limitations 5
4. Key Theories and Tools 6
5. Competitive Advantage 6-7
6. SWOT Analysis for Bigotti 7-11
7. Bigotti’s Marketing Strategy 11
8. Marketing Mix – 7P’s of Bigotti 12-18
9. Alternative Sources of Competitive Advantage 18-20
10. Does Competitive Advantage Lead to Profitability? 20-21
11. Conclusions 22
12. Bibliography 23-25
13. Appendix.
• Appendix A: 26-28
• Appendix B: 29
• Appendix C: 30-31
• Appendix D: 32
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Introduction
Founded in 1996 Bigotti has since grown to be the largest independent men’s apparel retailer in
Romania with 26 stores ranging from city centre boutiques to airport concessions. Bigotti offers
customers quality products at friendly prices, and its product line spans suits to jeans and extends
into accessories. As the company’s mission statement suggests “Bigotti offers style, quality and
diversity to help customers create an original image that can be appreciated by others.” (See
Appendix D).
In 2008, after 12 years of growth, Bigotti experienced reduced sales revenue and profit margins as a
result of the global financial crisis. In the wake of the ‘credit crunch’. Bigotti’s executives decided
to stick to what they considered a successful formula and continued to run the company using the
same pre-crash strategy. However, the strategy proved unsuccessful, and by 2012 no recovery was
in sight as Bigotti reported a net profit margin of just 0.06% (see Appendix C). A failure to improve
the company’s financial fortunes and adapt to a new retailing landscape were considered by
Bigotti’s shareholders as indicators that the CEO lacked the strategic ability to run the company.
The shareholders took action and voted to change the managerial team. The CEO was replaced by
one of the shareholders seen as having an entrepreneurial vision for the company. The incoming
CEO, Emil Rosca, believed that changing Bigotti’s marketing strategy would once again help the
company achieve sustained growth. Between 2012 and 2015 key measures of Bigotti’s success
improved, turnover increased 94.92%, and net profit figures rose from £3,450 to £770,245. Given
the current business environment and Romania’s strong economic growth, Rosca believes that the
company’s strong recent performance will continue. When asked “What will success look in three
years’ time?, he responded “I believe that in the next three years, Bigotti will increase turnover and
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net profit by 50% compared to 2015, meaning turnover will reach 24 million euros, and net profit
will hit 1.5 million euros” (See Appendix D).
Methodology and Limitations
Information used in this essay comes from primary and secondary sources. Primary data is in the
form of interviews with Bigotti’s CEO and confidential strategy documents. These sources enable
credible analysis when combined with frameworks such as Marketing Mix. However, some of the
documentation is translated from Romanian (by a native speaker) into English, and it is possible
that interpretation is flawed. Recent financial data is another primary source that adds validity to the
position the essay takes on profitability, although full accounts were not available and therefore
detailed analysis is limited. However, much secondary data is available around competitive
advantage and how sustained competitive advantage leads to profitability. Sources of secondary
data used include newspapers and journal articles, Internet research, and business textbooks.
Newspaper sources are as recent as possible to ensure up to date information, and only reputable
titles are used. While textbooks can be outdated, they are useful for understanding how to use
frameworks for analysis. It is important to recognise that Bigotti’s reporting and the interviews
conducted will seek to portray the company positively, the information is ‘customer’ facing and the
company has an image protect. Websites and articles aren’t always trustworthy as the sources of
information can be questioned and authors often anonymous.
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Key Theories and Tools
This essay asks “To what extent has a change in marketing strategy at Bigotti, led to a change in
competitive advantage and therefore profitability?”
Marketing Strategy and why it is important: ‘Marketing strategy’ is ‘a process or model
designed to allow a company to focus limited resources on the best opportunities to increase sales
and thereby achieve a sustainable competitive advantage.’ (Definition: Marketing Strategy)
Marketing strategy is part of what Kotter calls the ‘Marketing Process’, the way “companies create
value for customers and build strong customer relationships in order to capture value in return”.
Table 1: The ‘Marketing Process’; Kotter
(Kotler, Philip, and Gary Armstrong. “Principles of Marketing.” Pearson Education, 2010. Web. 25
Oct. 2016. p)
Building Block Actions required
Understand the marketplace and customer
needs and wants.
• Research customers and the marketplace.
• Manage marketing information and customer data.
Design a customer-driven marketing
strategy.
• Select customers to serve: Market segmentation and
targeting
• Decide on value proposition: Differentiation and
positioning
Construct an integrated marketing
programme that delivers value.
• Product design: build strong brands
• Pricing: create real value
• Place: manage demand and supply channels.
• Promotion: communicate the value proposition.
Build strong relationships with marketing
partners.
• Create trust with those that help deliver the process.
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Competitive advantage and why its’
important: Competitive advantage is
‘an advantage over competitors gained
by offering consumers greater value,
either by means of lower prices or by
providing greater benefits and services
that justify higher prices (Riley).
For Bigotti a successful marketing
strategy is based on showing customers
exactly how its products are different
from those of competitors. Competitive advantage is necessary for growth, unless a company is
clearly somehow better than the competition then the best it can do is survive. Porter outlines three
“generic strategies” as ways to gain competitive advantage.
A Cost Leadership strategy achieves advantage by reducing what it costs to deliver a product or
service while charging industry-average prices. A Differentiation strategy is about making a
company’s products or services different to those of competitors. Differentiation comes from unique
features like making something easy to use, design or service. Focus strategy concentrates on niche
markets and delivering products that are exactly aligned with customer’s needs. Companies using
this strategy create strong loyalty with customers.
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Bigotti: Pre-2012 and Post-2012 – A SWOT analysis
To assess whether a change in marketing strategy led to increased competitive advantage it is
important to understand the situation Bigotti was in before 2012. The interview with Rosca helps
summarize strategic and operational challenges;
There had been a lack of coherent strategy to guide Bigotti through the financial crash of 2008 and
the four years that followed. A lack of available capital and low sales, a result of the ‘credit crunch’,
meant that Bigotti’s debts increased, drastically weakening the company’s cash flow and restricting
its ability to invest in the future. The company survived, but the brand suffered a ‘rough period’
which, according to Rosca, was made worse by four important factors. Bigotti experienced a lack of
vision for the future and therefore long-term strategy, which limited the company’s ability to
recognizes and meet new trends; the company had developed “little insight into different concepts
to take to market” (See Appendix D). This meant that staff were left without appropriate training;
and Bigotti’s supplier network was spread across three countries resulting in a lack of control and
inconsistent quality.
SWOT - Bigotti Pre-2012
Fig. 2: SWOT - Bigotti Pre-2012,
STRENGTHS
• Established customer base
• Romanian company; generating brand equity
• Developed and diverse store network
WEAKNESSES
• Incomplete understanding of customer needs.
• Cash flow problem – lack of liquidity.
• Low stock turnover
• No coherent long-term strategy.
• Undiversified product portfolio and
‘incoherent collections’.
• Demotivated sales staff
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(Bruneski and Chen, 200, See Appendix C)
Emil Rosca’s interview also outlined the actions that Bigotti’s new management team took after
their appointment, moves that changed the company’s activities across key strategic areas. Rosca’s
team found new suppliers and by focusing on quality Italian manufacturers gave Bigotti back
control over its products. They secured a “significant capital injection” to “unlock cash flow
problems”. Taking the company’s focus away from cash flow stress meant it could develop a long-
term strategy focused on customers’ needs and thereby “creating a collection that established a
much more visible trend in the Romanian market” (See Appendix D). This understanding enabled
Bigotti to invest in a brand re-launch which simultaneously developing a “significant online, e-
commerce and social media presence” (See Appendix A).
OPPORTUNITIES
• Space in market created by exit of some
luxury brands
• Secure customers from failing Romanian
apparel companies.
• Increase online presence and social media
promotion.
THREATS
• Lack of supply chain integrity – poor quality
control.
• Flexibility / adaptability of smaller Romanian
substitute brands.
• Large International apparel chains investing
in Romania, taking advantage of challenging
economic conditions to for future growth.
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SWOT - Bigotti 2015/16
Fig. 3: SWOT - Bigotti 2015/16
(Bruneski and Chen, 2007, See Appendix C)
Analysis
Marketing
• Brand re-launch saw Bigotti establish clear strategic positioning based on customer need; giving
men “the freedom to…express themselves in an elegant, distinguished manner, never before
available in this country” (See Appendix D).
Investment / Finance
• Bigotti’s net-profit performance is now strong, it was 6.4% for 2015. Apparel retailers range
between 4 and 13%, so Bigotti is now on par with the sector (Crane).
STRENGTHS
• Significant international and Romanian
brand awareness.
• Brand perception: classic, expensive,
represents value.
• Consolidated supply chain delivering
consistent quality.
• Coherent long-term vision, focused on
customer needs
• Provides customers advice on their purchases
rather than just pushing sales.
• Social Media and online presence
WEAKNESSES
• Potential threat of ‘over-trading’*
• Possible liquidity as a result: restricts ability
to change in the face of market or economic
uncertainty.
OPPORTUNITIES
• Brand associations
• Develop a fully differentiated strategic
position – linked to Italian quality and value.
• Creating customer (men) loyalty via a ‘total
look’ offer with products at accessible price
points.
THREATS
• Positioning brand in a competitive market.
• Company is selling into a segment in which
large international brands are established.
• Underdeveloped store network compared to
competitors.
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Operations
• Supply chain has been consolidated in Italy and favorable terms negotiated. Products now meet
the expectations of the company’s target market.
• To compete successfully with international brands Bigotti needs to expand operations fast. This
could lead to ‘over trading’, whereby a company expands too quickly and runs out of working
capital (Overtrading Definition)>
Bigotti’s Marketing Strategy
Marketing strategy is an essential part of the Marketing Process (Kotter) and researching and
understanding the needs of potential customers is the first step. Before 2012 Bigotti had an
incomplete understanding of its clients’ needs and therefore an incoherent product offering.
However, the new management developed research-led insights that helped Bigotti shape its
strategy. Marketing strategy is about splitting an entire potential customer group into smaller groups
segmentation and then deciding which of these to focus on (targeting). Bigotti’s insight, that “In
Romania’s progress in the new millennium the urban professional man is looking for the freedom to
choose a stylish image, in a way never before available” (Bigotti, LinkedIn), gave the company a
clear target. The next stage in Bigotti’s marketing strategy, suggests Kotter is to articulate a value
proposition and find a point of differentiation as a way to seek competitive advantage. A value
proposition is a statement that outlines why a customer should buy a company’s product and why it
is better than other products (Investopedia.com, Value Proposition). Bigotti landed its value
proposition as ‘‘whole look’ style and contemporary Romanian design to the modern urban
professional’ (See Appendix A). Porter may describe this a Focus strategy, but as seen later Bigotti
takes a Differentiation strategy.
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Bigotti and the 7 P’s
The 7 P’s Marketing Mix (Booms & Bitner) is a way for a company to set “an integrated marketing
programme” (Kotler and Armstrong) that delivers the marketing strategy. For Bigotti it’s what the
business actually offers to its customers via a combination of 7 elements.
Table 2: ‘The Marketing Mix – 7P’s’
(Chartered Institute of Marketing)
It is important to analyse Bigotti pre and post-2012 in order to understand changes in its marketing
strategy and how they link to competitive advantage.
Product
Mix Element Summary
Price
Products should be perceived to be good value for money. This does not
mean cheap. Something that works well or has quality encourages
customers to pay more.
Product Products or services should fit the task its designed to do, it should work
and align with customer expectation.
Place Making products available at the point of sale where the consumer finds
it easiest to shop.
Promotion Getting the right messages to the right audiences in the way they want to
receive it. Promotion can be via Advertising, PR, or Social Media.
People People are key, they run the business. People are as important as the
products offered.
Process How the service is delivered. An essential element that the customer is
also paying for.
Physical (Premises)
This is the space from which the product or service is sold. Could be
premises or a website, either way space must be designed to meet the
customers’ requirements.
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