Corporate Strategy Report: Cotton On Group Analysis, 2020

This report provides a comprehensive analysis of the Cotton On Group's corporate strategy, focusing on key aspects such as integration, outsourcing, and diversification. It explores both horizontal and vertical integration models, outlining their advantages and disadvantages. The report also delves into the company's diversification strategies, examining how they enhance profitability. Furthermore, it addresses ethical issues related to privacy and CSR, offering recommendations for improvement. The analysis includes a discussion on the company's business model, the influence of governance mechanisms, and the role of technology and strategic alliances. The report also examines the dimensions of diversity within the organization and provides insights into how the company can achieve a competitive advantage in the market. The report concludes with actionable recommendations to enhance the Cotton On Group's strategic approach.

Running head: Management
0
Cotton On Group
Strategic Management
Corporate Strategy Report
4/14/2020

Management
1
Executive summary
In this report, the corporate level strategy has been set for the company Cotton On Group so that
the competitive advantage in the company can be increased over its competitors. The company
Cotton On Group is the fashion company that is the largest global retailer of Australia and
currently operates the eight brands. In this report, the horizontal and vertical integration models
have explained and their pros and cons are also stated. The major focus of this report has been
put on the diversity matrix and also includes outsourcing, merger, and acquisition. There were
certain ethical issues in the company related to privacy errors and scandals which has improved
in the company by giving some recommendations.

Management
2
Contents
1 Introduction...................................................................................................................................3
2 Strategy and Technology..............................................................................................................3
3 Corporate Governance, Ethics, and CSR......................................................................................4
4 Corporate Level Strategy (Integration and Outsourcing).............................................................5
5 Corporate Level Strategy (Diversification)..................................................................................6
6 Implementing Strategy through Organization and Diversity........................................................8
7 Conclusion....................................................................................................................................9
8 Recommendations.........................................................................................................................9
9 References...................................................................................................................................11
10 Appendix...................................................................................................................................14

Management
3
1 Introduction
The report is made regarding the corporate level strategy of the company Cotton On Group. The
purpose of this report is to increase the competitive advantage of the company by offering unique
products and services to the customers. The main purpose of the corporate level strategy in the
company is to maintain financial success and profitability in the company. The information
evaluated for this report will be found out from the website of the Cotton On Group and helps in
improving the divisions of the business (Theodorakopoulos and Budhwar, 2015). The
information which will be presented in this report is related to the applications of the corporate
strategy frameworks. The report will put the major focus on the governance mechanism, ethical
and CSR issues in the company. Strategic alliances and outsourcing which helps in corporate-
level strategy will also be elaborated. To increase profitability diversification is essential so in
this report, related and unrelated diversification will be explained. Dimensions of diversity which
also be determined aligned with the structure, process, culture, controls, and people (Coppin,
2017).
2 Strategy and Technology
Strategy and technology towards the standardization
For gaining a competitive advantage in the company it is important to consider the strategic
factors like technology and compatibility. The competition in the market is increasing so the
acceptance of the updated technology is required to gain a competitive advantage over the
competitors. The company Cotton Group has made technology tactics focus on technology
capabilities and helps in making the strategic decisions of the company (Bocken, et al., 2016). To
attain the higher standardization in the technology market the company has the strategy to know
the future in regards to the technology and also focuses on the infrastructure of the company. The
company has the standards which help the company in associating with the risk and also
increases the profit of the company by reducing the cost of the production.
Strategies firm used for establishing their technology

Management
4
Razer blade strategy is the business model which helps in increasing the sales of the
complementary goods in the company in which one item is sold at the low price. The model is
evaluated from King Gillette who has used this approach by selling the disposable blades (Robb,
et al., 2010). Razor and blade strategy used by the company Cotton Group for enhancing their
technology. This strategy is the business model that is used by the company to increase the sales
of complementary goods by reducing the prices of the products. It is the pricing strategy used by
the company which helps in generating good profits to the company by selling the goods at the
discounted or the lower prices. The company can also use the strategy related to the first-mover
strategy which helps in establishing strong brand recognition and attaining the loyalty of the
customers. The strategy is to occupant the market segment so that the competitive advantage can
be attained (Rao and Tilt, 2016).
Source: petapixel.com
Nature of technology paradigm
The nature of the technology paradigm involves the technologist and scientist in which the set of
procedures are involved where the values, beliefs, and meanings are shared. To evolve the new
technology is essential in the organization so their nature is elegant and helps in progress the
innovation in the company (Orsdemir, et al., 2019). There are several technical issues faced by

Management
5
the company which is related to the privacy matters, cyber security, etc. so the strategy is to shift
the technology paradigm by adopting the new technology so that the good market place can be
attracted. The company can create an autonomous operation by getting aware of disruptive
technology (Cotton On Group, 2019). The company also needs to change the technology as they
are facing the issues related to the data privacy, cloud computing and the integration and up
gradation of the technology.
3 Corporate Governance, Ethics, and CSR
Governance mechanism aligns with the interest of stakeholders and managers
The interest of the stakeholders in the company Cotton On group can be aligned with the goals of
their manager. The success in the company can be attained by aligning the interest with the
governance mechanism. Each stakeholder in the company has their interest which is different so
corporate mechanism helps in practicing, monitoring and make effective decisions which affect
stakeholders and their agents (Arasti, et al., 2017). The governance mechanism is of the two
types internal and external so they are aligned with the interest of stakeholders. The main focus
of the internal governance mechanism is on the managers, owners, directors, and controllers
whereas the major focus of the external governance mechanism is on the laws and regulations of
the external market. Governance mechanism influences the managerial, behavior to prevent the
sever problems in the company and has to stay motivated in the company to protect the interest
of the stakeholders and its own (Shaukat, et al., 2016).
The company Cotton ON group has done the partnership with the Ugandan communities which
help in building the sustainable and healthy future. The company Cotton on Group CSR report is
effective ads it is based on the four pillars which are infrastructure, education, health and
infrastructure. The company has back up their claims and does not have well enough in adopting
the business ethical practices (Cotton On Group, 2019).
Main ethical issues
Cotton on group is the largest retailer company of Australia and majorly known for its stationery
and fashion brands. The company involves an ethical sourcing program and they have a good
framework of the governing principles, ethics, and values. The major ethical issues found in the

Management
6
company Cotton On group are related to technology and privacy. The company has excess levels
of the data of its customers so it becomes difficult for them to maintain and keep private. The
technology is emerging rapidly so ethical issues in the company are related to the technological
security capability (Quarshie, et al., 2016). The company has to complied with the Code of
Conduct so there are many ethical norms that the company has to follow so it becomes quite
difficult for them and they face the scandals in the accounting practices. The company Cotton On
group also provides the services online to its customers so its issues related to online marketing
have seemed in the company where employees are punished and fired for something wrong.
Issues associated with CSR
The company David Jones is socially responsible in maintains the trade practices and working
conditions of the company but the company is not environmentally friendly. The company deals
in clothes and shoes so they use many nonrenewable resources and chemical fibers based on
petroleum which affects the environment badly (Roberson, et al., 2017). The investor pressure
has also grown in the company due to which they have to face the contemporary issue. The
business is conducting ethically but the issues related to the supplier relation are also faced
which impacts the profitability of the company.
4 Corporate Level Strategy (Integration and Outsourcing)
Company’s business model and business-level strategies
The companies Cotton On Group business model gets strengthen with the effective corporate-
level strategy as it satisfies the needs of the customers. The business model and the corporate
level strategy have a relationship that strengthens the company performance by driving the
model over time and helps in running the business effectively by using the functional level
strategy (Du, et al., 2011). The competitive advantage is gained in the company by using the
business level strategy as it focuses on the specific market segments and helps in competing in
the marketplace.
The corporate level strategy also strengthens the company by increasing efficiency and
productivity through the competitive advantage gain. The major competitors of the company are
Smiggle, Trueworths, Price Group, Zara and Pact, etc. (Cotton On Group, 2019). The company

Management
7
Smiggle uses the Ad Based Business model in which ads are created in the specific app, websites
by the company so that they can capture large number of audiences.
Horizontal and vertical integration
When the company takes over another company through the merger or acquisition which is
operating in the same value chain then it is considered horizontal integration. In vertical
integration, the company controls or owns the same production vertical chain. There are certain
benefits of horizontal business integration which are related to reducing competition in the
market, increasing the market share of the company and also create a good economy of the scale.
There are several disadvantages of this corporate strategy such as the level of flexibility is lower
and also includes the regulatory scrutiny (Adamides, 2015).
The vertical corporate level strategy also has certain benefits such as it helps in reducing the cost
of the company by controlling the processes of the company and increasing the efficiency. The
coordination among the supply chain gets increased but there are the certain disadvantages of
this vertical integration also such as it creates the barrier to market entry and makes the things
more difficult (Kaya, 2015).
The company Cotton On Group should use the horizontal integration strategy as this strategy are
related to reducing competition in the market, increasing the market share of the company and
also create a good economy of the scale for the company which helps in enhancing the
performance of the company.

Management
8
Source: strategicmanagement.com
Strategic alliances and outsourcing may become a substitute for vertical integration
Strategies alliances and outsourcing may become a substitute for vertical integration as it obtains
the cost-saving benefits and the differentiation of the product. In strategic outsourcing, the
company operates with small companies with a limited budget so that effective services are
engaged so they are the substitute for vertical integration as they also provide effective services
and efficiency to the company (Aspara, et al., 2013). Strategic alliances affiliate the relationship
as it is the type of strategic partnership that is less complex and undertake mutually beneficial.
Vertical integration has more difficulties and their flexibility level is lower. There is a huge
amount needed for the vertical business strategy so under the circumstances when the company
has the lack of the resources they can use the substitute for vertical integration for making things
better and flexible.
5 Corporate Level Strategy (Diversification)
Five primary ways in which diversification can increase company profitability
a. When the business units in the different countries are transferred then the profitability of
the company enhanced by the process of taking the distinctive competency.
b. When in the new industry the business unit of the company is created for leverage
competency.
c. The profitability also enhances when more value of the customers is created by sharing
the common kind of competency to operate more effectively in two or more business
units.
d. Diversification also increases the profitability of the company as it increases the
differentiation of the products and able to produce the lower cost which improves the
economies and the synergies of scope.
e. When several products are grouped with the single unit of price then it is known as
product bundling and helps in increasing the efficiency and reducing the distribution cost.
Differentiate between multi-business models based on related and unrelated diversification.

Management
9
The multi-business models use diversification to increase their range of products in the market.
The company Cotton On Group increases the range of the market served by taking the distinctive
competency (Tayşir and Pazarcık, 2013). The corporate level strategy of the company Cotton On
Group is to lead the market with diversified functions so their goal is to create an effective
business environment.
Related Diversification Unrelated diversification
In related diversification of the business model,
the products and services offered by the
company Cotton On Group have the
diversified relationship with the existing
business
In the unrelated diversification which is also
known as the Conglomerate the products and
services offered by the company has no
diversified relationship to the existing business
(Furrer, 2016).
The value chain functions are linked in the
related diversifications
In the unrelated diversification there is no
linkage of the supply value chain.
Related Diversification versus unrelated diversification and explain why some companies
pursue both strategies
The conditions where the related diversification is pursued by the company is when the company
Cotton Group wants to expands its market and add the product lines to its company. The
condition when the company pursues the unrelated diversification is the one when the company
adds the new products for expanding its business. In the company Cotton On Group, the
company always adds new clothes for expanding its market share so the manager leads the
company by using the corporate level strategy of unrelated diversification (Engert and
Baumgartner, 2016). The company also uses unrelated diversification as it has certain benefits
related to the increasing efficiency and providing effective cash flows.

Management
10
Source: dummies.com
6 Implementing Strategy through Organization and Diversity
Organizational architect
The organizational architect of the Cotton On Group includes certain things related to the like the
appropriate organizational structure, culture, diversification so that effective decisions in the
company can be made up. The culture of the company includes several norms, ethics, beliefs,
etc. which helps in operating the effective functioning of the company. In the company Cotton
Group functional structure is followed so that the desired goals and the objectives in the
company can be achieved (Adeniji, et al., 2014). The company has the right combination of the
effective design and process which helps in controlling the things effectively in the company.
Strategy aligned with the combination of structure, process, culture, controls, and people
The functional structure strategy is aligned by the company Cotton On Group. In the functional
structure, the company has group the employees of the Cotton Group as per the similarities of
their roles and tasks. The higher level of specialization in the company has achieved through the
functional structure and helps in increasing the skills of the employees too. The productivity of
the company gets enhanced with this structure as it enhances productivity by communicating and
cooperating between the different units of the company (Ghosal, 2015).

Management
11
The cotton group uses the service process mechanism where they deliver the services to the
customers with the appropriate flow of activities. The company is dealing in the fashion and
footwear industry so they provide services to the service shop and also concerned with focusing
on the customer's satisfaction. The organizational culture of the company is governed by the
behavior of the people so in the company Cotton Group the strategy of diversified culture is
followed where people share their values and beliefs (Scherer, et al., 2016). The company also
controls and monitors the activities by taking the feedback from the customers and the
employees and this strategy help in ensuring the growth of the company.
Dimensions of diversity and inclusion
The company Cotton group has several dimensions such as religions, age, sex, income, marital
status, etc. There are four types of diversity in the Cotton Group which are differences in the
skills and abilities, occupations, values and attitudes, and personal traits. The company is dealing
in the fashion industry so every customer has different preferences. In each type of diversity,
there is the inclusion of individual behavior. The company also has intra and inters personal
diversifications (He and Balmer, 2013). In intra diversification the educational background,
religion, income, etc. are included and in interpersonal dimension, race, age, gender, etc. is
included. In the company, there is the inclusion of the diversification where the employees work
together individually and collectively and attaining good results. There are the certain benefits of
diversity in the company which increases the creativity, productivity and also boost the
reputation of the company Cotton On Group. The performance of the company get enhanced and
improved through and variety of ideas in the company can be established through the
implementing diversity as the strategy.