Anthony Bamford shares his thoughts on strategic management in the second instalment of his article series for WhichPLM. Anthony (MBA MRICS MIWFM MCMI) is a senior interim manager and consultant specialising in strategic management as well as transformation and change.
The core of strategic management taught in Business Schools around the world is Professor Michael E Porter’s five forces, along with his seminal article “What is Strategy?” The aim of this approach is to achieve competitive advantage that has some durability and longevity. Two approaches achieve this. One is to be more effective as a company, by undertaking different activities; the other is to be more efficient as a company by using different approaches, to a similar end as your competitor.
In my previous article looking on marketing I mentioned Rob Walker’s I’m with the Brand. He gives an excellent example of the Founder of American Apparel initially being forced out of the T-shirt market and starting American Apparel as a new company, with a sustainable business model for T-shirts in an untapped sector. Possibly at the other end of the spectrum from the ubiquitous T-shirt is A.L. Gore, makers of GoreTex. Although there are many competitive offerings in the breathable fabric market this company is still seen by many as the standard for this material. Porter gives the example of Gap having a competitive advantage in his article, What is Strategy?, first published in 1996. It shows how sometimes strengths can become weaknesses over time.
The article also picks up Maytag in the US, maker of white goods, which might be likened to the Volkswagen empire today. As commonality of parts across the group and other efficiencies are achieved, the core strategic positions become blurred and possibly lost. For instance, Audi’s progress through technology approach can only be sustained to a certain degree if its car parts are the same as those on a SEAT or Škoda. Likewise, Bentley has had to avoid the risk of raiding the ‘parts bin’ of its parent company too much. I have purposely picked these examples for an element of clarity and also sometimes it is easier to see a point more clearly from another industry.
If we take these points and apply them to the clothing and apparel industry, Hugo Boss and Ralph Lauren with their broad lines to reach segments, are in a similar strategic position. The almost terminal image the Burberry brand reached some years ago clearly illustrates how important it is to balance market reach and perceived quality and exclusivity. In The New Strategic Brand Management Kapferer emphasises the distinction between a luxury and a premium brand. He then goes on to itemise and differentiate between four luxury segments.
In the watch making world an extremely stratified market perhaps shows this up most visibly. In Breiding’s Swiss Made, for example, only Patek Phillippe, Audemars Piguet and Breguet are given the highest prestige rating of “1”. Even Rolex and Vaucheron Constantin, established 1755, are given the rating “2”. Luminaries such as Bvlgari and Omega are flagged up at the “4” level. With this type of exclusivity, a similar scenario plays out with the top English private schools, with only five having the equivalent of a Grand Premier Cru wine to use another two stratified and historic assessment system. So even hundreds of years ago the essence of luxury or top quality was being defined across many and various industries and markets. Incidentally, for exemplary watch luxury, Roger Smith based on the Isle of Man produces ten watches a year, and has a six-year waiting list, with his latest edition costing just under £305,000 (yes-three hundred and five thousand pounds!).
This clarity of stratification and image helps when looking at the endurance of companies such as Coach, Calvin Klein, Tommy Hilfiger and L Brands’ Victoria Secret. Each of these is rooted in what Kapferer would firmly consider to be premium brands. Like Burberry, these companies cannot stay still and must reinvent themselves. A similar example can be seen with enduring pop stars like Madonna who has created and shed fresh personas over the years. This emphasises the importance of rejuvenation. More formally this is known as adapting to the business environment, with software producers existing in a particularly fast paced environment at a strategic level. Companies such as H&M and Zara, with their greatly reduced production to market times, created a strategic benefit through operational effectiveness.
This brings me to another essential part of strategy, known as ‘blue oceans’. This metaphor emphasises the comparative calm and opportunities such a market offers, in contrast to the cut and thrust and hard work of ‘red oceans’. Since no one had developed a breathable fabric of such capability before, this allowed Gore’s eponymous fabric (as mentioned earlier in this piece) to take a sustainable lead in this area. In working with a small company some time ago the company’s head became convinced low margin work had a market and this would lead to other opportunities. In actual fact similar firms avoided this area of work as far as possible and only offered it because it was expected, given the professional area. More importantly the core customer base was likely to choose different suppliers for this low margin business and higher margin business to follow good practice. Naturally enough with that lack of strategic clarity and customer understanding the company survives but does not prosper.
A clear understanding of your customer is essential to achieve successful and enduring strategy. There has been recent discussion about fashion brands seeking to use the benefits of influencers in social media. The rise of the influencer is a logical extension of some of the less obvious marketing approaches Rob Walker (mentioned in the intro) talks about. Whether social influencing can be considered a strategic blue ocean may be open to debate but if reports of Kylie Jenner’s business success are correct a small number of players may be able to fairly claim that.
One indicator that fashion and apparel is now considered more strategically is the joint McKinsey and Business of Fashion annual report “The State of Fashion”. The latest edition was launched in February and is the third annual report and review on the state of the industry. The importance of new and emerging markets is emphasised along with a range of other trends. Since this is now in its third edition trends and changes can be defined at a macro or strategic level more accurately than from individual pieces of work.
Effective strategy must be supported by capable implementation and that is crucial. Strategy has its early identification and development in the military sphere. I hope you can regularly create time and space to think strategically, and over time the benefits will become clear in your business and its bottom line.