Baleno: Expanding Retail Operations in China Harvard Case Solution & Analysis

Threat of Substitute Products:

The threat for substitute products for apparel industry in China is quite high. The reason for the industry being a high threat for substitutes is that the sources for fashion retailers such as Giordano, Esprit, Baleno, etc offer products that have fairly high prices as compared to the products offered by local apparel manufacturers. The switching cost is also low therefore; the customer has the option of substituting all the brands with low cost products at anytime, therefore the industry is highly competitive.

Threat of New Entrants:

The threat of new entrants in the apparel industry of China is low. The reason for this is that the initial start-up cost for entering the industry is very high. Secondly, to compete in the industry all players need to have technical and operational expertise in order to maintain and compete in such high competitive environment therefore, it makes the industry less attractive for new players. Along with this not only the new entrant will have to compete with local manufactures but it has to compete with foreign brands also which are strong financially and technically.

Rivalry among Competitors:

Rivalry among competitors in the Chinese apparel industry is very high. As the case states, all industry players were in competition with one another by offering unique futures in the clothes and fabric through colors along with quality. The industry makes it tough for the rivals because all the players have unique skills and features, which makes them highly competitive for other players in the industry. With such high capital investment the in apparel industry, it is next to impossible for any player to exit the industry.

 

Threat of Substitutes: Low

  • High number of substitutes
  • Cost of switching is low
  • People preference changing

 

Threat of New entrants: Low

  • High startup cost
  • Technical expertise required

 

 

 

Degree of Rivalry: High

  • Increasing number of competitors
  • Slow industry growth
  • High Fixed cost

Bargaining Power of Supplier: Low

  • High access to inputs
  • Importance of volume to industry development
  • Economies of scale

 

Bargaining Power of Buyer: Moderate

  • Highly price sensitive market
  • Buyer volume decreased

 

 

SWOT analysis Baleno

Strengths

Weaknesses

Opportunities

Threats

  • Market Share
  • Franchises
  • Latest fashions
  • Financial standing

 

  • High prices
  • Low in-store inventory
  • Minimal advertising

 

  • Consumer Preference
  • Strategic alliances
  • Strong research department

 

  • Competition
  • Changes in Customer behavior
  • Low switching cost

 

 

Strengths:

The key strengths for Baleno are the financial standing points of the company. With the strong financial background and increasing sales of the company makes it a strong financial entity. The franchise system that it has adopted has made the company grow enormously. The idea of establishing franchises in the 2nd and 3rd tier locations of China has made Baleno a strong brand name. Baleno has been keen on innovating new products, fabrics and quality within the products and apparels offered, this again is a strength for the company. Baleno has the highest sales revenue in T-shirts throughout China.

Weaknesses:

The biggest weakness of Baleno is the high prices that it has maintained since the introduction of the brand back in 1992. In spite of increasing competition, Baleno has still placed itself as an expensive brand. The advertising budget of Baleno is quite low; the company does not pay enough attention on advertising new products and new collections as it should actually do, which accounts to be considered as a weakness of the company. The company does not keep enough in-store inventories of products. In fact, sometimes people ask for a specific product and the salesman has to unfortunately tell the customer that the product is unavailable for now.

Opportunities:

Baleno is a preferred brand by most of the young people of China. They prefer Baleno because of the colors and the fabric that the company offers. Along with this, Baleno has a strong research and development department, which constantly looks to improve upon the quality of products. Not only does it bring improvements in quality but it looks to enhance better quality along with new features in apparels. An opportunity for Baleno is to form strategic alliance with a local manufacturer, this will increase the profit margins for Baleno and at the same time the local manufacturer will educate Baleno with the demands of local customers.......................................

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