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

Baleno: Expanding Retail Operations in China

Internal Analysis of Baleno

Tangible Resources

The company Baleno is financially a strong organization, which has been working since 1981 as young professional previously associated with Giordano. The financial position of the company in the Chinese market is quite profitable with the franchise system under the Chinese Government Law. Baleno over the past decade has become one of the most rapidly and largest growing brands in the casual wear industry therefore, it had strong financial backing as well. The parent company was one of the largest companies involved in the production, dyeing and selling of knitted fabric in Asia. Its turnover in 2007 amounted to HK$8,299 million. Fabric production, garment manufacturing, dyeing, bleaching and casual wear retailing were vertically integrated within the group, resulting in lower costs and economies of scale.

Baleno initially had their followers’ strategy where the company was constantly looking to follow the steps of Giordano and opened stores right beside Giordano franchises and outlets. With the changing trend of Chinese apparel industry, Baleno transformed into an “A simple living attitude”. A new collection, simple and clean design with latest fashion ideas for both sexes was introduced under the brand. Baleno in fact positioned itself as “value for money” where it offered mass apparel designs, superior customer service and quality clothing at competitive prices.

Intangible Resources

Baleno had a professional designer team who was constantly looking to update new and latest information on latest trends for Baleno in order to make the brand a continuously growing entity. In addition, efficient information technology communication systems help Baleno to become a trendy apparel company in China. Along with this, an integrated Information technology system complimented strong relationship between Baleno designers, manufacturers and suppliers. Baleno has been looking to involve colors, designs and fabric that can attract customer with new features and slogans.

Resources, Capabilities and Core Competencies

Valuable

Rare

Costly to imitate

Exploited by the organization

Competitive Implication

Performance

No

Competitive Disadvantage

Below Normal

Yes

No

Competitive Parity

Normal

Yes

Yes

No

Temporary Competitive Advantage

Temporary Above Normal

Yes

Yes

Yes

Yes

Sustainable Competitive Advantage

Sustainable above normal

The current strategy of Baleno provides it the temporary competitive advantage in the apparel industry in China. The reason it stands at a Temporary Competitive Advantage is because the company has a strong franchise system backed by quality production of trendy and youthful goods, targeting the most quality conscious segment of Chinese industry that is the people ranging above the age of 25. The company as compared to the other industry players has been dealing directly with the Chinese customers of 1st and 2nd tier cities while rest of the market is served through the strong franchise system that gives it the Temporary Competitive Advantage that is not very costly to imitate.

Porter Five Forces Of Competitive Position Analysis

Bargaining Power of Suppliers:

The bargaining power of suppliers in the apparel industry of China is quite low. The reason for this is that there are a lot of suppliers in the apparel industry, which gives the industry players the opportunity to bargain on prices with suppliers. The abundance of raw material, low cost labor and the wide range of fabrics available in the Chinese market make the country highly competitive for all the industry suppliers. Along with this, it is actually not possible for a single supplier to dominate raw materials such as cotton and cloth in the apparel industry, which again affects the industry suppliers negatively.

Bargaining Power of Buyers:

The bargaining power of the apparel industry in China is moderate. The reason it is moderate is because of the increasing number of local and foreign brands available in the market. Along with this the switching cost in the apparel industry is quite low, which makes the customer more inclined towards prices. However, more recently the trend in Chinese market has changed as young men and women are ready to pay higher prices for better colors, fabric and quality of the product. This industry is highly competitive for every individual industry player but increasing population gives all industry players the opportunity to compete with other players. Local brands in spite being cheaper than foreign brands still captures a higher market share of foreign goods in the Chinese apparel industry. Therefore, the increasing number of customers as compared to the fashion retailers along with the low customer integration makes the bargaining power of customers quite low.................

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