Crisis at the Bally Wedding Dress Company - Case Study Example

The Bally Wedding Dress Company: Case Study Analysis Name Institution Course Date Executive Summary The Bally Wedding Dress is a Chinese company that specializes in making wedding dresses. The company was founded in 2008 by Lee and Colleagues with Lee holding the majority of shares in the company. However, the company has been struggling in China’s wedding industry due to many factors, including rising labor cost in China, persistent currency appreciation, high cost of materials, low-cost advantage in the wedding dress manufacturing sector, and difficulty in getting qualified labor to work at its company. These are environmental factors that Bally have little or no control over. Porter’s Five Forces model also indicates that the industry is characterized by stiff competition that poses a threat to the company. However, the SWOT analysis indicates that Bally has a number of strengths that it can utilize to minimize weaknesses, threats and exploit the opportunities. Additionally, the VRIO analysis indicates that Bally has a number of resources and capabilities that if utilized properly will enable the company achieve a sustainable competitive advantage. Nevertheless, Bally needs to focus more on innovation, differentiation, cost leadership and affordability to compete effectively in the market Introduction The Bally Wedding Dress is a Chinese company that specializes in making wedding dresses. The company was founded in 2008 by Lee and Colleagues with Lee holding the majority of shares in the company (Yun & Jiqing, 2015). The business areas of operations include the design, manufacture and sale of wedding gowns, bridesmaid gowns, dresses, wedding accessories and children’s wedding clothes. Although the Suzhou-based firm has been around for barely eight years, the company has grown to become a global brand exporting its products to different parts of the world, including Canada, the United States, Australia and Europe. However, the case indicates that all have not been rosy at the Chinese firm that has faced numerous challenges over the past few years. The company’s woes arise from a combination of factors that include rising labor cost in China, persistent currency appreciation, high cost of materials coupled with the low-cost advantage in the wedding dress manufacturing sector (Yun & Jiqing, 2015). Besides, competition has become stiffer coupled with the difficulty in getting qualified labor to work at its company. These factors have caused a steep decline in the firm’s sales volume and profits. Although manufacturing enterprises in China face similar problems, Bally has to find a way of overcoming the problems. Industry Analysis Porter’s Five Forces Model The industry in which Bally Wedding Dress Company (BWDC) operates can be analyzed using Porter’s Five Forces model. Porter’s Five Forces model is a strategic analysis tool that helps the management of a company understands the extent of competition and the competitive position of a company in an industry (figure 1) Porter (2008). Fig. 1: Porter’s Five Forces Model Source: Porter (2008). Threat of New Entrants (Week) The wedding dress and accessory industry has a weak barrier to entry for new firms as the industry does not require a huge capital to venture into and operate (Yun & Jiqing, 2015).However, small companies cannot easily match companies like Bally that have been in the industry for about 8 years. Threat of Substitution (Strong) The threat of substitution is high as there are as people do not necessarily have to wear a wedding gown to have a wedding as most Chinese still practice traditional wedding that involve wearing traditional clothes for wedding. Besides, the wedding accessories such as jewelries have alternatives in the market that customers can buy because they are cheaper (Yun & Jiqing, 2015). Bargaining Power of Buyers (Strong) The bargaining power of buyers is high. The customers have a high bargaining power because there are many players in the industry from which they can buy their wedding dresses and accessories. At the same time, the industry is associated with low switching cost for the customers, which gives them a high bargaining power (Yun & Jiqing, 2015). Bargaining power of Suppliers (Strong) The bargaining power of suppliers is high. Bally have few suppliers for its products in the market and this give its suppliers a strong bargaining power over the prices. Besides, there is high switching cost for Bally from one supplier to another (Yun & Jiqing, 2015). Rivalry among existing firms (Strong) The intensity of rivalry among existing firms is high. The industry has more than 200 companies involved in the manufacture and sale of wedding dress and related accessories. This implies that Bally has many firms to compete with, include small and well-established players (Yun & Jiqing, 2015). Internal Analysis SWOT Analysis Strengths Strong brand Recognition Bally having been around in the Chinese wedding industry for about 8 years has made its brand enjoy strong recognition in the market. Strong Distribution Network Bally has established a number of sales stores in China and is exporting its products into Europe, Australia, Canada and the United States. The wide distribution network enables the company to reach out to many customers both locally and internationally (Yun & Jiqing, 2015). Strong Leadership Team Bally has a strong leadership team headed by Lee, which ensures that the firm is effectively run Technology adoption Bally has been effective in adopting technologies, such as online marketing to increase its brand awareness (Yun & Jiqing, 2015). Weaknesses Late Mover Bally entered into China’s wedding dress market late after other established firms had entered. The case indicates that the company was founded in 2008 while there are other competitors that have been in the firm for close to a century. Less Innovative Bally appears to be less innovative in terms of product and service innovation which is a weakness. Shortage of skilled workers The case indicates that Bally has been experiencing difficulty getting skilled employees to work in the company and this affects the delivery of products and services to customers. Opportunities Growing Demand in China The case indicates that the demand for wedding dresses and accessories have been rising in China and this creates business opportunity for Bally to exploit (Yun & Jiqing, 2015). Expand into Africa and Parts of Asia The growing demand for wedding dresses in African countries and Brazil creates an opportunity for business expansion into these emerging markets. Threats Rising labor cost The cost of labor has been rising in China and this pose a threat to Bally as it causes an increase in the cost of production, which affects profitability (Yun & Jiqing, 2015). High competition There are numerous firms both small and large that Bally has to compete with for the market share some of which enjoy low-cost advantage (Yun & Jiqing, 2015). Besides, there are potential entrants into the industry and this would increase the intensity of competition, thus causing Bally’s market share to shrink. Currency appreciation Because Bally exports part of its finished products into the international markets, such as Europe, Canada, Australia and the U.S., the persisted currency fluctuation affects its profitability (Yun & Jiqing, 2015). High cost of materials The rising cost of materials used in the manufacturer of wedding dresses pose a threat to Bally as it increases the cost of production, which in turn eats the profits made by the company. VRIO Analysis VRIO framework is a strategic analysis tool that companies use to understand how the capabilities and resources they have are capable enabling them realize a sustainable competitive advantage (Barney & Hesterly, 2014). The elements of VRIO framework include value, rarity, inimitability, and organizational to knowledge (Grünig & Kühn, 2015). Figure 2: The VRIO Framework Source: Grünig & Kühn (2015). Value: Bally have various resources that can be considered valuable. The resources include design and manufacture of quality wedding gowns and accessories, strong brand name and reputation and reliability (Yun & Jiqing, 2015). Rarity: Bally designs and manufacture wedding gowns and accessories with unique features that match the trends in the market, which is rare (Yun & Jiqing, 2015). Bally also has the ability to provide mass customization and to deliver a product ordered in the shortest time because of its efficiency and this is a capability, which is rare in the market. Inimitability: Bally has the capability to come up with innovative products and this is a resource that others cannot imitate. Besides, Bally has been in China’s wedding industry for eight years and this is a resource that will take new entrants a lot of time to match (Yun & Jiqing, 2015). Organizational Knowledge: Bally provides workers with an environment that promote acquisition of known and learning and this are a resource that facilitates innovation and faster technology adoption (Yun & Jiqing, 2015). Conclusion & Recommendation The case indicates Bally Wedding Dress, a company that has faced many challenges in China since it was founded about eight years ago. The challenges include rising labor cost in China, persistent currency appreciation, high cost of materials, low-cost advantage in the wedding dress manufacturing sector, high competition and difficulty in getting qualified labor to work at its company. However, therefore, to succeed in this market, Bally has to adopt effective strategies that will enable it respond effectively to these internal and external factors. First, Bally needs to focus on becoming more innovative to ensure that customers are provided with quality, fashionable and trendy products. At the same time, Bally needs to focus on differentiating its products and services to enable it penetrate the crowded market. Additionally, the firm needs to consider pursuing a cost leadership strategy as this would enable it minimize the cost of operations, reduce its prices and attract many customers to its brand. References Barney, J. B., & Hesterly, W. S. (2014). Strategic management and competitive advantage: Concepts. Oxford, NY: Pearson Education. Grünig, R., & Kühn, R. (2015). The strategy planning process: Analyses, options, projects. New York, NY: Springer. Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. New York, NY: Simon and Schuster. Yun, L., & Jiqing, Z. (2015). Crisis at the Bally Wedding Dress Company. Richard Ivey School of Business Foundation. 1-7. Read More