The paper "Strategic Management and Business Policy" is a perfect example of a Management Case Study. According to Kazmi (2008, p. 19), strategic management is the systematic process of creating, implementing, evaluating, and controlling strategies in a way that allows an organization to achieve its goals. From this definition, it is evident that strategic management is a continuous process and that an organization needs to evolve its strategy on a constant basis to remain competitive. This report examines American Apparel to evaluate its performance in the area of creating, implementing and controlling its overall strategy.
The company was started in 1998, and it experienced steady growth to the point that it was the leading garment manufacturer in the US by 2005 (Grant 2012, p. 658). However, there was a quick reversal in the fortunes of the company by 2010 as the company had to restructure its financial system and reduce costs. The paper will begin by identifying the strategic issues that led to this rapid decline. This will be followed by the use of strategic management tools to evaluate the reasons behind the problems at America Apparel.
Finally, the paper will provide recommendations that should facilitate the attainment of American Apparel’ s objectives. Strategic Issues and Problems According to Grant (2012, p. 656), $20 billion worth of T-shirts are sold in the US on a yearly basis. At first, this might seem like a large market that can be cornered by a single business. However, the segment is served by a wide variety of suppliers at both the retail and wholesale levels. As such, American Apparel’ s decision to focus on a T-shirt can be considered as a problem due to exposure to excessive levels of competition.
Statistics from 2011 indicate that American Apparel’ s sales amounted to 550 million, a figure that is minuscule when compared to Gap’ s $14.55 billion and VF’ s $9.46 billion in sales. This level of competition had the effect of forcing the company to be very innovative in product designs and to face the issue of imitation from both local and international players in the market. The other strategic issue comes from the vertical integration strategy. In this case, vertical integration defines the acquisition of separate and sequentially related economic activities by a single firm (Wu 2014, p.
5). Vertical integration can be backward where a firm acquires businesses that supply critical inputs or forward where a company owns the fabrication, distribution, and finishing activities (Wu 2014, p. 5). American Apparel’ s vertical integration included both forward and backward integration as it engaged in production, design, marketing, retailing, and advertising. While vertical integration created advantages like speed and flexibility for the domestic market, the strategy was not effective for a firm that established over 200 retail stores in international markets.
Therefore, a significant issue at American Apparel comes from the choice of strategy for the international market. The organization’ s decline can also be traced to the manner in which it implemented its vertical integration strategy. Dov Charney, the CEO, and founder was responsible for the poor implementation of the adopted strategy. The CEO had a controversial persona that was bound to taint the image of the organization and limit the company’ s attractiveness to a broad section of customers. For example, the CEO and the company faced sexual assault charges because of a culture that gave undue attention to sexuality.
Apart from these controversies, the company also suffered from the tight control of the CEO. It is surprising to note that the CEO of such a large company controlled virtually all aspects of the company’ s strategy. This extended from individual product designs to disagreeing with expert consultants on a corporate turnaround strategy that would rescue the business from its decline.
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