Competitive Environment and Business Level Strategy - Example

Competitive Environment and Business Level Strategy Name Institution Table of Contents Corporation identification 3 Definition of a corporation. 3 Product Portfolio and Service portfolio 4 Michael Kors Holdings Limited 4 Business Unit Research 5 Strategic Different Unit 5 Product and Service Lines 6 Michael Kors Retail Product Line 7 Business Unit Revenue 7 Revenue Centre 7 Retail Division 8 External Environment Analysis 8 External and internal environmental factors defined. 8 Economic Factors 8 Competition 9 Social factors 9 Technological Factors 9 Sustainable competitive Advantage 10 Sources of sustainable competitive advantage 10 Intangible assets 11 High switching costs 11 Network economics. 12 Cost advantages 12 Strategic Direction. 13 Global Expansion 13 Intensification of the e-commerce wing 13 References 14 Corporation identification Definition of a corporation. The term corporation is a term that is very common in the financial word today. A corporation can be defined as a business entity that is formed to fulfil specific objectives and that is separate and distinct from its owners. A corporation enjoys the privileges that are enjoyed by individuals such as having the right to own or sell property, legal ability to enter into contracts and the ability to sue or to be sued in a court of law. Corporations are usually owned by the stockholders. These stock holders share the profit and losses made during the operations of the firm. The owners have limited liability to the debts firm. This means that the property of the owners cannot be taken to settle the debts taken by the corporation. Firms become corporations through a process known as incorporation. Incorporation protects the owners of the firm from becoming personally liable if the company is sued. (De Bakker, 2013) Shareholders of corporations gain profits through dividends paid out to them. Most of the businesses known internationally are corporations. Corporation include coco-cola Company, Microsoft Corporation, Michael Kors Holdings, Toyota motor corporations among many others. Corporations are formed when the shareholders decide to incorporate it. A corporation may have the objective and goal of making profits from its operations or have no profit making objectives like in the case of charity organizations. Corporations may be public or Private Corporation and may have one, two or many shareholders. The creation and regulation of corporation is done by corporate laws in various nations. (Da Gbadji, 2015) Every year the shareholders elect the born of directors that is responsible for the management of the daily operations and activities of the corporation. The board of director have a duty to ensure that the corporation’s plans are executed. The members of the board of directors owe the corporation a duty of care and are liable if they neglect the duty of care owned. They are however not responsible for the corporation’s debt if they observe the duty of care owed. A corporation’s legal life and existence can come to an end through termination in a process known as liquidation. A corporation may be liquidated if it achieves the objectives and goals it had been created to reach or other circumstances making liquidation necessary. Product Portfolio and Service portfolio Product portfolio is defined as collection of all the products that a company deals with. These includes the products that are offered to consumers at both the production and consumption stage by a corporation. A product portfolio can be composed of diverse categories of products, different product lines and individual products. Products in a product portfolio may be classified on the basis of the BCG matrix which categorizes products according to their share in the market and the rate of growth of the various products. Service portfolio Refers to a collection of all the services that a company has to offer to its customers. These include the services that the Corporation offers directly or indirectly to its customers. (Rubera, 2016) Michael Kors Holdings Limited For the purpose of this paper I choose to deal with Michael Kors Holdings Limited. This is a lifestyle brand that is known globally. It is driven by an award-winning designer and managed by a top-class team. The company has grown over the years from an American luxury Sportswear house into a global company dealing with footwear, apparel and accessories. It is present in more than one hundred countries. It was founded thirty years by Michael Kors. Michael Kors has been able to include distinctive designs, materials, and craftsmanship. The company controls three lines of businesses that include retail, wholesale and licensing. (Cheong, 2014) The retail section is made up of collections and many lifestyle stores that are found in Europe, Asia and America. They also maintain an e-commerce store that uses the internet to carry out its trading activities. The wholesale department deals with the specialty stores. The corporation issues its licenses for its trademarks on some products. These products include fragrances, beauty, eyewear, jewelry and many others. The three major collections the company offers include the Michael Kors accessible luxury line, Michael Kors Collection luxury line, and the Michael Kors Men’s line (Darian, 2014) Business Unit Research Strategic Different Unit A business unit may be referred to as a part of a company that does its operations as a separate part of the whole business. A strategic business unit, at times abbreviated as SBU, is a division or a unit within an enterprise that is managed separately from the other divisions or units. Strategic business units have objectives that may be distinct from the objectives held by the parent unit. The objectives are very crucial for the general performance of the entire enterprise. Strategic business units are formed to handle a specific market or to deal with a particular business concern in the organization. This market or concern may require management expertise or specialty that may not be found in the parent enterprise. (Horkoff, 2014) Different organization have different ways of defining what constitutes a strategic business unit. In organizations that are relatively larger, a strategic business unit may be a division within the company, a single product offered by the corporation or a whole product line. Small companies may have the strategic business unit being the entire enterprise. All strategic business units have their own competitors who may be different or similar to those of their parent organization. They all have manages who are in charge of the day to day running of the units and the operations of the units are planned independently from those of the parent company. Michael Kors strategic business units include the retail, whole sale and licensing. Retail deals with products that are sold to the final consumers. Most of the retail dealings occurs in the various retail stores of Michael Kors found throughout the world. Michael Kors products are sold in 390 retail stores in the Americas and 278 retail stores in Europe and Asia. It is also using various E-commerce sites in U.S. and Canada (Michael Kors , 2017) Product and Service Lines A product line refers to a collection of products that are related to each other and that are under one brand that is offered in the market by the same company. These product are made by the same company. Product lines are developed in order to promote customer loyalty. When customers are satisfied with a product offered by the brand they will be willing to purchase the other old or new products by the same brand because they had a satisfactory experience with the product before. A good examples is a company selling makeup. The product line in that company may include cosmetics such as foundation, concealer, eye shadow, mascara, lipstick and blushes. A service line is composed of all services that are related to a particular division in a corporation. Many corporation supply different services either directly or indirectly to its customers and clients. These services may include mentorship services, training services, market access services, incubation services among others. A service line will be made up of services that are related to each other and offered by the same organization. Michael Kors Retail Product Line Michael Kors retail division product line has a very distinguished product line. It is composed of Michael Kors Men’s line, Collection Luxury line and the accessible luxury. It deals with products such as Dress shirts, suits, ties, casual shirts, skirts, perfumes, fragrances, boxers, tops, dresses, watches, jewelry, pants, polos, t-shirts, shoes, jeans, sweaters, swimwear, shorts, handbags, wallets, wristlets and footwear. These products are all designed to meet the needs of the modern man. The products vary in price, color and sizes but all of them have the same high quality that ensures that customers are satisfied and that they keep coming back for more. The fact that Michael Kors is a well-known and respected designer makes the whole product line very popular in the market. (Michael Kors , 2017) Business Unit Revenue Revenue Centre A revenue centers refers to a unit within an organization or a corporation that generates revenue for the organization from the sale of goods and services. Revenue centers monitor the revenues made by an organization. They are a counterpart to cost centers that are only concerned with the costs incurred by the organization. Revenue refers to the amount of money that a company earns during a specific given period from the sale of goods and services. This includes the discounts offered and received as well as the deductions made due to goods returned. (Dhangwatnotai, 2015) Retail Division The retail division within Michael Kors holding limited account for more than half of all the revenue generated by the entire corporations. In the year 2016, the total revenue for Michael Kors holding limited stood at 4.712 billion dollars. More than half of these amount was from retail trade. This amount is still growing due to the opening of new retail stores in various parts of the world. The retail strategic business unit is able to generate more profits as it offers its product at prices that are relatively higher than those offered by their wholesale counterparts. (Michael Kors, 2016) External Environment Analysis External and internal environmental factors defined. All businesses are influenced by many factors that exist in the market and the economy. These factors maybe internal or external factors. Internal factors refer to those factor that affect only a single corporation in the entire market and in most cases the management has control over internal factors such as employee turnover or financial positions. External factors on the other hand are those factors that affect all corporations in an industry which management has no control over. External factors include political factors, inflation, competition, socio-cultural factors, legal environment, environment and social factors among others. Operating environment refers to those conditions that affect the operation of an enterprise. (Khan, 2015) Economic Factors Michael Kors retail sector is affect by a number of these external factors in diverse ways. The performance of the economy affects the revenue and the number of sales made. Each economy s characterized by various economic cycles with some periods making consumers have more disposable income than other periods. During periods of low disposable income and reduced consumer spending, the retail stores suffer as most of the products offered by Michael Kors are luxury products. Customers spend less on luxury items when their incomes are low. Periods of recession also reduce the sales made in the retail stores and hence affect the revenue. (Prinz, 2014) Competition The markets that Michael Kors operates in both locally and internationally are highly competitive. There is presence of many retail stores offering similar products and many similar products being offered in stores that offer Michael Kors products. Companies and brands that create the high competition in the market include Coach, Palh Lauren, Burberry, Tory Burch, Louis Vuitton, Kate Spade, Gucci, Calvin Klein, and March Jacobs among others. These competitors pose a threat to the increased growth of revenue from retail strategic business units. (Kuo, 2013) Social factors Another external factor affect Retail stores is the growing culture of shopping online. Because retail stores depend on the ability and willingness of customers to travel to the retail stores, this current trend is them. The ability of customers to get to retail stores is further affected by the existing hard economic conditions, shortages in fuel and high fuel prices, restrictions on travel and more factors that hinder the mobility of customers. (Felton, 2013) Technological Factors Changing fashion trends also affect Michael Kors retail Stores. The frequently changing fashion trends may render some of the products already in the stores redundant. The success of the retail stores in selling Michael Kors depends on the flexibly of the company to respond to the changing dynamics in the fashion and retail trends quickly and efficiently. The accessories, apparel products and footwear commonly experience rapid changes in fashion and trends. (Dinh, 2014) There are also some socio-culture factors that may influence the performance of retail trading of Michael Kors products. The society in which one grows shapes the way they see things and their taste and preferences. If the opinion of the society towards is against a product it is very hard for sales to be made. In a society that does not believe in using branded items the performance of Michael Kors product lines will be very low. (Ortas, 2015) Sustainable competitive Advantage Sustainable competitive advantages are very necessary for the success of any business in the world today. An organization attains a sustainable competitive advantage when the organization develops a combination of attributes or just one that enables it to outperform the firms competing with it in the market. These attributes may include natural resources, highly trained professionals or even human personnel that is more skilled than those that exist in the market. A competitive advantage is termed as sustainable if a company is able to hold it for a long time. (Vanpoucke, 2014) Sources of sustainable competitive advantage The development or creation of sustainable advantage is aided by a number of factors. These factors assist in making the products of a company or the brand or the company itself be better off than all the other companies in the market. Intangible assets Intangible assets is one of the four factors of sustainable competitive advantage. Intangible assets are those assets that do not have physical substance and are hard to evaluate their value. Intangible assets include corporate intellectual property, patents, trademarks, business methodologies, copyrights, good will and brand recognition. Michael Kors holdings limited is a designer and therefore possess a lot of intellectual property and designs. Patents, copyrights and trademarks give the strategies business unit a competitive advantage as other designers can at no time copy the designs developed by the by the company. This gives them a higher hand in the market. These intangible also allow for product differentiation. Brand identification that Michael Kors products enjoy at the retail level lowers the level of competition in the market hence boosting sales. (Liu, 2013) High switching costs When the cost of switching from one brand to another is high, a company achieves competitive advantage. This is mainly the case in many power and water supply companies. Competitive advantage is directly proportional to the bargaining power of buyers implying that when the bargaining power of customers is low, the competitive advantage of a company will be high. Bargaining power in the fashion industry is normally low. Most pf the products that Michael Kors deals with have an inelastic demand. This implies that under all economics conditions, the prices will remain as high as they always are. A decrease in the price of products introduces an opinion that the quality of the product has gone down and therefore causes reduction in the demand. When prices include, more customers are attracted to purchase the products since customers associate high prices with improved quality. This gives retail stores the flexibility of changing prices as they see necessary. (Srivastava, 2013) Network economics. As the number of users of a product offered by a company increases, the value of the products and services also increase. Michael Kors products have been in the market for a long time and they have gained many loyal customers. The many celebrities who have appeared in many social events wearing Michael Kors designs have helped increase brand awareness and hence increasing users. When users become loyal to a brand, they rarely shift from it therefore giving the company a competitive advantage over the other designers in the market. Brand recognition and customer loyalty helps all the strategic business units including retail, wholesale and licensing gain an upper hand in the market. Cost advantages Cost advantages also contribute towards increased sustainable competitive advantage. These advantages seem from economies if scales that give retail stores high profit margins. When products are unique, such as the Michael Kors brands, the competitive advantage in enhanced. Many of the stores dealing with Michael Kors products are strategically locate in places with the target market hence increasing sales. The fashion industry has high cost of entry in to the market hence barring new entrants from joining the market hence protecting the competitive advantages held. There are also other barriers of entry that ensure Michael Kors retail stores stay at the top of the game. (Srivastava, 2013) Strategic Direction. For the continued success of any company, strategizing is very important. The strategies of a company may be directed toward increasing sales, promoting brands, expansion of the product lines, reducing costs and increasing brand awareness. Michael Kors retail lines have embraced some of these strategies with the aim of promoting profits. Global Expansion Michael Kors Company has been increasing its reach in the global market. It has had plans of increasing its customer base in Asian and European Market. This has been done by venturing into retail trade and the retail stores. There are many countries that more retail stores can be opened in including China, Hong Kong, Taiwan, and South Africa among others. The introduction of the Michael Kors products into these region will promote the sales and increase brand recognition in the whole world. (Sweezy, 2016) Intensification of the e-commerce wing Intensifying the e-commerce wing is a crucial strategy aimed at expanding the reach of the strategic business unit and the entire corporation into the global arena. This will also create a luxury digital presence. The company should aim at investing in technology by putting a lot of focus on making the digital presence optimal. The strategic business unit is adopting the strategy by launching novel e-commerce platforms in Europe and in Asia. (Fang, 2014) References Cheong, D. Y. (2014). Consumer Industry Report on U.S Luxury Goods. NUS Investment Society. Da Gbadji, L. A. (2015). 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