Keywords: massimo dutti pest analysis
Massimo Dutti was founded in 1985 as a business whose main activity was the deal of fashionable men's clothing. Ten years later, the commercial format was bought by the Inditex Group (Industria de Diseño Textil S. A. ), one of the world's largest fashion marketers, who owns brands like Bershka, Pull and Keep and Zara. The Inditex Group all together has more than 4, 530 stores in 74 countries in Europe, the Americas, Asia and Africa. The group also partially and wholly is the owner of more than a hundred companies related with the various activities available of textile and fashion design, production and circulation. Its unique management model, based on innovation and flexibility, and its vision of fashion has resulted in fast international growth and an excellent performance of most its commercial types.
Today, Massimo Dutti has more than 490 stores in 41 countries. The company joined UK in 2003 with its first store in London. The brand new megastore occupied three floors of an building put in downtown Regent Street, which got more than 2, 000 square meters of business area. Massimo Dutti offers quality international fashion design for men, women and children, with a number of collections that range between sophisticated urban styles to casual wear. Its widespread design connects with indie urban men and women whose lifestyle portrays an impeccable image. During 2008 Massimo Dutti lengthened its range of complements and accessories to help customers find the small details that indicate the difference in style and add the concluding touch to the desired look. Features in this product extension will be the new type of eye and shades, The Eyewear Collection, with an increase of models for women and men, and the kick off of a new women's perfume, En Esencia. The company also added the children's brand in 2008 which include collections for children and was launched in Paris. During the same time, the chain came into six new countries: Poland, Romania, Czech Republic, Slovenia, Guatemala and Israel. In addition, it continued its enlargement in the Asian Pacific region, beginning its second store in Hong Kong, in Harbour City, one of the city's main shopping areas. With this establishment, Massimo Dutti now has three stores in China, where it opened its first store in 2007 in Macao. Altogether they exposed 44 new stores in 38 new countries to develop their international presence. (Appendix B. 1, B. 2, B. 3)
This report examines the surroundings where the company is situated. The macro environment covers the developments in the changing environment and exactly how they may potentially have an impact on the Massimo Dutti resource chain. It also suggests various opportunities and hazards that the business may have to face. The next section of the survey analyses the various stakeholders i. e. the suppliers, consumers, rivals etc within the micro environmental analysis. The third section of the report analyses the internal environment and includes the supply chain research, the marketing resources, financial resources and the human resources utilized within the organisation. The record concludes by recommending a strategic route the business should ingest order to attain its full probable.
Macro Environment Analysis
Massimo Dutti being truly a global company is afflicted by lots of macro environmental factors. These factors are the basis on which a company builds up its knowledge of the market segments, business position and the strategic direction for its operations.
In recent years the macro environment has been progressively being put into factor because of higher marker volatility, the global slowdown and the economic downturn. These factors not only present a great risk to businesses but can also create many opportunities which a company can identify and benefit from. For instance, if a business is able to examine its current environment and forecast potential changes, it'll be better located in its market than its competition to respond to changes in the surroundings. Thus understanding and functioning with the macro environment i. e. the external environment where the business operates, is becoming increasingly the main element to organisational success as it can help maximise opportunities and minimise hazards which the organisation faces. In other words a macro environment scanning can help us to identify various opportunities and dangers in the organisation.
There are lots of macro environmental factors which impact the UK clothing retail market. These factors are known as the Infestation factors or the political, economic, communal and technical factors that assist the scanning of the surroundings. (Appendix A. 1)
(P)olitical Environment
The clothing retail sector in the UK has seen a number of changes in their politics environment in recent years. The first change is the recent extension of the European union territory which has facilitated import and export amongst various countries within the European union. Because of this trade between these countries legal contracts and establishing new operations and stores is becoming more attractive than ever before. For Massimo Dutti it translates to wider market segments and a wider consumer basic both within and outside the UK. This sort of a direct effect is visible in a long term with a good and increasing impact to the company.
The second change is the change in interest levels and federal government taxation which is the consequence of the global economical recession. The federal government has implemented a variety of procedures to stabilise the financial market segments and encourage the market including part-nationalisation of some banks, VAT reductions, and suspending general population sector borrowing guidelines. Also In March 2009, the Bank of England cut interest levels to a record low of just 0. 5% where they stay at the time of writing. The government also provided the go-ahead for the more major coverage of quantitative easing in order to kick-start the market. (Appendix A. 2) The impact of this government insurance policy has led to a higher degree of disposable income in the hands of the buyer and has thus facilitated the retail sector. Alternatively when interest rates eventually begin to climb they could do it quite abruptly and sharply in that way increasing the risk of less shelling out for mid-market luxury merchants like Massimo Dutti. (Appendix A. 3)
There have been numerous amounts of economical changes since 2007 which will be the consequence of the global financial slowdown and the downturn. Until lately the British market was enjoying the longest period of growth and possessed outpaced the majority of the others of Western Europe. However the global economic downturn, restricted credit and dropping house prices helped bring the UK in to the recession in the trunk 1 / 2 of 2008. This financial downturn led to a big change in the monetary factors that affected the UK retail sector all together. The style industry specifically has been more susceptible to such a downturn than other retail options.
Due to the tough economy the economy has shown frequent fluctuations in the money rates. This change has influenced the stores as they have got utilized these fluctuations. This is because they are located in a price-led market i. e. have to provide competitive prices on the market to make it through further placing more pressure on their income.
Also due to the reduction in the throw-away income of the consumers only the cheap fashion / fast-fashion sector has benefited. Companies like Penny's, Primark and TK max have saved highest sales because of the recession. The implications of such a style are that less overall is allocated to custom clothes as well as accessorises. Consumers may stop spending on high end luxury brand and accessories and go set for fast-fashion clothing in so doing posing a risk to Massimo Dutti. It can be noted that spending on clothing has reduced than in comparison to other spending areas. The global economic slowdown has impacted closely on clothing vendors as it offers hit consumer's determination and ability to invest on discretionary items. Thus companies like Massimo Dutti may face a slowdown in sales amounts.
Unemployment has climbed constantly since mid-2008, getting 7. 8% by Q2 2009 and it could grow to over 10% this year 2010. Junior unemployment (18-24-year-olds) exceeded 17% by the next 1 / 4 of 2009 and in the short term will continue trending upwards. This impacts intensely the purchasing electricity of those concerned and hence minimizing an important market segment for mid-market luxury suppliers. (Appendix A. 2, A. 4)
(S)ocial Environment- The Changing Demographics
The sociable environment relates to consumer behaviour and opinions towards different product types and brands available on the market. It also relates to changes in consumer behaviour and their demographics i. e. years, sex, gender, family size etc. Changes in interpersonal trends can effect on the demand for a firm's products and the availability and willingness of individuals to work. Thus it is vital for the firm to recognize these factors and convert them into opportunities and be rid of most potential dangers.
A large number of consumers have altered the way they look for clothes and in the key those changes involve cutting back for some reason - by spending less, by typically buying discounted lines, or by buying from value vendors or less costly shops. Corresponding to a study by Mintel over one in four people have not modified their shopping patterns for clothes because the recession started out but many consumers have, and the most important changes are savings-related i. e. spending less, doing your research more, not buying at full price, buying more from value or less expensive retailers. (Appendix A. 5) This cutting back on expenses by the consumer means that they wish to spend more on value merchants rather than mid-market luxury sellers.
According to Mintel the mid-market section in addition has squeezed therefore of the price-led consumer market. For instance mid-market players like like-for-like and Dorothy Perkins have gone down in sales. Like-for-like traded down 2. 4% in the Q1 of year 2009-10 and Dorothy Perkins was still heavy with summertime markdowns when rivals were relatively clean with new autumn runs. Gap's international quarterly sales to August 2009 slipped by 5% which is an important competition for Massimo Dutti. Other mid-market players like H&M and M&S have exchanged up as they are price-led sellers. (Appendix A. 6) On the other hand high-end designer customers tend to buy more from the mid-market than from the upmarket traditional retailers therefore of the ongoing recession. It is because of insufficient particular brand devotion, financial failure to buy everything from custom made brands and the propensity of buying essentials (i. e. T-shirts, jeans etc) from the mid-market retailers. (Appendix A. 9)
Another craze in change would be that the 25-54s have bought and sold down the most amongst all the consumer age ranges. This age band has been one of the worst reach by the downturn for their greater financial commitments. This age group is the primary marketplace for Massimo Dutti and therefore affect the business sales the most. (Appendix A. 7) Because of a combination of various above mentioned factors customers are more likely to now buy more from familiar brands/outlets they trust. (Appendix A. 8)
(T)echnological Environment
The technical environment contains changes in technology related to the manufacture, sourcing, distribution or sales of a various components of products for the reason that industry. A big change in technology for various functions on the market sometimes creates barriers to entry and also brings about innovation. Thus it is very important for organizations to adjust to the changing trends of technology.
Online fashion is becoming a lot more popular as choices have improved. Nowadays many consumers like to shop online as it not only will save you time but also offers a full view of the collection at an individual click. Fashion sites are also engaging better with the clients through; better product imagery, establishing social network; utilising user generated content, introducing digital changing room's etc. These kinds of innovations help the consumers to establish a better three dimensional understanding of the products they would like to buy and therefore provide a much better chance of the marketers to capture the consumer. (Appendix A. 10)
Another trend is M-commerce. It really is a potential way to obtain growth for future years, particularly one of the young - a key demographic for fashion. But it will be based upon more retailers introducing mobile applications and on consumer ownership of smart telephones. (Appendix A. 10)
Other Factors
There are various other factors apart from political, social, economical and scientific factors that influence the UK clothing retail market. One of these is environmentally friendly concerns facing the style industry today. Many environmentalists have increased objections against fast-fashion goods as they not only finish up in landfills faster than usual but also as a result of time, effort and resources employed in their production. According to a research it shows that on average in the united kingdom 30kg's of clothes per person are dumped into landfills because of this of the fast-fashion. It makes up about about 1, 000kg of CO2 per year - roughly 50 % that emitted by a tiny diesel car. Each year the average person in the UK spends about Ј650 on 50 roughly items of clothing and makes up about a large part of your carbon footprint. When they are built, when they are carried, when they are washed and even though they are disposed of, clothes are accountable for significant greenhouse gas emissions. 90% of the clothes people buy in the UK are transferred from in foreign countries, mainly from China, India and Bangladesh and it only adds to the environmental impact of clothing. Also, working in the textiles industry often means long hours, low pay, poor safety records and the utilization of child labour. This it increases environmental and honest concerns (Appendix A. 11). It increases concerns for the Inditex group as a whole as their excellent focus recently has been the launch of fast-fashion products in to the marketplaces through their various brands.
Massimo Dutti Opportunities
With the assistance of the macro environmental evaluation opportunities of the company can be determined. These opportunities can be maximised therefore the company can be located ahead of its competitors on the market. These opportunities are: -
As a result of the EU place expansion Massimo Dutti is able to reach wider markets both within and outside the UK increasing the scope of procedures in the company. It also means that it is much easier to source materials from the partner countries, which is an essential requirement of Massimo Dutti's business strategy.
The stimuli provided by the federal government in '09 2009 as a result of the economical tough economy have helped the visitors to overcome the issues of throw-away income and therefore has boosted the retail sector. However the impact is very permanent and does take time to show indicators of recovery.
Shoppers of high-end creator clothes have a tendency to buy more from the mid-market than from the upmarket high street retailers as a result of the ongoing recession. This has helped vendors like Massimo Dutti to capture new demographics.
As a result of the increasing concerns over the recession people have started spending reduced and lesser on clothes but have began to spend more on accessories which help these to look different with the same amount of clothes. Massimo Dutti thus has a competitive benefit because of their recent launch of men and women accessories as an addition to its preceding range.
Online shopping is one of the recent rising trends in the fashion industry. This opens up markets for consumers who recently were unable to shop at specific stores. This also reduces the necessity for a physical location of its stores. This provides a huge opportunity for mid-market vendors whose sales can be boosted in the existence of online sales.
M-commerce is another technological factor impacting the industry. It could tap the key demographic i. e. 25-50 season olds and for that reason has a great potential for companies like Massimo Dutti whose main target market is this demographic.
Massimo Dutti Threats
Due to the Economic tough economy and money rate fluctuation it has been difficult for suppliers to maintain with a price-led market. This influences the already low profit margins in doing so posing a hazard to the sellers.
As a result of the decreasing throw-away income mid-market brands have experienced because people have shifted from those to fast-fashion cheap sellers who provide fashion clothes at a cheaper price.
Another tendency in change that has impacted Massimo Dutti is that the 25-54s have exchanged down the most amongst all other consumer age groups. Being the key demographic of the company it has affected sales and could continue to achieve this task in the future.
As many environmentalists have lifted objections against fast-fashion it poses a risk for companies like Inditex (Massimo Dutti) as their primary business model revolves around the idea of fast-fashion goods.
Micro Environmental Analysis
The micro environmental factors are those that are related to the firm's immediate portion of operation that influences the performance and decision making for the reason that company. These factors also impact the entire costs of the organisation; the grade of products provided and directly contributes to organisational success. A couple of 3 major stakeholder groups which affect these factors. They are the suppliers, consumers and the competitors.
The Suppliers
There are lots of ways in which the suppliers impact the performance of a company. These may be related to the product quality the dealer provides, the amounts that may be sourced from the suppliers, lead-time demands of the marketplace or the moral and environmental concerns followed by the suppliers. All these factors are in charge of having the right product at the right time to fulfill the demands of an firm's consumer. Predicated on these factors businesses must decide on issues such as who to source from, responsibility it takes for these suppliers and on the conditions and conditions it adopts.
Inditex has over 1, 186 suppliers around the globe making it susceptible to many factors. Among the most important movements in change is the adaptive procedure for suppliers to operate in low cost regions. This is because the textile industry inherently is a labour extensive industry and hence was the first to move to low labour cost regions. Five years ago, China was the only source for low priced products but now Vietnam is contending against inland China and elements of India with the same position. That is because of the increased internationalisation of the clothing companies in Europe before decade. As customers are compelled to pass on their volumes across different parts, these parts or countries enter competition with each other. This resulted in the creation of special financial areas in many countries, mainly with cheap labour. Besides cheap labour and resources these areas haven't any other associations to the local economy. Alternatively they are immediately inspired by the high degree of fluctuations caused scheduled to favourable or unfavourable conditions in foreign market segments. China is one of the key suppliers to the Western attire industry but is less competitive than eastern Europe because of added logistics costs. (Appendix B. 4, B. 5)
Another factor that has damaged the suppliers is the requirement of customers for environmental compliance and labour standards. Recently the government has launched a marketing campaign to tackle the environmental and cultural impact of the fast fashion culture. Because of this many vendors have launched changes in their distributor regulations. For instance Markings and Spencer, Tesco and Sainsbury's have pledged to increase their amounts of Fair-trade and organic and natural clothing, and support textiles that can be recycled easier. Also Tesco is banning cotton from countries recognized to use child labour. All these changes in the buying behavior of the stores have obligated suppliers to follow stricter suggestions on environmental and ethical issues. (Appendix B. 6)
The Consumers
The customers are an integral to sales of all retail forms. An company must screen its consumers and the fads in change that have an effect on the consumers. By gathering data on shopping habits of the consumers the sellers can identify possible changes required to the online marketing strategy. It could be in the form of a changed marketplace, the change in syndication programs or by responding to the new product or charges needs of the consumers.
The marketplace for Massimo Dutti is women of 25-45 years old and men of 25-50 years old catering to the upper middle and upper socio economical class and upper middle cultural interests. The client plays an active role in the Inditex business model. At Inditex development activity commences once customers demand reactions have been analysed. Unlike the original fashion company business design which started out at the designer's pulling stand, Inditex activities starts by evaluating the customer's requirements and continues to the store.
The economical downturn is helping to raise sales of value clothing stores. Consumers have been required to cut back on other types of spending like holidays in another country and restaurant dishes. But consumer research implies that clothing is to be the most prone region of spend amongst parents who have been forced to lessen their expenditure because of the recession, although value clothing appears to be one area of clothing expenditure that is responding favorably to the craze. In response to economical worries, consumers are saving more and they appear to be trading down on clothing as a result. Specialist fashion discounters or value clothing sellers (led by Primark, TK Maxx and Matalan) are the main beneficiaries of the strong growth in value clothing sales, and also have seen their sales rise by 7% to Ј5 billion in 2009 2009. (Appendix B. 7, B. 8)
The GfK NOP consumer assurance index, released on 31st March 2010, exhibited that overall UK consumer self confidence dropped to -15 in March, from -14 in February. The 2 2, 000 parents interviewed by GfK NOP also had taken a more negative view of the entire monetary situation over next 12 months. The index also suggested that consumers are becoming more cautious about of their own private finances. (Appendix B. 9)
The Competitors
Another essential aspect which influences the micro-environment of an company is its challengers. The success and behaviour of any business will depend on the amount of competition in its market. In the case of fashion retail market your competition is strong because of a sizable variety of players in the market. This places a downward pressure on the price of the product offerings. Thus it is very important for a company to identify and monitor its competitors as a way to secure a competitive edge.
The major competitors to Massimo Dutti as a brand are Distance, Banana Republic, Mango and H&M (Hennes & Mauritz).
Gap Inc. is a clothing dealer from the US that has widened into Europe via operations in the UK, France and Ireland. 'Clean, old classic, American designs' are the words which the brand was founded and the existing offer is constantly on the reflect these principles. The commercial types at Difference Inc. include Distance, Gap Kids, baby Distance, Space Maternity and Gap body under the brand name Difference. Other brands which do not include the brand name Distance are Banana Republic and Old navy. Difference and Banana Republic have 140 stores in the UK. Due to the hard trading conditions in every its markets, Distance noticed the sales drop by 12% in 2008. However, Gap maintains a mid-market stance and because of this has searched to more muted shades in today's recessionary local climate as consumers seek items which will last longer. In August 2009 the company also ventured into the UK e-commerce industry, announcing the option of Gap branded items on the ASOS website. (Appendix B. 10, B. 11)
Mango
Mango is one of Spain most significant clothing specialists and in addition has developed a sizeable international business in Europe, Asia and the Americas. Mango predominantly focuses on women aged 18 to 30 with a stylish and sophisticated offer. Mango designs, produces and marketplaces women's and men's clothing and accessories. Mango presently has a complete of 1 1, 220 stores in 91 countries worldwide. In the united kingdom it runs 42 outlets which are generally franchised. Mango follows the same multi-brand strategy as of Inditex. Mango has admitted that the global tough economy has resulted in a decline in the sales volume level in early 2009 in market segments such as Spain, Ireland, the UK and Russia. Consumers have been cutting back on their spending, specifically on discretionary items such as clothing. In reaction Mango has launched 'Think Up', an inexpensive sub-range for the weaker consumer weather. Recently, the group has broadened into menswear and in addition has hinted that it could launch a string that targets young customers. (Appendix B. 12, B. 13)
