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Executive summary

Contents

Introduction

ASOS ( As Seen On Screen) is one of the leading fashion and beauty store for both men and women in the UK. It specialises in selling affordable versions of outfits worn by celebrities. ASOS was launched in June 2000 by Nick Robertson.

Asos.com has 9000 products available, with 500 new products added every week. This includes women’s fashion, menswear, accessories, jewellery and beauty products. According to Hit wise, it is the second most visited online fashion store in the UK, behind Next. It attracts3.30 million unique shoppers every month and has about 1.8 million registered users.

Asos’s 70%of sales are still on label, and they are also selling nearly 250 brands, including luxury labels such as

As a consultant at ‘Ure, Avin, Alaaf. I have been commissioned to extensively research and analyse the development opportunities of fashion retailing. This report will main focus will be Asos.com and its position as a E-commerce retailing store.

I will briefly describe how ASOS.com has developed a competitive edge in fashion retailing through the value chain concept. Further, a reflection on the main opportunities and threats likely to affect the business in the next five years.
This report will analyse the

Value chain
Explain how ASOS.com have developed a competitive edge in fashion retailing. Apply the concept of the ‘Value Chain’ to illustrate your answer.

Competitive Edge has been defined as:
"having a clear advantage over the competition in terms of one or more elements of the marketing mix that is valued by potential customers." Source http://wps.pearsoned.co.uk/

value chain
The successive stages during which value is created when producing, distributing, and servicing a product. Distinct stages in the value chain may include: (1) receiving and distributing raw materials, (2) converting raw materials into a finished product, (3) identifying customers and distributing the product, and (4) providing customer support. Identifying the value chain allows a firm to refine its operations in an effort to improve quality, add efficiencies, and increase profits. http://www.yourdictionary.com/business/value-chain

Macro Environmental analysis
What trends in the macro environment created the opportunity for ASOS.com to achieve its current market position?

Political Legal and fiscal ones, change in law as, customs duty on goods, taxation levels, and changes of government Government spending Taxation Regulation Economic policy

Political Factors.

The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:
1.How stable is the political environment?
2.Will government policy influence laws that regulate or tax your business?
3.What is the government's position on marketing ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

Economic

Inflation, budget changes, rising oil prices, unemployment Recession which sectors are growing and which not? What are the trends

Economic Factors.

Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:
1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.

Social/cultural

Lifestyle changes, educational reform, environmental changes, population movement These affect the consumers of the product or service, and the labour market.

Socio-cultural Factors.

The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:
1.What is the dominant religion?
2.What are attitudes to foreign products and services?
3.Does language impact upon the diffusion of products onto markets?
4.How much time do consumers have for leisure?
5.What are the roles of men and women within society?
6.How long are the population living? Are the older generations wealthy?
7.Do the population have a strong/weak opinion on green issues?

Technology

New materials and products are invented and energy saving substitutes and production methods are introduced.

Technological Factors.

Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:
1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?
2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?
3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?
4.Does technology offer companies a new way to communicate with c

Responsive society it to technology

Computer illiterate society is How many people actually use the internet to shop inline Trusted in internet shopping

Analyse the main opportunities and threats that are likely to affect the company over the next five years. Opportunities

New markets New products Market growth Competitor weakness Demographic/social change Political/economic change New technology Brand extension

Threats

New market entrants Increased competition Pressure from suppliers and customers Substitute products Low market growth Economic downturn Change in legalisation

Conduct a Porters Five Forces analysis for fashion retailing. How do you think the internet and online retailers will alter the balance of the forces? Give examples to illustrate your answer.
An industry is a group of firms that market products which are close substitutes for each other (e.g. the car industry, the travel industry).
Some industries are more profitable than others. Why? The answer lies in understanding the dynamics of competitive structure in an industry. Porter explains that there are five forces that determine industry attractiveness and long-run industry profitability. These five "competitive forces" are
- The threat of entry of new competitors (new entrants)
- The threat of substitutes
- The bargaining power of buyers
- The bargaining power of suppliers
- The degree of rivalry between existing competitors

Level of competition
The intensity of rivalry between competitors in an industry will depend on:
- The structure of competition - for example, rivalry is more intense where there are many small or equally sized competitors; rivalry is less when an industry has a clear market leader
- The structure of industry costs - for example, industries with high fixed costs encourage competitors to fill unused capacity by price cutting
- Degree of differentiation - industries where products are commodities (e.g. steel, coal) have greater rivalry; industries where competitors can differentiate their products have less rivalry
- Switching costs - rivalry is reduced where buyers have high switching costs - i.e. there is a significant cost associated with the decision to buy a product from an alternative supplier
- Strategic objectives - when competitors are pursuing aggressive growth strategies, rivalry is more intense. Where competitors are "milking" profits in a mature industry, the degree of rivalry is less
- Exit barriers - when barriers to leaving an industry are high (e.g. the cost of closing down factories) - then competitors tend to exhibit greater rivalry.

Threats of new entrants
New entrants to an industry can raise the level of competition, thereby reducing its attractiveness. The threat of new entrants largely depends on the barriers to entry. High entry barriers exist in some industries (e.g. shipbuilding) whereas other industries are very easy to enter (e.g. estate agency, restaurants). Key barriers to entry include
- Economies of scale
- Capital / investment requirements
- Customer switching costs
- Access to industry distribution channels
- The likelihood of retaliation from existing industry players.

Power of suppliers
Suppliers are the businesses that supply materials & other products into the industry.
The cost of items bought from suppliers (e.g. raw materials, components) can have a significant impact on a company's profitability. If suppliers have high bargaining power over a company, then in theory the company's industry is less attractive. The bargaining power of suppliers will be high when:
- There are many buyers and few dominant suppliers
- There are undifferentiated, highly valued products
- Suppliers threaten to integrate forward into the industry (e.g. brand manufacturers threatening to set up their own retail outlets)
- Buyers do not threaten to integrate backwards into supply
- The industry is not a key customer group to the suppliers

Power of customers
Buyers are the people / organisations who create demand in an industry
The bargaining power of buyers is greater when
- There are few dominant buyers and many sellers in the industry
- Products are standardised
- Buyers threaten to integrate backward into the industry
- Suppliers do not threaten to integrate forward into the buyer's industry
- The industry is not a key supplying group for buyers

Threats of substitutes
The presence of substitute products can lower industry attractiveness and profitability because they limit price levels. The threat of substitute products depends on:
- Buyers' willingness to substitute
- The relative price and performance of substitutes
- The costs of switching to substitutes

Using some of the strategy models described in lectures, make recommendations about possible business strategies that ASOS could pursue in the next five years.

Recommendations

Fashion is a rapidly moving market. ASOS.com demonstrates the growing trend for online shopping with increasing numbers of visitors and purchases on its website year-on-year. ASOS.com meets the needs of its target audience by providing an exciting and continually updated website with regular new fashion items. Being able to target customers through personalised customer communications is a vital aspect of its promotion strategy.
It also continues to enhance the range of product areas it offers, such as kidswear and maternity clothes, launched in 2008 and 2009 respectively. ASOS.com also continues to develop the range of services it offers, for example, its 'Style with substance' initiative ensures customer emails are responded to within one hour. By understanding its customers' needs and the life cycle of its products, ASOS.com is able to provide a product offering which ensures customers keep returning to the ASOS.com website.

LECTURE NOTES

What services they provide that make you wanna shop their?

Value chain • Guarentee delivery time • News letter • Member discount

P.E.S.T • Imports cheaper • Minimum wages • Government policy • Economic recession • Taxation • Broadband Britain

Economic
Recession
Online services-bargains
Exchange rates

Cheaper having a e-commerce site than high street presence
Just in time reduce industry costs
‘Cult of celebrity’

Threats
Growing profitable markets-competitors
Takeover
Online fraud

Reduce inventory- economies of scale
Experience – strong brands, loyal customers, well developed chance
Wider threat exists
Same for other online

Switching costs- loyalty schemes/customer services
Initial investment costs – low costs storage/ display
‘automated’ ‘virtual’
Cheaper to come into market