Question

Hi, can you answer this question in more detail?

Subject: Business Policy and Strategy

The G2000 Group was founded by Michael Tien in 1980 in Hong Kong. The label G2000, first introduced in 1985, was positioned as a specialty clothing chain distributing fashionable men’s and women’s career wear. Today, the G2000 Group is a multi-brand specialty retailer offering an assortment of men’s and women’s apparel and accessories, operating under different labels: G2000 MAN, G2000 WOMAN, G2000 studio, BLAACK and At Twenty.

1.

As for the situation analysis of G2000 company, it involves the following topics, shows your theoretical understanding, and uses Porter's 5 forces to analyze the external environment for the local market of Hong Kong.

(Words: 700)

• Threat of new entrants

• Bargaining power of buyer
• Bargaining power of supplier
• Threat of substitute product
• Intensity of rivalry among competitors

Answer 1

The G2000 Group is the apparel market leader of Asia region specialized in fashionable men’s and ladies’ career and casual wear. According to the G2000 Group, their business policy is “To be the apparel market leader by providing mass appeal but fashionable merchandise offering superior value to customers.

The franchising strategy (one of the business strategy) of G2000 allows continuous product innovation and design as well as more cost-effective materials for manufacturing the companies clothing lines. G2000 Group employs a merchandising information system which enables the management to analyze customer needs and preferences both on the regional and local market bases and customize product designs to exceed customer expectations.

Presently, the G2000 Group has developed into four different trade name lines to fulfill the different clients ‘ demands and wants i.e G2000, G2000 Pink, G2000 blu and G2 BLACK LABEL.

Using Michael Porter’s Five Forces Model, the (1) suppliers, (2) buyers, (3) new entrants and barriers of entry, (4) substitutes, and (5) industry competitors of G2000 in the fashion market are examined below :

Threat of new entrants

Bargaining power of buyer : The bargaining power of buyers depends on the number of buyers in a particular market, their size and their purchasing power. The power of buyers describes the impact customers have on an industry. Thus the bargaining power of buyers in the industry is high because in a broader view, all the people in Hong Kong might be their consumers. The consumers can always find alternative brands, as the products are undifferentiated or any differentiated products can be imitated easily.

Bargaining power of supplier : An organization that offers products as well as services also depends on suppliers that deliver the company’s raw materials. G2000 can adopt backward integration or outsourcing. For backward integration, they can do by acquisition of fabric mills and garment factories. There are certain benefits in this way. They can lower the costs of make and materials, which can further lower prices of the products. In this light, it is most appropriate to build win–win relationships with suppliers or arrange the use of multiple suppliers in order to protect the interests of both ends.

Threat of substitute product : Clothing serves as a basic need so it is not likely there are alternative products to replace them. The threat of substitutes often impacts price-based competition since substitute products may limit the ability of firms within an industry to raise prices and improve margins. Other related concerns include the presence of new technologies that can contribute to competition though more diverse and economical substitute products and services The threat of substitutes is low or minimal. However, some threats may be in the form of Relative monetary value and quality of replacement or Hexing costs to purchasers from other rivals.

Intensity of rivalry among competitors : The rivalry of existing competitors is intensive for several reasons. Industry growth is low leaving market share gains as the only avenue to growth. Along with the intense marketing nowadays, firms are faced with the challenge to maintain their own competitive edge to be able to survive and be successful.

In addition, the competitors such as Giordano and Bossini are roughly equal in size and power. Their products are perceived to be no differentiation. Economies of scale is significant creating the temptation to cut prices to build volume. Other recognized apparel companies that manufacture overseas through sub-contractors include Esprit, Bossini and Shanghai Tang. Esprit Bossini is the local retailers and franchisers which are characterized with relatively stronger local market share compared with the foreign brands in the same price range like Benetton and Mango.

Therefore, in this intensive competition industry, frequent direct observations of other competitors are vital for survival.

Since the company originated and developed in Hong Kong which is China’s free economic zone economy long before its affiliation and subsequent participation in the activities of WTO, G2000 is highly of advantage compared to foreign entrants in the local market. This gives G2000 the experience, skill, and knowledge of the people in China along with the cultural orientation and social practices in the mainland.

The franchising business expansion strategy of the company likewise proved to be successful in different locations. This enables G2000 to balance the centralized and decentralized approaches to business management and operations

As a conclusion, marketer should monitor their environments as the markets are increasing turbulent and complex. They should understand and sensitive to the elements of marketing and competitive environment to adjust their marketing mix. They can also identify any opportunities and remove threats from these changes in order to maintain survival.