Zhejiang Simer Ltd Case Solution
In current scenario the bottlenecks faced by Semir are
- The one-child policy which has decreased or stagnant the sales of kids wear.
- The increment in the sales prices due to expensive raw material.
- The market is shifting toward different channels of shopping, which is affecting the sales margins of the company; one channel is the ecommerce, which is cutting the sales of the company. The other channel is the shopping malls, where people have built inclination to make purchases due to ambiance, ease and variety. The issue with Semir is the factor of unacceptability to place Semir Clothing in Big mall, due to it’s under perceived value by the market forces.
Keeping the current environment and the business strategy in mind, a framework is developed to deeply understand the strategic placement of the Semir in the market. These frameworks will help Semir; develop more precise and accurate strategies to further operate in the market while keeping sustainability as top priority.
Porter 5 forces Model
Threat of rivalry
The threat of rivalry for the Semir is quite high, It has to fight for market sustainability and penetration against the external brands like ZARA and also the internal local brands which are producing a good apparel at low cost, due to low production cost
Threat of substitution
The threat of substitution is relatively very high because of multiple local and international brands, while the other reasons are the emerging channel of shopping, which is providing he customers array of variety and also the array of means through which they want to make purchase.
Power of Supplier
The power of suppliers relatively low with Semir. Semir builds long-term trustworthy relationship with the freedom to suppliers to switch, if they don’t find Semir fits for them. Due to the reputation of the organization, many suppliers are inclined to work with Semir.
Power of Buyer
The power of buyer to Semir is very high. The market of china is an emerging market, which has opened gates for many brands to enter the market, which has given the customer a wide range of choices. The threat is high because the switching cost is very low , he customer can switch to other Brands without incurring any additional cost while the quality of the products remain uncompromised and relatively same in the market.
Threat of New Entrant
The market of china is an emerging Market, with a lot of growth and buying potential. Many businesses are planning to enter into the markets of china, through acquisitions, Joint ventures or Strategic alliances. The main reason is the barrier ease, which china has removed after long time and the government is encouraging foreign direct investments to fill in the country. This trend has also increased the threat of new entrants in the market, due to large population and space in the markets.
Semir has to frame its external and internal both in order to develop a strategy that is the best of both the environments. The internal analysis will be enlighten the key areas of the Semis strengths and weakness which can help to tap new opportunities and deal with threat through an integrated Strategy
- The company has a strong financial back, which enables it to brand its product on all media channels, which creates brand identity in the market.
- Strong franchising system is strength of the company; it reduces the additional cost incurred by opening a flagship store while the sales remain same.
- Balabala is a strong competency of the company. It captures atleast 3% share in the market while the other competitors could not reach 1% even.
- The fashion trends are mostly set the Semir in the markets. It is fashion leader in the industry as it invests a great amount on R&D to research and analyze the fashion from almost all over the world.
- Even the company have strong financial back, it does not open flagship stores, which to some extent erodes the brand image of the product as well as the company
- No stand-alone brand houses, leading to mixed, confuse brand image.
- Another weakness is the convenience and ambiance of the franchised stores. The customer does not get enough ease to think and then make the purchase.
- One of the opportunity to Semir is the mean of shopping are shifting, people are now looking to shop through ecommerce mean. The company can tap major market share from there.
- The government has removed the policy of 1child and raised it to 2 children, which will grow the market segment of Kids and thus the market share..................................