Management of Organisation 2

Management of Organisation 2

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MONDETTA EVERYWEAR
Leena Malik prepared this case under the supervision of John F. Graham solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca.
Copyright © 1999, Ivey Management Services Version: (B) 2010-03-04
In June 1992, the office of Mondetta Clothing Company in Winnipeg, Manitoba, was alive with activity as Mondetta’s four owners and their support staff were busy at work. In the company’s meeting room, samples were being examined for the upcoming fall fashion line, while in the back warehouse, new clothing shipments were being sorted. After several years of rapid growth in the Canadian casual wear industry, Mondetta’s managers were committed to making their company a success through further market penetration. They wondered whether they should continue to solidify clothing sales in Canada or proceed with their desire to expand into the American, and eventually, the European markets. In order to make a reasonable decision, each expansion alternative would require careful examination of market and industry data as well as the company’s ability to handle another phase of increased growth.
COMPANY BACKGROUND
Mondetta Clothing Company was founded as a partnership in Winnipeg, Manitoba by brothers Ash and Prashant Modha, and Raj and Amit Bahl. The brothers were close friends who started by operating a small business selling cards and stationery while studying at University. In 1987, they decided to offer local casual wear buyers unique fashions by designing and manufacturing a line of beachwear and casual pants. Working out of their families’ basement, they managed product designs, production, marketing and distribution and were rewarded with $10,000 in sales in that year.
During the following two summers, the company’s casual cotton pants, shorts and tops were sold outside the city from a booth at Winnipeg’s popular Grand Beach. With a population of approximately 650,000, Winnipeg was the largest distribution centre between Vancouver and Toronto, and offered a direct connection to the United States.
As the Mondetta name proceeded to gain exposure in the Winnipeg market, the brothers were awarded the Small Business Achiever Award by Winnipeg’s Uptown Magazine, as well as other distinguished industry and media honors. In 1988, their sales grew to $25,000 and reached $125,000 by 1989. In May 1990, after most of the brothers had completed their undergraduate studies, they incorporated the business and
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started full-time company operations. Soon Mondetta expanded from a few local retail stores to more than 350 outlets across Canada, with sales beyond $2.4 million. The company’s financial statements are presented in Exhibits 1 and 2, and a ratio sheet is shown in Exhibit 3.
MONDETTA EVERYWEAR
The name Mondetta was based on French word-play for “small world” and the focus of the collection was the high quality appliqué and embroidery on cotton clothing. Mondetta catered to a market that generally desired clothing that offered something different from what was available in most regular stores. Their most popular items were their “flagshirts”, sweatshirts adorned with the flags of world countries, and their styles were targeted to the socially or politically concerned man, woman or young adult who enjoyed superior quality casual or street wear.
Consumers over 30 years old generally looked for a product made of high quality materials with superior graphic designs, while younger customers looked mainly for quality through an established brand name. Although the younger 13 to 30-year-old segment was highly influenced by fashion trends, the price of the apparel nonetheless remained an important consideration in their buying process. Word of mouth and the visual appearance of the clothing also influenced both consumer groups, who approached trendy wear stores to find the hottest new clothing available.
THE TRADE ENVIRONMENT
Innovative clothing companies like Mondetta often started their businesses by selling clothing to trend- setting independent stores in the hope that their products would create a new fashion craze. Once a trend had been created, product visibility and sales were increased through movement into the mainstream clothing stores.
Independent Stores
Independent store owners usually managed one or, at most, two local stores in a city or town. Some independents were considered to be local trend setters, while others were followers who copied the trend makers after product exposure had been created. Purchases were performed from one location, usually the store itself, using fashion trend information. Since independent stores generally did not have the ability to purchase in large quantities, volume and early payment discounts were not granted. Payment terms to producers were 30 to 60 days with a 50 per cent mark-up to retail customers.
Many independents were considered to be poor credit risks due to their limited financial resources, unstable management and variable clientele. The most successful independents distinguished themselves through their management style and the establishment of their own reputation, visibility and local market niche. Even though placement in an independent store appeared risky, it was an important channel for brand name and trend creation.
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Page 3 9A93J001 The Chain Stores
The chain store network was divided into regional chains which serviced either western or eastern Canada, and national chains. Chain stores were more stable and creditworthy than independent stores and had more purchasing power than the department stores. Chain stores expected a 55 per cent product mark-up as well as a two per cent warehousing discount. Early payment terms were three per cent in 10 days net 60 days.
Most chain stores offered relatively little product advertising and relied on in-store displays and word of mouth to attract customers. The need to approach only one or two buying offices for each chain offered the provision of wide geographic distribution with less selling effort than required for the independent stores.
The Department Stores
Canadian department stores such as the Bay and Sears were generally less flexible and entrepreneurial than other retail outlets and relied on more tightly controlled planning of operations. Department stores purchased clothing (based on product type) from central or regional buying offices through designated buyers. Some department stores also specifically allocated budgets for the exploration of goods from local companies to match merchandise with local demand. In order to get placement in a department store, clothing company representatives had to approach the appropriate buying officer. For casual and street wear, this officer was more likely to be the menswear or womenswear buyer.
Department store demands were usually very high. Most expected signed contracts specifying desired prices, mark-ups, volume discounts and early payment discounts. Mark-ups on cost for casual wear were close to 50 per cent, while volume and early payment discounts ranged between three to five per cent each. Although product distribution was usually allocated per store location by the clothing firm, products had to be sent to the department store’s central warehouse before being shipped to designated store outlets. This system resulted in an additional two per cent warehousing discount. Some department stores also demanded a one to two per cent advertising discount. The resulting nine to 14 per cent worth of discounts allowed Canadian department stores to sell products at a lower price than other retailers, thereby creating the perception that department stores sold discount low quality clothing.
American Stores
With expansion into the United States a serious consideration, the brothers recognized that American trade dynamics differed from Canadian dynamics in several important ways. First, the discount image of Canadian department stores made independent and chain stores hesitant to take on products originally featured in a department store. However, in the United States, department stores such as Bloomingdales, Macy’s and Nordstroms were perceived as leaders in the fashion industry. Therefore, initial placement in these stores created a fashion trend that the independent and chain stores were willing to endorse. Second, the American market was dominated by numerous strong retail stores and apparel companies that were more aggressive and demanding than their conservative Canadian counterparts. Third, highly diverse consumer tastes and the desire for more bold and flashy items resulted in an intensely competitive retail environment.
The American apparel industry was also undergoing a period of change and restructuring. By 1989, discount stores and mail order firms had gained market share at the expense of specialty department and
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?chain stores. In fact, discounters replaced department stores as the largest retail segment. Another trend in the American apparel industry was the formation of close, interdependent relationships between retailer and supplier based upon a joint commitment to mutual profitability through in-store boutiques. In addition, in order to improve efficiency and lower costs, retailers were making efforts to narrow their supplier structure with larger commitments and bigger orders.
THE COMPETITION
Competitors in the casual wear industry sold similar products (jeans, sweatshirts and t-shirts) adorned with their brand names in retail chain, department and independent stores throughout Canada and the United States. In Winnipeg, an independent company called “Passport International” had recently opened a retail outlet next to Eaton’s downtown store. Passport’s designs were identical to Mondetta’s with the exception of the logo, and the clothing was also sold at a lower price. For example, Mondetta’s highly successful flagshirt which retailed for $79.95 was sold for $64.99 in Passport. Passport also offered customized flags of any country compared to Mondetta’s 45 flags. Although Passport was made of lower quality materials, customers wanting a Mondetta but not able to afford one generally turned to Passport for their designs. Passport International was rumored to be opening a new location in Toronto’s Fairview Mall by fall 1992.
Nationally, Mondetta clothing was placed side by side with other established brand name products such as the Guess Jeans, Request and Pepe Jeans. However, the companies selling these labels had wider retail distribution networks in both Canada and the United States. Top industry names such as Guess Jeans, Buffalo Jeans and B.U.M. Equipment were all associated with large American and European firms, and the success of these companies was due to the creation of a highly visible media hype focused on brand name and product promotion. Because competing products were normally placed side-by-side in the store, sales depended more on brand name and reputation than on product differentiation.
Guess and B.U.M. were also beginning to license themselves in the European market. Through licensing, a European manufacturer had the right to produce and sell approved designs using a clothing’s brand name and logo. In the European and American high fashion markets, country of origin was less important than factors such as quality, style and price, particularly in the medium to higher price ranges. Exhibit 4 presents an overview of major international apparel markets and producers as well as their main strengths and weaknesses.
THE ENVIRONMENT
Increased opportunities for Canadian apparel firms to enter the large American market were becoming available because of the gradual reduction of trade tariffs under the recent Canada/U.S. Free Trade Agreement. However, Canadian companies wishing to export to the United States faced many established competitors. In addition, their flexibility was reduced due to a requirement to place 50 per cent Canadian content in their goods. As a general rule, apparel made from third country fabrics was not eligible for duty-free treatment under the agreement. Freer trade with the United States also prompted several large American retailers to expand into Canada, thereby increasing competition for the Canadian consumer. By June 1992, North American Free Trade talks with Mexico were well underway and an agreement was expected to be reached before the end of 1992.
Currency fluctuations appeared to have little impact on export competitiveness with the United States. On the other hand, the devaluation of the Canadian dollar relative to European currencies over the past two
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?years had sparked renewed interest by Canadian manufacturers in the European market. However, in Europe the duty-free movement of goods among European community countries, strong competition from European designer labels, and the aggressive marketing of private-label manufacturers, hindered Canada’s apparel trade in this market.
MONDETTA’S CURRENT STRATEGY
Mondetta’s strategy focused on product exclusivity rather than market saturation. This was achieved through careful selection of industry sales agents and retailers for clothing promotion. In 1989 and early 1990, Mondetta clothing was sold throughout western Canada in high quality regional and national chain stores and local independent stores. Since heavy price discounting by department stores compromised Mondetta’s high quality exclusive image, department store sales were restricted to Eaton’s in Winnipeg. In late 1991, after the establishment of western Canadian sales, Mondetta expanded into Ontario, Quebec and the Maritimes. Management’s sales goal for the 1992 fiscal year was $5 million to $6 million which they hoped to achieve through increased national and international market penetration.
Finance
Although monthly cash flow forecasts based on pre- to booked orders were prepared, the frequent opening of new accounts resulted in completely different cash requirements than those projected. This situation was beginning to strain Mondetta’s $250,000 line of credit for inventory financing. While government incentives to support small business were available to companies that promoted local employment, poor economic conditions in 1992 and the company’s young age made government agencies hesitant to provide funds. Banks were also afraid to lend funds to what they labelled as “here today, gone tomorrow” businesses. This feeling was created by the recent bankruptcy of several highly successful Winnipeg clothing companies that were owned and operated by young managers.
In order to deal with a difficult cash situation, Mondetta operated by customer order. This system enabled the company to match receivables with payables while carefully managing supply relationships to ensure timely payments. Management hoped that a new computerized system for accounting, purchase orders, production, marketing, and receivables would assist with the development of strict cash management plans.
Marketing
Mondetta’s managers tried to foster a mystique cult following and to avoid market saturation by restricting their products to a limited number of superior quality stores. To create visibility for its flagshirts, the company employed industry agents who targeted trendy name to setting stores in each location before distributing to the high quality chain stores. Agents received a 10 per cent commission on the Mondetta selling price (industry commissions ranged from eight to 12 per cent). Marketing communications consisted mainly of press exposure, word of mouth and the graphics appeal of the clothing. In Winnipeg, Mondetta clothing was also displayed on transit shelters.
The brothers participated in two semi-annual trade shows hosted by Salon International. Trade shows created product visibility and were attended by numerous retail sales agents and buyers. The Spring/Summer show was held during February in Montreal while the Fall/Winter show was held during
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August in Toronto. A trade show booth cost approximately $20,000, with a space cost of $5,000. Travelling and on-site expenses resulted in a total cost of $30,000 per show.
Mondetta’s major customers were: Bootlegger (nationwide), Below the Belt, and Off the Wall (western regional chains), and Eaton’s in Winnipeg. Approximately 40 per cent of the company’s sales volume resulted from these accounts. In terms of overall sales, Western Canadian sales comprised 80 per cent of the company’s business with 18 per cent in Ontario and only two per cent in Quebec and the Maritimes. In contrast, Canadian retail apparel sales in 1991 were around 37 per cent in Ontario, 34 per cent in Quebec and the Maritimes, and 29 per cent in Western Canada.
Mondetta’s most popular logos, “Mondetta Everywear” and “The Spirit of Unification”, were company trademarks. Traditionally, the two fashion lines (spring and fall) focused on the theme of international awareness and globalization. In 1993, the company hoped to sell four fashion lines (one per season) which placed more emphasis on the Mondetta name than on the flags.
Operations
The apparel design either led to rapid product acceptance or rejection, thus making it the first and most crucial step in the production process. Other major steps in apparel manufacture were material sourcing, pattern making, fabric cutting, sewing, and finishing.
During the first two years of operations, Mondetta clothing was produced in Winnipeg by eight to ten medium-sized clothing manufacturers. However, when the product’s quick success raised producer demands, unit labor and material costs escalated, forcing management to search for offshore manufacturers in order to reduce production costs and increase production capacity. An agent was subsequently secured for Hong Kong through some well established industry contacts. Although offshore production created periodic quality control problems, the cost of wasted production was much less than the cost of local production, and a 20 per cent savings was realized on every T-shirt produced abroad.
By 1992, approximately 40 per cent of Mondetta’s product line was produced in Hong Kong. While both local and offshore manufacturers had the capacity to produce approximately 10,000 t-shirts per month, shipment time for overseas production took an additional month. To avoid sales forecast misjudgments, Mondetta relied on pre-booked orders to trigger production with an additional 20 to 25 per cent buffer inventory built into each order.
Imports from Hong Kong were highly dependent on a quota system whereby the Canadian government allowed a maximum number of goods to be imported annually from Hong Kong based on product type and category. After the appropriate quota had been determined, the Hong Kong government divided it among manufacturers who produced goods for Canadian companies. This system placed the burden on the manufacturer to find adequate quota to supply the desired amount requested by the Canadian importer. If quota was unavailable, the manufacturer had to purchase the desired amount from a quota market before beginning production.
Human Resources
Mondetta Clothing Company was managed by Ash, Prashant, Raj and Amit. The company also employed a customer service representative and a support staff of four people. Ash Modha, Mondetta’s President
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?and Chief Executive Officer, was 23 years old and had just completed a Bachelor of Arts in Economics from the University of Manitoba. His brother, Prashant, aged 25, had completed a Bachelor of Science in Chemistry in 1988 and received a Master of Business Administration degree from the University of Manitoba in June 1991. Raj Bahl, also 25 years of age, had a Bachelor of Arts degree in Applied Economics from the University of Manitoba. His brother, Amit, had attended the University of Winnipeg but chose to work instead.
The company had no structured hierarchy and the brothers operated in an informal team-oriented atmosphere. Internal communications and reporting structures were also not formally specified. Traditionally, day-to-day operations were completed by the most experienced and available person. Major operating decisions were given deliberate individual consideration before a consensus was reached. During crisis situations, decisions were made quickly after careful consideration of available alternatives.
Although responsibilities were not formally segmented, increased growth had started to create a more divisionalized approach to management. Ash and Raj were primarily responsible for the company’s fashion designs. Ash also managed the company’s production requirements while Raj was responsible for marketing and sales force management. Prashant monitored the company’s financial operations and Amit organized distribution, shipping and receiving.
FUTURE STRATEGY
The four brothers were committed to the company’s growth and were considering several growth opportunities such as further penetration into Eastern Canada, expansion into the United States, and licensing in western Europe.
Continue Penetration Into Eastern Canada
Consumer acceptance of Mondetta clothing in eastern Canada, particularly in Quebec, appeared slower than in western Canada. Mondetta’s managers believed that slow sales in Quebec were due to poor product visibility created by inexperienced sales agents. In addition, retail sales in Quebec were controlled by large powerful buying groups. Established relationships with the buyers of these groups would be essential to product acceptance.
Although the company was experiencing healthy growth in Ontario, the Mondetta name was still relatively unknown in a large potential market. Management’s biggest concern was Passport International’s expansion to Toronto’s Fairview mall where Mondetta was also sold. If necessary, mall advertising and billboards would cost approximately $6,800 for six months.
Other marketing communications could also be used to speed up product exposure in both Ontario and Quebec. Economical advertisements such as point of purchase ads would cost approximately $25,000 per year. A Mondetta fashion catalogue could also be printed and distributed at an annual cost of $10,000 to $15,000. Advertising in the French version of Elle fashion magazine in Quebec would cost $7,000 per issue. Management wondered which forms of advertising should be purchased in eastern Canada, and what sales level would be required to break even.
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The nature of the apparel industry demanded that management approach their American entry with caution in order to avoid unmanageable rapid product acceptance or damaging product rejection. First, management had to consider which areas of the country to target. Exhibit 5 outlines American apparel consumption by region. Largely populated areas with the highest apparel consumption were the eastern states, while the north-western states more closely resembled the Canadian market. In addition, the appropriate distribution channels and distribution strategy for market penetration and trend creation had to be determined.
The brothers also needed to determine suitable product selection and market penetration strategies. Since production in Manitoba would be insufficient for demand, apparel would have to be shipped directly from Hong Kong to the United States, requiring quota negotiations similar to those for Canada. Sales agent commissions would be approximately 10 per cent of Mondetta’s selling price and American retailers would likely demand a 50 to 60 per cent product mark-up on cost. Some chains would also try to negotiate buy-back options or replacement of non-selling styles and volume discounts. Annual travelling and other expenses were estimated around Cdn$5,000 to $10,000, while annual trade show expenses would be $25,000 for the summer Magic Show in Las Vegas. The Magic Show was one the largest trade shows in America, attracting 52,000 agents, buyers and retailers.
American sales growth could not expand beyond Cdn$500,000 in the first year due to Mondetta’s limited ability to handle rapid international growth. Profit margins would be similar to those earned in Canada since losses on export duties would likely be recovered with the currency exchange.
Pursue Licensing in Europe
Successful name licensing could create new product demand and expand brand name exposure in both the United States and western Europe. Many well known names such as Guess Jeans and Buffalo Jeans were already licensed. Guess Jeans already had 22 licenses across the world while Buffalo was licensed in major European centres.
Through licensing, another company would be granted exclusive rights to manufacture, promote, distribute, and sell products using the Mondetta name with Mondetta designs or approved designs. The major advantage of licensing was widespread market penetration with minimal capital and financing requirements. There were also several risks. First, finding appropriate licensees could be difficult due to the required product specifications, quality and commitment. Second, licensees could demand that Mondetta handle the majority of product advertising. Third, a licensee could copy Mondetta’s sample designs and sell clothing under a new brand name. The brothers hoped that careful selection of licensees would reduce the risks and they were planning to attract licensees for kidswear, shoes and womenswear while continuing their main fashion designs and product lines.
The average license agreement was usually three years. During the three-year term, the licensee would be required to pay a non-refundable initial license fee as well as an annual license fee. Initial and annual fees could range from $10,000 to $1,000,000 depending on the size and reputation of the licensee. Management hoped major licensees would generate $2 million to $3 million in sales during their first year of operations. In each and every calendar year throughout the term, licensees would have to spend an average of six per cent of sales to advertise and promote the apparel. In addition, a royalty of eight to 10 per cent of sales would be owed to Mondetta. Mondetta would also incur lawyers’ fees and trademark
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?costs for different geographic areas. For example, Canadian trademarks for “Mondetta Everywear” and “The Spirit of Unification” each cost approximately $1,500.
DECISIONS
Clearly, the task of determining where to take Mondetta Clothing Company was not an easy one. While the company’s rapid market acceptance appeared to promise greater success in the future, further market penetration demanded careful consideration of alternatives before making the appropriate strategic decisions.
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9A93J001Total revenue Cost of goods sold Gross profit
Operating expenses: Accounting and legal Advertising and promo Bank charges and interest Bad debts
Depreciation and amortization Factoring commissions Insurance
Leases and equipment Management bonus Miscellaneous
Printing and stationery Parking
Property and business tax Rent
Repairs and maintenance Salaries and benefits Telephone
Travel and entertainment Utilities
Total operating expenses
Earning (loss) before tax Income taxes
Income tax reduction resulting from loss carry forward
Net earnings (loss)
$
29,390
2,649 1,224 3,198 3,702
0 0 0
265 0 307 695 0 0 1,288 0 1,437 1,136 1,693 0 17,594
11,796 0
0 11,796
$
573,217
7,732 29,135 14,726 21,735
9,038 52,006 810 8,498 110,400 1,328 9,055 46 1,276 12,696 528 75,339 12,091 14,731 970 382,140
191,077 43,517
3,864 151,424
Exhibit 1
STATEMENT OF OPERATIONS (For the Year Ended April 30)
19901
$104,896 75,506
1991
$247,970 178,543 $ 69,427
2,699 8,964 8,762 4,031 2,504
920
593 1,398 0 1,531 1,167 207 822 9,246 182 29,005 6,516 7,974 477 $ 86,998
(17,571) 0
0 $ (17,571)
1992
$2,436,644 1,863,427
1 For the period covered by this date the organization was a partnership. The firm was incorporated May 1, 1990.
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Current assets: Accounts receivable Inventories
Prepaid expenses
Total current assets
Fixed assets:
Equipment and leasehold improvements Accumulated depreciation
Fixed assets (net)
Exhibit 2
BALANCE SHEET (As of April 30)
4 month period 1990
ASSETS
$ 76,473 38,780 1,472 $ 116,725
$ 0 0 $ 0
1991
72,789 54,961 1,794 129,544
13,583 2,306 11,277
14,041 58,880 62,676
0
0 135,597
7,820 18,379 26,199
1992
875,641 433,653 3,752 1,313,046
53,895 10,982 42,913
6,593 1,362,552
57,936 185,840 790,847 110,400
39,653 1,184,676
0 22,218 22,218
$ $
$ $
$ LIABILITIES AND SHAREHOLDERS’ EQUITY
Other assets Total assets
Liabilities Current liabilities:
Bank overdraft
Bank loan
Accounts payable Bonus payable Income taxes payable
Total current liabilities
Long-term liabilities: Note payable
Payable to shareholders Total long-term liabilities
Shareholder’s equity Share capital Retained earnings
Total equity
Total liabilities and shareholder’s equity
0 $ 116,725
3,588 144,409
??????????$
$
$ $
1,539 41,400 27,585
0
0 70,524
34,049 0 34,049
$
$
$ $
???????$
$ 12,152 $ 116,725
n/a 12,152
$
$ (17,387) $ 144,409
184 (17,571)
$
$ 155,658 $ 1,362,552
21,804 133,854
?????????363
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PROFITABILITY
Total revenue
Cost of sales
Gross margin Operating expenses:
Accounting and legal Advertising and promotion Bank charges and interest Bad debts
Depreciation and amortization Factoring commissions Insurance
Leases and equipment Management bonus Miscellaneous
Printing and stationery Parking
Property and business tax Rent
Repairs and maintenance Salaries and benefits Telephone
Travel and entertainment Utilities
Total operating expenses
Earning (loss) before tax Income tax
Net earnings (loss)
LIQUIDITY
Current ratio Acid test Working capital
EFFICIENCY
Age of accounts receivable Age of inventory
Age of payables
Exhibit 3 RATIO SHEET
1990
100.0% 72.0% 28.0%
2.5% 1.2% 3.0% 3.5% 0.0% 0.0% 0.0% 0.3% 0.0% 0.3% 0.7% 0.0% 0.0% 1.2% 0.0% 1.4% 1.1% 1.6% 0.0%
16.8%
11.2% 0.0% 11.2%
1.66
1.11
$ 46,201
266 187 133
1991
100.0% 72.0% 28.0%
1.1% 3.6% 3.5% 1.6% 1.0% 0.4% 0.2% 0.6% 0.0% 0.6% 0.5% 0.1% 0.3% 3.7% 0.1%
11.7% 2.6% 3.2% 0.2%
35.1%
-7.1% 0.0% -7.1%
0.96
0.55
$ (6,053)
107 0 117
1992
100.0% 76.5% 23.5%
0.3% 1.2% 0.6% 0.9% 0.4% 2.1% 0.0% 0.3% 4.5% 0.1% 0.4% 0.0% 0.1% 0.5% 0.0% 3.1% 0.5% 0.6% 0.0%
15.7%
7.8% 1.6% 6.2%
1.11
0.74
$ 128,370
131 0 129
?????????364
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?STABILITY
Net worth/total assets Interest coverage
GROWTH
Sales
Net income Assets
Exhibit 3 (continued)
10.0% 4.7%
1990-1991
136.4% (249.0%)
23.7%
(12.0)% (1.0%)
1991-1992
882.6% 0.0% 843.5%
11.0% 14.5%
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Source: Apparel Retailing in the United States
Exhibit 4
THE INTERNATIONAL APPAREL MARKET
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Exhibit 5
AMERICAN APPAREL CONSUMPTION BY REGION
Source: U.S. and Canadian Governments
367
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SAMPLE ANSWER

Management of Organisation 2

The case is about Mondetta Everywear, a clothing company located in Winnipeg in Canada. The company is owned by four individuals also brothers (Laughren, 2013). The case therefore provides an in-depth analysis about the company that gives insights on the operation and best growth strategy for the company. The company has sound financial resources that have contributed to its expansion. Through licensing, the company has also managed to ensure that they preserve their copyrights (Laughren, 2013). There is also a fit between personal and corporate objectives since the four owners have resolved to work hard to ensure that the business to whom they have shares succeeds.

SWOT analysis as well provides insights about the company. Internal issues of the company are understood through the strengths and weaknesses. Strength includes, lean management structure and stable finances (Laughren, 2013). Weakness includes stiff competition. Opportunities include ready market in some of the foreign countries such as USA. Threats includes, different trade dynamics in part of the markets, and changes in fashion trends

Implications:

The products are distributed using independent stores and chain stores (Laughren, 2013). The company uses these distribution channels sparingly and decisively to ensure that the customers get access to their products. For instance, chain stores are preferred in USA as opposed to Canada markets hence, this ensures that more customers access to their products. Competitors in the market are many such as Passport International that contributes to stiffer competition in the market. They have reduced market share and as well leading to reduction in prices of the products.

The company is as well affected by various external factors such as social, economic, technological and politics. The environment of operation is stable hence, the company has confident in the markets. The economic situation is also stable. The advancement of technology requires the company to embrace innovation to remain competitive. Cultures vary and this should be considered in the designs of their clothing.

Corporate capabilities as well affect the business. The company uses various marketing strategies such as word of mouth which has enabled it to get more customers. This form of advertisement however takes long period for many customers to know about the products. Financial manages is good. The company employs competent employees that have enabled it to succeed in their initiatives. The company has as well managed to maintain its fixed costs as well as variable costs hence achieved a breakeven point.

I recommend the company to survey other potential markets that are yet to be explored and take the opportunity. They should as well change their distribution strategy, consider using technology to market, and sell its clothes to reach wider customer bas

Reference

Laughren, T. (2013). Management of Organizations COM 1007, Laurentian University; Ivey         Publishers.

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