At a lower price, Lululemon products would have targeted the market that wants quality apparel at an affordable price. If executed properly, this market could potentially be equally as profitable because there are many people that cannot afford or do not want to spend $98 on pants. Even for those loyalists that may own one or two Lululemon products, a lower price would mean that they could now buy several Lululemon products. The real difference is in the relationship between profit margin and quantity. As of now, Lululemon successfully sells a lower quantity but at a higher profit margin.
When a firm has a larger output, the firm is also hard to manage and this brings extra costs. Eventually, when the firm has reached a certain size, these extra costs will outweigh the marginal benefits and thus there are no cost benefits anymore (The Economist, 2008). Economies of scale can be internal or external: internal economies of scale are cost advantages for the specific firm, regardless of the industry it operates in. External economies of scale are economies that are beneficial because of the industry a firm operates in (The Economist, 2008). In the fashion industry, brands like Zara, focus on economies of scale for internal production activities that are cost advantageous (Christopher, Lowson & Peck,
They are trying to convince the audience to buy the product by saying that it is just as good as department store brands, and it is cheaper than the department store brand. It is good quality makeup for less. Why would anyone go spend more money on a product if they can get the same product for less? This appeals to logic. But, this is not the only strategy used by CoverGirl.
2.0 Porter’s five forces of Levi’s Strauss Threat of new entrants – low • Entry into a market where the production volume is so high already is not really a threat because the cost of production goes down. • Levi’s can produce more at a lower price and possibly sell for more. Bargaining power of supplier – low • Competition within manufacturer is high since it is mass – produced. • Manufacturer is located in many third world countries: Central America, China, Cambodia therefore Levi’s can switch to other manufacturer easily. Threats of substitute product - high • Buyers are likely to shift to other products considering the weather conditions.
Nordstrom distinguishes itself from other retailers by positioning itself as an upscale fashion store with outstanding customer service, and its multichannel approach. Many of the same clothes offered by Nordstrom can be purchased elsewhere for less money. However, Nordstrom knows that you can’t get the same level of customer service anywhere else, and people are willing to pay more
Nonetheless, competitors of Wilkerson overlooked the opportunity to make profit for themselves in flow controllers, due to the fact that Wilkerson has increased the product price by 10% without losing any business. President of the Wilkerson Company was discussing the business’s operating results with his financial controller and manufacturing manager. Reason for this meeting was because; competitors were now reducing the price of their pumps, posing a threat to Wilkerson’s major product line. Since pumps where a commodity product for Wilkerson, they had no other choice but to match the competitors price in order to maintain volume. Unfortunately, Wilkerson’s price cuts led to a decline in their company profits, especially in the pump line.
Higher quality products allow for a higher sense of value provided to the customer. Then, companies can charge a higher price because of that. Whereas, from the quality as reliability perspective, customers want a product that performs as it was intended and can last. The product or service has to appeal to the customer and make them want your product over another. Companies will be more profitable because their products are more reliable, then they will have less defected products.
Due to human’s unlimited wants, consumers will never be satisfied after buying one piece of clothing and would seek to continue buying more to feel more satisfied. In addition, with the relatively more affordable prices of apparel, more will have access to them and this indirectly encourages consumers to spend more, without consideration, to satisfy their desires. In the process of doing so, they may incur debts unknowingly as they are unaware of the long-term costs and there will be now be fewer funds in the banks to be loaned out to firms for investment purposes. As such, this will indirectly cause a drop in economic growth due to the decrease in investments being made. Hence, the growth of fast fashion should be slowed down as it promotes bad habits such as over-spending which can then cause more loans being made that is unhealthy to the growth of the
To reduce power and you gain customers, retailers seek to differentiate products and to create stronger brands. Individual private customers have a low bargaining power in front of large retail chains, however, their power is greater for small retailers, who are far less organized. Having a contract with large retailers such as Christian Dior can make or break a small supplier. In the fashion industry, suppliers tend to have minute power. For example the Jewelry section of the fashion industry: There is increasingly larger number of competitors in the market, which has meant a larger supply of diamonds in the market.
If brand is not able to meet the consumers expectations, consumer consider it’s a low-quality brand. Consumer compare the prices of brands. And purchase the product with best outcome in low price but in many cases, consumer can pay more for better results. The product has design which attract the customer and easy to carry. Fashion leaders purchase the product which is more stylish and can satisfy their ego.