The Limited Brands Company’s operations are all based on ensuring access and distribution of ideal, high quality products for women. The end use products are diverse ranging from clothes, all the way to accessories designed for women. At the end of 2014, Limited Brands was serving more than 20,000 customers in different countries. Although most of the services are centered in the USA, the company has managed to diversify into new countries as well as new markets. The founder of the company celebrated the diversity of the brands, the uniqueness of women tastes and even culture that dictates the taste of women.
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CORPORATE STRATEGY
The company’s senior management has developed a unique strategy employed by the company to increase sales as well as profits. The strategy is based mainly on relative diversification. Relative diversification ahs allowed the company to expand its business and target markets while at the same time reducing the risks of fast expansion. The company has been able to allocate and find an area of expertise as well as competence in the original business of supplying women clothing and accessories. David (2005) has argued that related diversification allows businesses to exploit its own strengths while at the same time transferring the enterprise risks from one business to another.
Related diversification provides stronger advantage in terms of allowing corporate to capitalize on a strategic fit. This is a situation that exists when the cost of business of the different business are sufficiently related to opportunities in the market to reduce costs, enhance differentiation or manage more effectively by coordinating those particular activities in the industry which are closely related. Limited Brands, has developed a strategy for profit growth and ensuring a better market position based on five principles which are in turn translated to the company beliefs. A study of the company shows the principles to be as follows:
Building leading positions in the targeted market segments: the great size and diversity for women fashion and accessories divide it into many and varied segments. According, as a company L brands selects markets in which the unique strengths of the company are seen, and the distribution gives a competitive advantage. By ensuring leadership in new and existing markets, L brands can operate with far greater initiative and flexibility.
Achieving cost competitiveness in operations: perhaps the greatest challenge for women is access to quality products at a cost effective price. L brands negotiates for a more affordable cites effective product for the average woman. Being among the lowest cost producers in each of the target markets is a great advantage to any company. At L brands, the company continues to invest heavily to ensure optimal production of the available resources through modernization, streamlining, development and even pruning when it becomes necessary. Developing systems for highly cost effective leads to higher and better profit margins, improving staying power through economic cycles, reducing the volatility of earnings and ensuring the possibility of continued investment, (Dess and Miller, 1993).
Balancing distinct but related businesses: while most segments of the industry tends to be cyclical in nature, they do not come close to coinciding either in time or degree. The company effectively counter-balances the business cycles by allocating L brand assets to an appropriate mixture of business. The brand put together have enough in common so that management can exercise effective direction of the entire enterprise. The principal rewards of the controlled diversification are reduced risk and greatly improved stability and predictability of company performance.
Expanding productive capacity by increments: in the current economic climate, building and brining up new businesses has become more costly. While such expansion maybe desirable, the best approach for L brands in the recent years has been steady growth by adding smaller increments of capacity. As suggested by Sadler (2003), by expanding existing businesses or by raising productivity, the company benefits from lower costs of operation per unit of sale, reduced exposure to economic problems and reduce the amount of time directed towards distribution.
Maintaining a strong, flexible financial position: to grow and progress in an industry such as ours, continuous large investment in expansion, distribution and markets is absolutely vital. The company has for a long time ensured availability of funds through long term planning for the need of funds: Maintaining suitable financial ratios, intelligent use of debt and employment of various forms of equity and innovative financial methods.
The related diversification strategy employed by the company is based on a shared brand name. Consumers are much more likely to enjoy the advantage of the shared name, which ensures an easier one stop shopping trip. A strong brand image and company reputation brings together less known brands with high quality inaccessible brands and creates a market place that is visionary for the average woman shopper. The more popular brands are ideal for increasing the confidence of the consumers and customers. The brands on the other hand enjoy shared advertising and promotion and are therefore able lower the costs of distribution and supply. The products can be found in L brand retail stores for much lower costs, even though they are still the high quality and excellently popular brands such as Victoria secret. Brands which would otherwise be out of reach for the average woman, become easy to access, afford and eventually own. This clout has been enjoyed by the brands, the result being faster servicing of customer calls. The company is able to meet a wider range of the diversified needs of the woman client.
SWOT ANALYSIS
An analysis of the L brand company shows some unique strength including also some general weaknesses which the company needs to consider to ensure future success.
Strengths
The first and most unique strength of the company is based on the supply strategy. The company’s strategy includes selection of the highest quality and selective brands for the women customers. This ensures that women are provided with the best and most premium products which cannot be found in many retail stores. Brands such as Victoria Secret and Pink are exclusive and unique enough to draw clients to the store.
Secondly, among the completion, the company is adequately recognized as the most affordable. L brand has come to show that affordability does not necessary mean compromise in terms of quality. The company has found the ideal platform for affordability as well as cost friendliness.
The company enjoys a high customer satisfaction rate. This in turn translates to a large customer loyalty base. Customers return for more products because they know they will not be disappointed, their needs will be met and even more than their needs.
With Limited Brands branches, managers have the freedom to control their shops in the manner they seem to be best. Jeffs (2008) states that there exists a core system of business culture which provides guidance for the general operation of the stores; but managers enjoy flexibility when it comes to addressing the needs of their clients.
Weaknesses
Despite the company’s involvement in various corporate social responsibility projects, in most cases the concern for the bottom line profits has driven managers to forget the importance of quality in CSR. Limited Brands needs to be more proactive in developing strategies for CSR.
The excellence program is yet to be developed in a manner to ensure uniform quality service provision in the various stores. Customers in one store are more likely to enjoy quality service, which they may not find in the same range as another store.
The company has proved slightly inflexible when it comes to generating market trends. Since inception there has been little change in the brands featured by the company, despite changing trends and emerging new comers in women’s fashion, (Barney and Hesterly, 2006).
Further, the brands that have been the focus of the company even when subsidized in cost are still found to be pricey for many women. The company is therefore seen as promoting high end products out of the range for many average women.
Opportunities
The company has a platform through which it can promote innovative and creativity among the employees. The flexibility of the employment opportunities available is likely to tract new and fresh talent which in turn means an increase in skills as well as growth for the company.
In return for a long term relationship and an opportunity to reach the elusive average woman customer, the company promotes low cost and high quality supplies from its distributors. Being a pioneer in this arena, the company has more opportunity for growing targeted markets.
Limited Brands maintains a strong relationship with its clients. Customers are reached through honest and trustworthy advertisements. Dissatisfied clients are immediately assisted to ensure satisfaction.
Threats
The main threat for the company comes through the upcoming online stores. The stores are able to give an almost similar shopping experience to customers. This means that where the company previously enjoyed monopoly there is chance of now losing the hold on the market.
Being attached to the brands is a risky maneuver. Majority of the times, when customers are disgruntled with one brand or when such brand is facing bad publicity, the Limited Brands Company also suffers jointly. Clients boycott the company and become disgruntled associating the company with the brand, (Scase, 2007).
PESTLE ANALYSIS
A pestle analysis provides an analysis into the environments in which the business operates. The environment of a business is often affected by six external factors and these are:
Political
The main concern for the Limited Brands comes in the form of the tax increment and maneuvering strategies. The tax implications not only affect the profit margin for the company, it also has an impact on the producers which may mean an increase in the selling price. Further, customers would likely be unable to afford the products being sold especially if income taxes and property taxes are increased. Considering the current economic condition, majority of the taxes have been lowered in an attempt to improve survival chances of businesses. However, the deficit in the government budget means that this situation is likely to change.
Economic
Majority of the businesses including Limited Brands are still recovering from the global economic crisis which saw the collapse of many companies. A decreasing GDP means that the company income is at an all time low. Customers are barely able to meet their obligations let alone purchase high quality fashionable items. Statistics continue to show chances of a double dip recession for which businesses should prepare. There is a likelihood of decreased income which means lower spending power.
Socio-cultural
There have been exciting changes in the culture of many societies making them more diverse in terms of fashionable trends. This is likely to present itself as an opportunity to grow unique markets that are beyond the borders. According to Chase et al (2004), Cultural diversity has provided an avenue for competitive advantage especially for a diverse company such as Limited Brands. Further, the younger generation is gaining financial independence at an early stage. These young women are more likely to understand the value of fashionable items sold in the company as well as opt to invest in the same.
Technological
Key technologies such as online markets have provided an avenue and opportunity for growth for limited brands. Without the internet, the cost of opening up new stores and expanding would be detrimental and sometimes crippling for the business. However, the internet has allowed Limited Brands to make impact beyond the borders. Further, social media sites have cut down the cost of advertising and promotion, granting access for the company to millions of possible new clients.
Legal
The most important law to note that has indeed has a major impact on the operations of the business is the minimum wage law. The company is required to pay a minimum wage even to employees who may not generally possess unique skills. This has cut greatly into the profits which of course would be higher. However, the law has also ensured that the company enjoys a more committed work force. The legal structure of the company has become slightly complex as it ventures into new markets. Secondly, some of the brands associated with Limited Brands have been tied to tax avoidance which in turn has reflected negatively on the company.
Environment
The entire society is now more concerned with a sustainable environment. Businesses are therefore forced to become more pro-active in ensuring protection of the environment. This translates to CSR activities that are more focused on the environment. However, as with the case of Limited Brands environmental CSR has proved more costly in terms of maintenance thereby having an impact on the income earned and profit margin, (Esty and Winston, 2006).
CONCLUSION
Having observed and reviewed the internal and external factors affecting our company in line with the strategy that has been developed, it is possible to indeed conclude that the company has some very effective strength. However, it would appear that the environment within which Limited Brands is operating is quite threatening. The economic climate has not improved and is not likely to do so which means less spending power for the consumers and therefore more difficulties for the company. On the other hand, advanced technology has made to easier for us to diversify and operate in new markets. While dealing with the weaknesses highlighted by the SWOT, such as the CSR strategy it is important to continually analyze the strengths that the company is developing. The fashion market is quite volatile in terms of changing trends and tastes, and the company needs to be in complete touch with the target customers. The belief that the “customer rules” will play a major role in ensuring success of the company in the future years. While it might prove to be difficult for the senior executives to deal with the weakness and threats that have been found immediately, they are now more aware of the same. This means that Limited Brands can now enhance plans that the care of the threats and take advantage of the strengths.
References
Barney, J. B., & Hesterly, W. S. (2006). Strategic management and competitive advantage: Concepts and cases. Upper Saddle River, NJ: Pearson/Prentice Hall.
Chase, R. B., Aquilano, N. J., & Jacobs, F. R. (2004). Operations management for competitive advantage. Boston, Mass: McGraw-Hill.
David, F. R. (2005). Strategic management: Concepts and cases. Upper Saddle River, N.J: Pearson Prentice Hall.
Dess, G. G., & Miller, A. (1993). Strategic management. New York: McGraw-Hill.
Esty, D. C., & Winston, A. S. (2006). Green to gold: How smart companies use environmental strategy to innovate, create value, and build competitive advantage. New Haven [Conn.: Yale University Press.
Jeffs, C. (2008). Strategic management. Los Angeles: SAGE.
Sadler, P. (2003). Strategic management. Sterling, VA: Kogan Page.
Scase, R. (2007). Global remix: The fight for competitive advantage. London: Kogan Page.
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