New Look’s Resource Base and the Taiwanese Apparel Industry

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Table of Contents

New Look’s Resource Base
The Taiwanese Apparel Industry
Conclusion
References

New Look’s Resource Base

Tangible and Intangible Resources

A firm’s resources are the tangible and intangible assets and capabilities that give it a competitive advantage in its industry. According to the resource-based view, resources are sources of value and competitive advantage for a firm (Delaney 2013).

Tangible resources include assets like workforce, capital equipment, and finances, among others. On the other hand, intangible resources include proprietary skills, patents, reputation, and customer base.

‘New Look’, a leading fashion UK retailer, derives its competitive advantage from its tangible and intangible resources. Its tangible resources include:

About 1,160 retail stores globally distributed in 25 countries (Anz Insights 2012)
A broad range of apparel brands for women and men
A workforce of 30,000 employees with 17,000 of them working in UK stores (Singleton 1997)
An extensive supply chain consisting of over 330 suppliers drawn from different regions, including Asia
Financial resources (operating income of £180 million)

The brand’s intangible resources include:

Brand equity (Brand revenue of £1,396 million in 2014) (New Look 2014)
E-commerce channels (newlook.com serves 120 economies globally)
Goodwill/reputation earned through its CSR programs and Environmental policy
International sales (25% growth in FY09)
Advertising campaigns using online channels and celebrities
Accolades for being the best retailer, e.g., the Drapers Award of 2009

Overall Business Network

Business networks can be cooperative or competitive. New Look’s horizontal networks bring together different firms, suppliers, buyers, government entities, and distributors who share common goals. Business networks may involve alliances between business enterprises or non-business entities that pursue common goals (Abecassis 2006).

New Look operates in a B2B business environment where it forms horizontal networks with its direct competitors, such as ‘Next’ plc and Mark & Spencer (Datamonitor 2009). Its networks also include non-governmental organisations and government agencies.

New Look also forms alliances with Not-for-Profit organisations, such as the Ethical Trading Unions that brings together a number of firms and NGOs to advocate for employee welfare in the UK (Hakansson & Snehota 1995).

The firm also forms policy networks with international bodies, such as the WIEGO, an organisation that seeks to empower the world’s poor (New Look 2012). These forms of networking are more cooperative than competitive, allowing New Look to improve its visibility in the market.

New Look also forms vertical relationships with suppliers in the different countries it operates in. In the upstream, the company has 339 suppliers located in over 90 nations globally (New Look 2012).

Most of its suppliers come from Turkey, China, and Bangladesh. The firm requires its suppliers to practice ethical standards in their manufacturing processes. Suppliers have to consent to the firm’s ethical goals before gaining the approval to work with New Look.

Distributors also form part of the company’s upstream vertical relationship. New Look has three distribution centres (distributors) placed in strategic locations in the UK (Staffordshire), Istanbul, and Singapore (Sinha 2000). The Staffordshire distributor supplies the UK market while the Singaporean centre serves the Asian Market.

The distribution centre in Istanbul serves the Russian and Eastern European markets. New Look’s downstream relationships involve customers, who include individuals of different demographics.

Vertical Collaborations (Supply Networks)

New Look has over 938 manufacturing plants run by 339 suppliers drawn from 29 different nations, including India, Bangladesh, and China, among others. It collaborates vertically with these suppliers to enhance the quality of its products.

Initially, Chinese suppliers had management issues, which affected the quality and efficiency in their factories, resulting in substandard products. However, through vertical collaborations, New Look introduced quality standards enshrined in a productivity toolkit that led to efficient and quality production (Chesters 2011).

By observing these standards, the Chinese manufacturers were able to improve their production without compromising the quality of items they produced.

Another instance of vertical collaboration is New Look’s relationship with Oracle. In 2007, the firm started working with Oracle to develop a service-oriented architecture (SOA) to support its international growth plans (Oracle 2009).

The suite was meant to strengthen New Look’s processes and lay the ground for its IT investments. The firm adopted the SOA solution in its Buying and Merchandising unit, contributing to improved business performance.

The apparel industry is highly dynamic. Since 2001, 35 percent of apparel sales have come from digital channels and the fashion industry in the Asia-Pacific region has tripled (UNIDO 2011).

To boost its ability to provide trendy items at competitive prices, New Look works with a supply solutions company, Retek Solutions (MarketLine 2014). Retek developed a technology for New Look that streamlined the supply chains resulting in improved productivity and efficiency.

The business solutions improved purchase order management, lowered marketing risks, and accelerated the rate at which new fashions reached the market.

Horizontal Collaboration

New Look collaborates horizontally with its customers, which helps it manage the demand for its products. Through the collaborations, New Look is able to manage its relationships with customers effectively. The firm has a customer services department that handles customer requests and complaints.

Customers can call in or send email messages to the customer services and receive feedback. New Look also uses the customer services function to seek the views of clients regarding fashion trends, quality, and prices. The firm conducted a survey of 4,000 clients in 2008 to seek out their opinions about its products (New Look 2013).

Thus, such surveys generate important data that New Look can use to produce items that meet the preferences and tastes of its customers.

New Look also has a strong presence in the online media. It uses its web page, ‘my Look’, to interact with its customers and ensure that it remains informed of the changing needs of the fashion industry. New Look remodels and redesigns its ‘look and feel’ units located in major stores based on the views it receives from its clients.

According to Datamonitor (2009), New Look redesigned its stores in the UK in 2008 based on client input. The intention was to provide products that suit customer preferences.

The Taiwanese Apparel Industry

Position in the Asian and Global Apparel Industry

Taiwanese apparel sector constitutes 2.4% of the textile retail industry in the Asia-Pacific region (Taiwan Textile Federation 2010). China, Japan, and South Korea dominate the region’s apparel industry with a market share of 39%, 37%, and 5.8% respectively (Datamonitor 2013).

Taiwan’s net revenue stood at $8bn in 2012, a 3.1 percent increase from 2009 (MarketLine 2013). In contrast, the Chinese apparel industry grew by 8%, while the Japanese one decreased by -0.8 percent in 2009.

The women’s garments subsector is the largest, accounting for 48% of the industry’s revenue compared to menswear, which constitutes 35.7% of the market share.

The leading companies in the apparel industry include Les Elephants, Levi Strauss & Co., and Liz Claiborne, Inc. (Jones 2006). Taiwan’s apparel industry is projected to grow at a CAGR rate of 2.3 percent between 2014 and 2017 (UNIDO 2011).

Supply and Distribution Networks

The main suppliers who dominate Taiwan’s apparel industry include producers and wholesalers. Retailers obtain products from local producers or wholesalers. A large proportion of retailers buy from international manufacturers (Chen 2001).

Supplier power in this sector is affected by the entry of foreign fashion retailers, such as Zara, which establish factories in low-wage Chinese areas, allowing them to compete effectively with local producers. The risk of switching from one supplier to another is low because the supply chain is not extensive.

This allows retailers to handle demand fluctuations or fashion changes without running the risk of incurring huge switching costs.

Since 2000, the industry has attracted foreign retailers, boosting its growth rate. In Taiwan, entry costs are relatively low. This has attracted major apparel retail stores, such as Zara and Uniqlo, into the industry (Taiwan Textile Federation 2009).

Euromonitor International (2014) states that established players, such as Levi Strauss & Co., enjoy economies of scale that enables them to put their top brands in many outlets. Additionally, these firms enjoy inordinate power over their suppliers. Due to low switching costs, the retailers can channel their client base to new partners.

New entrants face multiple challenges, including price wars from dominant industry players, such as Mikki and Bauhaus. In recent years, Mikki and Bauhaus have opened up multiple discount stores to benefit from economies of scale. The discount chain stores are increasingly becoming popular among Taiwanese shoppers.

Consumer Behaviour and Attitudes

Taiwanese consumers value apparels because they an indication of an individual’s social class, income, and identity (Thatcher 2002). They often shop at apparel retail stores, which offer a variety of items that portray one’s identity and socioeconomic class.

Besides retailers, consumers also obtain items directly from factories/producers through online channels. Additionally, consumers sometimes opt for custom-made (couture) apparels instead of buying finished dresses from the retail stores. The consumer market also features counterfeit products that threaten the retail industry.

Consumers make individual purchases as opposed to buying as a group. This lessens their negotiation power in determining prices (Taiwan Industry and Economic Research Center [TIERC] 2009). Industry players use product differentiation to offer different fashions and styles to consumers who consider style a sign of one’s personality.

Thus, ‘style’ is an individualised concept among Taiwanese consumers. This also further affects their buying power. Consumers consider retail apparels to be of higher quality than homemade garments (TIERC 2009).

Lower switching costs affect brand loyalty among consumers who value fashion designers serving high-end clients (TIERC 2009). However, retail stores offering apparels at affordable prices are increasingly becoming popular.

These retailers employ a price differentiation strategy to attract a certain consumer segment by retailing apparels sourced from their factories at very low prices.

Consumer subcultures influence the retail industry in Taiwan. Retailers have to provide consumers the styles and fashions that they want. This, coupled with the low switching costs, enhances the buying power of Taiwanese consumers.

Retail stores occupy a fixed position in the value chain, which makes forward integration difficult. Thus, the sector is consumer-driven, as retailers have to provide items that consumers want.

Cultural and Language Issues

The Taiwanese culture differs significantly from the Western culture. It ranks high on “power distance and uncertainty avoidance” dimensions (Lee & Carter 2005, p. 71). Uncertainty avoidance is evident in the way managers address competition.

Textile firms form B2B relationships in e-commerce to avoid losing their market share to new entrants. Taiwanese managers also value personal relationships with clients and suppliers. They believe that personal interactions can give more information and reduce business risks than automated solutions.

Another notable characteristic of the Taiwanese culture is collectivism. Taiwanese managers readily adopt collective B2B decisions made by the government or an alliance of companies (Thatcher 2002). Due to their collective orientation, individual vision is rare among Taiwanese managers.

The Taiwanese society is also a high-context culture. It embraces the ideals of guanxi, which supports the principle of reciprocity in a relationship (Thatcher 2002). Companies display a close interdependence and collectivism in their relationships. Thus, the guanxi concept may not support B2B models that do not include personal relationships.

The Confucian culture also affects time orientation among Taiwanese businesses. They focus on long-term or future outcomes in making their decisions. The Confucian view makes business leaders to focus on strategies that would lead to long-term success.

Other aspects of the Taiwanese culture that may affect B2B collaborations include the “concept of face or mien-Tzu” (Thatcher, Foster & Zhu 2006, p. 94). A company’s reputation or dignity affects business interactions in Taiwan.

A large population of Taiwanese (84%) speaks Mandarin Chinese as their national language (Thatcher 2002). The English language is used in schools and official communications. The Taiwanese people use indirect words in their communication due to the influence of the mien-Tzu.

Thus, communication is largely contextual and involves the use of verbal messages, facial expressions, and non-verbal cues. Additionally, brevity in communication, which is present in Western business communication, is largely absent in the Taiwanese culture.

Conclusion

New Look owns immense resources in terms of stores distributed in different locations. It also owns established apparel brands in Europe that it can leverage on to enter new markets. Its business networks and collaborations can also help the firm to enter the Taiwanese apparel industry.

References

Abecassis, C 2006, ‘Integrating Design and Retail in the Clothing Value Chain: An Empirical Study of the Organisation of Design International’, Journal of Operations and Production Management, Vol. 26, No. 4, pp. 412-428.

Anz Insights 2012, Textile and Garment Industry: Market Update. Web.

Chen, S. 2001, ‘Global Production Networks and Information Technology: The Case of Taiwan’, Industry and Innovation, vol. 9, no. 3, pp. 249–265.

Chesters, L. 2011, The Independent. New Look to revamp its store portfolio. Web.

Datamonitor 2009, Global Textiles: Competitive Landscape, Datamonitor Europe, London.

Datamonitor 2013, Apparel Retail Industry Profile: Taiwan. Web.

Delaney, D. 2013, New Business Networking: How to Effectively Grow Your Business Network Using Online and Offline Methods, New York, Que Publishing.

Euromonitor International 2014, Apparel and Footwear in Taiwan. Web.

Hakansson, H. & Snehota, I. 1995, Developing Relationships in Business Networks, Routledge, London.

Jones, R. 2006, The Apparel Industry, Blackwell Publishing Ltd, Oxford.

Lee, K. & Carter, S. 2005, Global Marketing Management, OUP, Oxford.

MarketLine 2013, Apparel Retail in Taiwan. Web.

MarketLine 2014, Apparel Retail Industry Profile: Asia-Pacific. Web.

New Look 2012, New Look’s Commitment to Ethical Trading 2012. Web.

New Look 2013, Annual Report & Accounts: 2013. Web.

New Look 2014, Annual Report 2014. Web.

Oracle 2009, Press Release. Web.

Singleton, J. 1997, The World Textile Industry, Routledge, London.

Sinha, P. 2000, A Comparative Study of Fashion Design Processes in the UK Women’s Wear Industry, University of Salford, Salford.

Taiwan Industry and Economic Research Center [TIERC] 2009, Fashion Industry Promotion Plans, Taiwan Government, Taiwan.

Taiwan Textile Federation 2009, Overview of Taiwan’s Textile Industry, Taiwan Textile Federation, Taipei.

Taiwan Textile Federation 2010, The Overview of Taiwan Textile Import and Export. Web.

Thatcher, S. 2002, Business-to-business e-commerce: a study of greater Chinese and US electronics and apparel/textile firms, CAPS Research, London.

Thatcher, S. Foster, W. & Zhu, L. 2006, ‘B2B e-commerce adoption decisions in Taiwan: The interaction of cultural and other institutional factors’, Electronic Commerce Research and Applications vol. 5, no. 1, pp. 92–104.

United Nations Industrial Development Organisation [UNIDO] 2011, The Global Apparel Value Chain: What Prospects for Upgrading by Developing Countries. Web.

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