Internal and External Marketing Environments
Analysis of Key External Factors in the Market
Porter's five forces framework:
According to Rutherford, an industry is "a group of firms producing the same principal product."
Porter (2008) claims that competition goes beyond the rivalry among existing firms, but there are many other competitive forces: potential entrants, substitute products, customers, and suppliers. The combination of these forces defines the competitive structure and the drivers of the success of an industry.
Using Porter's competitive analysis of five forces in the case of JGJ,
· The threats of new entrants and substitution are low,
· Customers" and suppliers" bargaining power is moderate.
· However, the intensity of competitive rivalry is relatively high because similar fashion firms are competing. Sustainable fashion has a shorter life cycle for products than most industries. This spurs both creativity and product innovation but demands more efficiency and advanced technology to reduce waste and avoid distribution delays.
Competitive rivalry:
Rivalry among existing competitors is high in the Textile industry. Still, since JGJ operates in a specific (unique) market, by making sustainable clothing manufactured by local manufacturers of the USA, the competition is relatively low. There is very little no. of companies that make sustainable clothing manufactured in the USA and neighboring countries. A few potential competitors could be H&M, Zara and Levi's, etc. However, the competition is very high in the non-sustainable wear segment, at similar or lower costs. The competition includes highly reputed brands such as the companies as mentioned above, who are already in developed business.
The JGJ operates using Oligopoly. The increased number of competitors makes the situation of the incumbents worse. The excellent news for JGJ is Industry growth rate is high in the sustainable clothing business. This indicates that high growth results in low price competition and high profitability.
The threat of potential entrants:
Barriers to entry are high, and thus the threat of new entrants in low. This is a capital-intensive business, and thus, the investment required is relatively high. The USA's labor is considerably expensive, and people from the neighboring countries E.g., such as Mexico Honduras etc. are the ones that JGJ mostly employs. After the network of work is set up, the labor becomes readily available for the company's needs.
Barriers to entering new firms towards sustainable clothing industry are high enough to cut potential innovative entrants.
High entry barriers are beneficial for already competing firms (incumbents) as entry barriers protect them from the new competitors who refuse to enter the market (Gerry et. al., 2008).
Bargaining power of suppliers:
Over time, JGJ has to develop a strong network of producers and a loyal manufacturing base. Since JGJ Inc is a supplier itself for the production of its sustainable products. i.e., buying back old garments and then reuse them for sustainable clothes manufacturing. JGJ has to work on customer loyalty so that every time customers buy something, they will also return old clothing. Moreover, the demand for sustainable clothing is constantly growing and JGJ is looking to get more suppliers. Suppliers are also highly demanded by their competitors, so the suppliers have a moderate bargaining power level.
Bargaining power of buyers:
The buyers don't have a lot of options readily available for them to buy from. They have limited opportunities to switch. JGJ products can be the most acceptable option for them. They can't buy similar clothes from all competitors as the product is unique and not every textile manufacturer is producing sustainable clothing. But the critical point to note here is the other brands/competitors have exclusive outlets, and they also have their products in multi-brand retail stores. This might as well be a disadvantage for JGJ as customers might prefer visiting multi-brand outlets. To compete, JGJ needs to open many retail outlets through out the USA.
The threat of substitutes:
The threat of substitutes is low because there are limited substitutes available for the consumers to choose from. Furthermore, JGJ has priced its products on the higher side, with its brand recognition and garment circularity concept. So consumers might not prefer other relatively cheaper options available to them
There is no product substitute offered by other companies that might perform the same clothing operations.
Other macro-environmental external factors
Political:
JGJ Inc products are manufactured by the USA's local/neighboring countries, thus directly supporting the 'Made in USA' campaign. This will provide JGJ and a competitive edge a none of the competitors has a manufacturing facility in the USA. They usually have their production facilities in China, Pakistan, and India, etc.
Economic:
The textile industry is the second-largest employment generating sector in many countries and JGJ will also help generate more work within the USA. The US's household income level is high compared to other countries, so JGJ can leverage this trend to expand the market beyond their traditional customers by employing a different marketing campaign. Though the US workforce productivity has risen by 25-30 percent in the previous two decades, the workers' salaries do not reflect upon them. JGJ can use this as an opportunity to hire a skilled workforce at competitive salaries.
Social:
The US has avoided the European Union-style stagnant economy because of a higher birth rate and increased immigration. Demographic trends are significant factors when it comes to demand forecasting of an economy. The USA population is growing old, and thus, the demand for products catering to this particular segment will grow. JGJ should consider demographic trends before they launch a new product and make sure the product has features that cater to this segment.
Technological:
When there is a high level of technology investment, then there's an opportunity to build a self-sustaining ecosystem that drives innovation. Using this, JGJ can hire the best people in the business. JGJ should focus on areas where technology can empower its supply chain partners. This will help them to make their supply chain more flexible and transparent. JGJ Inc should also focus on how the country's laws operate on the environment for intellectual property rights before entering in the market. JGJ Inc will also operate in the e-commerce market, and it's essential to evaluate e-commerce infrastructure, technology infrastructure.
Environmental:
Environmental regulation impacts the absolute cost advantage in the industry. JGJ should consider the country's waste management and how they can follow the waste management requirements in that market. Adding to the waste management requirements is the country's recycling policy, which should also be considered. It also must know the level of consumer activism on environmental concerns and based on this, they can develop environmentally friendly products. In many countries, the environment standards enforcement agencies delay the process of safeguarding norms to extract bribes. JGJ should also be aware of the presence of such practice in a country. To predict a country's environment policy, the country's per capita carbon emission and the overall level of carbon emission of the country are highly helpful.
Legal:
JGJ should know if the country is following common law in uniform for all the parties, irrespective of being a domestic on or an international party. Since JGJ Inc will be a new player, they need not worry about monopoly and restrictive trade practice laws. They must also know the country's consumer laws, the rate of enforcement, the attitude of officials on consumer protection laws, and activist groups' role in the enforcement of consumer protection laws. JGJ Inc is assuming the kind of legal challenges it can face. If the legal process is transparent and consistent, then JGJ can plan with more conviction since it's essential for a fair decision-making process. Lastly, they must also know the level of protection that intellectual property rights affect the system in a country.
Required Internal Resources and Competencies to Compete in the Market
CSR:
Loyal consumers are essential stakeholders in a company. Besides, they are individual members of society (Laughland and Bansal, 2011). JGJ wants to support the community and the environment through its business model. This will reflect in the corporate social responsibility (CSR) policy of JGJ Inc. Since buyers are, on the other hand, suppliers for the JGJ business plan, customer loyalty will play an important role is JGJ raw material procurement.
Environmental attention with JGJ philosophy: JGJ needs to create awareness to its customers about the environment and social responsibility. And that would be its primary marketing campaign.
A continuous level of new products: Since the fashion industry is fast-moving, JGJ needs to focus on a wide variety of designs and fashion industry trends.
Cost-effective cost: to be competitive, JGJ needs to focus on cost cuttings. For example, electricity-saving by installing LED lights in their outlets.
The precise strategy around discounts: Since JGJ is buying back the garments, discounts should attract the customers.
Required Licenses, Patents, and Rulings or Legal Requirements to Compete in the Market
Standard Certifications:
ISO: International Standard Organization. This provides a guideline for all Standard procedures to run any business.
SA8000: Established by social accountability international (SAI), SA 8000 is a social certification standard for factories and companies worldwide.
Technical Certifications
GOTS: The Global organic textile standard: covers the processing, manufacturing, packing, labeling, etc. of all textile made from at least 70% natural organic fibers.
ZDHC: Zero discharge of hazardous chemicals.
OKEO-TEX: It is another trustworthy label that focuses on chemicals. This certification tests for a substance like toxic chemicals that are harmful to humans.
USDA (Organic): USDA organic products are certified by the US govt if they meet strict standards in their growing and harvesting process.
BCI: Better cotton initiative: BCI is a non-profit organization that encourages a more sustainable way to source cotton through a defined set of standards.
C2C: Cradle to cradle: mainly focus on the circularity of products.
OCS: Organic content standard: It provides a strict chain of custody system from your finished products' organic source.
Other Requirements:
Business licenses, Occupancy certificates, Labor Laws (USA). Insurances etc.
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