Book Report: Pacific Brands Is Famous

Pages: 5 (1725 words)  ·  Style: APA  ·  Bibliography Sources: 10  ·  Level: Master's  ·  Topic: Business  ·  Buy This Paper

Pacific Brands is famous for its iconic labels such as its Berlei, Bonds, Clarks, Dunlop, Everlast, Grosby, Hard Yakka, Holeproof, Hush Puppies, King Gee, Mossimo, Razzamatazz, Sheridan, Slazenger, Tontine, and Volley brand names (Our brands, 2013, Pacific Brands). Although Pacific Brands has been a generally successful company in the past, the linens and apparel industry has grown increasingly competitive. Because fashion offers so many substitute goods and is often strictly speaking not considered a 'necessity,' consumers can easily cut back on clothing purchases during times of economic uncertainty. Pacific Brands must convey the 'additional value' its products offer consumers in terms of its marketing approach. One way it can do so is with an emphasis on sustainability. For example, the company's "Dunlop Flooring has been acknowledged amongst Australia's most environmentally and sustainable organizations by winning a Banksia Sustainability Award for our Recycle by Dunlop Program in the category of Waste Minimisation" (Dunlop Flooring wins the prestigious Banksia Environmental Award, 2013, Pacific Brands).

This paper will examine how Pacific Brands can incorporate sustainability and ethical principles into its vision and mission to generate revenue and differentiate itself from its competitors. It will be based upon the theory of competitive advantages and Porter's Five Forces theory. No firm can succeed unless it offers a substantial advantage in comparison to competitor brands either in terms of price, quality, or differentiation within the segment to which it markets. Ideally, differentiation should take place in all of these specific categories.

Issue identification

Product differentiation is a key component of success, particularly in areas such as consumer goods where there is often little real quality-based differentiation between the products. "Most companies state the business value of sustainability programs in terms of cost reduction through reduced energy and material use and reputation protection through voluntary commitments on labor, water, energy, greenhouse gas emissions, waste, renewable materials, toxic substances, ecosystems and habitats, and dozens of other issues. However, a number of companies also view sustainability as a way to drive revenue" (Green products, 2010, PWC). Particularly for clothing and items which are such an integral part of a consumer's sense of self, this can prove to be an essential component of marketing in the future.

Consumers are increasingly demanding high-quality products that have a minimal impact on the environment. There is also growing legislative demand for products which are relatively low in terms of their environmental impact. Even shareholders are beginning to make noise about how firms should move beyond pure profitability in their focus, contrary to the classical wisdom that the sole responsibility of the firm was to make money. "Interest in sustainable business is at an all-time high, driven by external pressures including regulation and legislation, but also by customer and stakeholder needs and interests" (Moore & Wen 2008).

Critical discussion

The theory of competitive advantages derives from Michael Porter's discussion of how firms can secure an effective competitive strategy. Porter believed that five critical forces shape all industrial developments and all successful firms must capitalize upon securing a competitive advantage reflecting such pressures. These forces include "competitive rivalry, powerful buyers, powerful suppliers, potential new entrants, and substitute products" (Dobbs 2012). Overall, the Australian apparel industry has been faced with "sluggish Australian retail sales and continued subdued consumer sentiment" which gives leverage to both buyers and suppliers, further adding to the competition (How sustainable are Australian retailers' new sourcing strategies, 2013, AMP). "Australian retailers are faced with faster fashion trends and more competition from the internet as well as new entrants in the domestic market. In 2011, the sharp increase in the cotton price also put pressure on retailers' earnings. Retailers have reviewed their cost structures to find efficiency gains to boost their declining retail margins. In particular, retailers have focused on new sourcing strategies" to secure a competitive advantage (How sustainable are Australian retailers' new sourcing strategies, 2013, AMP).

Although Pacific Brands has some limited diversification in the sense that it is not solely an apparel company, its diversification is limited enough so that it is constantly threatened by possible competitive rivals and substitute products. Unlike buying a new computer system, for example, no one is 'locked into' buying clothing from a particular company. There is also steady downward pressure in terms of pricing given the rise of discount brands to rival the popularity of Pacific Brands' Hush Puppies and its Clarks. Unfortunately, many of Pacific Brands' core offerings are in the dreaded 'middle zone' of product marketing. They are neither high-end nor low-end, which can make justifying the purchase of such items difficult in the consumer's mind.

As noted by Porter, "there are two basic ways to create competitive advantage: cost leadership and differentiation. Either can be utilized in a broad or narrow approach, resulting in a focused competitive strategy" (McCann 2011). Cost leadership is when a firm or country is the lowest-cost producer within the market (aka Wal-Mart) and generates a competitive advantage by economies of scale while differentiation "is the decision by the firm or country to be unique in some factors valued by its customers" in factors such as product, distribution, sales, marketing, service, or image and cost position (McCann 2011). "In a focused competitive strategy the firm or country sets out to be the best in market segment or group of segments" or it can focus on a wide range of markets (McCann 2011). Because of Pacific Brands broad-ranging focus as a company, it is clearly in competition with the general marketplace. However, it does not have a secure cost leadership position, indicating it must 'differentiate' itself from its competitors. One way to do so is by focusing on sustainability.

Sustainability would also bolster the aspects of the Pacific Brands lines which focus upon consumer fashions (such as Clarks), versus work wear, the aspect of its lines of clothing which have taken the hardest 'hit' in recent years. In October of 2013 it recently announced "Pacific Brands says its full-year profit is likely to be down as it faces weaker sales and challenging market conditions with 'no near-term signs of improvement" (Pacific Brands hit with sales downturn, 2013, Sydney Morning Herald). In particular, "its first quarter sales were weaker than expected due to a downturn in some of its markets, particularly work wear" (Wilkins 2013).

The decline in its profits has resulted in the company taking a number of unpopular cost-cutting measures, including outsourcing the jobs of its customer service representatives in 2013 (Cavanaugh 2013). This appears to be necessary for the company to move forward into the 21st century with a leaner business structure particularly in response to low-cost apparel from China. But given that the company has always marketed itself as caring about ordinary Australians, the bad publicity has been devastating (McCann 2011). Sustainability would be one way to differentiate itself from the competition in an ethical fashion, stressing its 'green' use of manufacturing products and also its kind treatment of workers overall, despite the outsourcing controversy. For example, it is a little known fact that "few companies other than Pacific Brands Group, which is a signatory to the Ethical Trading Initiative, commit to a 'living wage', which in several jurisdictions can be very different from the legal minimum wage" (How sustainable are Australian retailers' new sourcing strategies, 2013, AMP). In other words, Pacific Brands actually pays above minimum wage as part of the ethical commitment it makes to its employees. This must become a critical component of consumer awareness, not simply noted on its website within the 'sustainability' section, but incorporated in a broader and more integrated fashion into its overall marketing strategy. Ethics and service to the larger community are both buzzwords that resonate with consumers and sources of revenue and growth (Richards-Elliott 2009).

Recommendations

"Most managers have been brought up in, and trained for, an environment of certainty, whereas they now have to cope with increased complexity, uncertainty and turbulence" (Mason 2009: 14). The apparel industry is in a constant state of flux. However, there is a clear trend towards compassion and sustainability as demanded by Australian consumers. While it has been said that "very few organizations can afford to provide practicing managers with the time and resources to engage in scenario development, both retrospectively and prospectively" in the long run, sustainability must become a critical component of all business and policy decisions, upon which Pacific Brands can capitalize (Raspin & Terjesen 2007: 120)

Conclusion

Sustainability is not simply good ethics; it is also good business in the industry in which Pacific Brands is operating. Pacific Brands can no longer rely upon the good will it generated in the past, given the proliferation of consumer loyalties as well as the bad press it has suffered for layoffs and outsourcing. Instead, it must draw upon the new emphasis on sustainability to generate value for itself as a company in the Australia of tomorrow. Sustainability and ethics must be a key component of its differentiation as it 'packages' itself to the consumer.

References

Cavanaugh, R. (2013). Pacific… [END OF PREVIEW]

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