6/9/2015

ADMN 400 Strategic Management

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ADMN 400
Strategic Management
Individual Project

Mr. Jax Fashion Inc.

Instructor: Bill Chadwick Submitted By: Faisal Niazi
Student # : 197­7­03040

Mr. Jax Fashion Inc.
Contents

Introduction *
Strategies *
Industry *
Porter’s Analysis
Internal Rivalry * http://faisalh2.tripod.com/mr_jax.htm 1/5

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ADMN 400 Strategic Management

Threat of Substitutes *
Threat of New Entrants *
Bargaining Power of Buyers *
Bargaining Power of Suppliers *

Other Environmental Factors

Problems and Opportunities *
Alternatives

Feasibility *
Investing Strategy

Recommendation * Introduction:

Mr. Jax Fashion Inc.

Mr. Jax Fashion Inc. was formed after a venture between Joseph Segal and a Vancouver­based apparel manufacturer in 1979. Segal had hired Louis Eisman as women’s fashion executive. The primary objective and strategy of both Segal and the shareholders had been to proceed towards the growth of the company. Eisman helped achieving that through aggressive penetration into the women’s market segment. By 1988 Mr. Jax’s products were being sole in over 400 department and specialty stores across Canada. Though Mr. Jax initially focused on small retailers, larger retailers started to cooperate after high success in both quality and design of the product. Thus Mr. Jax had grown into both markets overtime.
Eisman, now president, faces the same decision once more to pursue towards maximizing shareholders wealth and company’s worth by looking for a good opportunity for growth. We shall take a strategic look at the alternatives so as to either step ahead towards growth or, look at the internal problems if any. The final objective would remain the growth of the company.

Strategies:

When Eisman had joined this company; he wanted to work on the base strategy of its founder, growth. For this purpose he started off with small retailers. His strategy was to gain support of all these small retailers who were easily swayed in their purchasing decisions. It worked well for Mr. Jax as they made their reputation as high quality, classic design apparel with excellent service. This reputation caused a high response from the larger retailers, and thus Mr. Jax finally emerged as one of the main women’s fashion apparel manufacturer.
In 1986, when Mr. Jax went public, it raised an excess capital of $17 Million. This was used to diversify growth through purchase of four semi­related companies. Thus spreading the risk associated as well. All four companies were not in the high profitability­high satisfaction category, as all of them lacked good management. Only two were bringing in profit, one at break­even and one in loss. The decreases in profits were being associated to the old management and increased competition.
In 1987 due to the decrease in the shipment rate from 90% to 75%, production strategies had to be reviewed and amended. For this purpose consolidation had begun and a

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Industry:

new building was renovated to accommodate an up­to­date technology. Workers had reported the difficulties of operating the new equipment, and thus decreasing their production ability. A consultant was hired to deal with this problem which eventually resulted in the removal of the machinery and changing the wage strategy to piece­rate pay scale. Overall, the production was still improving and efficiency had finally been restored.
Internal Rivalry
Moderate: Though the competition in the apparel industry is high yet there is no particular internal rivalry between any two. Thus I deduce a moderate internal rivalry, which is not generally among two direct competitors rather a few of them, with equality in the strength and ability.

Threat of Substitute

High: This segment is a niche market, which means it can be substituted for and by other apparel styles. Fashion styles are an ongoing process, and become out of date very quickly. Thus any company has to continue with innovative styles and designs to overcome this threat. Threat of New Entrants

High: Just as there are many substitutes available, this industry allows any small business to enter with little entry cost. Any small boutique may be a new entrant, with limited design in direct competition with a bigger manufacturer.

Bargaining Power of Buyers

High: Buyers in this industry particularly to a manufacturing company are the distributors. These distributors have the power to turn down any order if they deem it to be not feasible. Thus it is the manufacturer who has to keep up his standard with the demand of the buyer. Bargaining Power of Suppliers

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Low: Because of low information from the material the bargaining power of the suppliers, which in this case are the raw material provider, can be assumed as low. It is the manufacturer who dictates the material that comes in, so they would have a higher power over the raw material provider.
Now that Eisman is considering for a growth, it is better to see what other environments hold for Mr. Jax.
The US market in the past has proven to be more competitive in comparisons to the Canadian market. Similarly it has also shown a much faster pace then other markets. If Mr. Jax has to expand into US, it would have to go under a high facilities upgrade, along with high initial capital. The designs popular in US market have a “classical European styling combined with the North American flair”. Mr. Jax had deduced that from its test market in Dallas, NY.
Similarly, it can also look at the European market for expansion, however this has not been tested and any speculation would be a risky measure. Problems & Opportunities

Mr. Jax is facing many problems at different levels. These can be viewed and evaluated, so as to prioritize the action of Mr. Jax. The financial decision of diversifying the raised capital of $17 Million, in semi­related company proves to be unprofitable. It is very true that not all these companies are losing. It is only Surrey Classic Manufacturing Ltd. which is losing profits.
One of the major reasons for low profit outcome from these diversified companies is the lack of good management. This issue is already under address; however a quick decision has to be made in order to pursue growth. Should Mr. Jax Inc. go on with an integrated management even though Eisman doesn’t approve of it? Or should the same management be reconstructed in a more efficient manner.
In order to expand the business to US, Eisman has already studied and narrowed down its decision to a couple of alternatives. Mr. Jax
Inc. would have to establish a focused, coordinated, and aggressive marketing campaign to achieve its desired objective.

Feasibility:
Alternatives available at moment are:

1. Establish a retailing chain.
2. Establish a wholesale distribution on a regional basis.
3. Establish a wholesale distribution on a national basis. The above alternatives are realistically possible due to a few reasons.
FTA provides an easy import/export provisions for any Canadian company to expand into US market. Similarly tariffs and trade­balancing restrictions are accommodated by this Act, to make such decisions very attractive.
Therefore the only hindrance that might pose a threat for Mr. Jax Inc. is the financial feasibility. It would all depend on whether the
Canadian Banks or Government would give enough grants to Mr. Jax Inc. to pursue its expansion.

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Another option for it to raise enough capital would be to lose the non­profitable Company, naming, the Surrey Classic Manufacturing Ltd.
Mr. Eisman and Segal also held majority of its equity which could also be used to fund this expansion.
Thus Mr. Jax Inc. has enough resources to transform its current situation into the new environment. However it would simply have to reallocate the resources to a more profitable measure.

Recommendation

I recommend that Mr. Jax Inc. should expand into the US market. This should be done by following Alternative # 1. . Mr. Jax Inc. should establish a retailing chain. It has the resources to come up with the new capital and has the skills to attain the level of excellence in the new market. It would have to create some new distributing channels, which is a better alternative to grab a definite market share. This would give the retailers a chance to display all the high quality, newly designed apparel in the market, without much competition from other companies in that particular store. This way customer will be able to get acquainted with the new name in the industry.
Mr. Jax Inc. can finance its entry with the grants from the government, or from equity, which will enable it to reap the high return rewards from considerable high risk investment.

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