Harrington Case

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Issue: After three years of unimpressive sales and low margins, Harrington Collections must evaluate launching a new active-wear product line in order to increase profits and maintain industry leadership. Definition of Success: Break-even must be achieved within one year of new product line introduction and sales must bring net profit back to 2005 level of $154 million in the long-term. Positioning Statement: Harrington Collection provides high-quality professional and stylish attire for affluent, fashionable, college-educated, professional women ages 25 to 60 entering the workforce. 2. RECOMMENDATION

Harrington Collections should launch an active-wear line to be sold within the Vigor product line. Manufacturing will be conducted in Mexico and product will be distributed through Vigor’s current distribution channels with hoodies priced at $100, pants at $80 and T-shirts at $40. 3. KEY CONCLUSIONS

Alignment with Vigor’s current pricing, distribution and marketing models: * 10% of Harrington’s current customers said they would purchase an active-wear set in the $100-$200 price range. This is $3.3 billion of potential sales within Harrington’s target market. * Brands are beginning to trade up and 40% of total active-wear sales are forecasted to fall within the “better” classification in the next two years. * Active-wear is an appropriate introduction into the Vigor line with its lower price point and “better” classification. * Industry trends show customer preference for shopping in specialty stores, which aligns with Harrington’s current distribution channels of 120 specialty stores, 50 exclusively sell Vigor. * Harrington currently relies on a push promotional strategy, which will coincide, and be needed, in the launch of a new product line. Despite the departure from traditional professional attire, casual active-wear complements the current line well, both in pricing and distribution with the current Vigor business model, and most importantly caters to the wants and needs of the customer.

Substantial market opportunity due to changing consumer trends: * 7.5 million active-wear units sold industry wide in 2007, with sales expected to double by 2009. * Department stores shoe stylish active-wear inventory selling extremely quickly (at twice the rate of Harrington’s current product lines). * Focus groups conducted by Harrington revealed current loyal customers throughout their careers no longer desire the tailored, professional look. Rather, they are interested in something that better fits their active lifestyle. Although Harrington has been successful with its traditional professional line, if the customer’s lifestyle and preferences are changing, Harrington must respond and provide them with a product line that meets their needs and wants. Additionally, the active wear line complements the professional line well, as it provides both day and night or weekend options; it is not creating a direct competitor to its core line.

Harrington’s historic emphasis on quality is a competitive advantage: * Manufacturing in Mexico provides Harrington greater control over quality than outsourcing to less expensive manufacturing areas. * Other active-wear competitors in the “better” classification are of inferior quality, meaning Harrington could capture a leading market position with an affordable and durable active-wear line in the better category. Launching a new active-wear line in the better category with the same level of quality known to Harrington clothing, the company has an opportunity to capture a unique leadership position within the market, providing a stylish, affordable and durable active-wear product.

Introducing a new active-wear line is financially viable:
* Harrington can achieve a net-profit of $39.9 million with the launch of the active-wear line (see Appendix B). Conservatively assuming Harrington maintained net profit at...
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