Polo Ralph Lauren Performance Measurement

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Performance Measurement – 8343

Polo Ralph Lauren Corporation – Company analysis. Notes on the slides.

Agenda - Our agenda follows exactly the guideline that was given to us in order to carry out this assignment.

The Company – Short overview of the firm.

The Fashion Industry – It is based mainly on intangible assets, rather than capital or knowledge-intensive assets. Moreover, nowadays fashion companies are less affected by the problem of seasonality: indeed they experience sales that are pretty much stable over the year; in spite of this, PRL experiences different levels of sales in the different quarters, due mainly to wholesales shipments and in coincidence with holiday periods.

Industry Analysis – We used the Five Forces Model to assess the characteristics of the industry in which PRL competes in. The fashion industry is a very competitive one, rivalry among firms is high: some competitors are bigger than PRL, so they also have more resources, but still PRL is a pretty strong name and the company has a large customer base. The threat of new entrants is low because there are strong incumbents, brand loyalty in the high-price segment is high and access to suppliers and distributors is limited. Even though PRL has a high brand recognition which makes end customers less price sensitive, the bargaining power of the buyers is high as the direct customers of the firm are mainly large department stores (and the gist of the company’s revenues comes from the wholesale sector). The threat of substitutes is moderate as loyal customers tend to buy only from them but in general people may vary their purchases and also buy from the competitors. For what concerns the suppliers, it’s important to specify that PRL does not manufacture its products itself, but instead relies on licensees and other manufacturers to do so. Its suppliers are therefore manufacturers which supply the company with the finished goods. The bargaining power of suppliers is moderate: as the company doesn’t actually manufacture anything that it sells under his brand, it has to rely pretty much on manufacturers and licensees; high quality suppliers are few and there’s high competition among high-quality firms to find such reliable manufacturers. On the other hand though, PRL produces in many different countries, mainly outside the US, thus working with many different suppliers, and this lowers the suppliers’ strength in bargaining. In total they have 350 manufacturers, with none of them providing more than 8% of total production.

Internal and External Factors – In order to get a better understanding of the competitive environment from the firm’s perspective as well as of firm-specific resources and capabilities, we conducted a SWOT analysis. The company has successfully grown and expanded its range of product lines and brands, as well as his presence in the international market. One of its main strengths is the brand: it inspires a precise lifestyle and virtually everybody knows it: this high brand awareness and recognition, as stated above, make the end consumer less sensitive to the price. They decided to leverage on their strong brand in order to increase the profitability of the business and expand it by further diversifying the range of product offerings and apparel brands, which are divided into Polo brands and Collection brands (the most expensive). The firm manages to have high margins on its various brands, especially in the Collection brands. They also have no problem in accessing the end consumers as their presence is considerably high, thanks to what they call “multiple channel distribution”: this means that they have both their own stores and sell to third parties such as department stores, specialty stores and factory stores.

Their major weakness is the high dependence on department stores: as stated above, their revenues depend highly on this form of retail store, especially in the US and Canada (their biggest market, we will see...
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