Pumpkin Patch is a high end children’s clothing company that was established in 1990 when founder Sally Synnott (former children’s wear buyer for Kmart) noticed a gap in the market for fashionable children’s clothing. Pumpkin Patch has developed a vastly successful and highly competitive brand and is continually expanding further. 2. External Analysis
3.1 General Environment Analysis
The conditions of the general environment of an organisation have the potential to significantly influence its success. Pumpkin Patch is a part of the children’s fashion industry, which was likely to be influenced primarily by the economic, socio-cultural, and global segments of the general environment at the time the case was produced. During the period that the case was produced, Pumpkin Patch markets were generally experiencing strong economic growth and many consumers had elevated discretionary income. These economic conditions would have been favourable for the retail segment in general. Heightened discretionary income levels would likely be favourable for children’s fashion retail in particular. Children’s fashion may be unlikely to be a high priority purchase in times of economic struggle, however when consumers have strong incomes they are likely to be less price sensitive and invest children’s fashion rather than mass produced, inexpensive clothes. Socio-cultural trends are important to firms in the children’s fashion retail segment. At the time, societal focus on the environment and producing goods in an environmentally sustainable manner was just emerging and was beginning to have some relevance to firms within the retail segment. Social trends advocating the use of environmentally conscious production facilities and materials is a socio-cultural factor that would likely have be pertinent to firms within the fashion retail industry. In terms of the global segment, the move towards global outsourcing was a relevant to trend for organisations within the fashion retail industry. This trend towards outsourcing of manufacturing functions posed a difficult decision for fashion retailers. Firms must decide whether to maintain full control and the ability to make fast last minute changes by manufacturing at home, or elect to outsource in order to reduce costs and remain competitive. 3.2 The Industry Environment
Competitive rivalry- Competitive rivalry is high in the fashion retail industry in general. The large volume of competitors and relatively limited differentiation in combination with the low costs for buyers when switching brands makes it a highly competitive industry. The competitive rivalry is likely to be less intense in the children’s wear industry as there are fewer competitors, however competitive rivalry is still relatively high. Threat of new entrants- There is quite a high threat of new entrants to the children’s fashion industry for existing firms. The fashion retail industry requires relatively low capital outlays, there are few- if any- regulatory barriers and customer switching costs are low. These factors make is relatively easy for new organisations to break into the industry. However, like all industries, there are some barriers to overcome. Differentiating ones product amongst established brands is a pertinent concern for new entrants to the children’s fashion industry. Threat of substitutes- The threat of substitutes in the general children’s wear industry is low as there aren’t any substitutes for clothes. However, in the children’s “fashion” industry, budget, mass-produced children’s clothing could be considered a substitute. As switching costs are low for consumers and budget clothes are a cheaper alternative, this could pose a serious threat for firms competing within the children’s fashion market. Bargaining power of suppliers- The number of satisfactory substitute suppliers available, the criticality of the supplier’s product to the firm’s success and the switching costs...