Harrington Collection: Sizing Up the Active-Wear Market
Harrington Collection is a manufacturer and retailer of high-end women’s clothes. It was founded in 1960 and it focused on the design and manufacturing of formal dresses. As the company evolved however, it incorporated suits, pants, blouses, coats and other professional dress items into their offerings. Harrington is divided into four divisions; Harrington Limited – sophisticated elegance, Sopra – status seeker, Christina Cole – office chic, and Vigor – trend setters. They have become synonymous with high class fashions and their customers are extremely loyal. However, in the past three years sales have been down and the company is suffering. The women’s clothing industry has become very price sensitive and over 50% of the products are bought on sale or at a discount. This is not good for the Harrington Collection because they are a higher priced company. Blake Myers, who is the general manager of the Vigor division, knew that something had to be done to change this trend and make Harrington more profitable. His proposed that they introduce a new line of clothing which would focus on less-expensive active-wear. The active-wear market has grown a lot in the past few years so there is a lot of room for opportunity. There are certain issues surrounding introducing a new product line that would need to be addressed. There is a chance that a new line could potentially drain resources needed for the current and signature product lines. Also, Harrington has a reputation as sophisticated and high-class and active-wear would be straying from this status. There is also a question of competitive reaction. Two main competitors of Harrington Collection are Jones Apparel Group and Liz Claiborne. This competition would also integrate active-wear clothing their brands so Harrington would need a competitive advantage. This advantage will come from Harrington’s constant quality and timeliness of service. Most companies outsource to China because the production costs are significantly cheaper. However, Harrington does not like to do this because they want their product close by if it is ever needed to be able to provide fast turnaround. Outsourcing does not need to be all the way to China for there to be benefits though and this will be the advantage Harrington has over its competitors. Harrington can outsource production to Mexico, which can still be close to US retail stores, and have cost savings. Production costs in Mexico are slightly higher than China but lower than the United States which makes it appealing to Harrington. Also, the difference in wages in China and Mexico are less than $1. This will enable Harrington to continue to withhold its ideals of high quality control and fast turnaround. As stated above, the active-wear market is a huge opportunity for Harrington Collection. The market is already very large and it is expected to grow. In 2007, Harrington estimated that 7.5 million active-wear units were sold. It is also forecasted that this number will be to 15 million units by 2009, which is very quick for a market to double. Harrington also conducted different focus groups and the results all pointed to an active-product line being successful. The customers responded by being more interested in active-wear lines rather than the usual, sophisticated apparel usually offered. 10% of customers answered that they would purchase a stylish, “better” active-wear outfit if Harrington provided a high quality product. “Better” falls within the price point of $100-$200. The market for women’s apparel in 2007 in the price point of $100-$200 was 222.2 million units. This means that the market for “better”, active wear would be: 222.2 million x 10% = 22.2 million units
Financial Analysis Template:
This is the completed template of demand and profitability as given in Exhibit 9. This shows that the breakeven point would be 289,846.10 units. Karen Allen, the...
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