Implementation: True Religion Brand Jeans
True Religion Brand Jeans is a relatively new company, establishing itself in late 2002, and taking denim in a new direction. Just over three years old, the company has capitalized on the latest Hollywood trends and narrowed their target market to the likes of celebrities and high fashion gurus' who don't seem to mind forking out $400 for a pair of jeans. Currently, True Religion's strategy is through differentiation of their product through prestige, brand image and innovation. They have established a quality product with fashionable trendsetting lines and paying impeccable attention to detail, appealing directly to their target market and differentiating their product from their competitors. High end fashion is a concept that we all know. A classic example would be the reference to Hollywood's Red Carpet, designer gowns, tuxedoes, etc.; Red Carpet equals high end fashion. The high end fashion denim industry is fairly young, but has proved itself by pushing through the introduction stage and moving into the growth stage of the industry lifecycle. The industry's evolving shows a great strategy of concentrated growth, as we see in the rapid growth of True Religion Brand Jeans. This implies a lack of product or market development both of which are relevant to True Religion. Thus far, their strategy has worked and gained itself a brand name associated with prestige and quality. However, being so young, it is hard to say whether this will be merely a passing trend, or hold true to their profitability in the long run. Their first three quarters for 2005 totaled nearly $16 million in net income, an increase of over 374% of the previous year. These large numbers cause us to believe that their rapid growth may be putting a strain on their cash flow and current assets. True Religion may find itself outgrowing its own capacity, and discover themselves short on liquid assets to pay off current liabilities. They also may need to address their cost structure to widen their profit margin. In addition to finances, management needs to address the speed at which their target market changes opinions regarding fashion. Consumers are only willing to pay such a high premium for the differentiation of these products if they are the current most fashionable products available. Some strategic recommendations for management are to refinance current liabilities as long term liabilities to ease the strain on cash flows, retain earnings to pay down liabilities rapidly before trying to use their growth to expand, and continue to expand through boutiques and other stores without spending additional capital to open more direct retail stores. There needs to be MORE emphasis on research and development. By focusing on hiring innovative people, it will help lead the company's innovation, and market their brand image and brand prestige even more strongly so that consumers associate anything the company produces with fashion. With such a narrow target market, any swing in the market's opinion or likes (in regard to high end denim) could make or break this new company. A narrow target market, could cause for difficulty in drawing enough consumers to one retail location to cover the additional cost over merely distributing a few lines to other retail stores. Management could increase the sizes offered along product lines to attract more customers into their store. Management could further diversify their product mix with accessories and more apparel other than just denim. In addressing these strategic recommendations, we must take into account the functional policies and processes that will aid in implementing the strategy. Firstly, it is crucial to establish the company's functional structure, all production and operation of the product is a reflection of the functional structure. Currently, True Religion has four employees. Jeffrey Lubell, President, spearheads product development, marketing and sales. Kym...
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