The purpose of this report is to analyses the external environment of Victorians Secret through the Porters Five Forces analysis and then analyses the strategy of differentiation and strategic alliances used by the leading American lingerie retailer and to evaluate if these strategies are implemented and used effectively by the company. 2. 0 Analysis of the Internal Strategic Capabilities and External Environment A leading retailer such as Victorians Secret has to be aware of the different factors that could have an impact on the company’s session.
These factors can be identified by using a range of different analytical strategic tools; they include PESTLE, SOOT or Porters Five Forces analysis (Barney and Westerly, 2010). However this report will use a Five Forces analysis to evaluate Victorians Secret internal strategic capabilities and external environment. The report will firstly look at the five elements which make up the Porters Five forces. Garrulousness’s et al (2005) argues that the Five Forces model determines the average profitability of a particular industry. . 1 The Threat of powerful suppliers The threat of powerful suppliers for Victorians secret is very low, as it is difficult for Victorians secret suppliers to increase their prices; due to the size of the retailer and the amount of business it provides for its suppliers. Additionally due to the retailer selling a wide range of different products, it means they have a number of different suppliers. For example they would have suppliers who makes their clothing range and maybe a supplier who makes there fragrances.
If Victorians secret wanted to change to different a supplier, it would be both time consuming and expensive for the lingerie detailer, due to the high quality of their current products and the high order quantity the company would need. It may be difficult for the company to find a supplier who can supply the same quality products, on the other hand it could be fairly easy for the retailer to find a new supplier due to the type of products they sell, for example many suppliers make lingerie products, as they are sold by many different clothing retailers and they are easy and cheap to produce.
To conclude Victorians Secret has power over its suppliers, as they control the prices and the lingerie retailer is a well-known brand, so many appliers would quickly seize an opportunity to work with them. 2. 2 The Threat of Powerful buyers The buyer power for Victorians Secret is low, as their customers are willing to buy their products at the price set by the retailer. Firstly the Victorians Secret brand is well-known and trusted, therefore the company will have many loyal customers, and additionally they sell high quality products which are unique.
Victorians Secret also keep their customers interested in their product by range by using a range of different marketing techniques such as fashion shows with celebrity presence and catalogues, these techniques make customers want to purchase the retailers product. If customers wanted to buy their products somewhere else, it would be difficult for them to find a retailer that sale the same type of products at a high quality, as Victorians Secret products is what makes the retailer different. 2. 3 The threat of Rivalry Victorians Secret threat of competition is very high due to a number of different factors.
Firstly there are many different retailers and department stores that sell lingerie products, therefore stores such as Ann summers, Deadbeats and House of Fraser would be competitors to Victorians Secret. In edition to retail store competitors, there are also online competitors that the company need to be aware of such as SASS; they sell a range of similar products that are sold by Victorians Secret such as lingerie, clothes and fragrances. Furthermore the lingerie retailer has a threat of high competition, as many of their competitors sell similar products at a cheaper price and in a more convenient location, particularly within in the JACK.
However in the ASSAI the threat of competition isn’t that high as Victorians Secret is the leading lingerie retailer in America, this might be because they provide fashion shows ND catalogues and these are not provided by its competitors. 2. 4 The Threat of Substitutes The threat of substitutes for the retailer is low. Firstly the threat of substitution is low, as some of products that Victorians Secret sells are essential, for example underwear is worn by all women, so they need to have somewhere to purchase It.
However it could be argued that products such as underwear can be purchased from many other stores such as Primary for a much cheaper price but then the quality would be very poor compared to Victorians Secret products. Additionally Victorians Secret also sell their products inline, this makes it even more difficult for substitution to OCCUr, as they operate both online and offline to meet different customer needs. 2. 5 The Threat of Entry The last element that of the Porters Five forces model is the threat of new entrants to the market.
The threat of new entry to the lingerie market is very low due to a number of different reasons. Firstly all of the current lingerie retailers are well-known and trusted, due to their power and position in the market. Therefore it would be very expensive for a new entrant to enter the market and be recognized by customers. Furthermore if a new entrant wanted to enter the market, they would need to ensure they produce a product which is different to Victorians Secret and they would need to invest a lot of capital for advertising and promotion to even have a chance of being recognized. . The Strategic choices made There are a number Of different corporate strategies companies can use to help them gain competitive advantage (Takes and Furrier, 2010). They include vertical and horizontal integration, restructuring and alliances. However this report will focus on the strategy used by Victorians Secret, which re strategic alliances and will additionally discuss the strategy of differentiation that the retailer uses. A strategic alliance is where two or more companies cooperate with each other, usually to gain advantage in the market (Butler, 2008).
Victorians Secret has worked with a number of different companies as part of an alliance strategy including the collegiate licensing company, which helped them protect and manage their brand when launching their PINK collection (The Collegiate Licensing Company, 2005) and additionally they have worked with major league baseball and National oddball league in the USA to launch an exclusive co-branded collection (Limited brands, 2012).
Finally Victorians Secret has also worked with different footwear brands to sell their products online and in stores, the different footwear brands include JUG Australia, Converse and Collins Stuart (Victorians Secret, 2012). The product differentiation strategy has also been implemented by Victorians Secret to help them gain competitive advantage; product differentiation can be described as a method used to by an organization to add value to their products (Barney and Westerly, 2000). 1 How were the strategies implemented? The strategic alliances were implemented firstly by Victorians Secret ensuring there cloth inning collection, brand and trademark were protected by working with the collegiate licensing company. The collection included exclusive branded merchandise such as jumpers, trousers and bags; the merchandise was created for different universities in the ASSAI such as the University of Miami (Victorians Secret, 2012).
This alliance also focused on product differentiation by using a different color and design for each university collection. In addition Victorians Secret also worked with the football and baseball league to create an exclusive NFG (National football league) clothing collection. This exclusive collection was promoted through the website and additionally Victorians Secret open up a PINK store in a stadium in Texas to sell the merchandise.
Finally the last strategic alliance used by the retailer was working with different footwear brands such as JUG Australia and Colic Stuart; this provided Victorians Secret with the opportunity to sell these branded products on their website and in stores within the USA All the alliances formed by Victorians Secret were inequity alliances; XIX and Johnston (2004) states that this is where firms cooperate to develop or manufacture or buy and sell products.
The strategic alliance strategy implemented by Victorians Secret is successful for the retailer however their differentiation strategy is even more successful, as they create their products around a number of different factors to ensure they have add value and are different within the lingerie market. The different factors include the attributes Of their products which include the features, complexity and action of the product, for example the lingerie products are sophisticated and are designed to a unique standard and the products are available both online and in stores.
Additionally the promotion of products through the company’s fashion events makes the products more attractive to customers, as this adds value to the products sold by the retailer. 3. 2 Evaluation of the strategies Overall all of Victorians Secret strategic alliances were successful, as all of the alliances are still currently run inning at present. Victorians Secret have increased he number of Universities they provide merchandise for and the alliance has increased the brand awareness for the retailer and has contributed to higher sales.
Additionally the NFG strategic alliance created a new customer clientele for the company and the alliance with the footwear brands has increased sales a great deal specifically in the USA stores and on the website due to the popular footwear brands sold by the retailer. Furthermore the product differentiation strategy used has been effective as customers prefer to shop at Victorians Secret rather than its competitors due to the quality and the uniqueness of its products and the experience provided in store.
Overall the Collegiate and NFG alliance strategies could be improved by creating a merchandise collection to sell in the UK Stores as this would in increase the number of potential customers and sales. (Synergy Sponsorship, 2008). In addition the product differentiation strategy could be improved by the company by creating a new range of products and increasing the number of marketing techniques used to promote the products. 4. 0 Conclusion To conclude this report has analyses the lingerie retailer Victorians Secret sing the Porters Five Forces, this analysis has provided details on the different threats that face the company.
Additionally the report has evaluated the different strategic alliances between Victorians Secret and other organizations and has evaluated the implementation Of the product differentiation strategy used by Victorians secret.