Country Road is an Australian upmarket store that began as a niche women’s shirting business in 1974. This company has evolved to become Australia’s major lifestyle brand for children, men, women, and home accessories. Presently, this clothing retailer has sixty-eight free standing stores and seventy-seven department store franchises.  Most of Country Road’s success can be attributed to its robust marketing strategies like the customer loyalty scheme, cost leadership, and product and price differentiation among others. From 2004, this retail store giant was re-launched in Australia and New Zealand with a modern identity. Within a period of three years, their base began to expand rapidly through entering the major Australian department stores on concession basis. This entry was preceded by exclusive agreements, in-store visual merchandising, and joint marketing strategies with departmental stores, like Myer Holdings and David Jones Limited. This paper provides a strategic management analysis of Country Road.

Hor, Keats, and Holmes (2010) have argued that customers are the major reasons people are in business. Every organization is, therefore, expected to deliver added value to the customer through ensuring his/her satisfaction and providing him/her with quality products, and ensuring value for their money. Country Road (CTY), Australia’s prime lifestyle brand seemed to have grasped this concept and pursued it to its fullest. This upscale store was founded in 1974, as a shirt label, before extending its growth during the 1990’s in product range and locations (Bryt, 2009). Presently, this retail giant has over seventy retail stores in Australia and New Zealand and nineteen more in the United States. It also has a presence in South Africa. The stores in Australia are located in Northern Territory, Western Australia, New South Wales, Queensland, Tasmania, South Australia and Victoria.

CTY engages in retailing apparel, home wares, and other related accessories (Bryt, 2009).  Its products include apparel for women, men, and children. This company has its headquarters in Richmond, Victoria, Australia and it is a subsidiary of Woolworths International Pty Limited. This strategic management paper is a comprehensive and in-depth strategic analysis of this company’s businesses and operations, comprising an unbiased view of its SWOT, PESTEL, and industry strengths.

Company Overview and its Strategies over the Years

Country Road (CTY) is an up-market store that was started in 1974 as a niche women’s shirting business before rising to become Australia’s prime lifestyle brand, popular for simply stylish and high-quality apparel, home ware, and accessories (Bryt, 2009).  Apart from retailing apparels and clothing, CTY also engages in designing of clothes, homewares and other related accessories as its diversification strategy. According to Bryt (2009), CTY is the first retailer in Australia to introduce an apparel superstore concept offering menswear, womenswear, homewares, and accessories in one shopping complex. This business has nearly seventy free-standing stores and over eighty department store concessions.  These retail outlets and concession stores operate under the Country Road banner.

Country Road is traded on the Australian Stock Exchange (ASX), with Woolworths Holdings Limited, a South African company, owning eighty-eight percent of its shares (Stecker, 2009). This company has a consumer loyalty scheme that is aimed at offering early invitations to sales and special offers to consumers. It produces and sells women’s clothing footwear and accouterments, children’s clothing, home wares, and men’s clothing, footwear and accouterments. It also engages in wholesaling, designing, and licensing of these products.

Stephen Bennett founded this company back in 1974 as a small manufacturer of apparels, mainly to produce women’s shirts to complement the sturdy growth in denim jeans, experienced in the 1970s (Stecker, 2009). This unique ability to identify and grow with the market opportunity is among the many factors that has made Country Road successful in the Australian fashion scene for more than two years. This company has grown to become a leading retailer of home wares and apparel in the Australian market using its diversification and expansion strategies. By 1980, this company had ten stores in Australia and was reselling through department store outlets and chains.

According to Stecker (2009), Country Road started production using garments, made by menswear manufacturers which gave their classic styles a masculine quality. The first shirts produced by this company were distributed widely through departmental stores, like Georges and Myer. This distribution strategy was so successful, that the apparel range was immediately expanded and, six years later, ten retail stores opened up throughout Australia. The buy-out of County Road by Myer Emporium Ltd in 1981 led to a period of rapid expansion. In 1984, the menswear range was introduced and additional thirty-seven stores were opened up by 1987 (Bryt, 2009). Later in 1987, the founders bought Country Road back from Myer Emporium and subsequently listed it on the Australian Stocks Exchange. Rapid expansion followed this move, including the opening up of four stores in the United States and expanding into the Asian market.

The 1990s saw a deterioration in profitability of Country Road and weakening of its brand’s competitiveness. In 1998 Woolworths Holdings Limited, the South African Company, , acquired a controlling interest in this company. This move made this company re-enter the Australian market with various business strategies. In an attempt to regain its lost market share, Country Road reduced prices of its products and started offering more fashionable attires. According to Bryt (2009), this company later opened up more retail stores in New Zealand, Australia, and the United States.

CTY’s success story in Australia led it to adopt an expansionary strategy and enter Asian markets and the highly competitive and large United States’ apparel market. This company used alternative strategies to enter the Asian market as opposed to its aggressive expansionary strategies into the US market.

The strategies employed in the United States market included franchising agreements and strategic alliances (Stecker, 2009). The initial stages of these expansionary strategies were successful because of the higher quality products and broadening into homewares. The stores in the United States were mainly in New York, Chicago, Boston and other cities. At a later stage, in 2002, Country Road closed down its operations in America after it started incurring losses (Samson & Daft, 2010). Operations in the US were closed down at a cost of twenty-three million dollars (Samson & Daft, 2010).  Country Road had assumed that it could replicate its success in Australia and other countries, like the United States. These losses came about because Country Road lacked the focus to identify the specific needs of vast US market customers.

After this disastrous entry into the US market and painful attempt to internationalize, Country Road resorted to producing children’s wear and focusing more on expanding its domestic market. According to the Australian Securities Exchange [ASX] (2012), CTY employed strategies like: reducing the number of its suppliers and speeding up its supply chain, getting nearer to its customers via direct marketing, forging partnerships with Myer, and reinvesting in its own stores.

In 2004, Country Road was re-launched with a new modern identity as a company of higher sales volumes and lower products prices. This new identity was a positive response that successfully moved the brand direction towards the younger audience and at the same time identifying the gap in the market that led to the launch of Ternary (Samson & Daft, 2010). In this same year, the company entered the baby-wear and childrenswear market, a move which completed its lifestyle range.

Earlier in 2003 this company entered a special arrangement with Myer Holdings departmental stores where it sold its products exclusively to Myer and not its major rival, David Jones Ltd. According to Samson & Daft (2010), it also entered a joint in-store visual merchandising and joint marketing with this departmental store. This agreement came to a halt in 2007 when Country Road became a concession store in selected Myer and David Jones stores.

Later in 2007, Country Road reduced its prices by twenty-five per cent and enjoyed a seventy percent rise in its sales volumes (Plunkett, 2011). Prior, to this re-launch, this company operated as a premium priced and strong brand identity retailer. By 2009, Country Road’s store network in South Africa and Australasia expanded at a rapid rate to include seventy one retail stores, seven clearance stores, and ninety-three concession stores in Woolworths South Africa and other leading department stores in Australia. It also had an employee base of two thousand persons in Australia and New Zealand. In this same year, CTY managed to regain its market leader position in the Australian apparel and clothing industry.

According to Plunkett (2011), Country Road enjoyed a sale of $343.1 million, which represented 18.4% increase over the earlier year. It also posted a net profit after tax of $15.6 million as at 30th June, 2009, which was a sixty percent jump over the prior year’s $9.8million profit.

Company Profile, Mission and Vision Statements

Country Road Limited is presently a foreign owned company that is listed on the Australian Stocks Exchange (ASX) under the code CTY. Woolworths Limited, which is incorporated in South Africa, is its ultimate parent entity. Woolworths is an investment holding company and it is among the top one hundred companies listed on the South African Johannesburg Securities Exchange. According to the Australian Bureau of Statistics [ABS] (2012), the company’s core business, focus and, therefore, vision is to provide financial and retail services to the middle and upper income groups in South Africa, the rest of Africa, New Zealand, the Middle East, and Australia.

CTY has achieved this through its diversification and expansion strategies. The company operates internationally using its subsidiaries: Country Road Limited and Woolworths (Proprietary) Limited. Woolworths (Proprietary) Limited is a respected chain store, which has more than three hundred retail outlets and more than one hundred fifty franchise stores (ABS, 2012). This chain store offers a range of quality food, beauty services, clothing, home ware and financial services under its own brand in the Middle East and South Africa.

Country Road is driven by the mission of making beautiful merchandise, designed to mirror an authentic Australian manner and way of life. This enables it to be committed to greater value and quality. It has thus managed to build its reputation on sourcing the appropriate finest material; moreover, it offers to combine the best trends with the signature of fine tailoring and keenness to details (Bryt, 2009). Country Road boasts of standing for natural simplicity combined with a relaxed and extemporaneous style.

Mission statements, on the other hand, are ways of defining the essential overriding purpose or aims that the organisation seeks to achieve. Country Road’s strategy for growth is to enlarge its product ranges and expand its retail footprint (Stecker, 2009). In light of the prevailing economic conditions, this company has implemented a number of cost-saving initiatives. Its management continues to focus on cost control measures and investment management. This strategy is achievable in line with the SWOT analysis above.

Country Road Industry Environment Analysis

Country Road operates in the Australian apparel and clothing industry. Australia in itself has been considered a matured market as far as the consumption trends of clothing and apparel are concerned (Bryt, 2009). This country is a medium classified manufacturer, ranked number twenty-eight globally by Business Monitor International in line with manufacturing and textile value addition. According to the Australian Bureau of Statistics [ABS] (2012), this industry’s volume in monetary values was about three billion dollars in 2008. This industry is characterized by medium sized and small scale players.

The lifting of the protective tariffs has made Australian manufacturers lose their market shares to imports, specifically from China, which have stiffened the completion with their low-priced products. In 2008 alone, the total dollar value of apparel and clothing imports to Australia was over six billion dollars,  as against exports worth five hundred and thirty-nine million dollars (ABS, 2012). According to the Australian Government Productivity Commission [AGPC] (2012), the Australian clothing and textiles manufacturing value added declined to 4.9% in 2007, 6.7% in 2008, 11.3% in 2009 and 7.0% in 2011.

Porter’s Five Forces and Generic Strategies

In analyzing Country Road’s retail apparel and clothing industry, this paper employs the use of Porter’s competitive strategy. This competitive strategy utilizes industry structure and positioning within the industry as its basis. Michael Porter identified ‘five forces’, which define the rules of competition and competitive advantage in any industry (Ryall & Sadler, 2007). According to the two, competitive strategy is expected to develop out of a sophisticated understanding of the rules of competition that determine the attractiveness of a specific industry. The Porter’s five forces determine profitability of industries and give reasons why some industries are more productive than others (Draft, Murphy & Willmott, 2010).

Threat of New Entrants

In Rowe`s view(2008), a new entrant in an industry brings in extra capacity and more competition. Apart from this extra capacity, these new entrants face certain barriers like: economies of scale, high capital requirements, patents and licensing requirements, access to distribution channels, and switching cost of customers (Rowe, 2008). When Country Road was being formed in the early years of the Australian market, it had relatively few competitors. It is only with the reduction of tariff barriers that foreign competitors invaded this domestic market and Country Road faced stiff competition.

According to the Australian Bureau of Statistics (2012), most of these new entrants had realized that the Australian apparel market shares similar lifestyle and cultures, for example, outdoors and sports. This similarity translated into similar fashion trends and tastes. These new entrants have been brought by the reduction of custom duties for imported clothing from 17.5% to 10% in 2010.

These new entrants were mainly from China, New Zealand, and Canada. China had been ranked as the most dominating new entrant into the Australian apparel and clothing industry due to its low costs (ABS, 2012). Presence of these new entrants has increased the pressure on the domestic firms to compete on pricing, resulting into a contraction of the domestic industry and a focus on innovation and specialization. Additionally, the stiff competition, brought about by new entrants, forced Country Road and other local brand designers to differentiate and specialize in offering particular products. They also resorted to selling exclusive products that cannot be found in any other store and they started to implement low, mid and high-end marketing strategies.

Country Road had employed a strategy of aggressively entering new market zones, like the lucrative yet competitive United States Market and the Asian markets. In its expansionary projection into other international markets, CTY employed strategies, like franchising agreements and strategic partnerships (Samson & Daft, 2010). Unfortunately, Country Road faced a lot of difficulty in entering the international market, especially the United States’ clothing and apparel industry, due to the existence of barriers to entry, like high competition. In terms of brand equity, Country Road was successful only in the Australian market and not in the US market and it could not translate this success home in the abroad market.

The American market was new to Country Road and it already had an established and stiff competition presented by the key players, like Banana Republic, Old Navy, and GAP (Samson & Daft, 2010). This new market proved difficult for Country Road as the company lacked real research and foresight. Additionally, the two competitors, Banana Republic and GAP, were strong market leaders who had an already established customer base. Country Road also had a low bargaining power of the customers, since GAP and Banana Republic also sold similar products. Due to this fact, customers in the United States viewed Country Road clothing like more of a tourist clothing rather than potential clothes. Additionally, Country Road marketed itself heavily as Australian lifestyle type of clothing, a strategy that did not go well with the American consumers (Samson & Daft, 2010

In terms of switching or sunk costs, the exiting cost is high as the opening up of too many stores in the international market with minimal success proved uneconomical. Additionally, the opening up and establishment of many stores required a lot of resources and high capital requirements. Access to distribution in the international market proved challenging as Country Road had opted to distribute its apparel by itself rather than relying on established firms with good customer bases (Bryt, 2009).

Rivalry among Existing Competitors

According to Ritson (2011), a segment or industry is considered unattractive if it has many aggressive or strong competitors and if it is in a declining economy. Such an industry becomes more unattractive when the fixed costs and exit barriers are high. In most instances, these conditions lead to advertising battles and price wars, making new product introduction and competition expensive.

Apparel and clothing designers in Australia have been known for their ability to produce top quality fashion clothes at very competitive prices (Roth, 2012). With this skill, these designers have the capacity to compete successfully with other international labels that are being marketed within Australia. The local designers have adequate information about the latest design brands being developed in the United States and Europe. In addition, they are up-to-date with design brands that are unique to the Australian market. Italy, which has been the traditional supplier of designer brands in the high-end designer clothing lines, is Country Road’s major competitor for designer imports.

According to Roth (2012), Country Road also faces stiff competition from popular brands like Pacific Brands, SABA, Akurba, Enjoi, Ocean & Earth, Berlei, Quiksilver, Globe International, and Industrie Clothing among others. Pacific Brands, which is a vertically integrated retailer, is offering multiple channels, and is presently the market leader. This firm has introduced innovative strategies, like online retailing, which is giving Country Road a run for its money (Roth, 2012).

In the international market, the numbers of competitors were ranging from low quality to high quality and from low cost to high cost retailers. The main competitors CTY had to deal with were GAP and Banana Republic. Additionally, the rate of industry growth, diversity of competitors, and level of advertising were always evolving in line with the existing trends and styles. According to Roth (2012), these changes affected the international retail industry dramatically.

Bargaining Power of Customers

According to Ritson (2011), customers with a strong bargaining power may determine the price and quality of services offered within the market. Customers will often prefer lower prices than better quality of products or services. Due to this factor, they will often set competitors against one another at the expense of the profit of the seller. The bargaining power of the buyer often grows in the following cases: when they become more organized, when the products are undifferentiated, when their switching costs are lower and when they are price sensitive (Gattari, & Mooney, 2007).

The customers in the apparel and clothing industry have a good bargaining leverage as indicated by the presence of established firms with established customer bases. That is why convincing consumers to switch brands is sometimes a difficult task (Frommer, 2007). The customers also enjoy buyer volumes with the presence of the huge international markets where the customers can buy online. Consumers also enjoy the availability of buyer information in the Australian market. In the US market not much was known about Country Road despite trying to capture an Australian lifestyle as seen in its store apparel and layout.

Threat of Substitute Products/Service

Substitute products are those offered by other industries that have potential of satisfying the same customer needs (Hill & Jones, 2012). Substitutes often place a limit on the profits and on prices that a firm or industry can earn.

The availability of existing substitute products like Old Navy, GAP, and Banana Republic among others that have huge established markets in the US with large customer base have availed high quality apparel to the customer. There is also a lot of competition in the US market, given that most of the retailers sell similar products, such as home wares and unique apparel in the same store (Frommer, 2007).

Bargaining Power of Suppliers

Hill & Jones (2012) assert that suppliers in a number of instances tend to be powerful, especially when they are organized and concentrated. They can advertise better prices and reduce quantity supplied more so in instances where substitutes are few. The power of suppliers is mostly manifested where the supplied product is important to the suppliers’ product, where the cost of switching a supplier is high and when the supply can downstream.

Country Road’s supplier had a better bargaining power in the Australian market, for example, CTY sourced suppliers from distribution channels (Frommer, 2007). Additionally, the cost of manufacturing inputs relative to the selling price of the products is relatively cheaper, since it manufactures its own apparel.

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