Read below the case study and answers the questions: 1. Discuss the country spec

Question

Read below the case study and answers the questions:

1. Discuss the country specific advantages China gave Filment? (500 words)

2. Comment on the strategies used by Femilet when they entered Norway and Sweden. (500 words)

3.Femilet is smaller than its foreign rivals. What can Femilet do to compete with

them and ensure Femilet's own survival and success? (500 words)

Femilet: A SME is seeking a foothold in the European lingerie market
  
Femilet lingerie Danish Femilet is today one of the leading suppliers in Scandinavia of fashion lingerie, ladies’ underwear, swimwear, and nightwear, sold under the brand name Femilet. This case study will mainly concentrate on the fashion lingerie and ladies ‘underwear, which together makes up the largest part of Femilet’s turnover.

Femilet was founded in 1923 and was acquired by Thygesen Textile Group in 1995. Over the years Femilet has developed from a production-oriented company with main emphasis on classic women’s underwear in knitwear into a market-oriented company focusing on design, sales, and marketing of fashion lingerie in the upper price segment.

All products are designed and developed by Femilet in Denmark. The construction of lingerie is very complicated because the developers and manufacturers are dealing with a three-dimensional product. Bras are one of the most complex pieces of apparel. There are lots of different styles, and each style has a dozen different sizes, and within that there are a lot of colours. Furthermore, there is a lot of product engineering. You’ve got hooks, you’ve got straps, there are usually two parts to every cup, and each requires a heavy amount of sewing. It is very component intensive. There is very little automation possible, compared to say a shirt where 40 per cent of the sewing process could be automated. The average bra has up to 20 differential materials from lace, lining, foam, side panels, elastic, hooks, eyes, wire and ribbon.

Therefore the production of Femilet’s lingerie is outsourced – primarily to the Far East (China). However the laces to the lingerie are typically bought in France, and then sent to China for the final production process.

Femilet has own sales organizations in Denmark and Norway and importers in Spain and Holland. The company has four own sales representatives in Denmark, and two in Norway. These salespeople are visiting specialized multi-brand lingerie shops, major chain stores and shops where Femilet has in-shop solutions. In total Femilet has 18 in-shop solutions in Denmark and till now one in Norway.

Femilet has about 75 employees, of which half are working in the own Femilet shops.

The franchise concept In Denmark, Femilet has got 15 shops – recently a new shop was opened in Malmö, Sweden – and two new shops are planned to open in spring 2007. One of the shops is based on a franchise concept. It is the intention that the Femilet concept shops will be extended via the implementation of a franchise model. At the moment, Femilet is actively seeking potential franchisees for expanding the number of Femilet concept shops.

Besides low investment and high profit, the franchise concept offers guaranteed territory-market protection, comprehensive training, full operational assistance for startup and on-going support to the franchisees. In the franchise concept the Femilet brand has a better opportunity of being developed to a level where it is associated with quality, consistency, service and value. In Norway and other Scandinavian countries Femilet is also considering using the franchise model as leverage for profiling the brand and its underlying values.

Femilet’s lingerie market share is relatively high in Denmark (17–20 per cent). In Norway the market share is less than 5 per cent and in other markets it is less than a half per cent.

Further ‘international marketing’ activities Besides Norway, Femilet has recently started up with importers in Holland and Spain. In these countries (where the Femilet brand is completely unknown) importers are taking care of visiting multibrand lingerie shops and major chain stores. The resources for marketing activities are limited but the agent’s local marketing activities (e.g. advertising in local magazines or newspapers) are supported from the Femilet Headquarters with 50 per cent.

General trends in the international lingerie market Generally American women buy more lingerie than European women. One of the reasons is that Americans have a tendency to throw everything in the washing machine, so the wear out is quicker. Furthermore lingerie in the United States is not sold through specialist shops (multibrand shops) like in Europe, but through mass distribution channels such as Wal-Mart, which is estimated to have 20 per cent of the overall market. The US market is also much more price driven, and lingerie (e.g. bras) cost a lot less.

In Europe there seems to be a difference between northern and southern countries. In southern Europe they buy more lingerie than in northern Europe. One of the reasons could be that women in southern Europe place more emphasis on feeling romantic and sexy. Also the more intensive sweating in these countries may lead to more purchase of lingerie. Another explanation could be, that the northern countries are colder and women wear thicker clothes, so they are not so worried about how their underwear looks.

As in other apparel designs, the trends in lingerie have been dictated by fabric developments. This has meant that glamour, the art of seduction, and feminine charm are all ingredients in the current vogue. In addition, many bras are designed for women who partake in jogging, aerobics, tennis, etc. to gain maximum benefit from their active lifestyles.

Regarding the distribution of the lingerie, more and more of the textile turnover is now going to branches other than lingerie itself. For instance, Tesco in England, is offering even fashion brands, mainly sourced from third countries, to its customers despite this practice being declared illegal by fashion brands. In Germany, for example, food retailers, drugstores and even coffee shops are also selling a significant amount of textile products. Thus in the annual list of the largest textile retailers in Germany, the food discounter Aldi is ranked at number 9, and Tchibo – a chain of coffee shops, at number 13. In Germany, these non-textile retailers already have a market share of 11.8 per cent of the total textile market. They do not normally have a full assortment and only sell offers and special items, which they buy in huge quantities and sell at extremely low prices. Also, the idea of concept assortments is being used by some of them. Thus, the coffee chain Tchibo is selling every week, a completely different theme, wherein textile products are just a part of all on offer.

Only companies with a sharp profile are successful in the market. Here are some examples of successful specialty stores:

• French group Orsay is increasing its business with their specialty concept for girlies’ fashion. • The German teeny specialist New Yorker. • H&M with their concept of top fashion products at discounted prices, has been growing in almost all countries where they are present.

• Zara and Mango have also been opening stores worldwide in a remarkably short time frame for a similar target group.

Other specialty stores are also registering remarkable successes. Best examples of this can be seen in sports and sports-fashion business, where specialty stores such as Runners Point (Germany), Karstadt Sport (Germany), Foot Locker (USA), Sports Expert (Austria), Decathlon (France), Sketcher (USA) and The Sports Authority (USA) are gathering more and more market shares and expanding worldwide.

The lingerie segment, earlier a fixed part of normal textile and fashion stores, is also witnessing a fast growth. For instance, Oysho (Zara, Spain), Women’s Secret (Cortefield, Spain) and even Marks & Spencer are starting their own chains of lingerie outside their traditional shops.

Generally, a polarization is taking place in the European lingerie market. The distribution of the lower priced brands are being taken over by the huge retail chains, whereas the higher priced brands are gaining market shares by using their own concept shops, where the personal service plays a much higher role. At present, the losers in the industry are the ‘in-between’ brands, which are ‘stuck in the middle’.

Vertical integration More and more manufacturers are opening own stores and more and more fashion retailers are selling their own retail brands.

The vertical integration is a result of increasing efficiency between production and distribution given the assumption that organization of production is best made from the POS (point of sale). Middlemen and wholesalers, as well as middle activities like exhibitions, are cut out of the distribution channel to ensure that there are less costs and no losses of communication in the process. Success is more likely in cases where one company owns or controls the complete process from production to distribution. All fast expanding fashion companies are working vertically. Wal-Mart, Zara, Uniglo, Mango, H&M, C&A, Esprit – all these successful international retailers fall in this category. Frequently, they work on a completely vertical system, while at other times, they use a mixed system – selling own brands as well as manufacturer brands.

Explanation / Answer

1. Femilet has found a verycost effective solution for prodcution of its lingerie by outsourcing its manufacturing of Lingerie to far east China. Since the components of the lingerie includes approximately 20 parts and due to the design being a very labor intensive ordeal, by outsourcing the manufacturing and production to China, Femilet has been able to concentrate more on the sales and marketing strategies. It has retained quality by importing french lace and finishing the production at one location and thereby reducing too many issues in production constraints. Usually in a labor intense production the cost of production will eat into the profits, but bu making it in China the laborcost has been brought down considerably.

2.Femilet's market share in Denmark is around 17-20%, but its presence in Norway and Sweden has not been established and to do this the strategy that the company is looking towards to implement is the Franchise model. This model will not only effectively reduce capital investment but also create much more brand awareness if successful. The franchise model will also ensure that there is consistent quality and service to customers.By going the franchise wa, Femilet is aiming to build leverage.The model offers to the franchisee the following which is very lucrative for them to enter into the business:

3. Femilet as described is a Small to Medium enterprise at this point and should look into e-retailling concepts and strategies to increase its sales and customer base. By offering products online and distributing to foreign countries, Femilet would not only make its presence worlwide in a short period of time but also increase its profitability. Femilet should look into creating products for develioping countries as well as this is where the market is still unexplored for lingerie. It can also extend the franchise model to developing countriese specially china as well as other Asian coutries.

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