Country Road Analysis

INTRODUCTION

Country road has always been one of Australia leading premium stockists of apparel and home wares. Country Road began as a small manufacturer but expanded and diversified to become a leading wholesaler/retailer of apparel and home wares in the Australian market. The great success of this fueled the company into an expansionary strategy into the lucrative yet highly competitive US markets and also further along the way into the Asian markets. The strategy of international expansion into Asia had involved alternative strategies instead of the aggressive strategy into US. Such strategies included strategic partnerships and franchising agreements. Country Road was successful at first with its defined higher quality products and diversification but later spiraled down due to not having clear focus of what the market wanted.

CURRENT BUSINESS STRATEGY

The current business strategy of Country Road can be analysed through a business system. A business system is the configuration of resources (inputs), activities (throughput) and product/service offerings (output) intended to create value for customers (De Wit & Meyer 2005). Competitive advantage can only be achieved if a business system creates superior value for buyers (De Wit & Meyer 2005).

Product Offering

The Australian apparel market was characterized by high-cost and low-quality products, leaving customers with limited choices. Country Road saw an opportunity to attack this niche sector of the retail market by providing high-quality women cotton shirts, which gave way to huge success. The chambray shirt was one of the successful shirts and characterized the essence of the company reflecting the Australian way of life. The fabrics, designs and colours of garments saw success for Country Road. Furthermore Country Road diversified its products into women’s wear, men’s wear, accessories and home wares and expanded into newer geographical markets such as New Zealand, US and Asian markets. This created value for customers through quality and variety.

Activity System

Country Road established a list of activities that help shape the company. Country Road developed comprehensive distribution channels associating itself with Myer. Through this they were able to obtain a new customer base and hence more capital to better the quality of the apparel. More customers meant they could target a wider range of the market and hence needed to diversify its product to meet this new market, which proved successful. Country Road developed the superstore concept, combining all product areas of women’s wear, men’s wear, accessories and home wares into the one retail outlet. More strategic alliances were formed to fuel distribution channels and these included Itochu Corporations, Inchcape BHD and wishlist.com.

Resource Base

Country Road’s resource stems from its sales, generating the capital to expand globally. The capital gained comes from selling its high-quality products and this proved financially successful. New strategic alliances with companies brought about new knowledge and spurred a new intellect resource base. Customer loyalty is a hard resource to obtain but Country Road has managed to successfully obtain this as can be seen through sales.

Country Road has adopted a positioning strategy, which can be seen by positioning itself with higher quality apparel and its competitors in US. It was not very successful in the US but this strategy was adopted due to its popularity in the local market.

EXTERNAL ANALYSIS

PEST Analysis

PEST analysis stands for Political, Economic, Social and Technological analysis (See Appendix). It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. Country Road had lost money due to a downturn in the Australian economy and lost money also due to expansionary strategy in the US. Also unable to forecast was the 9/11 attacks in America, which further drove the economy down causing havoc to Country Road. SARS was also unpredictable driving force behind Country Road’s demise in international markets. There was no interest in Country Road as “Australian” style clothing, very questionable as to why individuals would choose to wear Australian clothes, when trends are more fashionable.

Porter’s Five Forces

Porter’s five forces is a framework for industry analysis that shows that 5 forces determine competitive intensity and attractiveness of the market (See Appendix). During the establishment of Country Road in the early years of the Australian market, Country Road faced few competitors. Only with the reduction of tariff barriers, did foreign competitors enter the domestic market and Country Road faced competition. Expanding into the US market, Country Road had to enter into a new market with established competition such as GAP and Banana Republic. This proved difficult as Country Road entered a market with no real research and foresight and the competitors are real leaders and have strong customer base established already. Country Road had little bargaining power of customers because Banana Republic and GAP already sell the same type of products as Country Road. Possibly customers in the US market may have viewed Country Road clothing as tourist clothing and not really potential wear. Country Road marketed itself too heavily on being an Australian lifestyle type of clothing.

INTERNAL ANALYSIS

VRIE Analysis

VRIE analysis stands for Values, Rareness, Imitability and Exploitation analysis. Country Road did manage to create value, in that they manage to create higher quality apparel than its competitors at the time. However, this failed later on due to tariff barriers reduced to allow foreign competitors to take advantage of price and quality. Country Road could not compete domestically and had to expand to the US market, in which they failed. This was due to exploiting the wrong idea вЂ" Country Road thought of themselves as an Australian lifestyle icon more than just a clothing store.

KEY SUCCESS FACTORS

Key success factors are determinants to why Country Road could have landed this competitive advantage and they include:

• Able