3. COMPETITIVE ANALYSIS
3.3 Marketing Strategy
The consumer data survey also reveals interesting information about the population growth rate which stands at 0.97% and a birth rate of 13.83 for 1,000 populations (2010 est.)
3.2 Who Buys Children’s Clothing?
- Moms are the dominant shoppers, with older moms turning to more hand-me-down (Incidence of buying children’s clothing, by age, May 2009)
- Tiered pricing warranted as clothing is a necessity for parents with children - Moms are changing shopping habits and open to secondhand clothing - Moms trade down and turn to affordable, private label brands
As a summary of all those facts from above, Aravore can target customer middle-or upper-class woman in her 20s, 30s, 40s or 50s who has children or grandchildren, ages 0 to 6, is environmentally conscious, and has interest in fashion.
A number of findings suggest that younger moms may take more pleasure in shopping for kids and are also open to more fashion-forward products, including sophisticated looks and pricier offerings (Mintel’s consumer research, September 2009).
3.3 Marketing Strategy
Insigthful opportunities after recent survyes, shows that differentiation Strategy for younger vs. older moms is needed, where younger moms shop for fun and may seek cooler and fashion for kids, highlighting more traditional kids’ styles and value proposition when speaking to older moms. The market of Aravore is divided according to the following segments:
Age: children, ages 0 to 6 years old Gender: male and female
Family cycle: families with children
Income: medium, high ($54,000 yearly and above)
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Attitudes and beliefs: eco-friendly, health conscious
3.4.1 SWOT Analysis for Aravore
The strength of Aravore as can be seen is that it is vertically integrate with suppliers of organic cotton. This is very important as it can have easy access to raw materials and timely availability in order to be ahead of competition. This can also lead to strong supplier relationship while minimizing the cost of input and inventory.
Aravore has a highly differentiated product which is made from certified organic cotton. The flexibility in its business model to gather resources and increase turnover provides superior advantage.
The weaknesses of Aravore are that it is new in the market relative to its major competitors.
With little or no market share, Aravore will have to compete with little cash. In order to be successful, Aravore US will have to increase its learning curve to catch up with already established competitors.
The opportunities for Aravore are abundant. The US market is very large and continue to grow. The estimates are very positive for Aravore US. The online market is growing especially in the organic clothing segment. This means that Aravore can capitalize on this trend and make competitive inroads in the first year of business. There is also an opportunity for strategic alliances with suppliers and other chain stores to sell the products of Aravore. In this way, Aravore will leverage on the market share of these chain stores. This is very crucial for success and where necessary, Aravore will consider joint ventures with partners to penetrate the market.
However, there are some threats for Aravore. With a low entry barrier, this market can be very competitive and bloody. Businesses that have deep pocket can easily come in and dilute
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the market share. There are no labor laws inhibiting potential entrants. This means that companies that have higher and wider product range and reach with strong distribution networks and easily come in and take the market.
Figure 2. SWOT
3.4.2 Resources and Capability Analysis
In order to differentiate Aravore and its products from its competitors, a Resources and Capabilities Analysis is conducted to see what are the valuable, rare, immobile, costly to imitate and non-substitutable offerings of Aravore US. This will determine how easily and fast Aravore can succeed in the US market.
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1. Valuable: The quality of the product is high which made of organic cotton. These highly processed products from certified producers are healthy and environmentally friendly to baby skins. This makes the product of Aravore even more valuable compared to some competitors.
Another competitive edge Aravore has over it competitors is that all products are100%
handmade adding to the beauty and style of the clothes.
2. Rare: Baby clothing made of organic cotton are rare even though the trend is changing towards them. This is due to the scarcity in organic cotton producers. Organic cotton means, the cotton have to be grown organically and treated and proceed organically. This process is
Valuable organic cotton which is highly processed from certified producers
Baby clothing made of organic cotton
Aravore babies products are mobile
Not really costly to imitate however is difficult to have certified suppliers and raw material
It is substitutable but with the green movement and the trend makes it highly in demand
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many companies combine organic and chemical components to produce baby clothing.Aravore employs many artisans in Paraguay who are skillful in handicraft. The design is uniquely made from computer simulations and sent to these experts in Paraguay for sewing and knitting.
3. Immobile: However, Aravore products are mobile but the cooperative we belong is immobile. This is one the advantages Aravore enjoys. In Paraguay, there are cooperatives that control organic cotton in order to sustain and support the indigenous cotton industry.
This support and control from government will help Aravore to maintain its competitive edge in the supply of certified organic cotton.
4. Costly to Imitate: The products Aravore makes are relatively costly to imitate but it is difficult to have sufficient supply of certified cotton to feed the mass market. We will continue to strengthen the supplier relationship to sustain the competitive advantage.
5. Non-substitutable: Even though the product of Aravore substitutable, the green movement and the new trends in environmental products serve as a good sign for success for Aravore.
3.4.3 Five Forces Analysis
According Michael Porter’s Five Force analysis, the industry of the organic clothing should be analyzed on the following five elements.
Industry Rivalry: There are three main competitors in the US that have considerable market share. However, the intensity is medium since the market is still in the growth stage. There is sufficient demand for the industry which means that other companies can come into the market easily to tap the benefits. There are low exit barriers with low barriers to entry.
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Entry barrier: The international certification is the main entry barrier. Once potential entrants have this certification, they can enter the market without much restrain. There is also low capital requirements compared to other industries. This may allow easy entrance from potential competitors.
Bargaining Power of Buyers: Due to the low switching cost buyers face, there is considerable buyer power for the product of Aravore. Buyers can freely choose between products at any given time.
Bargaining of Suppliers: due to the availability of few certified suppliers of organic cotton, suppliers tend to have strong power over Aravore.
The Threats of Substantial Substitutes can not be neglected. Aravore must plan and prepare for fluctuation in demand specially in economic down turn, when customers will be force to cut on their spending, there by buying cheaper products.
Aravore should also educate consumers about the qualities and benefits of organic products versus non organic ones.
If Aravore build brand loyalty fot its products, we will have an absolute cost advantage with respect to potential competitors.
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Figure 4. Five Forces Analysis
3.4.4 Product Life Cycle
Stage in the Product/Industry Life Cycle: An important determinant of the strength of the competitive forces in an industry is the changes that take place over time. A useful tool for analyzing the effects of industry evolution on competitive forces is the Industry Life Cycle.
The development of most markets follows a growth curve similar to that illustrated in industry life cycle figure below. As the graph shows different groups of customers have different needs as they enter the market over time and this has major implications for a company’s product differentiation and market segmentation decisions. Figure 5 shows the quantity of product sales on the (Y) along the time period (X)
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Aravore is in the second stage, the early adopters, which means the customers understand that technology or innovation might have important future applications and are willing to experiment with it, meaning try new trends or products of features so see if they can pioneer uses for it. Early adopters are often visionaries who appreciate how this new products may be used in the future and try to be the first to profit from its use.
Early adopters enter the market while the industry is in its embryonic stage.
The next group of customers, the early majority, represents the leading wave or edge of the mass market. Customer in the early majority are comfortable with the new product. However, they are pragmatists, they weigh the benefits of adopting new products against their costs and wait to enter the market until they are confident that the product will offer them tangible benefits.
The turning point from the embryonic market to the mass market is not a smooth transition, sometimes it implies a competitive chasm or gulf, a gap that companies must cross. If companies fall into the gap they go out of business.
Strategies matched to fit this stage
Aravore should build new competencies, creating a business model that can successfully cross the chasm. For example identify the customers’ needs, then developing new strategies and redesigning new products continuously, creating exclusive lines, assuring distribution channels and having marketing campaigns to reach the early majority. In this way we will have a suitable product, at a reasonable price that can help us penetrate the market easily.
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Figure 5. Product Life Cycle Stages
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3.4.4 Business Strategy
Figure 6 Four Ps Model
Non-Price Competitive Strategy:
Product differentiation allows industry rivals to compete for market share by offering products with different or superior features. Product and market segment are the dimensions used to identify four nonprice competitive strategies: market penetration, product development, market development and product proliferation. Notice that Aravore will concentrate on expanding market share in an existing product market, so it will engage in a market penetration strategy. This will involve strong advertising to promote and build product differentiation. This will be done through marketing campaign aiming to influence customer’s brand choice and to create a brand-name reputation for Aravore and its products.
Because brand-name products often command premium prices, building market share in this situation is very profitable.
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Figure 7. Non price strategies
3.4.5 Why Buying Aravore Products?
Aravore has organic cotton, and we adhere to labor standards of Fair Trade. Aravore products are also made out of certified cotton that is certified by IMO Control-Switzerland. Aravore is also ethically concerned about paying the just price to the artisans in Paraguay by making sure they are not only empowered and have access to open markets but also they improve their livelihoods and their families and communities through a trade to the benefit of all.
Aravore engagement with the local Paraguayan community is a measure of Fair Trade.
Even though consumer demand for US-grown organic cotton has skyrocketed over the last few years, the supply of US-grown organic cotton has decreased significantly during that same period. The main reason for this is simply overseas competition. It is much cheaper to produce organic cotton in India, Turkey, PARAGUAY, for example, than it is to produce it in the United States. Without commitments from buyers to pay them for their organic cotton crops, farmers have been forced to turn to other more profitable crops.