Strategic Evaluation of Tod’s

Assignment

09106685

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Contents Page

Introduction................................................................3

Strategic Business Units..............................................4

Competitive Analysis...................................................5

Stakeholder Analysis...................................................7

PEST Analysis..............................................................8

Porters 5 Forces..........................................................9

Linking PEST Analysis to Porter’s 5 Forces…...............10

HPFI.............................................................................11

Value Chain.................................................................13

Ansoff’s Matrix......................................................................

14

Conclusion...................................................................16

Bibliography................................................................17

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Introduction

This assignment investigates the reasons behind Mr. Delle refusal to move Tod’s S.p.A’s manufacturing abroad from Italy, were it would significantly lower production costs for the company. The analysis has been undertaken using a selection of strategic models.

Tod’s is owned by Mr. Delle Valle who was born in Cassette d’Ete, Le Marche in 1953. His grandfather Filippo was a humble cobbler and his son Dorino started and expanded the family business in the 1920’s. Mr. Delle Valle then changed the name of the company to Tod’s. Since then it has become a world famous, well known brand trusted for its high quality. Gianni Agnelli is the key celebrity endorser of Tod’s, he liked to wear driving shoes; slip on moccasins with pebbly rubber soles. Mr. Delle Valle adapted these in his factory to become the signature product of Tod’s.

Tod’s creates leather shoes and bags that are undeniably luxurious, yet light weight flexible designs that lend themselves to informal, everyday use. The firm’s mission is to offer global customers top-quality products that satisfy their functional requirements and aspirations. The secret of Tod’s is its pure Italian style, which Mr. Delle Valle says is identifiable anywhere in the world. “We are the best Italian product (Worn in Italy and made in Italy) and we are trying to explain and promote this around the world, every day more than the day before; especially in new markets, and show why we are different.” Says Mr. Delle Valle

The workbench that was used by both Mr. Delle Valle’s father and grandfather to hand stitch shoes stands in the new factory for all to see ‘so we don’t forget our roots’ says Diego Delle Valle. It is mostly due to Mr. Delle Valle’s philosophy and beliefs that he will not move the manufacturing of Tod’s S.p.A abroad.

The TOD’S brand is positioned on the luxury market and combines tradition, top quality and modernity. It offers consumers shoes, leather goods, accessories and apparel whose design is exclusive, functional and never ostentatious, interpreting timeless elegance.

The HOGAN brand is positioned in the elegant luxury sportswear market, offering consumers contemporary style shoes, leather goods, accessories and apparel with an international vision.

HOGAN products, which are distinguished by their innovative character and high quality, have created a unique style, contributing to changes in the fashion habits of consumers who want a functional, comfortable, but also sporty and elegant product for everyday life.

Fay - This brand offers consumers a line of high-quality apparel that is distinguished by the technical treatment of fabrics, obsession for detail and extreme functionality, combining style and quality with excellence. FAY products can be worn everywhere: from the sports stadium to the office, and from the city to the countryside. In every season, the FAY collection offers innovative, recognisable products for men, women and children.

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Strategic Business Units

The Strategic Business Units (SBU’s) are:

Tod’s Hogan’s Fay’s Roger Vivier

Tod’s S.p.A uses hand stitching techniques to produce high quality, unique product ranges. Tod’s, Hogan’s and Roger Vivier have the same high quality product range that you cannot buy online and have to purchase in store. Both Tod’s and Hogan’s offer products for men and women where as Hogan’s also offer junior products. Only Fay’s allows you to buy their products online. Roger Vivier makes products solely for women.

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Competitive Analysis

Tod’s, Hogan’s and Roger Vivier’s competitors that follow the same strategy;

Marc Jacobs Louis Vuitton Gucci Diane Von Furstenberg

Competitors that follow different strategies;

Next Laura Ashley

They are well known famous established brands that are trusted by customers. Some offer most of the same products as Tod’s and follow the same differentiation focus strategy, some follow different strategies.

Tod’s competitors’ customers can buy products online from their website. Tod’s doesn’t offer this service and limits its reach to a wider customer audience because of it.

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Fays competitors

Capezio Supadance

Fays follows a differentiation focus strategy as do its competitors. Fays competitors use uniqueness as a major selling point as well as their established brand name. They offer a broader range of high quality products were as Fays concentrates on Irish dancing shoes.

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Stakeholder Analysis

Suppliers, pressure groups, the media and local/ global communities need to be kept satisfied as they are powerful stakeholders and can influence Tod’s greatly; positively or negatively, not too much as to make them bored with Tod’s.

Key players include; suppliers and partners, customers, the CEO, investors, pressure groups and employees. They are highly interested in Tod’s and will be among the most affected by Tod’s strategies. They are powerful stakeholders; from the CEO Diego Delle Valle – who makes the final decisions to the customers who buy Tod’s products and keep Tod’s in business. These need to be engaged the most and the greatest effort made to satisfy them.

Tod’s needs to be adequately informed of what is going on with; Animal welfare groups, the government, trade bodies and most importantly competitors to make sure no major issues are arising that will affect them.

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External Analysis

PEST Analysis

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External Analysis

Porter’s 5 Forces

Threat of New Entrants

The threat of new entrants in this industry is low. This is due to the high entry barriers a new company would have to face and overcome; customers associate big brand names with top quality, Investors put stock in a company’s reputation and both are influenced by their experience and character.

Threat of Substitutes

There is a very low threat of substitutes in this industry as big brands are established and trusted with their unique range of products; buyers will be unwilling to substitute. The price and performance of substitutes is low in comparison.

Bargaining Power of Suppliers

The top players in this industry use top quality raw materials from trusted suppliers, some of this cost is passed onto the customers (who know that they are paying for quality). In example of Tod’s S.p.A’s suppliers they have neither high nor low bargaining power; they rely on the company’s regular custom as do the companies. The industry is a key customer group to the suppliers.

Bargaining Power of Buyers

There are many dominant buyers and few high quality, top brand sellers in the industry. Buyers such as celebrities and even royalty help to showcase products to other potential customers whose demand increases due to its advertisement.

Intensity of Rivalry

Rivalry is less due to; clear market leaders in the industry and because competitors can differentiate their products. Rivalry is higher due to; low switching costs between competitors because of similar pricing. Through strategic objectives there is some competition due to competitors using aggressive growth strategies.

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Linking PEST to Porter’s 5 forces

The social influences of the PEST mainly influence the bargaining power of buyers.

Political influences of the PEST mainly influence the threat of entrants, but some technological influences also have an impact.

The economic influences of the PEST mainly influence the threat of substitutes, but some technological influences also have an impact.

The technological influences of the PEST mainly influence the bargaining power of suppliers.

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Internal Analysis

HPFI

Human Resources

Tod’s S.p.A has the Human Resources to maintain and increase the skills-base of the business. The skills-base has been increased to meet the new requirements of the company. Tod’s S.p.A’s existing staffing resources include; 2,840 employees, a low rate of staff loss, a high overall standard of training and specific training standards in key role. Changes required to their resources include; new stores have been opened, their new collection is coming out with new product ranges. All Tod’s S.p.A’s use the same factories for production which lowers staffing needs and keeps highly skilled workers for all SBU’s products.

Physical Resources

Tod’s S.p.A’s production structure is based on complete control of the production process, from creation of the collections to production and then distribution of the products. This approach is considered key to assuring the prestige of its brands. Shoes and leather goods are produced in Tod’s S.p.A-owned plants, with partial outsourcing to specialized workshops. All of these outsourcers are located in areas with a strong tradition of shoe and leather good production. This preference reflects the fact that an extremely high standard of professional quality is required to make these items, with a significantly high level of added value contributed to the final product by manual work. Tod’s S.p.A relies exclusively on selected specialized outsourcers, which enables it to exploit their respective specializations in crafting the individual products sold as part of the apparel line.

Tod’s S.p.A relies principally on three channels: DOS (directly operated stores), franchised retail outlets, and a series of selected, independent multi-brand stores. Tod’s S.p.A strategy is focused on development of the DOS and franchising networks, given that these channels offer greater control and more faithful transmission of the individual brands. In particular market situations distribution through independent multi-brand stores is more efficient. Tod’s S.p.A includes a series of commercial companies that are delegated complete responsibility for retail distribution though the DOS network. Through a series of sub-holdings strategically located on international markets which are assigned major roles in product distribution, marketing and promotion, and public relations processes

Financial Resources

Tod’s S.p.A has the financial resources to support their strategies, their existing financial funds shown this; Net working capital 200,129 (euro 000’s) and Invested capital 482,744 (euro 000’s).

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Tod’s S.p.A made a 5.6% increase in revenue from 2008 to 2009. Their ability to raise new funds is due to their strong relationships with existing investors and lenders and the strength and reputation of the management team and the overall business.

Intangible resources

Tod’s S.p.A’s goodwill from ‘business combination parent company’ and ‘business combination group’ is (13,242) and 11,789 respectively.

Tod’s S.p.A operates very prudently in view of their framework, with the aim of protecting the prestige of the brands, the quality of distribution and reputation in relation to their customers without, however forgetting the turnover objectives and the best possible efficiency. The correct positioning of the brands, which combine quality and dream and are not associated with volatile fashion trends, will make Tod’s S.p.A stand out and will continue to reward them in the future, considering that consumers will privilege timeless and quality products more and more with their purchases.

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Value Chain

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Ansoff’s Matrix

Tod’s S.p.A started with a Market Penetration strategy; they advertised to encourage more people within their existing market to choose them, they Increased their sales force activities and bought up other companies that then became SBU’s (Hogan’s, Fay’s and Roger Vivier). Then when well established and become more dominant in the market they moved to a Product Development strategy; they then extend their product range by producing different variants of the ‘moccasin’ driving shoe, then by developing related products like the driving shoe and handbags and massively improving their customer service and the quality of their products and materials. At the moment they are breaking into a Market Development strategy by using different sales channels, Targeting different groups of people and Targeting different geographical markets.

If Tod’s S.p.A moved their production abroad then they would have to move to a Diversification strategy and to do that they would have to go through the following checks to see if they would be able to make the move successfully;

Research the move carefully. Build or access the capabilities needed to succeed in the new strategy.

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Resources to cover a possible ‘lean’ period are plenty, while learning what makes the new market ‘tick’.

Think through what you would have to do if things went wrong and didn’t work out, making sure failure wouldn’t ‘break’ the company.

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Conclusion

After analysing Tod’s S.p.A with strategic models to see whether they should or should not move their manufacturing abroad, I have come to the conclusion that they should not.

Many of their SBU’s thrive in their respective markets because they have the edge of sharing all their resources, such as the knowledge, experience and skill of the employees handcrafting their products.

Tod’s S.p.A as shown by the competitive analysis and the Porters 5 forces model is in the best possible place in which to compete with other high quality named brands. The HPFI model shows that they have the HR, Physical, Financial and Intangible resources capable of supporting and expanding their current strategy. This strategy is proven to work as they were part of the few companies that through 2008 to 2009 actually had an increase in revenue.

However, to move their manufacturing abroad this would affect some of their unique selling points, they would no longer be seen as having ‘family values’ or their famous ‘made in Italy, worn in Italy’ slogan. They would have turned their back on everything they believe in, their morals and what has put them in the forefront of the luxury market. Their customers who love the high quality, hand stitched products would go to their competitors.

They would be able to supply a higher quantity of lower quality products, due to the less skilled workers, but the demand for such products would not be there. The price of their products would go down almost half due to the lower manufacturing costs. They would no longer be able to successfully compete in the luxury market; therefore for these reason Tod’s S.p.A should not and would not benefit from moving their manufacturing abroad.

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