Category Archives: Comm101

Michael Porter created a framework that shows 5 influences on an industry, revolving around the concept of rivalry. These forces exemplify how business managers must develop an edge over rival firms in order for such firm to compete. (Porter’s 5 forces) The threat of substitutes is among Porter’s framework and I believe the threat of substitution is becoming increasingly worrisome for small businesses as they must compete with larger companies that provide cheap alternatives to high-end fashion. A Globe and Mail article expresses the pressure that European businesses are feeling towards discount competitors. I believe this article is relevant in the Canadian fashion industry as well, as big-name companies (such as Forever 21) are able to offer customers cheap, trendy clothing that rivals small businesses attempting to sell similar trends.

With this being said, I believe it is relatively attractive to enter the fashion industry-everyone needs clothes and with online stores, it is becoming increasingly easy to start your own brand. However, the real challenge is creating a brand that resonates well with its customer segment(s) and can survive with the threat of substitution (which is especially prevalent in the fashion industry).

“Sitka is a lifestyle brand” (Sitka) that is focused on trendy yet casual wear for stylish adventures in the beautiful local environment. Founded in Victoria, BC in 2002, Sitka has only 3 stores in Victoria, Vancouver, and New Zealand. This company has a niche market catered to young, higher-income, outdoorsy types of people, which I believe is a relatively difficult customer segment to focus on.

However, I believe that Sitka has been successful as the company has not been shut down due to intense rivalry with similar stores offering products to the same customer segment. Sitka does not have many threats of substitutes as it is such a specific niche-MEC offers practical outdoor-wear, but not in the stylish way Sitka does. I believe that the barriers to enter to the fashion industry is of low difficulty, making Sitka even more attractive as a brand- it continues to sell the same products it started out with, and not changed its mission due external pressures. While suppliers and buyers have relatively high power (as mentioned in Porter’s model), the fact that Sitka provides to such tailored needs has allowed for enormous success and the company has even expanded into having a café in its Victoria location, bringing in even more revenue.

Despite having such a specific niche in the market, I believe Sitka has been successful in its value propositions and its endeavours due to the fact that its consumer market is so narrowly defined. While the fashion industry is an attractive industry to enter, the stylish-outdoors niche is unattractive to enter; Sitka has proved how having a specific niche gives a company a competitive edge, making a relatively unattractive industry to enter seem attractive.

Photos: http://www.quickmba.com/strategy/porter.shtml , http://www.vendhq.com/testimonials/sitka-surf-shop-pos

Sources: http://www.quickmba.com/strategy/porter.shtml , http://sitka.ca/

Aritzia was founded in 1984 by CEO Brian Hill. Privately owned, it is a Vancouver-based women’s clothing boutique for the dynamic and stylish. Artizia’s customer segment is upper class women who can afford to pay higher prices for their clothing. In the recent decade, the company has become extremely popular amongst young people, opening stores all over North America. Sustainability is not a major component of its value proposition, but with a recent announcement, I believe the company can use sustainable practices as a point of difference in comparison to other high-end fashion retailers.

I believe that Aritzia has been very successful in creating a brand that resonates well with its customers. Sally Parrott, Senior Director of Marketing, explains in a BC Business interview that Aritzia’s brand truths are about style and quality design. CEO Brian Hill explains that their value proposition is simple: They “offer beautifully designed clothes that are on-trend, high quality, and of good value.”

As a consumer, I feel they have achieved what they have outlined in their value proposition, but feel that there is a lack of attention to environmental needs. Aritzia has targeted a customer segment that is catered to the elite: high prices and well-known brand names. In my opinion, sales associates embody Aritzia’s brand values and are able to build a customer relationship with each customer as they are extremely attentive and are willing to find something that suits each woman’s needs and wants. However, it is likely that Aritzia’s consumer market does not care about sustainable practices, despite having a employees fully embody the organizational culture.

I believe Aritzia has created a brand that does many jobs for its customers. Some gains include shopping for different occasions among different brands, convenience of sales associates, personal shopping, and positive social consequences (ie. well recognized, higher-end brand). The downside of owning a high-end fashion store is that sustainability often gets overlooked.

However, companies are evolving as consumers become more aware of how companies use their resources and in the way they manage their materials. This in turn, influences where people shop. I believe people on the West Coast, especially Vancouver, are becoming more conscious of sustainability and ethically sourced products. Aritzia, along with a few other well recognized companies in the fashion industry, have recently committed “to source clothing fiber that doesn’t come via conversion of old-growth and high conservation value forests” (Mongabay News). I think this announcement, with perspective to Aritzia, will enhance their value proposition and draw in a new customer segment that would otherwise not shop at Aritzia due to unknown ethical practices. This sustainable decision will give the company a competitive advantage over other elite fashion retailers as I believe that sustainability will soon become a deciding factor on where customers spend their money. 

Photo Source: http://www.refinery29.com/canadian-super-boutique-aritzia-to-set-up-shop-in-soho

Web Source: http://www.bcbusiness.ca/people/qa-with-aritzias-sally-parrott

In her blog, Erin mentioned the uproar over Air Canada’s decision to charge $25 for checked baggage on domestic flights. I agree that since there is high demand for their trusted services, they are able to get away with additional charges.

Upon their announcement, people were unhappy, and the company received negative attention. I wonder whether the announcement was necessary? I believe that if Air Canada had added $25 onto flight costs instead of making a big announcement of this additional charge, people may not have noticed, and may not have made such a big fuss about it.

Air Canada could say that their business model appeals to passengers with carry-on items as it means lower costs as they waive their $25 fee. However, their customer segment as to which this applies to is a small minority of flyers. Those who carry-on their luggage tend to be frequent flyers travelling in business class-I would conclude that saving $25 on a business class ticket is not a leading reason as to why the passengers chose Air Canada.

If prices have been relatively constant for carry-on passengers, I do not think that a drop in carry-on price is better than charging the majority of people more for checking a bag. As a client of Air Canada, I respond more to an increase in price than a drop in price. To me, paying $25 is a bigger deal than saving $25 depending on my luggage choice.

In regards to Air Canada’s practices, I can understand that the company is looking to maximize profits. From this checked baggage policy alone, they “should generate $60-million in annual revenue” (Financial Post). However, I believe there would have been less of a response if the company had silently added $25 per flight than announcing their decision to charge people more. It is simply the idea of paying for something that used to be free that is of concern.

Would you notice a $25 charge on a $322 flight to Edmonton? Does $347 sound much more expensive than $322 if you know that is your final cost? I would rather pay $347 and be done with it.

Source: http://business.financialpost.com/2014/09/20/airlines-go-a-la-carte-why-travellers-should-get-used-to-baggage-fees-and-more-unbundling/

Photo: http://www.thestar.com/news/canada/2014/01/18/air_travel_woes_have_passengers_call_for_usstyle_disclosure.html

The Temporary Foreign Worker (TFW) Program is said to be a major asset for the province of Alberta as the province is facing major labour shortages. The TFW Program is deemed necessary for fast food places to continue to operate for twenty-four hours. McDonalds’ workforce is made up of 24% TFWs (5). In 2012 it was shown that Alberta uses the process of hiring TFWs more than any other province (3), exemplifying its impressive need to keep the TFW Program running. Immigration in Canada since 1967 has progressively increased, with a total and record of 491,547 TFWs in 2012, which is five times more than in 2002 (2). The Program allows those unable to find work in their country of origin to experience living in a new country while earning savings to support themselves upon their return home. In addition, the program allows these workers to gain experience, which could lead to full time work; if TFWs are given full time work, they have the opportunity to “qualify through the Provincial Nominee Program for permanent residence” (1).

I, however, will argue that in contrary to the labour shortages in Alberta, the Temporary Foreign Worker Program should be permanently discontinued because the program’s guidelines have been abused, workers have been mistreated, and it has lead to family unification immigration. It is nearly impossible to prove that there is a “serious labour shortage” (3) as the “quality of Canada’s labour market data” (3) is extremely poor.  It was reported by the CBC that three McDonald’s restaurants “displaced (Canadian workers) by temporary foreign workers” (3). Employment Minister Jason Kenney announced that the TFW Program is facing the possibility of elimination by 2016 (4) on the basis that this program has become a “family reunification program” (4) in disguise. The program is increasing the number of immigrants wanting to enter Canada to be reunited with their family. It can be assumed that most have no job prospects lined up, as their reasons for entering Canada is to be reunited with loved ones. In addition, McDonalds workers claim they are treated “like “slaves,”” (6) and were deducted money from their paycheck on the claim of payment for rent (which was not specified in the initial recruitment). The government should continue to investigate the major flaws in the TFW Program, especially in the McDonalds industry as I believe the program creates more problems than it solves.

Sources:

1: http://www.cic.gc.ca/english/resources/publications/employers/temp-foreign-worker-program.asp (CIC)

2: http://www.immigrationwatchcanada.org/

3: http://www.theglobeandmail.com/news/politics/temporary-foreign-workers-everything-you-need-to-know/article18363279/ (Photo also from here)

4: http://www.theglobeandmail.com/news/politics/elimination-of-foreign-worker-program-will-be-on-the-table-in-2016/article19322845/

5: http://edmonton.ctvnews.ca/edmonton-area-franchisee-concerned-over-changes-to-temporary-foreign-worker-program-1.2001572

6: http://www.cbc.ca/news/canada/edmonton/mcdonald-s-foreign-workers-call-it-slavery-1.2612659

Over the last decade, major leaps have been made in technology. In my opinion, Apple has been a long-time front runner, as their innovative designs have become increasingly popular as new devices were introduced. I appreciate that Apple makes easy-to-use devices and the modern design is what draws in consumers such as myself. They have been extremely successful in their marketing strategies as they have played a significant role in Apple’s success as a company. The brand name has become a global phenomenon, but with popularity comes an increased price as Apple products are in such high demand. Purchasing an Apple product has become somewhat like buying a Chanel purse: expensive, well-recognized, but (is becoming) impractical.

With Apple’s recent release of the iPhone 6, iPhone 6 Plus, and the Apple Watch, I have started to question what is in store for the future of the company. Especially with the release of new products in such a short time span, I find it tough to keep up with what the company keeps releasing. The Economist suggests that price is becoming a concern for some consumers. The average selling price of the iPhone is $609 and competitor prices are $249 worldwide. The Apple watch is priced at $349 and “unlikely to be a serious competitor to other expensive watches”. While the watches are “supposed to help the firm expand into new areas”, is Apple thinking in the right direction? It is said that Apple is thinking outside of the box in inventions such as a mobile wallet (a tap of the watch instead of use of credit cards), but I wonder if Apple is possibly thinking too far outside of the box…in another dimension. Apple has been losing shares to Samsung and Xiaomi and is becoming a “niche player”. With a decline of revenue in the iPhone and iPad in 2014, I question whether Apple products will soon become unnecessary accessories just for “techies”.

Apple’s business model appeals to the mass market, specifically those able to spend more on their technology. To be fair, I would say that the majority of apple’s customer segments are willing to purchase just about anything at any price. They have been successful in creating a dedicated, loyal consumer market. However, I am starting to question the role I play as a consumer.

In my opinion, Apple has become a very different company that is trying to refocus on different products. I believe it needs to continue having a competitive edge, but it should realize that its refocusing may drive consumers away. Consumers and  investors may need a clear path drawn out as to where Apple is trying to lead consumers in their new direction. If I were an investor, I would be wary of the company’s known secrecy; as a consumer of Apple products, I am finding myself not wanting to buy their newest products as many features do not appeal to me whatsoever. While I admire their simplicity and aesthetic appeal, I worry that I will soon not want to buy any Apple products; in that case, I will have a difficult time finding a substitute. 

Source: http://www.economist.com/news/business/21616967-apple-becoming-very-different-company-and-not-just-because-its-newly-unveiled

More than Hardware photo: http://www.economist.com/news/business/21616967-apple-becoming-very-different-company-and-not-just-because-its-newly-unveiled

Cover Photo: http://www.returnofkings.com/31224/rotten-apple-inc-poisons-cultures

“The stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization.” (Source 2) Many companies promote being “health conscious”, when in fact, many sell products that contradict the message they are advertising. The consumer’s values are compromised, as are the values of the stakeholders. CVS, one of the largest drugstores in the United States, recently announced the discontinuing of sales of tobacco. While the company earns a considerable profit from tobacco sales, their medical clinics in stores help patients directly affected by smoking (and other such problems) This “conflict of interest” is what lead to the company’s ethical decision of stopping the sale of tobacco products.

This decision was an admirable one, as it has caused other big name companies to assess the messages they are sending to consumers, and act accordingly. CVS is a stepping stone in the right direction to businesses being more aware of what they are selling. Many companies do not take into consideration the effects their products have on one’s health, which is unethical. CVS has done a good deed by promoting health care and discouraging the sales of products that cause health problems. This decision arguably enhanced their competitive edge as customers may be more inclined to support a business that 100% believes in providing health care. In addition, tobacco sales have been rapidly decreasing while health care has been increasing. It was a wise move on CVS’s part to scrap the sale of tobacco and focus on a more lucrative part of their store.

Companies like CVS must critically assess the products they are selling and the ethics behind what they are trying to promote. In order to send a positive message about the products they are promoting, companies should make wise decisions and take health risks seriously into consideration when looking to make a profit. Companies such as CVS are on the right track.

source 1:  http://www.nytimes.com/2014/02/06/business/cvs-plans-to-end-sales-of-tobacco-products-by-october.html?_r=0

Source 2: http://en.wikipedia.org/wiki/Stakeholder_theory

Photo: One Page News

Also check out http://www.forbes.com/sites/barbarathau/2014/09/09/walmart-and-walgreens-wont-stop-selling-smokes-but-will-the-decision-backfire/ to see if Walmart and Walgreen’s decision to continue selling tobacco with backfire on them.