American Apparel, special for its “made in US” tag, has filed for bankruptcy recently. Again, whether manufacturing in the US has truly benefited the company is brought up for discussion. Different from its competitors in teen clothing industry, American Apparel isn’t a trend follower under manufacturing globalization. My question is, will outsourcing be an effective strategy for the business to restart?

Admittedly, manufacturing in the US makes the brand stand out from the crowd and helps it form the core value of being socially conscious¹. Promoting fair employment, the company is paying $30,000 for each worker annually instead of $600 (a Bangladeshi garment worker’s average earning). As well, “made in USA” marks the “guaranteed” quality of the product, which helps the company easily earn customers trust and loyalty.

However, most decisions made by young customers are based on the cost and style of the product. From my perspctive, basic styles at high costs only result in the loss of customers regardless of the social consciousness (rather hypocritical value) it’s promoting. Outsourcing, which leads to a big drop in manufacturing cost², seems the optimal choice as to lower the selling price. It’s necessary for the company to find cost-saving materials and labours under such urgency.

Having a long-term debt of $234.9 million, the company can hardly keep the business going, and the liquidity necessary to sustain operations may evaporate in the next few months³. I believe it’s quite challenging for the company to boost sales in a short term due to factors such as the unpopular sexist brand image (overtly sexual ad) and intense rivalry (competitors including H&M, Zara, etc.) the company is facing. Cooperating with oversea manufacturing sectors should be regarded as one of the most significant opportunities for the company, which can largely reduce the variable costs and thus increase the profits.

 

Works Cited

1. American Apparel: about us
2. The Advantages and Disadvantages of Outsourcing
3. 5 reasons American Apparel is now bankrupt
4. Image — American Apparel
5. Video — American Apparel files for bankruptcy 

Flight tickets from Toronto to Iceland for only $99? Yes, that’s the price Wow Air offers for a one-way trip. Wow Air, an Icelandic low-cost airline that operates services to a total of 23 destinations, is entering Canadian market by next May. As discussed in Comm 101 lecture, businesses such as Wow employ one of the generic strategies — cost leadership strategy — focusing on providing inexpensive services and products for a given level of quality¹. It’s challenging for the firms to make profits while pricing significantly lower than others; in this case, Wow flies the narrow-body A320 and A321¹ in order to minimize the operating cost.

Cost leaders attract a large market share as potential customers find paying lower prices for services of acceptable quality to be appealing². This gives Wow a bigger chance to expand and survive in Canada. In the presence of existing competitors such as Air Canada and WestJet, why would customers choose a new start-up over the big companies they are already familiar with? Low price is the answer.

However, I believe that cost leaders sometimes disadvantage themselves from winning long-term customers due to the inferior services they offer. According to Skytrx Airline Review³, Wow has constantly delayed its flights, charged a lot for the extra services, lost luggage, etc. It’s true that Wow is targeting customers with low incomes and ones who do not seek supreme flight experiences. However, the company still needs to reflect: is it an optimal strategy to sell poor-quality services with rock-bottom prices? Will this truly benefit the company in a long run?

In a nutshell, Wow Air exemplifies the cost leadership strategy, showing many advantages and disadvantages of implementing such a model in the real business world.

 

Works Cited

1. Porter’s Generic Strategies
2. Iceland’s Wow Air expanding into Canada, sparking potential fare war among transatlantic flights

3. Mastering Strategic Management: Cost leadership
4. WOW Air Customer Reviews
5. Image

Turning a religious component to a new fashion item? H&M’s refreshing marketing strategy of adding hijab into its new advertising campaign has attracted a lot of attention. This is a perfect example of adapting a customer-driven marketing strategy¹ where firms develop products targeting certain groups and offer unique attributes meeting customers’ special needs, thus gain comparative advantages.

Evidently, huge benefit can be obtained after the strategy update. Muslim community, a tremendous potential consumer group, has always been forgotten by the fashion industry. There are more than 1.6 million Muslim consumers around the world and the group is constantly expanding which is expected to hit 3 billion by 2050, estimated by the Pew Research Centre². Advertising cultural clothing will broaden H&M’s customer base enormously and stimulate the company’s expansion. Due to the uniqueness of the product, H&M easily outscores the big rivals by its innovative design concepts and “milestone-ish” combination of modern fashion and religious wear.

From my perspective, religious items are often stereotyped and misinterpreted by the mainstream media, and the public has failed to appreciate the aesthetic value of religious outfits. H&M’s action catalyzes the breakdown of the inaccurate stereotypes and leads the new fashion trend by adding special fashion elements. It’s hard to determine whether the sales will surge in a short term, but the positive reputation and unique brand culture H&M builds as being open to diversity are of much higher value.

H&M’s example gives us a deeper insight of the effectiveness of creative business ideas and showcases a great strategy that helps develop customer base. Reaching out to the Muslim community, H&M has found the undiscovered gold mine.

 

 

Works Cited

1. Customer-Driven Marketing Strategy
2. H&M Muslim Ad Campaign With Hijab Model Signals Future Diversity In Fashion Advertisements
3. Image