Verticalization of Fashion Business

Research project

WS 2010

VERTICALIZATION OF FASHION BUSINESS

Project Supervisor Prof. Claus Bühs

Project Team Arzu Uslu Asif Mangat Mehroon Gull Sajid Mehmood Sohail Raza Umer Jabbar Usman Ameer


Table of Contents Introduction

Definition, Structure and Types Reasons for Verticalization

Major Trends Verticalization of Fashion Business

Verticalization Trends in National and International Business

SWOT Analysis for Vertical Integration Best Practices for Verticalization Conclusion


Definition

Structure Contractual vertical system Corporate vertical system

Types Backward vertical integration Forward vertical integration


Reasons for Verticalization

Lower transaction costs

Assure supply of outputs

Correct market failure

Increase monopoly profits

Eliminate market power


Major Trends

Joint venture

Franchise

Concession business

Manufacturer‘s owns retail shops

Retailer‘s owns manufacturing

Traders with manufacturing & retailing


Verticalization trends in National and Internation Trade

Retail business to service provider

Business specification

Customer consistency multiple channels

Diverse marketing techniques

Brand strategy


High Fashionable Skirt


BackwardVertical

Integration

ForwardVerticalIntegration

Different Types of Vertical Relationship


Spot sales/

purchases

Long-term contracts

Agency agreement

s

Franchises

Vertical integration

Joint ventures

Informal supplier/ customer

relationships

Supplier/ customer

partnerships

Low

Form

aliza

tion

Hig

h

Low Degree of Commitment High

Strengths Transportation costs Transportation costs SC coordinationSC coordination Control over inputsControl over inputs Profit marginsProfit margins Access to distribution channelsAccess to distribution channels Facilitate investmentFacilitate investment


Weaknesses Capacity balancing issues Capacity balancing issues Potentially higher costs Potentially higher costs Decreased flexibilityDecreased flexibility New core competenciesNew core competencies

Opportunities Economies of scaleEconomies of scale Managerial RewardsManagerial Rewards Shareholder ValueShareholder Value Control of MarketsControl of Markets Risk BearingRisk Bearing

ThreatsThreats Production cost fluctuationProduction cost fluctuation Vertically adjacent activitiesVertically adjacent activities Monopolization of marketsMonopolization of markets CompetitionCompetition

Backward Vertically Integrated Companies ZARA H&M

Forward Vertically Integrated Companies Hugo Boss Esprit


Verticalization of Fashion Business

Documents

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