Marketing Analysis for American Apparel

Topics: Vertical integration, Brand, Dov Charney Pages: 9 (2728 words) Published: October 17, 2010
Problem Statement
American Apparel whom once used to be the

Situational Analysis:
American apparel is the largest clothing manufacturing company in the U.S. The company has initially specialized in cotton-knit wear yet it has gradually developed the interest for leotard, leggings and other vintage-inspired clothing. The company was founded in 1989 by Dov Charney. Charney was born in Montreal, Canada however he was fascinated by the American culture. In 1991, he started designing T-shirt using the name of American apparel. With the expansion of their sales and popularity, the company sub-contracted Sam Lim and moved the company to Los Angeles. The stores are usually situated in North America and Europe, however, its currently expanding its market into Asia by setting up stores in countries like China and Pakistan. _____________________. From the SWOT and Porter’s five forces analysis, we have gained many insights into the company. The company has several strengthens. Being the largest clothing manufacturing in the fashion industry, it already created sufficient brand loyalty and barriers for new entrants into the market, thus easing the threats of potential competitors. Secondly, the company was designed to represent “American ideologies”, therefore, it has always been a fervent advocate for immigration and homosexual equality. (pink dollar)__________________ Lastly, the company is vertically integrated creating lower transaction cost and uncertainty within its production. Also, this eliminates the potential threat of suppliers’ bargaining powers creating more flexibility. Aside from strength, the company boasts several weaknesses. The most urgent one currently is the negative quarterly financial statements that limits the company’s functions, resources and decreases its reputation. After the interior analysis, it is most necessary to contemplate on the exterior situation. There are many foreseeable opportunities that may assist sales of the company. Given the situation that most stores are situated in lower-rent mid-town area, the company should consider introducing them to large shopping malls in order to have access to a larger number of customers. Secondly, the emergence of Asian market in the eastern globe gave rise to unprecedented opportunities (52% of the world’s population controls 29.4% of the world’s total wealth). The company should consider setting more stores in countries such as India, Pakistan etc in order to facilitate more sales. Lastly, the company is always facing many threats from all around. First of all, fashion industry boasts less barrier for new entrants (less patent, light government regulation, common knowledge/skills in production), as a result, there are threats of the number of new entrants taking its own market shares. Also, American Apparel’s products are easily substitutable, with its competitors providing similar products at cheaper prices (Zara and H&M). Lastly, the reputation of American Apparel has been declining in recent years. The overly sexual and provocative advertisement has led to many controversies. Also, the CEO has been accused many times on the charges of sexual harassment. All of these combined to decrease the popularity of American Apparel.

Alternative One: Change the target market

According to the employer from American Apparel located in Yonge and Bloor, the current major target market of the brand is an age group of fourteen to nineteen years old teenager girls. However, from the research, it is evident that this target group is not fully apt for American Apparel, due to the fact that the price ranges for most of the items are more expensive than Aritzia, H&M and Zara, the major competitors of American Apparel offer. In fact, fourteen to nineteen years old girls would be more likely to prefer cheaper and affordable prices, especially when the style of the items is similar to each other. Thus, focusing on a different age group may be a favourable option. In...
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